Home Health Industry Divided on Severity of Pre-Claim Threat

Whenever policymakers aim potentially controversial or burdensome regulations at the home health industry, stakeholders big and small typically march in lockstep to ward off attacks.

But this year’s proposed iteration of pre-claim review appears to be an exception. There is a noticeable divide between larger home health providers and smaller ones—and a more muted overall response than what might be expected.

Industry concerns surrounding pre-claim were highlighted during a public commenting period on the proposal that closed earlier this week, with the vast majority of commenters in staunch opposition.


Nonetheless, there’s evidence that large, powerful voices in the health care industry are not mobilizing against pre-claim with much vigor.

“I was actually having breakfast with someone from a pretty large health system, and this person made a comment saying it’s not a big deal, that everybody should just kind of roll with it and it’s all fine,” Cindy Krafft, co-owner of consultant firm Kornetti & Krafft Health Care Solutions, told Home Health Care News. “I think a larger organization’s [pre-claim] experience is different because they have more resources in terms of managing the mechanics of the process.”

The new iteration of pre-claim was announced in May and is known as the Review Choice Demonstration (RCD). It resurrects the Pre-Claim Review Demonstration (PCRD) that took effect in Illinois in 2016, leading to industry upheaval and a huge outcry from providers, who said that the program was burdensome, poorly administered, and that it threatened to choke their cash flow and force them out of business.


The 2018 version of pre-claim is similar to the 2016 version, though it does have differences.

Unlike CMS’ PCRD trial run, RCD gives home health agencies the option to forgo prior authorization in favor of post-payment review. Both models let providers completely opt out of the process, as long as they agree to take a 25% reduction on all payments for claims submitted.

Additionally, CMS’ new proposal gives home health agencies with high claims approval rates the chance to skip full review and only take part in a spot check to ensure continued compliance.

These changes might help explain providers’ more tempered response this time around. Yet industry consultants, lobbyists and legal experts warn that RCD is not a proposal to take lightly.

Larger providers appear undaunted by RCD

In general, larger providers seem undaunted by RCD, either because they won’t be immediately impacted by a potential demonstration or because they’re confident in thriving under the proposed model.

For smaller providers, many of which are already strapped operationally and financially, RCD can be the final straw that breaks the camel’s back, however.

“[PCRD] did add extra time, cost and resource burdens to all agencies and was especially tough on small agencies where employees wear many hats,” Sara Ratcliffe, executive director of the Illinois HomeCare & Hospice Council, told HHCN in an email. “We think this added burden runs counter to CMS’ efforts to prioritize patients over paperwork.”

RCD tentatively will be implemented in a staggered manner, starting in Illinois, then expanding to Ohio and North Carolina, and later to Texas and Florida.

Claims review would be carried out by Medicare Administrative Contractor (MAC) Palmetto/JM.

“We believe RCD is better than the previous program, primarily by providing a way for providers to come off the program for good performance,” Encompass Health Corporation (NYSE: EHC) President and CEO Mark Tarr said during a call with investors on July 26. “We believe we are prepared for this demonstration and have been working with Palmetto, the MAC-included in the demonstration, to better automate the review process as much as possible.”

On a combined basis, Birmingham, Alabama-based Encompass Health’s home health locations in RCD states represent 47% of its 2017 home health Medicare Revenues, according to Tarr.

Amedisys, Inc. (Nasdaq: AMED) and LHC Group (Nasdaq: LHCG)—both headquartered in Louisiana—have made similar remarks during past investor calls as well.

Comment window highlights concerns

There are roughly 12,000 Medicare-certified home health agencies in the United States, according to CMS data.

Despite that robust population and pre-claim review being a hot-button issue, CMS only received less than 470 public comments while its 60-day RCD feedback window remained open. The public comment period officially closed just before midnight Eastern Time on Monday.

“My fear right now, as it was the first time, is that [pre-claim] is only seen as an Illinois issue because it hit Illinois first last time and Illinois is going first again,” Krafft said. “[The number of comments] is a pittance compared to how many providers there are.”

The vast major of publicly filed comments were against pre-claim review.

“Given how unsuccessful the pre-claim review demonstration was the first time, I am surprised to see it back,” one anonymous commenter from Ohio wrote. “Pre-claim review does nothing but slow the whole system down.”

Likewise, the majority of comments came in the past couple weeks in a final push. As of July 15, there were fewer than 70 total RCD comments filed.

“I have experienced pre-claim review firsthand in Illinois,” an anonymous commenter from Illinois wrote. “It was a disaster.”

When PCRD was introduced in 2016, CMS did not offer a formal comment period.

Nationwide ambitions and unanswered questions

The fact that North Carolina was included in CMS’ proposal likely means the agency has its sights set on expanding the demonstration nationwide, Matthew Wolfe, a partner at the North-Carolina based health care legal firm Parker Poe, told HHCN.

North Carolina does not have a reputation for being a high fraud or high error rate state, Wolfe said, so it wouldn’t make sense to include the state in the demonstration unless it’s to sample regional impact.

“This really is something every home health provider should be thinking about, no matter where they’re located,” he said. “With North Carolina being included, that suggests CMS has nationwide ambitions, otherwise it would have just focused on states of higher [improper billing] concern.”

Previously, PCRD targeted Illinois, Florida, Texas, Michigan and Massachusetts.

IHHC is “strongly advocating” that agencies proven to perform well under PCRD be exempt from RCD, Ratcliffe said.

“The current regulatory environment distracts from patient-centered care and turns clinicians into paper-pushers,” she said. “Some small agencies feel forced to discontinue their home health services because the administrative burden is too high, consequences are dire and reimbursements are waning.”

The industry may be torn on RCD’s administrative impact, but it’s hard to ignore pre-claim reviews’ alleged success in reducing government spending.

Estimates have found that the 2016 implementation of pre-claim in Illinois alone eventually contributed to a $100 million reduction, with spending staying down even after the demonstration was paused.

Still, some say CMS has not adequately analyzed pre-claim’s effect on the home health industry and that savings estimates are deeply flawed. There may have been a noticeable reduction in spending, but that could be tied to agencies going out of business because of the extra administrative burden, critics argue.

“You don’t know if the agencies that did close in Illinois ended up doing so specifically because of pre-claim—there isn’t a box or anything that they check for reasons why they closed,” Krafft said. “But you do wonder if that was just the one thing too many they couldn’t manage effectively.”

Similarly, even if Medicare home health spending did indeed fall, that doesn’t mean overall health care spending decreased, critics claim. Theoretically, patients could have pursued care in more expensive settings as a result of agencies closing their doors and home-based care becoming less accessible.

“When I hear that $100 million number and that spending even stayed down, it leaves me wondering where those patients went, where those services went,” Wolfe said. “Did pre-claim actually have a positive affect on health care spending … or did it actually just shift costs to other settings, to hospital settings, to [skilled nursing facility] settings?”

CMS proposing to re-start pre-claim before questions have been answered and lessons publicly shared has been “challenging,” Wolfe said.

Written by Robert Holly

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