How CMS Could Prevent Home Health Deserts Caused by PDGM

The U.S. Centers for Medicare & Medicaid Services (CMS) may have to get creative if it wants to avoid the formation of home health deserts in 2020 and beyond.

One possible solution: revisiting the current six-year overpayment lookback rule.

As part of its efforts to curb fraud, waste and abuse, CMS finalized a rule in February 2016 requiring Medicare health care providers to report and return any overpayments that occur within a six-year window. If providers don’t self-identify an overpayment, the rule gives Medicare Administrative Contractors (MACs) the ability to demand repayment on behalf of CMS.


“Our general aim of this final rule is to strengthen program integrity and to ensure that the Medicare Trust Funds are protected and made whole and that taxpayer dollars are not wasted,” CMS officials said at the time.

Because that six-year lookback exists, home health providers need to tread carefully when exploring any acquisitions that are on the table. Buyers could mitigate some risk through the structure and terms of the acquisition agreement itself, but options may be limited when a selling agency is exiting the market due to financial hardship, according to Matt Wolfe, a partner at law firm Parker Poe.

“There’s a scenario where Agency A buys Agency B, and Agency B’s claims are audited from four years ago with Medicare demanding $2 million back,” Wolfe said. “Because Agency A bought that other business, they could say, ‘Hey, look. You know, Medicare is saying we owe that money back. If that’s right, you need to be on the hook for paying.’ But it doesn’t work if you’ve got a defunct agency you’re dealing with.”


So, what does that six-year lookback have to do with the formation of home health deserts?

When the Prospective Payment System (PPS) went into effect, thousands of home health agencies went out of business. Some industry insiders expect to see a similar trend with the Patient-Driven Groupings Model (PDGM), a Medicare payment overhaul that requires many providers to do more with less.

That trend becomes even more likely considering CMS’s plans to eliminate Requests for Anticipated Payment (RAPs) and phase out rural add-on payments.

“At some point, this could be like food deserts,” Amedisys Inc. (Nasdaq: AMED) President and CEO Paul Kusserow said Wednesday during a Q4 earnings call. “There could potentially be home health deserts, particularly in some of the rural areas where you’re losing the rural add-on, plus you’re getting the RAP issues, plus you’re getting the [PDGM] cuts.”

Presumably, Amedisys and other large, well-capitalized home health providers are interested in acquiring at least some of the agencies pressured to leave the market, which could help ensure access to care in some areas. Ultimately, though, the six-year lookback might present too much risk, especially when linked to smaller, mom-and-pop agencies that are mostly paper-based.

To encourage Amedisys and prospective buyers to do deals, CMS should lessen the lookback’s reach, Kusserow said. The CEO noted he’s already had conversations on the topic with agency officials.

“I’ve been trying to work with CMS on this,” he said. “We had some good early discussions with CMS, but since then they’ve kind of gone dark on us.”

Besides directly acquiring assets, Amedisys has been exploring absorption opportunities, where the Baton Rouge, Louisiana-based company absorbs patients and certain employees into its existing operations.

For the most part, home health deserts have been few and far between. More than 80% of Medicare beneficiaries live in a zip code served by five or more home health providers, while 98% live in a zip code served by at least one provider, according to the Medicare Payment Advisory Commission (MedPAC).

The six-year lookback has its downsides, but the situation could have been even tougher on providers.

Before settling on six years in 2016, CMS originally proposed a lookback period of 10 years.

Additionally, even if CMS did decide to tweak the six-year lookback under Medicare, home health providers would still have to deal with other lookback mechanisms, Wolfe said. Medicaid-reimbursed in-home care providers face varying degrees of lookbacks, for example, while the False Claims Act can trigger lookbacks with an even broader scope.

“If we’re talking about a potential whistleblower or False Claims Act case, the lookback period can actually be greater than six years,” Wolfe said. “Obviously, the longer the look back period is, the greater exposure there is for a potential buyer.”

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