Medicare Compliance & Reimbursement

Patients might suffer equally.

Rebasing, reshuffled case mix, and reduced home health utilization are all adding up to a shrinking potential market for home health agencies (HHAs). And beneficiaries are likely to be hit by the inability of HHAs to attract the best potential caregivers.

In its proposed rule for the 2017 home health prospective payment system update, the Centers for Medicare & Medicaid Services (CMS) announces its plan to trim HHAs’ Medicare payment rates by 1 percent, slicing $180 million from 2017 payments.

Breakdown: “The proposed decrease reflects the effects of the 2.3 percent home health payment update percentage ($420 million increase); 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 ($420 million decrease); the effects of the -0.97 percent adjustment to the national, standardized 60-day episode payment rate to account for nominal case-mix growth for an impact of -0.9 percent ($160 million decrease); and the effects of the proposed increase to the fixed-dollar loss (FDL) ratio used in determining outlier payments from 0.45 to 0.56 for an estimate impact of -0.1 percent ($20 million decrease),” CMS says in a release about the rule it issued June 27.

The decrease may not be a big surprise. The National Association for Home Care & Hospice (NAHC) says the cut is within its “expectations given the 4-year phase-in of rate rebasing that started in 2014.”

But it’s still bad news for providers. The Visiting Nurse Associations of America “continues to be frustrated by CMS’s lack of acknowledgement that health care grows more expensive every year and their repeated reductions in home health care reimbursement,” says VNAAVP Joy Cameron. “At the same time that CMS is instituting new quality measures that will require additional measurement and data submission, further administrative protocols and mandatory demonstrations, our rates are reduced,” Cameron protests. “Home-based care is the backbone of quality and community choice and is an integral force in the health care marketplace,” she tells Eli.

“Continual reductions are a real problem,” stresses Chicago-based regulatory consultant Rebecca Friedman Zuber. That’s particularly true “for small agencies that provide a local safety net such as those that are county health department-based,” she says. HHAs that have to also deal with the pre-claim review demonstration will be especially hard pressed under declining reimbursement, Friedman Zuber adds.

“Agencies cannot continue to operate on reduced reimbursement,” claims attorney Robert Markette Jr. with Hall Render in Indianapolis. “Home health is seeing costs rise significantly due to the loss of the companionship services exemption and the employer mandate, yet CMS keeps reducing reimbursement.”

Breaking point: “Providers have been cutting costs and cutting costs to try to survive, but there are limits to what can be cut,” Markette maintains. The repeated rate reductions are starting to take a toll on HHAs’ ability to hire and retain staff, particularly, Markette notes.

“When you cannot afford to offer competitive pay and cannot afford raises, potential caregivers go elsewhere. One of my clients pointed out to me that they are losing potential home health aides to the local Amazon fulfillment center,” Markette tells Eli. “We see the same issue with nursing — hospitals and SNFs are able to offer RNs and LPNs better pay, which makes it a struggle for HHAs to obtain the staffing they need.”

Bottom line: “These ongoing cuts are going to create, if they are not already creating, access issues,” Markette warns.

HHAs’ Payments Outstrip Costs, According to Medicare

At least in this year’s rule, CMS didn’t ratchet up the case mix creep reduction as it has in some previous years. “Since the 0.97 percent reduction … for nominal case-mix growth from 2012 to 2014 was finalized in the CY 2016 HH PPS final rule, we did not consider alternatives to implementing this reduction for CY 2017,” CMS notes in the proposed rule scheduled for publication in the July 5 Federal Register.

CMS does claim, however, that HHAs’ payments continue to rise more quickly than their costs. Analysis of 2014 cost report and 2014 claims data “suggests that an even larger reduction (-5.30 percent) than the reduction described in the CY 2014 HH PPS final rule
(-3.45 percent) or the reductions described in the CY 2015 HH PPS final rule and the CY 2016 HH PPS proposed rule (-4.21 and -5.02 percent, respectively) would have been needed in order to align payments with costs,” says the rule.

CMS dismisses concerns about access to home care services as rebasing wears on — despite the fact that key indicators are all declining.

For example: The agency argues that these declining numbers aren’t necessarily due to the steadily falling Medicare reimbursement rate. Preliminary data indicates there was a decrease in hospital discharges of about 0.7 percent and a decrease in SNF days of about 0.9 percent in CY 2015.

“Any decreases in hospital discharges and skilled nursing facility days could, in turn, impact home health utilization as those settings serve as important sources of home health referrals,” CMS maintains in the rule.

And, as it and the Medicare Payment Advisory Commission have done often in past years, CMS points out a wider comparison. In 2015 “there were 2.9 HHAs per 10,000 FFS beneficiaries, which is still markedly higher than the 1.9 HHAs per 10,000 FFS beneficiaries before the implementation of the HH PPS methodology in 2001,” CMS notes. The rule does not point out that the 2001 number came after about one-third of the industry was put out of business by Medicare’s Interim Payment System that took effect in 1997.

Get Used to Annual Recalibrations

Figuring out exactly how you’re going to fare under the 2017 changes may prove difficult, because CMS is once again shuffling the case-mix system.

Reminder: In the 2015 HH PPS final rule, “we finalized a policy to annually recalibrate the HH PPS case-mix weights — adjusting the weights relative to one another — using the most current, complete data available,” CMS notes in the proposal.

The recalibration means “an apples-to-apples comparison between 2016 and 2017 is not easily done,” NAHC acknowledges.

Resource: You can see the proposed revised clinical and functional dimension thresholds in the rule in Table 7, and the new proposed case mix weights in Table 9.

In addition to LUPA and NRS changes, CMS is retaining the 3 percent rural add-on as required by law. “The 3 percent rural add-on is applied to the national, standardized 60-day episode payment rate, national per visit rates, and NRS conversion factor when HH services are provided in rural (non-CBSA) areas,” CMS reminds agencies in the rule. Right now, the rural add-on is set to expire Jan. 1, 2018.

CMS also makes big changes to how it reimburses HHAs for outliers and Negative Pressure Wound Therapy disposable devices.

Note: The rule is available at https://federalregister.gov/a/2016-15448. HHAs can submit comments until Sept. 4.