Home Health & Hospice Week

Low profit margins for hospital-based agencies fail to sway influential advisory body.

Home health agencies will be in for a lean year ahead if the Medicare Payment Advisory Commission gets its way. The committee that advises Congress on Medicare payment issues voted Jan. 14 to recommend a payment rate freeze in its annual report. Ratcheting the inflation update from market basket minus 0.8 percent all the way down to zero will reduce home care payments by between $200 million and $600 million over one year, and would result in $1 billion to $5 billion less in home care payments over five years, according to MedPAC researchers. "The adequacy of payments in the current year and over the coming year in the aggregate suggest that there will be no major implications for beneficiaries or providers" if rates are frozen, MedPAC staffer Sharon Bee Cheng said in the meeting. Commissioners based their vote on a 16.8 percent profit margin projected for HHAs in 2004. However, they did note that figure represented only freestanding agencies. For hospital-based agencies, the figure was much lower - only about 3 percent. But commissioners refused to believe that 3 percent was due to actual costs incurred by hospital-based HHAs. Instead, they blamed it on the peculiarities of hospital cost reporting. Hospital-based agencies' figures "pull down the average," said MedPAC Chair Glenn Hackbarth. They explain the differences between MedPAC's profit figures for the industry versus the ones compiled by the National Association for Home Care and Hospice (see Eli's HCW, Vol. XII, No. 22, p. 170). CMS and the Congressional Budget Office expect home care spending to grow significantly in coming years - an estimate much disputed by industry experts. But MedPAC researchers maintain that home care costs aren't going to go up much in coming years. Although "input prices" increased in the last few years, costs of episodes went down because of reduced numbers of visits, they pointed out.