Home Health Groups Decry MedPAC Proposed Cuts As Too High

No cuts based on bogus calculations. That’s the message coming from some home health care industry groups after members of the Medicare Payment Advisory Commission (MedPAC) voted to increase cuts to home health reimbursements.

The commission, which is charged with recommending payment rates to Congress for the Prospective Payment System (PPS), voted on a 5% cut in reimbursement rates for home health agencies in 2018 during a recent meeting, and pointed to high operating margins on average as the justification. The cut would reduce spending by $750 million to $2 billion in 2018, with $10 billion in savings over the next decade.

The home care industry has taken issue with the average margin, which reached 15.6% in 2015, MedPAC reported. Marginal profit reached 18.1% during the same year, the commission said. With reimbursement cuts already in place to the tune of 0.7% or $130 million for 2016, estimated margins are expected to reach 13.7% on average in 2017.

Home care groups argue these margins don’t tell the whole story by not including the averages of all types of home health care agencies.

“This national estimate alone is questionable, as it does not consider any of the 1,500-plus agencies in the U.S. that are part of a hospital or skilled nursing facility,” Joanne Cunningham, president of the Home Care Association of New York State (HCA), wrote in a letter to the executive director of MedPAC, Mark Miller. “These facility-based agencies have distinct financial and operational structures from free-standing providers and are an important part of the home care continuum that must be considered in MedPAC’s analysis.”

These facilities, she writes, have an average un-weighted Medicare operating margin of -6.19%. In New York alone, which constitutes more than 20% of all Medicare-certified providers, the un-weighted operating margin is -32.53%, based on Medicare cost reports in 2014.

“As these and other numbers show, MedPAC’s sole reliance on nationwide margins—and its use of incomplete data in doing so—overlooks the significant variation in margins exhibited on a regional or state-by-state basis,” Cunningham wrote.

HCA urged MedPAC to amend its proposal and consider more inclusive data in its analysis.

The margins may also be out of whack with the consistent reductions in home health payments over the last few years. MedPAC’s reported margins show a “significant increase since 2014 despite the 4.5% reduction in payment rates,” the National Association for Home Care & Hospice (NAHC) wrote.

While associations critiqued aspects of MedPAC’s recommendation, there were some changes where all parties may agree—eliminating therapy visits as a payment factor. Instead, MedPAC proposed basing payments on patient characteristics.

NAHC supports the change and agrees the current model incentivizes utilizing more therapy for higher payments.

“NAHC has long supported eliminating or minimizing therapy utilization as a payment rate determinant,” the association wrote. “A utilization factor to define resource use in a prospective payment system is antithetical. Further, it incentivizes unnecessary utilization and therapy creates risks of abuse that lead to a negative image of home health agencies.”

While MedPAC makes recommendations on payment rates, Congress routinely does not adopt them.

Written by Amy Baxter

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Amy Baxter
Assistant Editor at Home Health Care News
When not writing about all things home health, Amy fulfills her lifelong dream of becoming a pirate by sailing in regattas and enjoying rum. Fun fact: she sailed 333 miles across Lake Michigan in the Chicago Yacht Club "Race to Mackinac."