September 13, 2013

Partnership Commends U.S. Small Business Administration for Highlighting Potential Impact of Medicare Home Health Cuts on American Small Business

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Washington, DC – The Partnership for Quality Home Healthcare (Partnership) today commended the U.S. Small Business Administration’s (SBA) Office of Advocacy for expressing concern for the potential impact a 14 percent cut to Medicare home health payments proposed by the Centers for Medicare and Medicaid Services (CMS) in the draft Home Health Prospective Payment System (HHPPS) rule would have on America’s small home health agencies. Data show more than 90 percent of all home health agencies (HHAs) in the U.S. fall below the SBA’s small business size standard for the home health sector.

In CMS’ proposed HHPPS rule, the agency proposes to further reduce Medicare home health funding by instituting a rebasing rate set at the maximum level permitted by law – 3.5 percent annually from 2014 to 2017 – totaling a 14 percent cut over the next four years. Analysis of the proposed rule reveals that a 14 percent reduction in home health reimbursements would result in an additional cut of $21.5 billion over 10 years.

Such deep cuts would drive Medicare reimbursement below the actual cost of providing care in a majority of States. Unless CMS mitigates its proposed rebasing rate set for the home health sector, this regulation will cause 47 of 50 States to experience negative Medicare home health margins by 2017. In addition, a majority of the home health providers serving seniors and disabled beneficiaries will operate at a loss as a result of the rule.

In a letter to CMS, the SBA Office of Advocacy raises concerns that CMS underestimates the impact the proposed rule will have on the nation’s small HHAs, including small businesses and non-profit organizations. Under the Regulatory Flexibility Act (RFA), CMS is required to assess the impact of a proposed rule on small businesses if a rule is expected to impact a substantial number of small entities. However, within the proposed HHPPS rule, CMS certifies that the regulation would not have a significant impact on a substantial number of small entities in the home health sector without conducting the proper analysis as required by the RFA.

The Chief Counsel for the SBA Office of Advocacy (Advocacy) states, “Advocacy believes that the transparency of this rule would be increased if CMS refined the RFA analysis that lead the agency to certify no impact… Advocacy suggests that CMS’ certification would be buttressed if the agency provided an improved explanation for its conclusion that the proposed rule would not have a significant impact on a substantial number of small entities.”

Among SBA’s other concerns are the measures CMS took in analyzing economic impacts of the proposed rule. According to the SBA, CMS’ analysis does not provide an adequate assessment of the rule’s impact on HHAs based on size by revenue, and therefore does not properly meet CMS’ guidelines for certifying that the rule would not have a significant impact on a substantial number of small businesses.

SBA further notes that CMS did not complete a full analysis of the proposed rebasing adjustment as required under the Affordable Care Act (ACA). CMS’ Regulatory Impact Analysis does not offer a payment outlook for all four years during which CMS has proposed to rebase Medicare home health payments (2014-2017) and instead only offers impact analysis for CY 2014.

“We applaud the Small Business Administration for examining the proposed rule and calling attention to the need to more fully assess the impact of these cuts on smaller HHAs,” said Eric Berger, CEO of the Partnership for Quality Home Healthcare. “Like the SBA, we strongly urge CMS to complete a more detailed assessment of the proposed rule over all four years in which rebasing will take place to ensure the proposed cuts do not force small businesses to close their doors on the patients they serve and the jobs they support.”

Analyses by Avalere Health and Dobson DaVanzo & Associates also find that small home health agencies with the lowest margins face the greatest financial threat under CMS’ proposed rule. These same agencies typically serve a large portion of health professional shortage areas, medically underserved communities, and ethnic and racial minorities, therefore putting these communities at greatest risk for agency closures and patient access challenges.

Home health leaders also note that their sector is a leader in U.S. job and economic growth, which will be severely undermined if proposed cuts take effect. According to the U.S. Bureau of Labor Statistics (BLS) August jobs report, 9,500 new home health jobs were created last month, representing nearly one-third of new healthcare jobs. Since 2012, home health has contributed more than 93,000 new jobs to the U.S. economy.

Added Berger, “Small business is the backbone of America and a leading provider of clinically advanced, cost-effective and patient preferred home healthcare services nationwide. We look forward to working with the Administration and Congress to further address the concerns raised by SBA and the home health community to ensure these small agencies and the vulnerable patient populations they serve are protected.”