Home Health & Hospice Week

Findings for one state's rural home health agencies point to a problem the whole nation's rural providers are experiencing, and the result may be reduced access to home health care.

Rural HHAs are financially challenged under the prospective payment system, say two new studies from the Pennsylvania Office of Rural Health and the University of Pittsburgh Center for Rural Health Practice.

And those findings probably can "be generalized to rural agencies throughout the United States," says a report on the studies. Rural agencies across the nation are subject to the same Medicare rules and so suffer the same financial constraints, says Michael Meit, director of the Center for Rural Health Practice.

At first, rural agencies in Pennsylvania fared well under PPS, found the studies, which examined financial data from 10 rural HHAs and surveyed agencies statewide. From October 2000 to June 2002, rural agencies in the state saw Medicare margins of about 23 percent. But after the reimbursement cut in October 2002 those margins shrank to 16.6 percent, and after the elimination of the 10 percent rural add-on in April 2003, the margins decreased to only 6.6 percent, says the report.

Rural agencies "were hit by a double whammy" with those two reimbursement cuts, notes consultant Rick Ingber with ZA Consulting in Jenkintown, PA. And agencies in other rural areas might have even received a third hit, with decreased wage indices for 2003. Pennsylvania's index increased slightly in 2003.

The two successive cuts are hurting rural agencies' bottom lines, Meit warns. Such financial burdens threaten to tear apart the continuum of care available to rural beneficiaries.

Before the cuts, Medicare reimbursement didn't fully cover costs for two out of the 10 most frequent home health resource groups (HHRGs), the report notes. But after the two cuts, seven of the 10 most frequent HHRGs are under-reimbursed for rural HHAs, it claims.

Rural providers have major costs tied into the time it takes visiting staff to reach patients' homes, notes consultant Barb Gingerich with York, PA-based HCMR Advantage HCMR Consultants. And in rural Pennsylvania, road conditions in the winter create even longer travel times for visits, resulting in further decreased productivity for staff, Gingerich points out.

Rural agencies also suffer from a lack of volume over which to spread their overhead costs, Ingber says. "A smaller agency means a smaller population base."

Under cost-based reimbursement, rural providers could pass those higher overhead costs onto the Medicare program, Ingber recalls. But under PPS, HHAs have to wrestle with high overhead under PPS payment limits.

And rural HHAs don't have the luxury of hiring staff at rock-bottom prices, Meit insists. They often have to pay competitive salaries to keep staff from making the commute to urban employers.

As with the rest of the industry, Pennsylvania's rural agencies saw their utilization decrease markedly, with a 42 percent drop in visits from 1997 to 2001, according to the report. That drop isn't at all surprising, Gingerich judges. The Centers for Medicare & Medicaid Services expressly designed PPS to curb utilization and decrease visits, and agencies have responded to PPS' incentives, Ingber adds.

Total visits, including non-Medicare visits, dropped 41 percent for the rural agencies surveyed, the report adds.

In another response to PPS incentives, rural Pennsylvania HHAs increased physical therapy utilization by 8 percent to 23 visits from 1997 to 2001, and decreased skilled nursing and aide use by about 4 percent during that period, to 51 visits and 13 visits respectively. Occupational therapy utilization increased 1 percent to five visits and medical social work decreased 1 percent to six visits.

More perplexing is a significant decrease in the number of consumers using home care services. With the nation's population aging, especially in rural areas, and the number of Medicare enrollees growing, observers would expect to see the number of home health users increase, Ingber notes.

But the report found that 12 percent fewer consumers overall used home care from 1997 to 2001, and 8 percent fewer Medicare beneficiaries used home care during that period. The finding is "particularly noteworthy" given the demographics, the report stresses.

Pennsylvania has the second-oldest population in the U.S., notes Meit. The drop in consumers "makes no sense," he claims. "It tells you something else is going on," and that something isn't good for the health of rural home care providers.

Perhaps some of that decrease resulted from reduced referrals from physicians. Docs' referrals fell about 11 percent during that time period, although hospital home care referrals grew 8 percent and nursing home referrals inched up 2 percent, the report notes.

A letter from the feds warning physicians of their liabilities in prescribing home care seemed effectively to choke off referrals, Meit laments.

The study's findings point to potential access problems, Ingber says. As rural reimbursement rates go down, providers in those areas may struggle and go under. Losing one agency in a county or region where it's the only HHA can mean a big hole in access to home care, he notes.

"We need our rural agencies to be financially stable," stresses Meit. Rural HHAs tend to cover a wide area, and another agency is unlikely to step in and pick up the slack if an existing agency folds.

Keeping rural home care providers healthy is an important part of keeping expenses down for the nation's health care system, the report argues. Furnishing home care is much less costly than paying for hospital care.

The report recommends extending the 10 percent rural add-on, providing administrative technical assistance to rural agencies, educating referral sources on home care and undertaking more studies on access problems and quality of care.