Reimbursement changes to affect all home health services

HHAs have time to prepare for some significant reductions

[Note from editor: This is the first of a two-part series that looks at health care reform implications for home health. This month, we evaluate the issues that will affect home health and offer tips to prepare for changes. Next month, we will examine another issues more closely: outlier payment caps.]

There were no real surprises for the home health industry when the health care reform bill became the health care reform law, but home health experts recommend that agency managers pay close attention to a number of issues in the new law.

"We've known that Congress would want to rein in costs, and we've seen that MedPAC [Medicare Payment Advisory Commission] is skeptical of profit margins for home health," says Andy Carter, MPP, president and chief executive officer of Visiting Nurse Associations of America (VNAA). "We anticipated cuts in reimbursement and have been working with other home health organizations, such as the National Association of Home Care and Hospice, to educate lawmakers about the risks of making blind, across-the-board cuts," he says.

Although there are cuts planned for home health reimbursement, Carter points out that the numbers could have been higher. "We owe the Senate Finance Committee thanks for reducing the $60 billion of reimbursement cuts proposed by the House to under $40 billion," points out Carter. "Home health rebasing will also take place and will be based upon cost report data over the next two years," he says. The good news is that the payment adjustments will be phased in over a 4-year period of time, beginning in 2014. "This gives home health agencies time to make sure their cost reports are in order," he adds.

Because home health reimbursement has not been driven by cost reports, they are not always as accurate as they should be, points out Carter. "Now, it's important that the data that CMS will use to define reimbursement changes be accurate," he says. Home health managers should focus on capturing all costs the payment adjustments will be based present a true picture of home health costs, he suggests.

Ensuring accuracy is important because if rebasing occurred today, the reimbursement reductions would total 16% based on current data, says Carter. The delay in implementation of rebasing adjustments not only gives the home health industry time to improve the accuracy of data, but it gives agencies time to prepare for significant cuts if they occur, he adds. In addition to implementing the adjustments over a 4-year period, the health care reform law also limits the amount of reduction per year to 3.5%.

In addition to rebasing, home health agencies will face other specific reductions, says Carter. "Case mix creep cuts will continue, but home health agencies will continue to get their market basket update, with cuts of 1% for 2011, 2012, and 2013," he says. The rural add-on was also reinstated so rural agencies will get an additional 3% for each year between 2010 and 2015, he adds. "Agencies also face caps of 10% on their outlier payments," he says, "which for a small minority of all agencies will entail significant reductions."

Home health agencies that serve populations that are high risk due to complex medical conditions or socioeconomic status are going to struggle if they rely upon CMS reimbursement, says Carter. "Non-profit agencies, such as VNAA members, can solicit philanthropic support to cover the gap between reimbursement and costs for these patients, but not all agencies have that option," he says. "Access to home health services may suffer in some areas if agencies cannot cover these gaps," he adds.

The good news is that a study to determine how home health payment restructuring will affect quality, outcomes, and access to care is one of the mandates in the reform law, says Carter. "The study will look at the clinical and socioeconomic factors that drive costs; and provide documentation of actual costs and provider losses on certain types of patients," he says. This study will also evaluate how reimbursement reductions may affect access, he points out.

The study, which must be completed no later than 2014, is the first of a two-part mandate, explains Carter. "If the study results justify a demonstration project to evaluate the effects of reimbursement adjustments on access, there is $500 million designated to fund the demonstration project," he says.

Need for home health to grow

Although the health care reform law does include reimbursement cuts, overall it will mean an increase in demand for home health, says Marcia P. Reissig, RN, MS, chief executive officer of Sutter VNA and Hospice in Emeryville, CA. "This is really more of a health insurance reform law than a health care reform law," she says. "Although there are a lot of ideas and programs that will change the way health care may be provided, the real change is that more people will have health insurance and be able to access services such as home health," she says.

"This is a tremendous opportunity for home health to increase its role in the health care system," says Reissig. The pressure to change the health care delivery model will come from the increased demand for health care services as more people have access to health insurance, she explains. Also, reimbursement reductions will force providers to find more efficient, effective ways to deliver care. "This pressure will mean more opportunities for home health to work with hospitals and other providers," she says.

One example of an opportunity is the law's provision that penalizes hospitals for readmissions, she says. "Readmissions have been an issue for home health for years, but hospitals were not as concerned because another admission meant more revenue," she explains. Now, hospitals will be open to work with home health agencies to prevent readmissions, she adds. "Because chronic conditions are often a reason for readmission, home health agencies that have chronic care management programs that keep people at home will be in a good position to partner with hospitals and other community providers," she adds.

Another provision that will provide opportunity for growth is the Community Living Assistance Services and Supports (CLASS) Act, says Reissig. The CLASS Act provides for a national, voluntary insurance program for purchasing community living assistance services and supports for adults with limitations of at least two or more activities of daily living, she explains. "It's not tied to Medicare benefits, and non-medical, or private duty services, can be provided in addition to Medicare home health services," she adds.

Beginning in 2011, all actively working employees of employers who decide to participate will have premiums automatically deducted from their paychecks to purchase the insurance, Reissig says. Employees who do not want to participate can opt out. A separate plan will be developed for self-employed individuals or people who work for an employer who has decided not to participate.

After a 5-year vesting period, individuals are eligible for $50 or more per day for non-medical services that enable them to remain in the community if they have functional limitations of at least two activities of daily living, explains Reissig. "Skilled nursing services will still be covered by traditional Medicare, but this policy will enable people to receive non-medical services in their homes," she says.

"I've always believed that private duty care is the future of home care, and the CLASS Act points out the need for agencies to offer affordable private pay or personal care services in addition to Medicare skilled care," says Reissig. "Most home health agencies would not be able to meet the demand for this type of care today, but we have time to develop programs to meet these needs because there is a 5-year window before benefits are paid," she adds.

No matter what the opportunities for growth might be, home health managers should be looking carefully at ways to improve efficiency and productivity, suggests Reissig. "We have to prepare to be paid less, so everyone should look at how nurses can care for more patients and how technology can improve back office and billing."


For more information about health care reform's impact on home health, contact:

• Andy Carter, MPP, President and Chief Executive Officer, Visiting Nurse Associations of America, 900 19th Street, NW, Suite 200, Washington, DC 20006. Telephone: (202) 384-1425. Fax: (202) 384-1444. E-mail:

• Marcia P. Reissig, RN, MS, Chief Executive Officer, Sutter VNA and Hospice, 1900 Powell St., Suite 300, Emeryville, CA 94608. Telephone: (707) 864-4664. E-mail: