Home Health & Hospice Week

Good news for rural agencies but bad news for everyone else is coming next month.

A 0.8 percent reduction to the home health agency base episode rate will take effect April 1, as called for in the Medicare Modernization Act passed in December (see Eli's HCW, Vol. XII, No. 43, p. 338). It equals about $17 per episode, before adjustment for wage index (see chart, this page).

The payment cut, which is achieved through a reduction to the market basket index (an inflation update factor), generally has been seen as the home care industry's trade-off for not having a copayment for the benefit imposed, notes Abilene, TX-based consultant Bobby Dusek.

While eight-tenths of a percent won't shutter agencies on solid financial footing, Dusek says, it will add up, squeezing the bottom lines of providers already struggling under partial episode payment (PEP) recoveries and other financial pressures.

In addition to the payment cut, HHAs serving patients in rural areas will see a payment increase of 5 percent for one year, also called for in the legislation. That means they'll see about a 4.2 percent increase overall for patients in non-MSA areas, Dusek notes.

The same cuts and increases hold true for per-visit payment rates. Under the prospective payment system, they are used to pay for low utilization payment adjustments (LUPAs) and to calculate payments for outliers - patients whose costs significantly exceed the payment threshold.

Tip: HHAs that have patients with open episodes, but whose care plan goals are met and don't require any more visits, should end those episodes early in order to qualify for the higher payment rate effective until March 31, Dusek advises. The new rates are effective only for episodes that end April 1 or after.

"I never recommend holding a patient until the end of the 60 days" anyway if the plan of care is wrapped up, Dusek tells Eli. One reason is that doing so puts the HHA on the hook for supplies bundled into PPS, even when the agency is no longer actively caring for the patient.

Exception: The only reason not to discharge when care is finished is a significant change in condition (SCIC), where payment for the second part of the episode runs through the last visit date, Dusek points out.

 Lower Rates Ahead

In addition to seeing a payment cut now, HHAs have to wait longer for the next inflation increase, Dusek notes. The Medicare law moved the payment update from the beginning of the government fiscal year, Oct. 1, to the beginning of the calendar year, Jan. 1. That means an extra three months of lower rates.

And the inflation update will continue to be reduced by 0.8 percent through 2006, as the law requires.

But HHAs should count themselves lucky if they see even those modest payment increases. The General Accounting Office and the Medicare Payment Advisory Commission are blasting high profit margin figures for agencies under PPS (see Eli's HCW, Vol. XIII, No. 9, p. 66). And MedPAC has called for a rate freeze next year.

If politicians reopen Medicare legislation in this election year, it's likely that cuts, not just freezes, could be the result, Dusek fears.

Editor's Note: The new rates are at www.cms.hhs.gov/manuals/pm_trans/R59OTN.pdf.