More on Reimbursement

Home health provider groups rips proposed slash to reimbursement rates

MedPAC's proposed 5 percent cut, coupled with a new payment model, comes at a time when Silver Tsunami will increase demand for home services.

A proposed cut to home healthcare providers' reimbursement rates would disrupt the industry at a crucial period in its evolution, according to an advocacy group representing home health providers.

More seniors are expected to need home health care as part of the Silver Tsunami of retiring baby boomers.

The Partnership for Quality Home Healthcare, a nationwide coalition of community- and hospital-based home healthcare agencies (HHAs), warned against a 5 percent rate cut that the Medicare Payment Advisory Commission (MedPAC) recently recommended in its annual report to Congress.

Such a reduction could hurt access to home care at a time when providers are already contending with a shift to a new payment model, the group believes. "Now is not the time to inject more uncertainty into the home health sector," said Keith Myers, the Partnership's chairman.


Aging baby boomers, a rise in chronic conditions and the growing belief that the home is the ideal care setting has contributed to home health care expenditures climbing faster than those in most other health care categories since 2013, according to Home Health Care News. In 2019, the annual growth rate for home health spending is projected to be 6.8 percent, higher than the national health expenditures growth rate of 4.8 percent. The spending outpaces that of nursing care facilities and continuing care retirement communities, and hospitals.

Medicare is the biggest payer.

Home healthcare providers are already worried about pricing pressures because of a new payment structure set to take effect in 2020. The Patient-Driven Groupings Model (PDGM), if implemented as designed, will make payment adjustments based on assumptions about providers' likely behavior instead of on observed evidence or actual provider billing behaviors.

That shift could potentially result in a 6.42 percent payment reduction next year, totaling an estimated $1 billion. 

The 5 percent cut recommended by MedPAC--the Medicare program's independent advisor--could further erode profit margins if enacted. Providers also fear this reduction is only the tip of the iceberg. MedPAC's report to Congress notes that a 5 percent reduction next year "will likely be inadequate to align Medicare payments with providers' actual costs, and further reductions will likely be necessary."


MedPAC's recommendation for a rate cut in 2020 is in line with its past recommendations: The committee also called for cutting the home health payment rate by 5 percent in both 2018 and 2019.

This consistent push for lower reimbursements is driven partly by the home health industry's high margins. MedPAC's most recent report notes that freestanding home health agencies' marginal profit--the rate at which Medicare payments exceed providers' marginal cost--was 17.5 percent in 2017.

Every year, MedPAC must report to Congress on the Medicare fee-for-service payment system, the Medicare Advantage program and the Medicare prescription drug program. However, Congress isn't required to adopt the commission's recommendations.


"MedPAC's recommendations to slash reimbursement rates for the Medicare Home Health benefit come at a time when the entire health system is increasingly dependent on home health as an effective alternative to other types of post-acute care," said Keith Myers, chairman of The Partnership for Quality Home Healthcare. "Moreover, as the home health sector prepares for the shift to our new payment model, any destabilizing forces like arbitrary rate cuts will disrupt the momentum of home health."

Mark Klimek is an independent writer and editor with 20 years' experience covering financial issues, healthcare and more.

Focus on: Aging and the Silver Tsunami

We are diving into one of the most pressing issues facing healthcare today – the baby-boom generation and its swelling demands on our system.

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