Home Health & Hospice Week

Increase comes as a surprise.

While home health agencies are facing down the biggest change to Medicare payment since PPS, they also will need to counter the largest cut recommendation in years from an influential advisory body to Congress.

In its Dec. 5 meeting, the Medicare Payment Advisory Commission fast-tracked a recommen­dation to cut Medicare home health payment rates by 7 percent in 2021. MedPAC commissioners will execute an expedited vote on the recommendation in January and, if approved as expected, will include the endorsement in their annual March report to Congress.

The jump from a 5 percent to 7 percent cut is surprising, since “the expected impact of PDGM should have led MedPAC to tone it down a bit,” says National Association for Home Care & Hospice Pres- ident William Dombi. “On the other hand, MedPAC might be feeling that they had to raise the number to attract Congress’s attention,” Dombi tells Eli.

As always, MedPAC justifies the cut by citing home health agencies’ double-digit profit margins for Medicare payment. HHAs’ average margin for 2018, the latest year available, was 15.3 percent — nearly steady from the previous year’s 15.2 percent. MedPAC estimates that agencies’ margin in 2020 will be 17 percent, staffer Evan Christman said in the meeting.

“Medicare has overpaid for home health since the PPS was established,” Christman argued. “The fact that home health can be a high-value service does not justify these excessive overpayments.”

Those high margins have persisted for years, Christman responded when asked by Commissioner Kathy Buto, a consultant, why the cut recommen­dation should increase from 5 percent to 7 percent (see box, p. 351). HHAs have maintained high margins despite rebasing cuts the Centers for Medi- care & Medicaid Services made, as required by the Affordable Care Act.

HHAs are “basically in as good or better shape than they were in 2013 before rebasing,” Christman said. “It’s time for more serious action.”

But industry experts scoff at the idea that HHAs will be able to achieve a 17 percent margin under PDGM. Securing accurate margin predictions is very difficult, believes Rick Ingber with Vanta-Health Consulting in Ardmore, Pennsylvania. “I really don’t think the feds or providers have a good handle on this yet,” Ingber says.

The prediction is “unfounded and based on pure speculation,” Dombi blasts.

“There are too many things changing” under the new payment model to achieve such a high margin, insists financial expert Pat Laff with Laff Associates in Hilton Head, South Carolina.

For example: The mechanics of 30-day billing combined with Request for Anticipated Payment levels reduced from 50 or 60 percent to 20 percent will significantly slow cash flow, Laff predicts.

Plus, agencies’ administrative costs will in- crease significantly to keep up with the doubled billing workload and the increased efficiencies needed to get claims out the door ASAP, Laff expects.

Don’t forget: With PDGM, “there is no practice period,” Laff emphasizes. Agencies will have to hit the ground running without a phase-in, and that ramp-up will cost cash.

Reimbursement will be reduced by the surge in Low Utilization Payment Adjustments sparked by 30-day billing as well, Laff adds.

Adding all those, as well as other PDGM factors, “I really, seriously don’t think the margin will be anywhere close to 17 percent,” Laff tells Eli. HHAs with size and cash reserves will weather the PDGM storm and come out the other side, but smaller, less capitalized providers will struggle and even shut their doors, Laff forecasts.

“I look for PDGM to cut profit margins to under 10 percent and eliminate 15 to 20 percent of HHAs,” predicts Tom Boyd with Simione Healthcare Consultants in Rohnert Park, California.

Remember: Just as with current PPS, margins will vary greatly among providers. “PDGM will result in there being winners and losers,” Ingber points out.

Meanwhile, MedPAC dismisses concerns that key indicators continue to decline (see box, p. 352).

For example: The “slight” 1.2 percent drop in the number of agencies between 2017 and 2018 is OK because “the recent decline is concentrated in a few areas such as Texas, Florida, and Michigan that have been targets of efforts to reduce fraud,” Christman explained to commissioners. “These areas also experienced rapid growth in recent years.”

A reduction in agency numbers should be no problem because “in the 2002 to 2013 period, the number of agencies increased by over 80 percent,” Christman contended. He did not mention that HHA numbers were so low in that period because the Interim and Prospective Payment Systems wiped out about one-third of the nation’s agencies in the years before that.

Likewise: The 8.3 percent decrease in volume over the last eight years has been “concentrated in states that experienced higher-than-average growth in the prior period,” according to the meeting presentation.

MedPAC commissioners also indicated in the meeting that they may agree with the HHS Office of Inspector General and others that the home health industry continues to have major fraud and abuse problems.

Home health is “one of the easier post-acute care benefits to access” because “they do not enforce the homebound requirement,” Commissioner Buto said when discussing Inpatient Rehabilitation Facility payment levels.

Despite the huge payment shift that will occur under the Patient-Driven Groupings Model next year and declining agency and volume numbers, MedPAC commissioners agreed to move the 7 percent reduction for home health pay into expedited voting in their next meeting, meaning it will have no substantial discussion.

And don’t be surprised to see even steeper cut recommendations ahead. The 17 percent profit margin under PDGM is “extremely conservative,” MedPAC Executive Director James Mathews claimed in the meeting. “It would be a safe bet to say that margin might end up being a bit higher.”

“Why not go to 10?” Buto asked.

“I’m supportive of 7 and … could go even higher,” added Commissioner David Grabowski, professor at Harvard Medical School.

On the other hand: Commissioner Jonathan Perlin, president of clinical services and chief medical officer of HCA Healthcare in Nashville, Tennessee, pointed out home care’s ability to stave off much-higher-cost institutional stays. “Home health has such high utility … as a preventive service,” Perlin said. “This may be the time … to think about making sure that we can access those lower levels of service, so the higher levels of service aren’t necessary,” Perlin, who is a physician, said in discussing reimbursement for Long-Term Care Hospitals.

Get to work: HHAs may feel they don’t have to worry about the cut based on history. “Congress has ignored MedPAC recommendations for home health cuts many times in recent years,” Dombi acknowledges. “However, each year we have worked hard to achieve that result. The new recommendations will mean we need to work hard again.”