Medicare Compliance & Reimbursement

Advisory body favors cuts due to high HHA profit margins.

The fight will be on in Congress next year over Medicaids home health agency payment rates.

The Medicare Payment Advisory Commission is considering which of two recommendations it wants to give Congress in its March report.

Bad: The influential advisory body to Congress may recommend another rate freeze for 2010, it said in a Dec. 4 meeting. That draft recommendation is based on the average 12.2 percent profit margin it projects for HHAs in 2009.

Worse: Or MedPAC may go a step further and recommend no inflation update plus a 5 percent cut. That would be a 7.71 percent cut added with the case-mix creep reduction already slated for that year, or a more-than-10 percent cut from what rates would be if the market basket inflation factor were allowed to go through.

MedPAC staff has definitely set the stage for a heated contest on what MedPAC should ultimately recommend, notes the National Association for Home Care & Hospice. Further, they have fired the first salvo in the 2009 legislative battle for home care.

Part of MedPACs concern rises from the industrys significant growth. While HHA numbers still havent reached the 1997 peak, the number of agencies has increased more than 30 percent from 2003 to 2008 with nearly 9,700 providers, MedPAC staffer Evan Christman pointed out.

Therapy use surges: Some types of services have risen more than others. Therapy-intensive episodes rose from 0.9 percent of all episodes in 2002 to 1.6 percent in 2007 -- nearly 12 percent.

Utilization is one big reason for the agencys perceived overly generous payment rates. The Centers for Medicare & Medicaid Services based its prospective payment system rates on historical data that showed 31.6 visits per episode time, Christman said. But in reality, HHAs now furnish an average of 22 visits per episode.

Threat: If the industry doesnt take care of itself, then maybe we should, declared commissioner George Miller, who heads up hospital chain Catholic Health Partners in Springfield, Ohio. That will send a lesson because these margins are just ungodly, quite frankly.

Commissioners shouldnt think of zero as the absolute lowest one can go, urged commissioner Jack Ebeler, a former Health and Human Services staffer and current consultant. Cuts can be necessary, Ebeler said.

Cooler heads: While a number of commissioners seemed thirsty for HHA budget blood, others pointed out the problem of across-the-board cuts when margins range so widely. In 2007, the average profit margin for an agency at the 25th percentile is 3.1 percent while the average at the 75th percentile is 26.3 percent, Christman noted.

The gap is about 20 percent greater than that for skilled nursing facilities, pointed out commissioner Mitra Behroozi, head of 1199SEIU Benefit and Pension Funds and an attorney. You dont want to hurt the ones who may be at low margins but doing the right things, Behroozi said in the meeting.

There is concern about pulling a number arbitrarily out of the air, added commissioner Arnold Milstein of employer health care purchasing coalition Pacific Business Group on Health.

Timeline: Commissioners will vote on a recommendation in their January meeting and will include the measure in MedPACs annual March report to Congress.