What could be worse than the interim payment system? An indefinite one

HCFA says'year 2000 problem' will delay implementation of PPS

It's both a frightening and possible scenario. Unless major legislative changes are made soon, the government may place the prospective payment system (PPS) on hold and leave home care agencies struggling to survive under the interim payment system (IPS) indefinitely. In fact, the Baltimore-based Health Care Financing Administration (HCFA) recently announced that it will postpone implementation of home health PPS because of the year 2000 (Y2K) computer problem.

"The year 2000 work we have to do is to make sure beneficiaries get their care, and providers are paid promptly," says Chris Peacock, HCFA director of media relations.

This delay of PPS could be the final straw for thousands of home care agencies that are barely surviving the changes brought about by the Balanced Budget Act of 1997. "By and large, every provider is in terrible straits," says Theresa Forster, vice president for policy for the National Association for Home Care (NAHC) in Washington, DC.

An informal survey conducted by state home care associations indicates that close to 800 home care agencies had closed by mid-year, Forster says. (See special supplement, The Bulletin, inserted in this issue.) "There's a real strong sense of fear out there; no one knows who's going to drop next," she says. HCFA data put the total number of Medicare-certified home care agencies at 9,444, so the closings are approaching 10%, Forster adds.

What will happen on Jan. 1, 2000?

The Y2K computer problem relates to computer systems that were programmed more than 20 years ago that recognize only two digits for the year, for example, July 7, 1998, might be stored as 071598. The problem with this scheme is that there is no specific reference to the century. If an H.R. Clinton has a date of birth listed as 021593, should you enroll her in kindergarten next fall at age 5 or ask her advice on reforming the health care system in deference to her wisdom at age 105?

When all details are not there in a program - for example, the century is missing - the computer makes assumptions. This means when the year 2000 rolls around, the computers may not recognize "00" as "2000" but instead may assume the year is 1900. This leaves any date-sensitive data in jeopardy, affecting businesses and institutions of every kind all over the world.

Industry analysts and computer consultants predict a variety of dark scenarios may be looming on the horizon. Some of the darker possibilities forecasters see are: airplane schedules getting scrambled, telephone systems going haywire, government services grinding to a halt, elevators getting stuck between floors, and banking as we know it disappearing, along with our checking accounts. What problems actually will occur, of course, no one knows for sure, but everyone has an opinion.

Nevertheless, hospital-based home care agencies should be in the process of assessing their programs' compatibility and, where appropriate, working with the hospital information systems manager or vendors to ensure a smooth transition into the new millennium.

HCFA outlined its problems with adjusting its computers this way in a recent memo:

The chief problem is the agency relies on numerous internal and external systems to pay claims to providers and to determine the eligibility of beneficiaries. The systems are used by more than 60 contractors and each web of systems must be changed to accept year 2000.

If HCFA makes any changes in its payment policy, as will happen with PPS, then this will require an analysis of millions of lines of computer code. HCFA administrator Nancy-Ann DeParle decided to make compliance with the Y2K problem a priority by hiring contractors, shifting staff positions, and asking for an additional $104 million in funds to pay for the changes.

Also, DeParle has decided that some provisions of the Balanced Budget Act of 1997 will have to be postponed, and home health PPS is on that list.

Y2K problem aside, home care's in trouble

This means that IPS will continue to be the way agencies are paid indefinitely. And as many agencies already have discovered, IPS has all the negative aspects of the prospective payment system with none of the benefits, Forster says.

In addition, if IPS is left in place beyond Oct. 1, 1999, the original date PPS was to be implemented, then home care agencies will be hit with another automatic 15% cut in expenditures. NAHC and some state home health associations are lobbying Congress to change this rule and to eliminate or adjust IPS. No bills had been passed at the time Hospital Home Health went to press. (For list of bills, see story at right.)

Forster says that at least the home health industry no longer is alone in its opinion that HCFA has gone too far with cutting home care benefits."There has been a very dramatic shift, and the momentum is continuing in terms of more and more members of Congress and other public officials saying there's a problem here," Forster says.

Costs will exceed reimbursements

HCFA has calculated that total home health expenditures will decrease by $533 million during fiscal year 1998, when compared with fiscal year 1997's total expenditures of $17.8 billion. This is $2.9 billion less in expenditures than the $20.7 billion limit on home health expenditures that was set by the Balanced Budget Act of 1997.

Some experts predict the industry's total expenditures will dip to $12 million next year, and that Medicare cuts will continue if IPS is left intact. "We've run some numbers, and it looks like home care agencies across the country on average are getting 31% less for providing care than they did last year, and some are getting 80% less," Forster says.

"Under IPS you don't get the benefit of balancing some high-cost cases against some low-cost cases because the most you're going to be paid is what your costs are," she explains. "You don't have a buffer."

Forster says HCFA's own estimates show that 93% of home care agencies will be affected by one of the new cost limits. (See explanation of IPS, p. 118.) "That means for virtually all home health agencies, the costs of providing care will exceed what they're reimbursed, and that's happening under IPS," Forster adds.