Home Health Firms Met With OMB, But Failed To Avert Proposed Pay Cuts

By John Wilkerson, Inside Washington Publishers

Representatives of the home health industry met with Office of Management and Budget officials to make a case against pay cuts shortly before CMS proposed the 2014 pay rule for that sector, but the proposed rule that industry had been awaiting since the Affordable Care Act passed still made pay cuts that the Partnership for Quality Home Healthcare called “alarming.” Industry is arguing for more targeted pay cuts and is lobbying for an alternative fraud-fighting proposal that it estimates would save nearly $20 billion – industry’s earlier preliminary estimates put the savings at around $15 billion.

The Partnership for Quality Home Healthcare on July 10 issued results of a national poll of registered voters that finds that 93 percent of seniors surveyed think Congress should stop Medicare fraud instead of cutting Medicare payments or increasing fees on seniors’ Medicare services.

Representative of the Partnership for Quality Home Healthcare, consultant firm Avalere Health, health economics firm Dobson | DaVanzo and the lobbying firm Liberty Partners Group met with OMB officials on June 18. CMS on June 27 proposed the regulation, which calls for cutting pay rates 3.5 percent each year from 2014 through 2017.

The Affordable Care Act directed CMS to rebase home health pay, and the proposed rule implements that requirement for the first time.
The home health sector has been arguing against rebasing. It hired Dobson | DaVanzo to study payment adequacy, and the economics firm projected that, even if CMS does not rebase the industry’s pay, home health companies in many states will be losing money on Medicare beneficiaries by 2017. Because Medicare is both the predominant and best payer for home health agencies, the agencies say they cannot offset Medicare losses with private insurance pay.

The findings are in a report released May 9, which is part of the sector’s efforts to get CMS to factor projections out to 2017 as the agency considers rebasing for the first time in the home health proposed pay rule. Industry presented the findings to OMB at the June 18 meeting.

Savings projections from the Affordable Care Act already have been met, before the rebasing even begins, because other pay cuts have caused the change intended by rebasing, industry says. Legislative pay cuts – the outlier cut, market basket cuts, productivity cut and sequestration – save Medicare $24.9 billion between 2011 and 2020, and regulatory cuts – the 10 percent outlier limit that began in 2010 and case-mix cuts since 2009 – save $47.6 billion, industry says. That $72.5 billion in home health savings equals a 22 percent pay cut, the report states.

The Partnership says it appears that the proposed rule only assesses the impact in 2014 and does not include a cumulative impact analysis. “Further, the proposed rule also appears to exclude quantitative analyses on the cumulative effect of the proposed funding cuts as well as the $72.5 billion in legislative and regulatory cuts already impacting the home health sector,” the Partnership states in a release. “Such cumulative analysis is required under Executive Order 12866 (Clinton), which was reaffirmed by Executive Order 13563 (Obama). In light of these factors, it appears that the draft HHPPS rule does not provide any projection of its impact in 2015, 2016 or 2017 on states or on rural, non-profit, hospital-based and other home health subsectors.”

The industry group also says it appears CMS did not use the most reliable data. “For example, fuel costs – which constitute the second largest expense for many home health providers and are a particularly significant expense for providers serving seniors in rural settings – have risen nearly 30 percent since 2011, but the draft rule does not take this cost increase into account,” the Partnership states.

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