MedPAC: COVID-PDGM Combo Had Little Effect on Home Health Supply

In its report to Congress, the Medicare Payment Advisory Commission (MedPAC) recommended that the Medicare base payment rate for home health should be reduced by 5%, something that will come as a shock to almost no one in the industry.

The report, released Tuesday, also recommended that home health agencies be required to report telehealth services provided during a 30-day period.

Other highlights included:

– In 2020, about 3.1 million Medicare fee-for-service beneficiaries received care, $17.1 billion was spent on home health care services and 11,456 home health agencies participated in Medicare.

– The number of beneficiaries receiving home health services fell by 4.7% in 2020, though that is skewed by significant drops in services from March and April during the onset of the pandemic.

– Likewise, the average number of in-person visits per 30-day period declined by 9.4%, though that can likely be attributed to the above point and increased telehealth usage.

– The report suggested that access to home health care is adequate, citing that “over 99% of Medicare beneficiaries lived in a county served by at least one agency, and 87.9% lived in a county served by five or more agencies.”

The data in the report is real and interesting. It’s also, at times, lacking context. Even if context is indirectly presented, I didn’t feel like the necessary connections were made.

Below, I try to draw at least some of those connections myself.

Home health access and supply

Based on the numbers and geographies that MedPAC parsed through, the legislative branch agency felt that both access and supply were in good shape in home health care.

“Our review of payment adequacy for Medicare home health services indicates that access is more than adequate in most areas and that Medicare payments are substantially in excess of costs,” the report read. “Home health care can be a high-value benefit when it is appropriately and efficiently delivered. … However, Medicare’s payments for home health services are too high, and these excess payments diminish the service’s value as a substitute for more costly services.”

Access data, in general, is prone to being flawed.

In fact, MedPAC itself recognized this fact in its December public meeting, where it had already recommended a 5% cut to Medicare payments for home health.

“The access data shown seems incredible,” Lynn Barr, the founder and chairwoman of Caravan Health, said in December. “But we have an incredible problem getting access to home health. … I have no alternatives in post-acute care in most of my rural communities, which is a real disconnect with what [the numbers show].”

Barr, a MedPAC member, is the founder of the Kansas City-based Caravan Health, a company that supports about 250 hospitals and their physicians in the Medicare Shared Savings Program (MSSP). The company is now a part of Signify Health (NYSE: SGFY).

She suggested a geographic information system study to discern the actual distance between patients and home health agencies in lieu of zip code-based data.

“I’d love if we could take a different look at access,” Barr said. “Because the numbers you have are amazing. And if it was true, I would be all in over it. But we really don’t see that. And it’s a huge problem for us.”

The March report also acknowledged that between 2019 and 2020, the number of home health agencies fell by 1%. A slower decline in agencies compared to years prior, MedPAC reported, suggests that the public health emergency (PHE) and the implementation of the Patient-Driven Groupings Model (PDGM) did not have a significant impact on home health supply.

A clear caveat would be that many providers received funding from the Provider Relief Fund as well as the Paycheck Protection Program, a fact mentioned later in the report. That support certainly masked what could have been a much larger fallout from both PDGM and the PHE, a fallout that would likely be more evident in more recent data.

Without that data, it seems short-sighted to make recommendations or draw long-term conclusions for next year based on 2020.

With the relief funding included, the Medicare aggregate margin for freestanding home health agencies was 21.9%, according to the report.

What has definitely had the largest effect on what would be considered home health supply generally would be the staffing constraints, some of which are due to low wages and COVID-19 surges over the past two years.

Though this wouldn’t be reflected in the observed data, staffing caused significant admission losses in the beginning of 2022. For that reason, among others, referral rejection rates remain high.

The data is also reflective of fee-for-service home health care, which is undoubtedly a key and reliable revenue driver for home health agencies. But it doesn’t paint the entire picture. For instance, last year was the first year LHC Group Inc. (Nasdaq: LHCG) had more non-Medicare home health admissions than it did Medicare admissions.

That is one of the reasons why providers would likely push back on MedPAC’s view of the revenue margins in home health care.

“We are getting our clocks cleaned,” Bruce Greenstein, LHC Group’s chief strategy and innovation officer, said in February regarding Medicare Advantage contracting in home health. “We’re losing. This is a really serious moment in time for all of us.”

MedPAC, on the other hand, may retort that this is just based on the data and programs that it is evaluating.

Telehealth and quality trends

Telehealth may have skewed the 2020 data, but how much so is still in question.

“The lack of detailed information on the use of telehealth in 2020 impaired our ability to assess the changes to the benefit in this year, limiting our ability to assess the impact of the PDGM and the PHE,” the report read. “Since virtual visits in some instances may have substituted for in-person visits, we lack important context for assessing the in-person visit decline.”

To avoid making “too high or low” payments to home health agencies based on the volume of telehealth visits performed, those visits should be reported in 30-day periods, according to MedPAC.

“Payment accuracy would be improved by requiring [agencies] to report the use of telehealth

services on home health claims,” it said in the March report.

Quality trends for 2020 also paint a murky picture. This is likely due to effects from the PHE.

While the number of patients hospitalized during home health admissions fell slightly, the share of beneficiaries “successfully discharged to the community” also fell.

“Given the various disruptions to the health care delivery system in 2020, these results should be interpreted cautiously,” the report read.

To be fair to MedPAC, they did include that quality metrics should be interpreted cautiously.

I do wonder, however, whether the rest of the data they sifted through – of which they made recommendations based on – should have been interpreted more cautiously as well.