economics

0

Home health care agencies have been wildly popular ventures over the last several years due to their low expenses and fat profit margins. But as the federal Health Care Financing Administration (HCFA) begins to implement reforms, home health care agencies now face the end of their heyday.

The most dramatic change targets Medicare’s reimbursement system. Currently, home health care agencies bill Medicare for every service and visit provided to patients. Medicare then reimburses the agencies for the total costs.

Since HCFA is only able to audit a limited number of claims, it has become a common industry practice to pad billings, several industry sources said.

Hospitals, in particular, have been quick to get into home health care, not only because they can deliver necessary health care outside of the costly inpatient hospital setting, but because they can recoup hospital expenses through Medicare’s generous payment system to home health.

“Home health care has been a way for hospitals to manipulate their numbers,” said Eric Sokol, assistant director of government affairs at the National Association for Home Care. “They shift their costs out of the hospitals themselves and into the home health care units where they know they will be reimbursed at a higher level.”

Moreover, the current payment system has meant that home health care providers have offered as many services and visits to patients as possible sometimes regardless of whether those services are warranted.

Sometimes, Medicare is billed for visits that never occurred.

“There is an urgent need to make fundamental changes in the way (Medicare) does business with home health providers,” Department of Health and Human Services Secretary Donna E. Shalala said during her announcement of a six-month moratorium on the accreditation of new home health agencies.

During the moratorium, HCFA will enforce regulations designed to rein in home health care costs being billed to Medicare.

In an effort to stem spending, Medicare is phasing in a “prospective payment system” similar to the so-called capitation system of managed care. The new system would have Medicare paying a pre-determined reimbursement amount per episode a flat fee set for each type of medical incident.

The home health care agency then has to work within those pre-determined cost constraints set by Medicare or incur losses. This has been the standard payment method for hospitals and nursing homes for more than a decade.

The new payment system will be phased in beginning on Dec. 1 when Medicare will reduce its reimbursement levels for billed services and is scheduled to be fully in place by Oct. 1, 1999.

Simultaneous with the six-month moratorium enacted on Sept. 15, Medicare also ended its “periodic interim payment program” for home health care providers. That had Medicare giving money to home health agencies in advance of any care being given.

Some home health care agencies have expressed concern about whether the prospective payment system will fairly calculate costs.

“The 1999 start date seems overly ambitious,” Sokol said. “There is no adjuster in place, so calibrating costs may not be done fairly, and inflation isn’t being taken into account.”

Aside from reimbursement rates, there is concern that the quality of care may be compromised as agencies look for ways to preserve their profitability.

“A prospective pay system is likely to change the way care is delivered to match the payment system, and services will adjust accordingly,” said Steve Valentine, president of the Camden Group, a health care consultancy in El Segundo. “It is possible that we may see a decline in services.”

The change in Medicare reimbursement, though, does not signal the end of quality home health care.

Hospitals and home health care agencies that already are run as managed care facilities will be able to handle the transition with relative ease because they already work under a tighter reimbursement system.

“Prospective pay is certainly not as lucrative as the pay-per-visit system, but health care providers working under managed care capitalization

rates like us will do fine,” said Linda Zalesky, director of home health services for Tenet Healthcare Corp.’s San Fernando Valley hospitals. “It is the agencies that are high utilizers of home heath care under the old payment system that have real concerns.”

Hospitals that rely on high reimbursement rates for home health care to absorb operating costs of other hospital departments will be much harder hit.

Besides undertaking payment reform, Medicare is instituting requirements for accrediting home health care agencies, a process that had been relatively lenient.

Under reforms being hammered out by HCFA during the moratorium, each new home health care agency seeking accreditation will have to prove it has a minimum of 10 patients and enough funds on hand to support itself for either an initial three- or six-month period (to be determined) without insurance reimbursement. They also will be required to post a $50,000 surety bond.

HCFA officials believe these prerequisites will establish that the agencies are financially stable and not overly dependent on Medicare payments, as well as reduce the number of fraudulent claims by struggling agencies.

HCFA also will require that home health care agencies supply information about all the related businesses they own. According to HCFA, some agencies have been funneling fraudulent activities through subsidiaries.

In such cases, a home health care agency might also own a health care equipment company. A certain percentage of the equipment may go to nursing homes or hospitals, but the agency will claim that all of its equipment is used in its home care activities in order to collect the higher home care reimbursement level. The new disclosure requirement would make this more difficult to carry out.

Despite the new accreditation requirements and revised Medicare reimbursement system, home health care is expected to continue to be a growth industry. “Revenue may be down, but the demand for home health care will continue to increase as our population ages and hospital costs continue to rise,” Valentine said.

No posts to display