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Home Health & Hospice Week

Reimbursement:

MedPAC Plays Grinch To HHAs’ Hopes For Reasonable Reimbursement Rates In 2025

Published on Fri Dec 15, 2023

Provider numbers, spending, and profit margins have all fallen — again.

Home health agencies’ average fee-for-service Medicare profit margin has fallen, but the misleading statistic is still giving congressional advisors ammunition for punitive pay cuts.

In its Dec. 8 public meeting, the Medicare Payment Advisory Commission gave preliminary unanimous approval to a recommendation for Congress to cut HHA reimbursement rates by a staggering 7 percent in 2025. That’s on top of the massive behavioral adjustment cuts the Centers for Medicare & Medicaid Services has implemented in the past couple of years.

The rec was tentatively approved despite a number of key statistics declining, including:

  • The number of HHAs fell yet again, this time by 1.1 percent to “more than 11,300” in 2022, according to the MedPAC presentation.
  • Spending dropped to $16.1 billion in that year, down from $16.9 billion in 2021.
  • There were 2.8 million home health fee-for-service Medicare users in 2022, down from 3.0 million the year before.

But one of the main reasons for the aggressive 7 percent recommendation is that HHAs racked up a 22.2 percent Medicare FFS profit margin in 2022, down from 24.9 percent in 2021.

And MedPAC pegged the all-payer margin at 5.7 percent, down from 11.9 percent last year.

“These margins indicate that Medicare fee-for-service continues to pay well in excess of cost,” MedPAC staffer Evan Christman noted in the meeting.

And that margin is going to stay high, MedPAC forecasts. The Commission estimates it will be 18 percent for 2024.

MedPAC Problems Abound

In its December meeting last year, multiple commissioners raised doubts about the Commission’s stats on access to home health services, citing anecdotal evidence from colleagues and family about difficulty obtaining the service (see HHHW by AAPC, Vol. XXXII, No. 10).

Unfortunately, this year commissioners let the staff’s assertion that access is fine go unchallenged. In fact, “beneficiaries needing post-hospital home health are able to access it at a rate that is actually higher than before the pandemic,” Christman maintained in the meeting, according to its transcript.

But commissioners did raise some other potential issues. In addition to concerns about Medicare Advantage (see box, p. 346), they expressed reservations about private equity activity in the home health sector.

MedPAC estimates that 5.7 percent of HHAs are owned by PE, according to the presentation.

Commissioners expressed relief that the ratio was relatively small. However, Commissioner Lawrence Casalino with the Weill Cornell Medical School pointed out that the PE-owned agencies may be quite large, putting the amount of market share much higher than that figure. “Just so people don’t jump to the conclusion that, ‘oh, this is trivial,’” Casalino cautioned.

Labor pressure might also be worse for HHAs, because hospitals and other inpatient settings are able to pay more, added Commissioner Tamara Konetzka with the University of Chicago.

Despite these concerns about MA, PE, labor shortages and closures, the Commission advanced the 7 percent recommendation. “We expect that there will be no adverse effect on access to care and continued provider willingness and ability to treat fee-for-service beneficiaries,” the draft recommendation reads.

Industry Fights Back With Cold Hard Facts

As usual, home health advocates were quick to criticize MedPAC’s stance.

“There are many shortfalls in MedPAC’s home health margins report — starting with the fact that MedPAC’s analysis only captures a declining fraction of the Medicare home health population, ignoring that overall margins are low,” charges Joanne Cunningham, CEO of The Partnership for Quality Home Healthcare. “MedPAC’s flawed approach and misleading conclusions fail to accurately inform policymakers about the state of the Medicare Home Health benefit at a time when the program is under extreme financial pressure due to billions of dollars in Medicare cuts that began in 2020 and are planned over the next decade,” the Partnership insists in a joint release with the National Association for Home Care & Hospice.

“When policymakers don’t receive accurate information, they risk making policy decisions that have unintended, yet negative, consequences on beneficiaries,” warns NAHC President William Dombi in the release.

The margin process in particular is riddled with problems.

“Medicare Advantage (MA) plans generally pay significantly less than FFS, and state Medicaid programs pay even less than that. Taken together, overall home health margins are significantly lower than the incomplete picture MedPAC painted,” the groups argue.

Cost report data itself is far from reliable, they add. Among Medicare cost reports’ many problems is that they “have not had a direct relationship to payment in more than 20 years,” NAHC and the Partnership emphasize. Plus, “the data used by MedPAC is over two years old, meaning it fails to capture the historic inflation and rising costs plaguing home health providers across the country,” they add.

And the reports “rely on a definition of allowable costs that fails to capture ordinary business costs such as equipment, telehealth services, certain taxes, and marketing,” they point out.

“All of this raises serious questions about the accuracy and reliability of MedPAC’s data,” NAHC and the Partnership blast.

The good news is that, as in previous years, “the Centers for Medicare & Medicaid Services (CMS) and Congress are not obligated to act on the commission’s recommendations,” trade group LeadingAge notes on its website.

In contrast: MedPAC also voted to recommend a pay increase for hospitals and physicians; a 3 percent pay cut for skilled nursing facilities; and a 5 percent payment cut for inpatient rehab facilities, the American Hospital Association notes in its analysis.

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