HME Industry Q&A with John G. Beard, Alacare Home Health & Hospice

HC: How have Medicare’s reimbursement changes affected the Home Healthcare industry?

JB: Since Medicare established the Home Heath Prospective Payment System (HHPPS) on October 1, 2000, Home Health Agencies (HHAs) have been subjected to annual adjustments based on amendments to the law along with regulatory changes. The National Episodic Reimbursement Rate is about the same amount today as it was in 2000 and the Case Mix Weight adjustments have become more restrictive in terms of addressing the needs of older, frailer Medicare patients who have an adequate Home Health Care Benefit to address all their homecare needs.

Medicare is now seeking to address the problems that have resulted from a system that has incorrectly addressed the management of chronic conditions via an acute care, institutional model. In the past year Medicare imposed ACA authorized Hospital Readmission Reduction Penalties of up to a 1 percent reduction on reimbursement for all Medicare hospital admissions for those providers that had excessive 30-day readmissions.

Starting Oct. 1, 2013, this penalty will increase to a max of 2 percent and in 2014 increases to 3 percent. Hospitals are now communicating more closely with Medicare HHAs on improving services so these readmissions are reduced. Also, the ACA created a new set of Medical review organizations, Recovery Audit Contractors (RACs). The four RACs are reviewing Medicare hospital stays with respect to medical necessity. Between Oct. 1, 2012, and March 31, 2103, RACs denied about $1.3 billion in hospital claims. Over 60 percent involved what the RACs deemed to be medically necessary care that did not have to be provided in a hospital but could have been furnished in another setting. Based upon these changes, HHAs are having to change the way we have traditionally provided service. This means additional investments to meet the needs of Medicare patients and their family caregivers at a time when Medicare is systematically reducing our payments and we are having to return money to Medicare when these same RACs are also denying some of our claims.

HC:  What are the biggest changes you’ve seen in your industry in recent years in terms of the role of home-health agencies?

JB: Like all providers, HHAs have been most affected by the ACA. The ACA amended the law to allow for more annual payments reductions to the Medicare Home Health Care Benefit to pay for extending health insurance to the uninsured. Home healthcare payments were around $17 billion—3 percent of Medicare outlays—when the ACA was passed. The ACA imposed total reductions to this benefit of $39 billion (10 percent of the total cuts to Medicare outlays). Ongoing regulatory adjustments are projected to inflict an additional $31 billion in cuts. Thus, one can see why payments for an episode of care in 2013 are no more than they were in 2000.

HC: From an entrepreneurial standpoint, do you see any synergies that could be realized between HME/DME and HHA in this changing healthcare landscape?

JB: These synergies already exist in a limited number of situations where an organization operates an HHA as well as HME/DME. Alacare did so for a number of years, but with the added complexity to our HHA operations combined with similar issues in HME/DME, we elected to sell this small part of our operations to several local companies. This was a trend followed by a number of HHAs. The future suggests that Medicare may be moving to “bundled payment” models. One could be a bundled payment for HHA services and HME/DME. Medicare’s hospice benefit has always bundled payment for HME/DME into the per diem payment to the hospice. No rule bundles HME/DME into the current home healthcare benefit, although Medicare’s initially proposed rules for HHA Prospective Payment did bundle HHA.