Medicare Compliance & Reimbursement

CMS action awaited to even the playing field for HHAs.

Home health agencies are keeping their fingers crossed that the Centers for Medicare & Medicaid Services will heed their pleas this year and correct the inequities of the current wage index system.

The problem: Home health agencies have to rely on the hospital-based wage index, but are not eligible for the reclassification exceptions that hospitals are.

Problems under that system include "the labor market distortions created by reclassification of hospitals in areas in which home health labor costs are not reclassified" and "the unpredictable year-to-year swings in wage index values that are often based on inaccurate or incomplete hospital cost reports," notes Nicole Fedeli-Turiano, legislative affairs director for Home Nursing Agency in Altoona, Pa., in her agency's comment letter on the 2013 home health prospective payment system proposed rule.

The inequities in the system have "for many years created a competitive advantage for hospitals in recruiting and retaining increasingly scarce nurses and therapists," says the Home Care Alliance of Massachusetts in its comment letter based on the rule published in the July 13 Federal Register.

For example: "In 2012 ... virtually every hospital in the state became eligible for a new rural floor based on wage data from a tiny hospital on Nantucket. Because Nantucket is a resort island with very high living costs, wages on the island are extremely high. As a result, the wage index -- and Medicare reimbursement rates -- for all hospitals in the state increased dramatically in 2012," HCAM relates. "In many CBSAs in the state, hospitals enjoy a wage index that is over 25 percent higher than the wage index for home health agencies in the same CBSA!"

Home health agencies across Massachusetts, who are "already at a serious competitive disadvantage, are absolutely unable to compete with their local hospitals for increasingly scarce nurses and therapists," HCAM concludes. "The result could very well be reduced or delayed access to home health services for Medicare beneficiaries in Massachusetts. The irony, of course, is that the wage index is supposed to be a method to REDUCE wage inequities."

Solution: Until it can set up a new wage index system, CMS should at least implement a policy to limit the wage index variation between provider types within a given CBSA to no more than 10 percent, HCAM urges.

Vermont agencies see wage index problems too, relates the Vermont Assembly of Home Health and Hospice Agencies in its comment letter. "There is no rational justification for a higher labor rate for hospitals than for home health when the two are in the same service area," VAHHA says. "All this does is put the home care agency at a significant competitive disadvantage."

Another solution: The labor rate for the home care agency should match the highest hospital rate in the same district, VAHHA proposes.

Agencies in rural areas also suffer from wage index inequities, notes Lafayette, La.-based LHC Group in its comment letter. "Beginning in FY 2004, CMS dropped critical access hospitals (CAHs) from its calculation of hospital wage indices," the national chain notes. "As CAHs are located in rural areas, the absence of CAH wage data further compromises the accuracy, and therefore the appropriateness, of using a hospital wage index to determine the labor costs of home health agencies located in rural areas."

Rural areas are disproportionately affected by artificially reduced rural wage indices, LHC insists. And the current method of adjusting labor costs using the hospital wage index does not accurately account for increased travel costs and lost productivity home care providers experience in serving rural areas, the company tells CMS.

"The dramatic swings in wage index values from one year to the next are obviously not a creature of real changes in wages," points out the National Association for Home Care & Hospice in its comment letter on the rule. "Instead, it is likely that these swings represent the use of inaccurate or corrupt data. Home health agencies are helpless with respect to the damage that can be done by bad hospital wage data."

Bottom line: "At a minimum, the home health wage index should put HHAs on a level playing field with hospitals and other care settings with respect to covering comparable labor costs and competing for staff that are employed in each care sector," NAHC says. "The current home health wage index does neither."

Another solution: NAHC would like to see "change corridors" that would limit annual changes in a CBSA. That would limit changes such as these extreme examples proposed in the 2013 wage index: a 22.5 percent increase for Bowling Green, a 15.5 percent increase for Napa, and a nearly 15 percent decrease for Yuba City.

Note: The 2013 PPS proposed rule is at www.gpo.gov/fdsys/pkg/FR-2012-07-13/pdf/2012-16836.pdf.