MedPAC Says Home Health Margins Too High, Fraud Rampant

Integrity remains at the heart of ongoing discussions about home health care reimbursements, and rampant fraud could be cause for further payment cuts.

With overpayments remaining high across the home health industry, more payment reductions are called for, as rebasing attempts to bring reimbursement rates in line with costs, members of the Medicare Payment Advisory Commission (MedPAC) said during a recent meeting.

Home health providers should also be worried that MedPAC members think recent reimbursement cuts are too small. For CY2017, Medicare home health payments will be cut $130 million, or 0.7%.


Fraud and Payment Reductions

Medicare spent $18.1 billion on home health services in 2015, with the program providing about 6.6 million episodes to 3.5 million beneficiaries. There were more than 12,300 home health care agencies. The commission has expressed that reimbursement cuts for home health should be steeper.

Medicare has reportedly overpaid for home health services since the prospective payment system was established in 2000, MedPAC concluded at its December meeting.


“The fact that home health can be a high-value service does not justify the excessive overpayments,” Jon B. Christianson, vice chair of MedPAC, said during the meeting.

The commission noted that there have been several regulations and attempts to curb fraud recently, including the Pre-Claim Review Review Demonstration (PCRD). Yet, the problem persists, and efforts like PCRD may not be making much headway to combat the issue.

“There has been significant recent activity on this front, including a moratorium on new provider enrollment and some areas and efforts to implement a pre-claim review process,” Christianson said. “The Secretary and the Attorney General have made a number of efforts to address fraud in this benefit, but many patterns of unusual utilization suggestive of fraud remain.”

Additionally, “geographic variation and utilization” may contribute to fraud throughout the home health benefit, the committee concluded.

Another area that may be ripe for fraud surrounds therapy reimbursement rates, which incentivize agencies to provide higher levels of care for higher reimbursement rates. This trend has contributed to higher average payment per episode in 2015, according to MedPAC.

Eligibility for home health benefit is “poorly defined,” despite a rapid growth in episode volume, the commission noted. This trend is cause for concern, Christianson said, as providers are rewarded for additional service under a fee-for-service model.

Industry Highlights

There were some bright spots across the industry, such as the fact that 99% of beneficiaries live in an area served by at least one home health agency, and many live in areas served by five or more agencies. The number of home health agencies also remains near its all-time high reached in 2013, despite a drop of 115 agencies in 2015.

Some of the biggest home health care companies also seem to have adequate access to capital, the commission suggested, hailing recent deals by Almost Family (Nasdaq: AFAM) and LHC Group (Nasdaq: LHCG) as prime examples.

Margins for home health agencies were 15.6% in 2015, with a recent CMS audit showing that costs were overstated by 8%, the commission said. These high margins could be cause to continue reducing reimbursement rates. However, industry association the National Association for Home Care & Hospice (NAHC) strongly disagrees, calling MedPAC’s calculations of costs unreliable.

“NAHC has and will continued to oppose MedPAC recommendations on rate reductions as the MedPAC Medicare margin analysis continues to fail the test of reliability,” NAHC stated on its website. “For example MedPAC does not consider all costs when calculating margins.”

Written by Amy Baxter

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