Budget:
FEDS PUSH FOR HHA RATE FREEZE
Published on Thu Feb 08, 2007
MedPac, CBO hammer proposals that cut Medicare home health spending
You'll have your work cut out for you in fending off a Medicare rate freeze for next year. Two more federal bodies are proposing cuts to Medicare reimbursement rates for home health agencies.
In its March 1 report to Congress, the Medicare Payment Advisory Commission carried out its January vote to recommend an HHA payment freeze for next year (see Eli's HCW, Vol. XVI, No. 3).
"Most agencies should be able to accommodate cost increases in 2008 without an increase in base payments," MedPAC says in the report advising Congress on Medicare reimbursement.
Main argument: MedPAC justifies the freeze by pointing out agencies' continued double-digit Medicare profit margins. MedPAC expects HHAs to have an average 16.8 percent margin in 2007 despite a rate freeze in 2006.
"There's nothing surprising" in MedPAC's report, notes William Dombi with the National Association for Home Care & Hospice's Center for Health Care Law. The recommendation closely mirrors MedPAC's proposals in previous years.
Agencies' margins have remained high despite freezes because they respond to incentives under the prospective payment system to reduce services, maintains Bob Wardwell with the Visiting Nurse Associations of America. "As agency operating costs increase, agencies have to reduce the volume of services within the average episode or go out of business," explains Wardwell, who headed up the design of PPS when he was at the Centers for Medicare & Medicaid Services.
"Episode costs have not increased dramatically because agencies have been forced to respond to the incentives deliberately included in the system," Wardwell argues.
The Commission cites good patient access, sustained care quality and higher numbers of both agencies furnishing and beneficiaries using home care as proof that agencies are doing well and thus aren't in need of a rate increase.
In fact, the number of Medicare-certified HHAs grew 25 percent between 2002 and 2006, to 8,802, the report says.
The high influx of HHAs into the program may mean more scrutiny ahead for an industry that has been relatively left alone after the interim payment system put one-third of agencies out of business in the late 1990s. Agency Growth Throws Up Red Flag "Hopefully it won't explode into an ORT-style situation," Dombi says. Under Operation Restore Trust in the late 1990s, regulators cracked down on many agencies in high-growth areas, running a number of them out of business.
The greatest growth in the numbers of agencies is concentrated in six states that gained more than 90 agencies between 2002 and 2006, the MedPAC report points out. California and Texas accounted for two-thirds of the growth during that time period.
The home health community needs to "be very concerned ... about the proliferation of agencies in the same areas of the country in [...]
