Medicare Compliance & Reimbursement

Home health agencies' failure to report medical supply costs under the prospective payment system could mean they are stuck with bundling of pricey nonroutine supplies under PPS for good.

So indicates the General Accounting Office in a new, long-awaited report on PPS supplies bundling (GAO-03-878).

Because furnishing costly supplies for wound care and ostomies is so financially draining to HHAs, "patients who require costly supplies may have problems accessing home health care and the agencies that treat them may be financially disadvantaged," the GAO says in the report.

When it figured supplies costs into PPS rates, the Centers for Medicare & Medicaid Services added up supplies costs for a pool of patients and then divided the total cost over the total number of episodes. That means costly but relatively rare cases, such as ostomy patients, added little to the overall rate but actually cost a whopping amount per episode, explains Colin Cooke, a consultant for the United Ostomy Association.

Even CMS has admitted PPS reimbursement is sometimes too stingy. "CMS officials have acknowledged that payments may be too low for certain types of patients who require nonroutine medical supplies, such as those requiring wound-care supplies," the GAO notes.

"Everyone is getting short-changed" under the current bundling system, judges financial consultant Pat Laff with Laff Associates in Hilton Head Island, SC. HHAs are "getting creamed" when they take on wound care patients. That has led some agencies to stop accepting such patients, resulting in the access problems the GAO references.

But there appears to be no hard data to back up the commonly held idea that agencies aren't paid enough under PPS for some supplies. Although CMS "has asked home health agencies to report information on non-routine medical supply use and cost, they have not done so," the GAO chides. "Without this patient-specific supply data, CMS does not have the ability to determine whether the PPS needs to be adjusted ... or whether certain supplies should be excluded from the payment."

Because under PPS there is no revenue associated with supplies, HHAs strapped for time and resources haven't been reporting related cost data, laments Laff. Many agencies neglect to include supplies on their UB-92 claim forms or their cost reports, he says.

And PPS supplies-related billing glitches, such as the one that kicked out claims with itemized supplies charges for adjusted claims, haven't helped encourage agencies' supplies reporting, notes Bob Wardwell with the Visiting Nurse Associations of America.

In fact, current data show PPS episode payments are 35 percent higher than "average estimated episode cost," the GAO says. That margin could be a lot lower if all HHAs included their supplies costs in their data, experts say.

First Data-Gathering, Then Unbundling

Thus, the GAO urges CMS to find a way to collect and analyze supplies data, then modify PPS categories to better reimburse those costs. Only after taking those laborious steps should CMS consider unbundling costly medical supplies, the GAO recommends in the report.

The GAO's recommendations are "under-whelming," Wardwell judges. Likewise, Cooke notes "qualified disappointment" with the agency's conservative advice.

"Unbundling would be fabulous," says wound care nurse Patti Johnston, president of wound and ostomy management company Positive Outcomes Inc. in The Woodlands, TX. "It would take the financial burden off HHAs."

And it might encourage agencies that are now reluctant to use more advanced but pricier wound care products to switch over, Johnston predicts. That could benefit patients and cut down on HHAs' labor costs by reducing daily visits for dressing changes.

Unbundling would make life easier for suppliers that furnish ostomy and other chronic condition supplies to Medicare beneficiaries as well. Currently, when a patient starts a home health plan of care, the supplier has to stop furnishing the supplies because claims will be rejected for home health bundling. The supplier then generally resumes providing the supplies when the home health episode ends.

However, such coordination can be a headache and suppliers often furnish supplies they can't get paid for. Also, the patient sometimes sticks with a supplier the HHA uses instead of going back to the original supplier, experts note. Finally, depending on when the episode ends and when the agency submits its billing, supplies claims can get held up for weeks or even months.

The report is at www.gao.gov/new.items/d03878.pdf.