Home Health & Hospice Week

An 8.8% profit margin is still too high, Medicare watchdog says.

While you may feel Medicare is swinging toward drastically underfunding home care services, a powerful voice in CMS’s ear feels the opposite — and the feds appear to be listening.

The Centers for Medicare & Medicaid Services proposed a 1 percent payment reduction in the 2017 Home Health Prospective Payment System proposed rule released in June. That would slice about $180 billion from home health spending next year (see story, p. 262).

Home health agency commenters protested the cut vociferously, but another influential advisory body to Congress is advocating for even deeper cuts.

“Rebasing will not sufficiently reduce home health payments,” the Medicare Payment Advisory Commission told CMS in its comment letter on the proposed rule. Despite the fact that CMS has maxed out the amount by which it is allowed to reduce PPS payments under rebasing, “we continue to be concerned the cuts are too small,” MedPAC maintained.

MedPAC predicts that agencies will have an 8.8 percent average profit margin this year, “and the rebasing adjustment will not lower payments in 2017 due to the offsetting statutory payment update,” the Commission says. This is despite CMS’s prediction of the $180 billion less in home health spending under its proposal.

“Medicare has overpaid for home health care since the inception” of PPS, the advisory body insisted in the letter. “More reductions are necessary to stop this pattern from continuing.”

You Can’t Get Blood From A Stone

Instead: MedPAC would like to see CMS drop the offsetting 2.3 percent payment update but keep the punishing $420 million in rebasing reductions for 2017. Plus, CMS should extend rebasing another two years, MedPAC added.

Such cuts “would better align costs with payments in 2017, and would provide a framework to ensure that payments in future years are at appropriate levels,” MedPAC judged.

MedPAC brushes off access concerns by comparing 2015 utilization levels to 2000 figures instead of more recent data. And by pointing out that the majority of utilization declines are in fraud hotbutton states anyway.

MedPAC’s comment letter is mostly a reiteration of the recommendations it included in its annual report to Congress issued in March (see Eli’s HCW, Vol. XXV, No. 13).

Reply: In its comment letter, the Visiting Nurse Associations of America took a preemptive strike against MedPAC’s recommendation for more rebasing. “Since this is the end of the rebasing period, CMS should wait until current year data is available, evaluate the impact of the rebasing adjustments using current data, and consult with Congress before considering the additional reductions or further rebasing as suggested by the Medi-care Payment Advisory Commission,” the trade group said in its letter. “VNAA is dismayed that CMS continues to pursue implementation of the inherently flawed nominal case-mix adjustment that is based on outof- date data and implicitly violates the limits place by Congress on the size of rebasing adjustments.”

Cost report flaws: VNAA also takes aim at CMS’s and MedPAC’s reliance on a flawed profit margin figure. “While CMS maintains that home health margins are high compared to an unspecified standard, the experience of our members is that Medicare payment rates underpay and do not reflect the real costs of serving vulnerable patients and maintaining a qualified, trained workforce,” the trade group insisted. “The illusion of high margins is created by outdated cost reporting regulations that force agencies to understate their costs both by refusing to recognize certain costs (such as telemonitoring) and encumber home health agencies with laborious documentation requirements for justifying costs that are concentrated in vulnerable populations (such as intensive case management, employee security, and patient non-compliance).”