Home Health & Hospice Week

The influential advisory body blasts agency profit margins in its latest recommendations.

The Medicare Payment Advisory Commission has dealt a serious blow to home health agencies hoping to fend off major Medicare payment cuts next year.

In its Jan. 8 meeting, the influential advisory body to Congress approved three recommendations that will likely result in cuts of at least 10 percent to Medicare payment rates over the next few years.

In a set of three recommendations MedPAC will include in its March report to Congress, the commission pushes:

1) Eliminating the inflation update for 2010 and moving up the last year of cuts for supposed case mix creep. The Centers for Medicare & Medicaid Services already has a 2.75 percent cut slated for next year due to the case mix creep issue, but MedPAC wants 2011's scheduled 2.71 percent cut added to it, which would result in a nearly 5.5 percent cut overall.

The cut would result in $1 billion to $5 billion less in HHA payments next year and up to $10 billion less over the next five years, MedPAC notes.

2) Rebasing the prospective payment system base payment rate to reflect the average cost of providing care. MedPAC claims the current base rate is much too high because average HHA visits per episode have fallen from about 32 in the PPS base year to about 22 now.

A rough projection puts the payment impact of rebasing at another 5 percent cut, said MedPAC staffer Evan Christman in the meeting.

3) Using quality measures and other payment reforms to reduce payments fairly for agencies. The commission has mechanisms like caps on profits in mind with this vague recommendation, says the National Association for Home Care & Hospice.

As MedPAC pointed out in its December meeting, it's been eager to cut HHA payment rates due to high industry profit margins. The 2007 margin for agencies is 16.6 percent, Christman noted in the Jan. 8 session. Even though the 2009 margin is projected to fall by more than 25 percent to 12.2 percent, MedPAC still thinks that average is too high.

"More aggressive changes are necessary," Christman stressed.

Even the drastic cuts proposed shouldn't hurt Medicare beneficiaries' access to home care, Christman maintained. "We expect that a change of this magnitude would result in some agencies leaving the program," Christman admitted. But because access was fine five years ago when there were about 2,400 fewer agencies in the program, "we would expect that access to care would remain adequate."

Therefore, "we expect that this [recommendation] ... would have no impact on providers' willingness or ability to serve Medicare beneficiaries," MedPAC's report will say.