Analysis: Virginia Home Health Medicare Margins on Steep Decline

RICHMOND, Va., June 6, 2013 /PRNewswire-USNewswire/ -- The Virginia Association for Home Care and Hospice, in coordination with the Partnership for Quality Home Healthcare, today released data demonstrating that the rebasing of Medicare home health payments within the proposed Home Health Prospective Payment System (HHPPS) rule for 2014 will negatively impact Virginia's home health sector and the nearly 85,000 vulnerable Medicare beneficiaries receiving home health by driving Medicare margins to an all-time low.  Leaders are urging regulators to carefully consider home health sector's current-law economics when implementing this policy.

Under the Affordable Care Act (ACA), the Centers for Medicare & Medicaid Services (CMS) is directed to rebase home health payments between 2014 and 2017 by a percentage determined appropriate by the Secretary.  This percentage is to be implemented in equal increments during each year from 2014 through 2017.

Analyses developed with the support of Dobson DaVanzo and Associates and Avalere Health indicate that the current trajectory of Medicare home health reimbursement is on track to produce negative margins by 2017 in 10 states, even if home health payments are not subjected to further legislative and regulatory reductions.  Under this 'best case' scenario, using the Medicare Payment Advisory Commission (MedPAC) methodology for calculating margins (which has been found to exclude many costs that home health agencies routinely bear), Virginia's Medicare home health margin will fall to 9.7 percent by 2017.  

This decline is due to the impact of an estimated total of $72.5 billion in Medicare home health payment cuts – equivalent to a 22 percent reduction – made since 2009 through legislative and regulatory changes.  

"Home healthcare is a valuable and clinically-effective healthcare service to the seniors of Virginia, who will be put at risk if home healthcare is subjected to more Medicare funding cuts," said Marcia Tetterton of the Virginia Association for Home Care. "Our community has been impacted by significant cuts in the last four years, which data show will put Virginia home health Medicare margins on track to reach an all-time low."

The analyses illustrate the impact of cuts projected under multiple rebasing scenarios for the state of Virginia, including: -0.5 percent rebasing, -1.2 percent rebasing and -3.5 percent rebasing annually from 2014 to 2017: 

• If payments are rebased at 0.5 percent per year, the national average Medicare margin would fall to 2.7 percent in 2017 and 18 states would have negative Medicare home health margins.
• If payments are rebased at 1.2 percent per year, the national average Medicare margin would fall to zero percent in 2017 and 19 states would have negative Medicare home health margins.
• If payments are rebased to the statutory maximum of 3.5 percent per year, the national average Medicare margin would go negative beginning in 2015 and plummet to -11.4 percent in 2017, with every state in the nation projected to experience negative Medicare margins.

"We urge decision-makers to consider the economics we are already operating in before further reducing needed Medicare funding. Instead of more cuts, we urge lawmakers to embrace pro-patient solutions that better ensure beneficiary access to clinically advanced, cost-effective, patient preferred home healthcare services for all seniors," added Eric Berger, CEO of the Partnership for Quality Home Healthcare.

Across Virginia, 84,676 Medicare beneficiaries receive skilled home healthcare from 196 home health agencies employing more than 22,500 home health professionals.

SOURCE Virginia Association for Home Care and Hospice