Hospital home health is hardest hit by BBA

A recent study commissioned by the American Hospital Association (AHA) in Chicago and conducted by Lewin and Associates, a private consulting firm in Falls Church, VA, has shown that hospital-based home health agencies have far and above been hit hardest by the Balanced Budget Act of 1997 (BBA) when compared to its effects on inpatient care and other Medicare services provided by hospitals.

In its study, Lewin extrapolated Medicare expenditures following the enactment of the BBA and the Balanced Budget Refinement Act of 1999 (BBRA) for inpatient and outpatient services, home health care, and those services that are exempt from the hospital prospective payment system (PPS). According to the results, over the next four years overall Medicare revenues are predicted to be 13% lower under BBA and BBRA than had they never been enacted. Hospital home health by comparison can expect reduction in reimbursement of about 34.4% and, even with BBRA reductions, will continue to grow to 37.5% in 2004. BBRA will increase payments to hospital home health agencies by only 2.8% from 2000 to 2004.

A National Association for Home Care release noted that even with the adjustments allowed under BBRA, "margins for outpatient services, hospital-based home health, and PPS-exempt services would all be negative through the year 2004." (A margin analysis compares projected costs to projected reimbursement.) For hospital-based home care, the study says, margins range from -7.8% in 2000 (accounting for the start of PPS) rising to -16% in 2001 (when the 15% reduction takes effect) then leveling off at -14.8% by 2004. In comparison, overall hospital margins range from -3.2% in 2000 up to -6.6% in 2004.

(Lewin and Associates’ hospital-based home health projections are derived from data sources developed by Lewin for the National Association for Home Care analysis of BBA published in August 1998. Those data, based on cost reports from agencies nationwide, were updated using more recent data on home health spending and AHA data, and incorporating assumptions about the impact of the proposed PPS for home health. The report adds to the growing body of evidence that home health remains in a fiscal crisis due to inadequate Medicare reimbursement.)