MedPAC Proposes Reissuance of 2011 Homecare Recommendations

Each year the Medicare Payment Advisory Commission (MedPAC) assesses the adequacy of payments to home health agencies and makes a recommendation to Congress in the March report to Congress.

The key questions posed to the MedPAC Commissioners during the Dec. 6, 2012 meeting were:

  • Are current payments for home health adequate
  • How should payments change in 2014

The Commissioners examined data presented on access to care (supply of providers and service utilization), quality of care, providers’ access to capital, and Medicare payments and costs.

According to the report presented during the MedPAC meeting, home health service supply continues to grow (net increase of 512 agencies in 2011 with 73 percent increase since 2002) with 99 percent of beneficiaries living in areas served by home health. Further, although less favorable than in prior years, access to capital remained adequate. Finally, financial performance of freestanding agencies in 2011 showed an overall Medicare margin of 14.8 percent, with a 15.7 percent margin in for-profit agencies and 12.2 percent in non-profit agencies. Margins for 2013 are projected to be 11.8 percent.

The number of home health users and episode remained stable between 2010 and 2011. This stabilization followed several years of rapid growth which was essentially limited to certain geographic areas. It was reported that t he home health benefit continues to allow opportunity for fraud and abuse and incentives and that home health provider behavior continues to be “sensitive to Medicare financial incentives” such as the amount of therapy delivered as a payment factor. It was also concluded that therapy services are overpaid. MedPAC suggested that the stabilization of volume of users and home health episodes in 2011 is likely due to fraud and abuse initiatives undertaken by CMS, including Face-to-Face encounter and therapy assessment requirements.

It was concluded that the indicators of payment adequacy for home health care are generally positive. In addressing Commissioner concerns about the Medicare margins for the bottom 25 th percentile of home health agencies of -0.3 percent in 2011, MedPAC staff reported that these negative margins could be due to agency inefficiencies. According to the information presented, “relatively efficient HHAs outperform other agencies in cost and quality,” with costs per visit 15 percent lower and Medicare margins 28 percent higher for these agencies defined as being efficient. Rates of re-hospitalization of “relatively efficient” agencies were reported to be 20 percent lower while providing the same mix of services to similar populations of beneficiaries.

The recommendations agreed to by the Commissioners are to repeat the March 2011 recommendations to Congress. Included were recommendations for accelerated rebasing (rebase over two years) and elimination of the payment rate update during rebasing. The 2011 recommendations to Congress were:

  • The Secretary, with the Office of Inspector General, should conduct medical review activities in counties that have aberrant home health utilization. The Secretary should implement the new authorities to suspend payment 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 in 2013 eliminate the market basket update in 2012.
  • The Secretary should revise the home health case-mix system to rely on patient characteristics to set payment 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 copay for home health episodes that are not preceded by hospitalization or post-acute care use.

Sustainable Growth Rate

The Medicare Sustainable Growth Rate (SGR), which is a method currently used by the CMS to control spending on physician services has been fraught with problems over many years. In addressing SGR, MedPAC repeated its March 2012 proposal to repeal the SGR, offering options that should be considered to offset the cost of an SGR fix such as reduction of payments to home health agencies and other providers. Specifically MedPAC proposes that Congress direct the Secretary of Health and Human Services (HHS) to:

  • Repeal the SGR and replacing it with 10 years of statutory payment updates;
  • Collect data to improve payment accuracy and to identify overpriced services;
  • Incentivize movement into accountable care organizations (ACOs) by raising the amount of money plans can get under “shared savings” programs;
  • If Congress does fund an SGR fix, it should pay for it by freezing primary care payments and reducing it for all other specialties, creating higher out-of-pocket costs for beneficiaries, and reducing payments to other providers such as hospitals and home health services.
From the NAHC Report Article