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MedPAC Recommends Congress to Reduce Medicare Payment Rates by 5% to Home Health Agencies

Posted on Friday, February 3, 2017 8:48 PM

The Medicare Payment Advisory Commission (MedPAC) is encouraging Congress to reduce annual Medicare payment rates to home health agencies by 5%. In addition, MedPAC is recommending Congress to implement a two-year rebasing of the payment system starting in 2019. On January 12, the commission voted on the recommendations,

According to industry experts, “The new MedPAC recommendations could reduce 2018 spending on agencies by $2 billion. Such a large cut in rates would mean the end for some agencies and a serious hardship for others.”

In recent years, Congress has rejected MedPAC’s recommendations — and it likely will do so again this year, says Bill Dombi, Vice President of the National Association for Home Care & Hospice (NAHC).

Instead of having debates about payment rates, the new Congress is more likely to focus on “guiding Medicare into a new generation with value-based purchasing, outcome-oriented reimbursement policies and integrated care,” Dombi says. “Still, we must not ignore the MedPAC recommendations, because unfounded allegations of provider overpayments could affect how the payment system innovations are constructed.”

And if Congress does side this year with MedPAC about a 5% cut, that would devastate the home health industry, adds attorney Robert Markette of Indianapolis based all, Render, Killian, Heath & Lyman.

“A lot of providers would not survive,” he says. “I doubt that Congress will adopt this 5% cut, but at the same time, home health agencies are not likely to see a huge rate increase next year.”

During its meeting, MedPAC also recommended that payments to hospices remain flat.
Last year, MedPAC recommended rate rebasing and freezing of payment rates for home health agencies, Dombi notes.

“We think the recommendation is based upon insufficient information relative to what it takes to maintain access to care,” Dombi says. “They really don’t appreciate all the costs that there are.”

During the Jan. 12 meeting, MedPAC members discussed how home health profit margins are high compared to the cost of caring for patients.

MedPAC studies for 2015 showed free-standing providers had margins of 15.6%, according to NAHC. That was a large increase from 2014 — despite a reduction in payment rates.

Revising payment systems for the home health and skilled nursing facility industries would “correct flaws,” MedPAC Director Dr. Francis “Jay” Crosson said at the meeting.

The cost of not implementing the commission’s update recommendations in prior years was substantial, Crosson said.

“For example, had the 2008 recommendations to eliminate the updates to payments for home health agencies and (skilled nursing facilities) been implemented, we estimate that fee-for-service spending between 2009 and 2016 would be $11 billion lower today, all else being equal.”

“As a result, our recommendation will include a clause calling for the end of therapy visits as a payment factor and would make the system fully prospective by basing
payments solely on patient characteristics,” MedPAC’s presentation states. “Implementing this change would be budget neutral, and it would effectively move money from agencies that do more therapy on average to those that do less.”

MedPAC sees home health agencies as having excessive profit margins and being fraught with fraud, which is why the committee of government appointees constantly calls for more cuts, Markette says.

If that were true — and it’s not— the entire industry should be eliminated, he says. Instead, agencies are growing because home health is a much-needed industry.

When calculating what pay rates should be, MedPAC doesn’t include day-to-day operations including telehealth services, taxes paid and marketing costs, which in today’s competitive environment is not even an option, Dombi adds.

The Affordable Care Act’s employer mandate has been another big hit, as has CMS’ pre-claim review, Dombi says.

“Beyond that, they do a number of other things to support their recommendations, like ignoring 1,200 home health agencies that are part of a health system in the Midwest and rural areas where care is more expensive there,” Dombi says.

Fortunately for the home health industry, Congress is more focused on how providers are paid than on what providers are paid, Dombi says.

“Congress is more focused on innovations that recognize value,” he says. “They want to see patient outcomes. Part of value is outcomes overall, and that’s why you see bundle
payments and accountable care organizations.”

For the full article, please see the February 6, 2017 Home Health Line Edition.

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