Medicare Compliance & Reimbursement

Medicare issues final regulations on 'Medicare Advantage' MCOs

To industry veterans, the rise of Medicare managed care seems like a blast from the past. But this time around, home health agencies are in a better position to take advantage of the trend, experts say.

Medicare managed care, now called the "Medicare Advantage" program, is back with a vengeance thanks to newly increased payment rates to MCOs. The Medicare Modernization Act passed in 2003 mandated higher payment rates and more contracting flexibility for MA plans.

Now, the Centers for Medicare & Medicaid Services has issued final regulations on the MA changes.

MCOs plodded along for years before figuring out they weren't profiting under the old Medicare reimbursement rates, notes consultant Alison Cherney with Brentwood, TN-based Cherney & Associates. But once they realized their plight, MCOs exited many markets very quickly in the late 1990s.

For the most part, home care providers were happy to see Medicare MCOs go. Plans often curbed utilization severely compared to fee-for-service Medicare, required lots of paperwork and red tape, and paid comparatively low rates.

But now those MCOs are coming back - many are already advertising on radio stations for beneficiary enrollees, Cherney notes.

Good news: HHAs are much better poised to handle managed care business these days, Cherney believes. Under the interim and prospective payment systems, successful agencies have tightened their belts while still providing high quality care. HHAs have managed costs by cutting visits and overhead, while maintaining or boosting patient outcomes.

That gives providers the perfect tools to contract with MCOs, Cherney urges. "It's very good timing for agencies," she cheers.

Caveat: But of course, a managed care environment won't be a bed of roses for home care providers. HHAs in many areas face stiff competition, notes managed care expert Martin Hadelman, president of Advisors for Health Care in Roswell, GA. That will drive down MCOs' payment rates to home care providers and result in quite low margins compared to regular Medicare, Hadelman predicts.

And some Medicare MCOs may be planning to charge a copayment for home care visits, industry representatives indicated in the Jan. 25 Open Door Forum for home care providers.

But if HHAs don't choose to interact with MA plans, they could lose a significant chunk of business as time goes on and Medicare MCOs flourish. CMS officials have said they hope to see half of Medicare beneficiaries in MA plans eventually.