The Centers for Medicare and Medicaid Services’ (CMS) proposal to place a 2.5% cap on Home Health PPS outlier payments in CY2010 will produce meaningful healthcare savings without negatively impacting patient access to care.
Such is the determination announced this week by Healthcare Market Resources (HMR), a research company that provides customized local market analysis for home health agencies and hospices. The Dresher, Pennsylvania firm recently conducted a state-by-state analysis of the new Medicare Home Health Outlier payment plan.
“It is as if we are attacking a cancer that is very localized,” explained Health Market Resources CEO Richard Chesney. “The cap will offer the precision of a scalpel, realizing tremendous savings for all provider while only impacting a small number of Medicare beneficiaries.”
Little impact on honest providers
HMR’s customized local market research, which can be read in detail online at www.healthmr.com/outliers, reveals that most agencies have not been billing Medicare for outlier payments in the past anyway. “More than 84% of outlier reimbursements in 2007 were paid to agencies in just three states,” the report declares, “California, Florida and Texas, states with only 23.4% of Medicare enrollees.”
Florida seems to have learned how to game the outlier system better than any other state. It was revealed by NAHC attorney Denise Bonn at this summer’s Financial Managers meeting that 200 of the 300 home care agencies in Miami-Dade county received at least 60% of their revenue from PPS outlier payments in 2007. Some managed to reach 80%. The national average among legitimate providers is 6%.
A more detailed analysis of HMR data pinpoints where the worst system manipulators are located:
- 550 agencies received just over half of 2007 PPS outlier payments.
- Nearly 88% of these high outlier agencies were located in Florida, California and Texas.
- A whopping 94% of these agencies were organized as “for-profit” corporations.
“Had the 2.5% cap on outlier payments been in effect in 2007, Medicare home health reimbursements would have been reduced by $845 million or 5.4% of total expenditures,” Chesney noted. “Fewer than one-fourth of agencies will be impacted when the cap goes into effect.”
Research leading to the outlier rule change helped shed light on Medicare abuses and spawned investigations of home health agencies. Though not mentioned in the HMR news release, it must be asked why a pay rate change from MedPAC and Congress and not fraud enforcement from CMS or the FBI is finally what lead to action to stop home care’s highly localized Medicare fraud problem.
“The geographic concentration of the outlier spending increases should have been a red flag,” Chesney said. $845 million, it should be noted, is roughly the same amount recouped by the three-year RAC demonstration project, which targeted only hospitals.
How outlier payments will change
A Medicare outlier is a patient who consumes a disproportionate amount of healthcare resources. A home health agency is only reimbursed a fixed amount per episode of care, however, a percentage of patients rack up higher healthcare costs because the intensity of treatment exceeds the fixed amount.
The current Medicare system allows home health agencies to recoup some of these expenses through supplemental payments, which become available by setting aside 5% of total Medicare home health payments into a separate outlier account. Until recently, however, the outlier budget was never completely spent.
It was when Home Health PPS outlier provision payments exceeded their projected levels in 2007, rising to 6.35% of the Medicare home care budget, or $996 million, that a systemic change was proposed.
As it happens, this exact change, cutting the outlier budget in half and reallocating the rest back to the general PPS budget, was long recommended to MedPAC by NAHC’s Bill Dombi. “We looked at how the outlier budget was being spent, even before the criminals discovered it as an easy target,” Dombi told an HCTR reporter in July, “and we told MedPAC to go ahead and cut it from 5% to 2.5%. We knew it would not harm most honest agencies, if any.”
MedPAC has declared its intention to continue cutting home care PPS pay rates but this transfer of 2.5%, basically from fraud professionals to legitimate providers, will help defray a portion of those cuts.
Full details of the Healthcare Market Resources data, including state-by-state percentages, can be found at www.healthmr.com/outliers.
About Healthcare Market Resources, Inc.
Healthcare Market Resources provides customized market and benchmark data for home health agencies and hospices. The company is based in Dresher, Pennsylvania.
