Home Health & Hospice Week

Commenters give CMS an earful on the penalty/ reward pool.

Medicare proposed one of the biggest changes in the way it reimburses home health agencies since the prospective payment system began, but commenter participation doesn’t necessarily reflect the magnitude of the modification.

Last year, 364 interested parties commented on the Centers for Medicare & Medicaid Services’ proposed rule for 2015 home health PPS. This year, only 120 stakeholders commented.

Recap: Most of the commenters who offered feedback on the proposed rule were passionate about the Value-Based Purchasing model CMS laid out in the HH PPS proposed rule published in the July 10 Federal Register (see Eli’s HCW, Vol. XXIV, No. 24). Under VBP, all home health agencies in nine pilot states (Massachusetts, Maryland, North Carolina, Florida, Washington, Arizona, Iowa, Nebraska, and Tennessee) will be subject to the program starting Jan. 1. CMS will “adjust” up to 5 percent of those agencies’ Medicare reimbursement for 2016 and 2017 outcomes; up to 6 percent for 2018; and up to 8 percent for 2019 and 2020. The adjustments based on 2016 outcomes would take effect in 2018 and so forth. CMS will calculate VBP scores based on 29 quality measures — 15 current outcome measures, 10 current process measures, and four new process/reporting measures.

Number one on commenters’ hit list was the size of the reward/penalty pool under VBP. “Those agencies who are struggling the most now to stay afloat will be the first to close,” said a commenter from Pennsylvania-based Main Line in a comment letter. A risk pool up to 8 percent “is unrealistic,” according to the letter.

HH VBP penalties are “far and above those enacted for hospitals,” points out a commenter from Tallahassee Memorial Home Health Care in the VBP pilot state of Florida. Hospital-based VBP will cap at 2 percent.

“I am unclear why the penalty/reward is as much as 8 percent while other healthcare industries do not have anywhere near as high a penalty/reward,” said a commenter from Family Home Health Services in Florida. If CMS wishes to change behavior, “1-2% will achieve this without driving smaller, vulnerable, but honest agencies out of business,” the commenter told CMS.

“It does not make sense that our industry is on the max end of cuts,” chided Alison Smoot of Texas in her letter. “Why wouldn’t the reduction be in line with other programs?”

Medicare has declared the hospital-based VBP program successful, maintained Diamond Home Health in Florida in a comment letter. “If that is in fact a true statement, then why not use the same rates that was used for them, why is the home health industry being hit with such a large rate?” it asks.

No Level Playing Field Under VBP

VBP puts mom-and-pop providers at risk, some commenters criticized. “Most of the best home health agencies that provide the best care, do so by throwing their profits back into patient care,” Dennis Heide from Florida said in a comment letter. “The margins of these companies are not in double digits. If they happen to slip below the line in outcomes, it will put them out of business while big corporate-based agencies that have the bottom line in mind as their first priority, will just be able to ride out the ‘penalty storm’ because of their deep pockets. We will end up with very large providers delivering very poor care.”

A stock analyst seems to agree with Heide. In a report published after the proposed rule was issued, SunTrust Robinson Humphrey analyst David MacDonald noted that the VBP proposal “inherently favors larger players with likely better clinical outcomes,” according to Benzinga. “We view it as highly likely that clinical outcomes at the large public players stack up quite favorable and that these companies are the ultimate winners in an environment with an increased portion of reimbursement tied to quality of care,” MacDonald wrote.

MacDonald further noted that a move towards outcomes-based reimbursement is a positive for “larger, more sophisticated” providers and could result in “incremental pressure” on smaller operators, Benzinga reported. And a quality focus will drive merger-and-acquisition opportunities in an already “frothy” environment, he said.

Bottom line: A 5-to-8 percent penalty will put many agencies in the pilot state of Tennessee out of business, warned one anonymous agency in the Volunteer State.

The same goes for North Carolina, said the Association for Home & Hospice Care for North Carolina in its comment letter. “Many of our agencies do not have reserves to be able to sustain such potential losses at the end of the long demonstration period,” said the trade group in the VBP pilot state.

VBP Could Limit Access

“Setting the risk level to begin at 2% to 5% — with an ultimate range up to 8% — is extreme and far outpaces the degree of risk incurred by far more well capitalized organizations such as hospitals,” says Margaret Franckhauser, CEO of the Central New Hampshire VNA & Hospice. “It is possible that agencies with reasonable quality will not be able to withstand that level of risk, and the safety net for community-based care will erode under so high a risk level.”

“Being a small agency, a reduction of 5-8% could force us to close our doors,” warns AllPro Home Health in Florida. Home care “is the most cost effective mechanism of delivering Health Care.” Stats: In the rule, CMS pointed out that agencies would rarely if ever receive the full penalty.

A National Association for Home Care & Hospice analysis forecast that 60 percent of HHAs “would be at risk of being paid less than the cost of care in 2018 based on the CMS estimate that the bottom 10% of HHAs would be penalized 2.98% in that year under its proposal,” NAHC said in its comment letter. “If the actual outcome is a 5% penalty, the forecast rises to 63.68%.” Further, “by 2022 when the VBP pilot reaches an 8% risk, NAHC forecasts that 69.31% of HHAs will be paid less than the cost of care.”

With the risk pool so high, any payment penalties incurred at the beginning of VBP will probably become permanent, NAHC warned. After a 5-8% cut, “it is unlikely that it can afford the necessary changes in its operation to improve its performance and avoid future penalties,” the trade group told CMS. You can expect “a death spiral caused by a likely permanent reduction in payment.”

Data from freestanding HHAs’ cost reports from 2013 shows an average profit margin of about 4 percent, NAHC said. Thus, “even a very small amount at risk will change behaviors and achieve performance improvements.”

“The HHVBPP proposal is far more aggressive than hospital VBP,” BayCare HomeCare in Florida says in its letter. “BayCare is concerned with this approach and recommends something more incremental.”

Instead: “CMS might consider starting with 1% in 2016, increasing to 3% in 2019,” offered Trinity Health in Michigan in its letter.

“The VBP should include no more than 1-2% at risk for any provider as that level is sufficient to trigger desired behavioral change without creating too high a risk of impacting care access and depriving HHAs of sufficient resources to support performance improvement,” NAHC recommends in its letter.

Stay tuned: Agencies will see whether CMS heeds its advice about the penalty pool when the agency issues the 2016 HH PPS final rule, expected in late October or early November.

Note: See the proposed rule at www.gpo.gov/fdsys/pkg/FR-2015-07-10/pdf/2015-16790.pdf.