Home Health Cuts Run Counter to Health Industry Goals

By Debra Wood, RN

 Home Health CostsAt a time when healthcare is focused on improved efficiency, quality and patient satisfaction, in part through moving care from hospitals to the community, the Centers for Medicare & Medicaid Services (CMS) has enacted austere cuts to home healthcare reimbursement, totaling 14 percent by 2017.

By its own account, CMS admits the cuts will result in 43 percent of home healthcare agencies operating in the red by that year. 

“You must have home health if you are going to make the rest of the healthcare system work as well as it could,” said Bill Dombi, vice president for Law at the National Association for Home Care & Hospice (NAHC) in Washington, D.C. 

According to the Medicare Payment Advisory Commission (MEDPac), CMS spent $18 billion on home healthcare in 2012 for 3.4 million beneficiaries. Home health plays a key role in caring for people in the community, ostensibly keeping them out of high-cost institutional settings. According to an Avalere Health analysis for the Partnership for Quality Home Healthcare, the CMS cuts could put more than 1.3 million seniors and 465,000 home health jobs at risk.

“These cuts pose a tremendous threat to a critically important delivery system,” said Eric Berger, CEO of the Partnership for Quality Home Healthcare in Washington, D.C.

The reimbursement cuts are part of a “rebasing” of the standard 60-day episode payment rate, because the cost per visit and number of visits per episode has changed since 1997. CMS used cost-report data to come up with the new rate, which went into effect in January. NAHC estimates rebasing will amount to a $22 billion cut. Additional cuts, including sequestration – the automatic budget cuts from a 2012 federal budget deal – already are hurting reimbursements.

Dombi expects adverse consequences in the near future. NAHC estimates 57 percent of the agencies will be paid less than the cost of care by 2017, with some states at higher risk. Agencies will not be able to survive operating in the red, he said. 

Gentiva Health Services in Atlanta, a large for-profit home health provider, announced the closing of 46 locations in a February Securities and Exchange Commission filing. Those cuts were attributed to rebasing, according to a Home Health Care News article. 

Dombi indicated that he was not aware of any member agencies turning away patients with complex chronic conditions due to reimbursement issues. Yet reimbursement for outlier patients provides only about 50 percent of costs. Providers could start reducing the number of visits.

“When you get pressured to the point of survival, you start saying ‘should I cut a visit here or there,’” said Dombi, who estimated eliminating a couple of visits could mitigate the cuts but also could affect quality of care. “We do not want to see it going in that direction.”

Home health agencies have already implemented strategies to enhance efficiencies, as a response to prospective payment cuts. Dombi reported a downward trend in Medicare margins, with increased cost and lower revenue per episode.

Unlike hospitals and other providers that can make up losses from government payers, most home health agencies have minimal patients covered by commercial policies, Dombi said.

MEDPac, an independent federal commission that advises Congress on Medicare, considers the home health cuts to be small, reasoning that agencies have successfully controlled costs while margins have remained high. Therefore, it does not think the reductions will reduce access. 

Dombi disagreed, and noted that reducing home health access will increase overall costs in the Medicare program. 

Rep. Greg Walden (R-Ore.) introduced legislation to repeal the cuts and reward home health agencies that provide high-value care to their patients while reducing payments to agencies that don’t meet performance and quality standards. 

The Partnership for Quality Home Healthcare supports the bill. NAHC suggests CMS consider using a methodology that includes all costs, respects the need for capital and recognizes that a single national rate will not work, due to regional differences in costs.