Home Health & Hospice Week

Industry faces suspicions of care skimping.

The home care benefit has undergone a major transformation under the prospective payment system that took effect in October 2000, and the differences could be smearing home health agencies with an unfair reputation for poor care.

The Medicare Payment Advisory Commission is examining the accuracy of home health PPS. "We have some evidence that suggests with three years of data under this system, that it might not be working optimally for all patients," MedPAC staffer Sharon Cheng said at a March 10 MedPAC meeting.

HHAs have recorded "over-adequate," double-digit profit margins under every year of PPS, Cheng claimed. And patients in the same HHRG require significantly different costs to care for them, she added. That means profit per patient varies widely, and so does profit per agency, industry observers point out.

Furthermore, utilization has changed significantly under PPS, Cheng noted. In 1997, agencies furnished 36 visits per episode, 1,500 minutes of care per episode and 9 percent of visits were for therapy. In 2002, those statistics changed to 19 visits per episode, 945 minutes of care per episode and 26 percent of visits were for therapy, Cheng reported in the meeting. And agencies treat patients for a shorter amount of time under PPS, she maintained.

The range of the margins concerns Commissioner Bill Scanlon, he said in the meeting. "The idea of getting a patient and then not providing enough services is a possibility. And when I look at this range of margins, I say to myself that's not all efficiency. Some of that is stinting," continued Scanlon, formerly with the Government Accountability Office.

Due to the number of HHAs increasing, Scanlon fears abuses. "I worry that we will see some of the same kind of abuse developing over time that we saw under the old system," he said.

PPS, Not Agencies, Drives Changes

But PPS incentives have created the change in utilization, not agency abuse, industry reps insist. "Why should [providers] be punished when they respond to financial incentives?" asks Chicago-based regulatoryconsultant Rebecca Friedman Zuber. "Part of the goal of PPS was to reduce visits - should you be punished for doing so if outcomes are as good or have improved?"

Patient outcomes have improved slightly since PPS began, says MedPAC's March report to Congress.

"It's important to remember that the intended incentive of the episode-based PPS system was to eliminate excess services that were driving payment," notes Bob Wardwell, the architect of the PPS system when he was with the Centers for Medicare & Medicaid Services.

Even if HHAs are engaging in unscrupulous behavior, they are not likely to be stinting on care, argued Commissioner Carol Raphael in the meeting. "If I wanted to do very well, I would be very careful about who I admit," said Raphael, with the Visiting Nurse Service of New York. "That's a much more important variable than the number of visits that I give."

Besides responding to financial incentives, HHAs have increased therapy visits to improve patient outcomes, notes consultant Lisa Selman-Holman with Denton, TX-based Selman-Holman & Associates. "Many of the outcomes have to do with functional improvement, so in order to increase scores, therapy is essential," Selman-Holman maintains.

Payment System Needs Facelift

Industry reps dispute the characterization of HHAs gaming the system, but they are eager to see PPS refinements for another reason - to adequately compensate agencies for their patients' care.

"It has long been apparent that the case mix adjuster has severely weakened in its ability to explain resource use," says William Dombi, vice president for law with the National Association for Home Care & Hospice's Center for Health Care Law. "Since it was based on 1997 data, refinements are overdue."

"The system is not accurately matching the resources needed to take care of patients with the payment offered in each HHRG," agrees Wardwell, now with the Visiting Nurse Associations of America. "As it becomes clearer which patients are systematically underpaid, the system begins to become distorted."

For example, agencies complain that they are underpaid for patients with wounds and receive too much of an increase for patients requiring therapy, Zuber relates. Admitting "someone with a wound that requires more visits and wound care supplies is a great disadvantage," Selman-Holman points out. "Any profits made from other patients go to care for this patient."

"Some reweighting is needed as it would be with any new system," Zuber says. "Experience always trumps prognostication."

Specialty hospitals face a similar dilemma. The hospitals are inordinately rewarded for rehab patients and not compensated enough for medically complex patients, Commissioner Ralph Muller noted.

"Refinement really needs to be Job 1, Step 1 of improving the Medicare home health benefit," Ward-well stresses.

Looking Beyond Refinements

But MedPAC is looking at doing more than just tweaking payment levels.

One of the easiest options for the Commission to recommend would be risk-sharing, Zuber notes. Under risk-sharing, agencies would give back a portion of their profits to Medicare, or receive payment for a portion of their losses.

However, risk-sharing involves a number of problems, Wardwell warns. The shared profits and losses would be dependent upon cost report accuracy. And retroactive profit recoveries could destabilize the industry, he predicts.

Risk-sharing would essentially return home health to cost-based reimbursement, Dombi says, and would require intensive administrative resources to operate. "That approach would bring back all the craziness of cost reimbursement, including the increased risk of fraud," he cautions.

Adopting another MedPAC suggestion, to pay partially on a per-visit basis, is another step backward. "Does Medicare really want to reintroduce utilization incentives again?" Wardwell asks.

"We've worked very hard in home health care to get away from the per-visit mentality," Raphael said in the meeting. "Going back to per-visit payments does bring us back to yesteryear."

MedPAC's other ideas about splitting the benefit into chronic care sections are worthy of consideration, Zuber says. "We ... need to look at disease management of patients with chronic conditions" to reduce Medicare costs overall, she says.

But MedPAC's ideas on restructuring the benefit are too vague and too radical a departure from the current benefit for serious consideration, observers say.

MedPAC will continue to examine the question of PPS reform this year, and is working on a report regarding home health case mix and financial performance, Cheng said.