Home Health Closures, Mergers Expected Under Medicare Proposal

Newly proposed Medicare payment policies for 2016 likely will create advantages for larger providers and stimulate merger and acquisition activity, while smaller players could be forced out of business, industry leaders and market analysts say.

Home health agencies (HHAs) would see an overall $350 million reduction in Medicare payments in calendar year 2016 if the proposed rule from the Centers for Medicare & Medicaid Services is finalized.

While some of these cuts were anticipated, such as a rate rebasing being phased in over four years, the proposal still represents a major blow to providers.

“The impact of the rate rebasing requirement in and of itself will force many agencies already teetering on the brink to close their doors,” said Val J. Halamandaris, president of the National Association for Home Care & Hospice, in a statement. “The additional cuts, along with them the veiled and inaccurate accusation that all home health agencies are abusing the Medicare program, may very well be the straw that breaks the camel’s back.”

Part of the issue is that the year-to-year difference is dramatic, as the $60 million payment reduction between 2014 and 2015 was modest by comparison, Molly Smith, vice president of policy and innovation at the Visiting Nurse Associations of America (VNAA), tells HHCN. The organization represents represents nonprofit home health care and hospice agencies in over 40 states, with a membership base of more than 160 agencies.

In addition to the payment cuts, the proposed rule puts forward a new value based purchasing model. This would tie an agency’s payments to its quality measures. CMS has proposed implementing the model for all agencies in nine states still to be selected.

VNAA supports the move to tie payments to performance but fears that the payment cuts will undermine the success of the new model, president and CEO Tracey Moorhead said in a prepared statement issued Tuesday.

Also, larger providers could be better positioned for success under the HHVBP model, Smith tells HHCN.

“When you get into value based purchasing, you need to have particularly robust data analytics to be monitoring your performance more in real time than CMS is going to be giving it to you, which is quarterly,” she says.

Larger providers with more resources would find it easier to invest in this type of tracking, if they haven’t already, she notes.

Smith is not alone in her belief that the proposed rule favors larger providers.

“We view it as highly likely that clinical outcomes at the large public players stack up quite favorable and that these companies are the ultimate winners in an environment with an increased portion of reimbursement tied to quality of care,” wrote SunTrust Robinson Humphrey analyst David MacDonald in a report released Tuesday.

The report also states that the increased focus on care quality created by the VBP model can be expected to drive even more deals in an already “frothy” merger and acquisition market, Benzinga reported.

In addition to the challenges it could pose to smaller operations, VNAA’s Smith has a number of other concerns about the proposed value based purchasing model. One is that providers would be facing a 5% payment adjustment right off the bat in 2016, with the risk/reward ultimately escalating to 8% by the time the model ends in 2022.

No other provider type doing VBP has faced such high percentages, Smith says. Doctors and hospitals are between 1% and 3%, she says.

The HHVBP also could be beset by an issue that plagues home health quality measures generally, she adds, which is that outcome measures are based on how much a patient’s condition improves.

This ignores the fact that many people receiving home health will never improve, and the goal of care is to maintain a particular status or slow decline. The lack of stabilization measures has persisted even after the verdict in a high-profile lawsuit, which established Medicare reimbursements cannot be withheld simply because a beneficiary’s condition is not improving.

And then there’s the fact that of the 29 quality measures that providers will be judged on, four are entirely new: Adverse Event for Improper Medication Administration and/or Side Effects; Influenza Vaccination Coverage for Home Health Care Personnel; Herpes Zoster (Shingles) Vaccination; and Advanced Care Plan.

While providers will be evaluated only on whether they report these measures and not on how they perform on them, they are untested, Smith says.

Still, Smith believes that VNAA members have the quality outcomes to achieve success under the new model. And she remains “very supportive” of value based purchasing as a concept.

“I’m still really mulling this over in my mind, the specific provisions of this rule,” she says. “Honestly, I almost want us to move faster. It’s a seven-year program. What’s going to happen to the rest of the industry in those seven years?”

Written by Tim Mullaney