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Delta Connect Blog

MedPAC Approves 2015 Recommendations on Home Health Services

Posted by Crystal Parks on Jan 22, 2014 8:42:58 AM


The Medicare Payment Advisory Commission met on January 16 and 17 to consider and vote on its recommendations to Congress for 2015 payment rate changes and other reforms. Annually, MedPAC issues its “March Report” to Congress setting out a wide range of recommendation predominately focused on payment rates for all Medicare provider sectors. In addition, these reports often present recommendations on broader system reforms.

This year the Commission decided to maintain last year’s home health recommendations on payment related matters and to add a new one on penalties for providers that show a high degree of avoidable readmissions to hospitals. The left-over payment recommendations include:

  • A zero inflation update (Market Basket Index/MBI)
  • Accelerate rate rebasing from a 4 year phase-in to a shorter period, e.g. 2 years
  • Reduce reimbursement for therapy episodes
  • Institute a copay for patients that are not admitted from inpatient care
  • Expand fraud and abuse efforts to address regions with aberrant patterns of utilization

The commissioners did not vote on the leftover recommendations, choosing instead to merely agree that they would continue them for another year.  The primary reason for the continued recommendations on payment rates is MedPAC’s calculation that the Medicare margin for home health agencies in 2012 was 14.4 percent. MedPAC’s calculation excludes all hospital-based HHAs.

NAHC’s analysis of all 2012 cost reports shows a slightly - but materially different -Medicare margin of 13.02% for freestanding HHAs and 10.14% for all HHAs. What is significant about the difference is the margin trend that it displays. Over recent years, Medicare margins for freestanding and hospital-based HHAs have been dropping at a level just under the level of rate cut triggered by legislative or regulatory action.

The reductions in Medicare margins means that MedPAC’s forecast on the impact of rate cuts and rate rebasing understanding the financial fragility of home health agencies. MedPAC predicts that HHA Medicare margins in 2014 will be 12.6% despite the 1 point MBI and 1.32 point case mix creep cuts in 2013 and the near 3.5 point cut in 2014, the first year of rebasing.   Under MedPAC’s approach, that means that it forecasts that 7.82 points in cuts in 2013 and 2014 only reduce margins by 1.8 points. NAHC’s projection is a margin of approximately 5% for freestanding HHAs in 2015.

The margin forecasting is crucial to proper payment rate decisions. NAHC continues to counter the MedPAC assertions in discussions with Congress, using its data on nearly 10,000 HHAs and its analysis of margin trends to show that rebasing cuts need to be rolled back rather than deepened.

The MedPAC recommendation on copays borrows from the President’s budget to an extent. That budget and the MedPAC recommendation focus on copay on episodes of care that are not preceded by an inpatient hospital stay. NAHC sees such a proposal as the least sensible copay concept in that it would encourage patients to seek high cots hospital care to avoid home health copay. Instead, Medicare should encourage early use of home health services to avoid both initial hospitalizations and readmissions.

The newest MedPAC recommendations affecting home health services are:

  • Establish a hospital readmission reduction policy through a penalty payment for abnormal rehospitalizations rates
  • Devise a patient assessment instrument that can be commonly used across post-acute care (PAC) settings

The PAC patient assessment instrument recommendation is one that NAHC has long supported. In the recent past, Medicare tested a NAHC-supported CARE tool for assessing all patients in PAC.

The MedPAC recommendation on a hospital readmission policy has qualified support from NAHC. The MedPAC recommendation appears to focus on penalizing HHAs that show high rates of avoidable rehospitalizations. NAHC instead supports a policy that combines rewards with penalties, recognizing that incentivizing high performance in HHAs is a positive way to achieve success. In addition, such a value-based reimbursement system requires a reliable risk adjuster and a precise standard for determining “avoidable” rehospitalizations to operate fairly. NAHC has conveyed to MedPAC that important work needs to e done on those two matters prior to implementing any penalty/reward program.

The MedPAC recommendations, both the new and rerun ones, will be included in a report to Congress that will be submitted by MedPAC in early March. With the flurry of activity on the physician SGR legislation expected this year, the recommendations are likely to take on a special weight in Congress’ search for ways to pay for the physician rate reform. This means that the home health care industry needs to remain highly engaged or face the risk of unfavorable policy actions.

NAHC encourages all of its members to join in this year’s March on Washington March 23 – 26. Please click here for more information.


From the NAHC Report article

Topics: home care payments


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