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Home Health & Hospice Week

Budget:

PRESIDENT'S PROPOSED RATE CUTS THREATEN HHAs

Published on Mon Feb 09, 2009

President's and MedPAC's recommendations a double whammy.

Home health agencies' honeymoon with new president Barack Obama appears to be over.

HHAs were hopeful that the Obama administration would be supportive of the home care benefit, judging from comments Obama and his advisers made on the campaign trail. But in the budget blueprint the president released Feb. 27, Obama calls for $550 million in cuts to home health in 2010 and a whopping $37 billion over 10 years.

That translates to a 3.4 percent cut to HHA rates next year and a 6 percent cut in 2011, says the Visiting Nurse Associations of America. The budget outline is light on details, saying only that the cuts would "improve Medicare home health payments to align with costs." The cuts would include a freeze on inflation updates for five years, says the National Association for Home Care & Hospice.

Watch out: Combined with the recommendations the Medicare Payment Advisory Commission makes in its March report to Congress, the president's budget proposal could deal a deadly blow to HHA rates. The recommendations MedPAC approved in its January meeting (see Eli's HCW, Vol.XVIII, No. 3, p. 18) would eliminate the inflation updates, rebase HHA rates to reflect the average cost of care, and restructure payment based on quality of care and incentives.

"VNAA is extremely disappointed with the proposed cuts," the trade group says in a release."They are inconsistent with President Obama's initial statements about home healthcare."

"MedPAC, and now apparently the President, fail to grasp the impact that continued acrossthe-board cuts will have on patient access to the home health benefit," VNAA continues. "While it is true that some home health agencies have generated high profits under Medicare, there are many agencies that lose money or just break even."

The cuts would push 70 percent of HHAs' operating margins into the red, NAHC warns. Obama's proposed health care reform "must not be accomplished on the backs of those who are so sick with multiple and complex medical problems that they cannot leave home without assistance," NAHC's Val Halamandaris says in a statement.

The budget should support adequate payment for post-acute services to prevent unnecessary hospitalizations, urges the Leadership Council of Aging Organizations in a letter to the president. "Adequate reimbursement under Medicare is critical to ensure that post acute care providers are able to meet the cost of recruiting, training and retaining qualified staff as well as other essential operations."

Investors are taking notice of the threats to providers. Stock prices for publicly traded chains like Gentiva Health Services Inc., LHC Group Inc., Amedisys Inc., and Almost Family Inc. all dropped significantly after the budget proposal's release.

No hospice cuts: Neither the president nor MedPAC has yet proposed any cuts to hospice rates.

P4P, Hospital Bundling On The Horizon

Other budget proposals that could affect home care providers less directly include those for increased fraud-fighting and payment reforms. The Obama administration plans to cut $20 billion from Medicare spending by increased program integrity activities, NAHC reports.

Enhanced funding for fraud-fighting will enable "the Centers for Medicare & Medicaid Services to more rapidly respond to emerging program integrity vulnerabilities, identify excessive payments, and establish new processes for correcting problems," the proposal says.

The president also wants to start paying hospitals based on pay for performance (P4P) and bundling hospital and physician services for payment. If successful, these ideas could quickly spread to home care, experts predict.

Bright spot: The president proposes to cut funding for Medicare Advantage plans by subjecting them to competitive bidding, among other changes. HHAs hope this would lead to fewer beneficiaries enrolled in the programs and fewer MA-relatedheadaches for benes and providers.

A proposal to give hospitals a bundled payment that would include the hospital stay and postacute services for 30 days after discharge is concerning some home care providers. The measure aims to reduce re-hospitalizations after discharge,which currently stand at 18 percent, the budget proposal says. HHAs fear they wouldn't get fair payment from hospitals under the arrangement.

On the other hand, the emphasis on reducing readmissions could boost home care's presence for post-acute patients, suggests the National Association for Independent Medical Equipment Suppliers. The president expects to cut $17.8 billion over 10 years on the measure.

What's ahead: The president's budget proposal and MedPAC's congressional report are the opening shots in a budget battle that is expected to wage all year. Providers can expect to see actual budget legislation, including possible cuts not even proposed yet, finalized at the end of the congressional session.

Note: The MedPAC report is at www.medpac.gov/documents/Mar09_EntireReport.pdf.

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