Home Health & Hospice Week

Expect 14.4 percent profit margin for 2018.

Home health agencies would see cuts on top of cuts, if Congress heeds an influential advisory body.

As it voted in meetings earlier this year, the Medicare Payment Advisory Commission urges lawmakers to cut home health agencies' Medicare payment rates by 5 percent in 2019. And MedPAC wants Congress to rebase Home Health Prospective Payment System rates in 2020 and 2021 to boot, according to its annual report released March 15.

Why? "Medicare has always overpaid for home health services under the PPS," MedPAC maintains in its report advising Congress on Medicare payment. "In 2001, the first year of the PPS, average Medicare margins for freestanding HHAs equaled 23 percent," the commission says. "The high margins in the first year suggest that the PPS established a base rate well in excess of costs."

HHAs cut visits so drastically under PPS that they "were able to garner extremely high average payments relative to the cost of services provided," MedPAC continues.

The 5 percent reduction and rebasing would strip up to $2 billion from 2019 payments and up to $10 billion over five years, MedPAC calculates.

MedPAC has some budget-neutral recommendations that would impact certain agencies more than others, as well.

For instance: The commission would like to see the Centers for Medicare & Medicaid Services target its rural add-on to low utilization areas. In 2016, most payments were made in areas with higher than average utilization. For example, "79 percent of the episodes that received the add-on payments in 2016 were in rural counties with utilization higher than the median for all counties," the report notes. "Rural counties in the lowest fifth of utilization accounted for just 5 percent of the episodes that received the rural add-on payment."

MedPAC concludes that "higher payments in areas without access problems can encourage the entry or expanded operations of agencies that seek to exploit Medicare's financial incentives. More targeted approaches that limit rural add-on payments to areas with access problems should be pursued."

Reminder: The Bipartisan Budget Act of 2018 did reinstate the rural add-on, but phases it out over five years. The budget deal also reallocates the add-on payments to counties with lower population densities, but doesn't account for utilization directly (see Eli's HCW, Vol. XXVII, No. 9).

Another budget-neutral suggestion is eliminating therapy from the PPS calculation, but Congress took care of that already in BBA 18 (see Eli's HCW, Vol. XXVII, No. 8).

Profit Margins Fuel Rate Cut Recs

As usual, MedPAC bases its pay cut recommendations in part on HHAs' high profit margin figures - an average of 15.5 percent in 2016 for freestanding agencies only. The commission predicts a 14.4 percent margin for freestanding HHAs in 2018.

MedPAC also points to high utilization figures, even though those stats are on the decline (see box, p. 90). Figures are still at historic highs even though they are going down, the report insists.

"This rate cut recommendation does not come as a surprise to the National Association for Home Care and Hospice, since MedPAC has previously called for payment rate cuts to home health care," the trade group notes in its member newsletter. So far, Congress has mostly ignored the calls for rate cuts, including last year's suggestion to reduce rates by 5 percent.

"NAHC remains opposed to the MedPAC recommendation of home health payment rate cuts and we will urge members of Congress to reject policies that would deny the home health benefit to the vast majority of Americans who say they want to age at home and in their own communities," the trade group says.

Note: See the report's chapter on home health at www.medpac.gov/docs/default-source/reports/mar18_medpac_ch9_sec.pdf.