MedPAC Says Home Health Providers Had 14.8% Margins in 2011

In its draft recommendations to Congress due this spring, the Medicare Payment Advisory Commission (MedPAC) points out that home health providers in 2011 had 14.8% average margins. MedPAC projects 11.8% average margins for 2013.

MedPAC staff reported that there were 6.9 million episodes in 2011 with 3.4 million beneficiaries utilizing home health and total expenditures for home health were $18.4 billion. In 2011, over 700 providers entered the sector because of the low capital requirements. MedPAC staff stated that the margins for home health providers in 2011 were 14.8% and were projected to be 11.8% in 2013 due to some regulatory changes such as market basket and case mix cuts.

The staff report found that agencies that provided more therapy had higher margins in 2010 and as such, the payment for therapy services was revised in 2012. Medicare margins were lower in states with high utilization and the majority of rural add-on payments are received by high-use counties.

Agencies with high numbers of Medicare/Medicaid patients and high shares of community-admitted episodes had lower margins than other agencies. Community-admitted users account for about half of all home health users and 64% of episodes in 2010. Community-admitted users also had fewer chronic conditions and more functional assistance needs.

MedPAC reiterated their 2011 and 2012 recommendations to Congress, which include:

  • The Secretary of the U.S. Department of Health and Human Services, with the Office of Inspector General, should conduct medical review activities in the counties that show aberrant home health utilization. The Secretary should implement the new authorities to suspend payments and the enrollment of new providers if they indicate significant fraud.
  • The Congress should direct the Secretary to begin a two-year rebasing of home health rates and eliminate the market basket increase.
  • The Secretary should revise the home health case mix system to rely on patient characteristics to set payments for therapy and non-therapy services and should no longer use the number of therapy visits as a payment factor.
  • The Congress should direct the Secretary to establish a per-episode copayment for HH episodes that are not preceded by hospitalization or post acute care use.

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