Medicare Compliance & Reimbursement

The 1.4-percent cut means you’ll have to make do with less.

Experts fear that many home health agencies (HHAs) might have to shut down, thereby significantly reducing access to home-based healthcare for many patients who need it, thanks to the reimbursement cuts announced recently.

The bad news: The Centers for Medicare & Medicaid Services (CMS) issued its 2016 Home Health Prospective Payment System final rule on Oct. 29, and it retains a reimbursement cut for home health agency rates.

The good news: CMS scaled back the cut from 1.8 percent (an estimated $350 million) in the proposed rule to 1.4 percent ($260 million). The improvement is due to a change in the cut for so-called case mix creep. Many commenters urged CMS to eliminate the case mix creep reduction altogether.

CMS didn’t go that far, but it did reduce the cut from 3.41 percent in the proposed rule to 2.88 percent in the final rule. The agency also spread the cut over three years (2016 to 2018) rather than the originally proposed two years. Each of the three years will see a 0.97 reduction. “Implementing the case-mix reduction over three years gives home health agencies more time to adjust to the intended reduction of 2.88 percent than would be the case were we to account for the nominal case-mix growth in two years,” CMS notes in the final rule.

The math: The 1.4 percent decrease “reflects the effects of the 1.9 percent home health payment update percentage ($345 million increase); a 0.9 percent decrease in payments due to the 0.97 percent payment reduction … to account for nominal case-mix growth from 2012 through 2014 ($165 million decrease); and a 2.4 percent decrease in payments due to the third year of the four-year phase-in of the rebasing adjustments to the national, standardized 60-day episode payment rate, the national per-visit payment rates, and the non-routine medical supplies (NRS) conversion factor ($440 million decrease),” CMS explains in a release.

The base episode payment rate actually goes up in 2016, to $2,965.12 (from $2,961.38 this year). But the payment reductions take place in the other payment mechanisms (case mix, etc.). The base episode pay rate for rural areas is $3,054.07.

CMS batted down criticism that making cuts for supposed case mix creep contradicts congressional intent. “This policy reflects our goal to better align Medicare reimbursement with real changes in patient severity,” the agency maintains in the rule.

CMS also was unswayed by the many commenters on the rule who insisted that sustained cuts for case mix creep, rebasing and other reasons would close agency doors and reduce patient access. The Medicare Payment Advisory Commission (MedPAC) estimates a 10.3 percent average profit margin for HHAs in 2015, the agency points out in the rule. “As a result of the payment update offsets to the rebasing adjustments, HHA margins are likely to remain high under the current rebasing policy and quality of care and beneficiary access to care are unlikely to be negatively affected,” CMS notes.

CMS also cites MedPAC’s assertion that “low cost growth or no cost growth has been typical for home health care, and in some years we have observed a decline in cost per episode. The ability of HHAs to keep costs low has contributed to the high margins under the Medicare PPS.”

Bottom line: The rapid growth in the number of HHAs since 2000 means “even if some HHAs were to exit the program due to possible reimbursement concerns, we would expect the home health market to remain robust,” CMS concludes.

Having a scaled-back cut for case mix creep is helpful, acknowledges attorney Robert Markette Jr. with Hall Render in Indianapolis. But the overall 1.4 percent cut still will be “problematic” for many agencies, Markette expects.

Chicago-based regulatory consultant Rebecca Friedman Zuber is frustrated that “there is little recognition on the part of CMS regarding the actual points the industry is making on the issue of coding creep,” Zuber tells Eli.

“The toughest thing to deal with is just the constant and ongoing degradation of payments accompanied by the growing expectations for sophisticated management and administrative costs,” Zuber maintains. “CMS’s contention that they cannot isolate those providers who are creating the coding creep and so therefore across the board cuts are justified just isn’t satisfactory. This is a complex payment system, and we know there are cheaters. Let’s find them and leave the rest alone.”

Plus: “Providers must try to use the payment system to cover their costs — then they get accused of manipulation. It’s is a depressing, continuous downward pressure,” Zuber concludes.

And that pressure doesn’t look to let up any time soon. “We can look forward to continuing case mix creep cuts in coming years, which means it may be 2019 before agencies see any real increase in home health reimbursement,” Markette warns.

Do this: “The projected reduction in home health spending of 1.4 percent, at a time when other factors are increasing provider costs, means home health providers will need to work harder to further reduce operating costs,” Hall Render advises in an analysis of the rule.

Note: The rule is in the Nov. 5 Federal Register at www.gpo.gov/fdsys/pkg/FR-2015-11-05/pdf/2015-27931.pdf.