By William Dombi, Esq., NAHC
The Medicare Payment Advisory Commission (MedPAC) met on Dec. 3, 2010 to unveil and discuss its potential recommendations to Congress for 2011. As part of its agenda, the MedPAC commissioners focused on home health services with more time devoted to that subject area than any other in its two-day meeting. As the staff discussion on the home health benefit opened, it was apparent that the reason for the extended discussion time on home health was that MedPAC staff had many action items for the commissioners to consider.
The staff presentation targeted several areas in home health including the adequacy of payment rates, payment accuracy, patient safeguards, beneficiary incentives to control utilization, and advancing program integrity.
On an annual basis, MedPAC assesses payment adequacies using a long-standing formulaic approach that looks at access to care, changes in the quality of care, access to capital, and financial performance of existing home health agencies (HHAs). MedPAC staff conveyed that 99 percent of beneficiaries live in an area served by a home health agency and that the number of home health agencies grew by 1,000 in 2009 and now numbers in excess of 11,300. While not detailed by staff, the HHA growth is concentrated in relatively few areas such as Texas and Florida. MedPAC staff did note that the number of users increased by 3.8 percent between 2008 and 2009, with a total of 3.3 million home health beneficiaries under Medicare. At the same time, home health now represents 9.4 percent of all fee-for-service beneficiaries with 6.5 million episodes and 2.0 episodes per user. These changes represent a year-to-year growth of 4.3 percent, 7.5 percent, and 4.5 percent respectively.
Much discussion of the commission staff focused on a large increase of community-admitted patients over those coming from a hospital or other institutional care setting. In 2008, 64 percent of episodes involved community-admitted patients, with 36 percent of home health patients having been admitted from a hospital or other post-acute care institutional setting.
Quality of care continues to improve on such indicators as walking, getting out of bed, bathing, and managing oral medications. However, staff commented that there are questions arising regarding the reliability of the self-reported patient outcome measures in OASIS.
MedPAC staff conveyed to the commissioners that access to capital is adequate given home health care’s less capital-intensive needs compared with other health care sectors, a continual entry of new providers suggesting adequate access to capital for expansion, and reports from Wall Street analysts that indicate capital is available, albeit on less favorable terms than in prior years.
As usual, the focus intensifies on the financial performance of home health agencies. Once again, MedPAC looks only at the margins of free-standing home health agencies. In 2009, these margins are calculated at 17.7 percent for all free-standing agencies with mildly varied margins for urban (17.9 percent), rural (16.6 percent), for-profit (18.7 percent), and non-profit (14.4 percent) HHAs. The average hospital-based home health agency margin, though excluded by MedPAC, is calculated at -5.4 percent.
The commissioners were informed that Medicare margins have averaged 17.5 percent since 2001. Further, staff explained that agency cost growth has been less than the inflation assumed in the home health market basket index, thereby allowing agencies to continue to maintain 17 percent margins despite reduced inflation updates and other rate reductions over the years.
Based on these findings, MedPAC staff presented a draft recommendation to the commissioners that would eliminate any inflation update in 2012 and accelerate the planned home health rate rebasing to start in 2012 and phased in over two years. Current law has a 1 point reduction in the 2012 inflation update and rebasing beginning in 2014 with a four-year phase-in.
A second area addressed in the MedPAC meeting was an analysis of a potential revised payment model that eliminates the therapy utilization thresholds as factors in establishing episodic payment amounts for beneficiaries. MedPAC staff expressed that the current case-mix system overpays for higher case-mix weighted services such as episodes with therapy care and underpays for many non-therapy related episodes. To address this concern, MedPAC has been studying, through the use of an outside contractor, the development of a revised payment system that utilizes patient-specific variables that do not include consideration of therapy volume. With a model in development by the Urban Institute, it is suggested that the revised system better protects therapy and non-therapy services than the current model without use of therapy thresholds. By eliminating the therapy thresholds from the current case-mix system, its performance reliability drops to 7.6 percent compared to the proposed revised model, which achieves a 15.3 percent reliability. However, MedPAC staff did not explain that with the use of therapy thresholds, the current model far outperforms the proposed revised model. MedPAC is attempting to address concerns that the financial incentives encourage HHAs to provide more therapy than needed to meet the clinical condition of the Medicare patient.
From the analysis presented by MedPAC staff comes a draft recommendation that Medicare revise the case-mix system to rely on patient characteristics to set payment for therapy and non-therapy services and no longer use the number of therapy visits as a payment factor. Although a presentation of the yet-to-be-completed new model provided scant information, MedPAC commissioners seemed to wholeheartedly support the recommendation. In fact, most MedPAC commissioners felt that it was the highest priority of all the recommendations ultimately presented. The National Association for Home Care & Hospice (NAHC) has long criticized the use of a therapy threshold-driven case-mix adjustment model but no reliable alternative has surfaced to date. NAHC will be carefully reviewing details on this potential new payment distribution model, as soon as they become available. Of concern would be the possible creation of disincentives to provide therapy services and incentives to shift away from patients with restorative capabilities. In earlier discussions with MedPAC staff, it was suggested that the new model could be available for use as early as 2012.
A third recommendation presented to the commissioners is a reprise of a 2010 MedPAC congressional recommendation. Its intended purpose is to address concerns that providers may stint on care when rebased payment rates are implemented. That recommendation would direct the modification of the payment system to include risk corridors and blended payment that includes some level of prospective payment and elements of cost reimbursement. The “corridors” are effectively limits on profit and losses that come from an imprecise system or abusive clinical practices that define care needs based on a provider’s desired margin. This concept was originally suggested by the Government Accountability Office a number of years ago as a way to deal with the widely varying margins experienced by home health agencies under the prospective payment system. NAHC has long opposed this concept, arguing that it essentially returns home health to cost reimbursement — an era that most would hope to forget.
The most spirited discussion surrounded the fourth recommendation of MedPAC staff to institute some form of cost-sharing for Medicare home health beneficiaries. Staff expressed concerns with the growth in the admission of patients from the community over those discharged from inpatient settings. Further, staff noted the increasing number of episodes per patient. particularly in certain parts of the country where the utilization variation showed more than 4 episodes on average per patient with as much as 35 percent of Medicare fee-for-service beneficiaries using home health. In contrast, the national averages are 1.9 episodes per user and 9 percent Traditional arguments in favor of cost-sharing were advanced such as patients will self-deny unnecessary care.
MedPAC staff suggested that cost-sharing could focus on certain sectors of the home health population that excludes patients discharged from a hospital to home health services and those who are dually eligible for Medicare and Medicaid. A potential copayment was suggested to be set at approximately $300 per episode.
The copayment proposal came under both widespread criticism and support. Virtually all of the commissioners expressed support for beneficiary cost-sharing, but many indicated that the $300 amount could cause problems for access to care for low-income beneficiaries. In addition, the commissioners raised concerns about implementing a copayment on home health services while other efforts are underway to develop a global cost-sharing mechanism within the Medicare benefit as a whole. No clear consensus was discerned from the commissioners’ remarks except for the need to consider imposition of some form of cost-sharing.
NAHC has long opposed institution of any form of cost-sharing in the home health benefit. Studies have shown that copayments dissuade individuals from receiving necessary care. Further, with the MedPAC staff’s recommendation, Medigap insurances would be prohibited from covering the cost of any home health copayment. That would put beneficiaries in the position of choosing services other than home health services where their Medigap policies would pick up any deductibles and copayments. Since the elimination of Medicare home health co-insurance in 1972, NAHC has fought multiple battles to prevent their reinstitution. We are prepared to do battle on this front once again.
The final area addressed by MedPAC at the meeting is a draft recommendation to institute efforts to address fraud and abuse. Effectively, MedPAC staff offered support for the Centers for Medicare & Medicaid Services’ (CMS) utilization of its new authorities under the Patient Protection and Affordable Care Act in high-risk areas of home health services. The two areas staff advanced were Medicare’s new authority on a moratorium on new providers and the power for payment suspension. NAHC has been supportive of a moratorium for a number of years, provided that it is targeted and it does not interfere with access to care for Medicare beneficiaries. With respect to payment suspension, Medicare has significant power to arbitrarily suspend payments to providers of services and has exercised it in the past in a manner that effectively destroys a home health agency without due process.
While discussing efforts to address fraud and abuse, the commissioners also discussed the role physicians play in authorizing Medicare home health services. In that discussion, several commissioners supported extending the existing face-to-face encounter rule to all episodes of care. The current rule applies only to the start-of-care episode.
MedPAC commissioners will meet again in the beginning of January to vote on the recommendations that they will make to Congress. These recommendations will be embodied in a report issued to Congress in March 2011. If past experiences are any guide, the final recommendations will look much like the draft recommendations. However, there is great uncertainty around the cost-sharing recommendation, and this may evolve to a point where the concerns are addressed through some sort of Medicare global cost-sharing mechanism. Between the December and January meetings, NAHC will be providing information to the MedPAC commissioners to bring some balance to their deliberations over the draft recommendations. MedPAC staff portrayed the home health industry as a high-margin enterprise with unchecked growth in utilization of care and subject to manipulation and abuse. This is not an accurate picture of home health care, and NAHC intends to set the record straight before any votes on the recommendations take place.
It could be reasonably expected that Congress will once again give serious consideration to the MedPAC recommendations as it debates Medicare-related action in the 2011 congressional session. With the large number of new members of both the House and the Senate, it will be crucial to provide comprehensive data and real-life experiences on home health services to this new Congress to avoid automatic acceptance of the MedPAC analysis. 2011 promises to be another challenging year, but one with many new opportunities for home and community-based care surfacing as well.
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