June 28, 2013

Proposed Medicare Rebasing Puts Seniors’ Access to Home Healthcare at Serious Risk

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Washington, DC — The Partnership for Quality Home Healthcare — a coalition of home health providers dedicated to developing innovative reforms to improve the program integrity, quality, and efficiency of home healthcare for our nation’s seniors — expressed alarm about deep Medicare funding cuts proposed by the Centers for Medicare and Medicaid Services (CMS).

Since 2009, Medicare home health funding has been reduced by 22 percent due to a series of legislative and regulatory cuts that are estimated by Avalere Health and the Partnership to total $72.5 billion over a 10-year period. In its draft Home Health Prospective Payment System (HHPPS) rule for 2014, CMS proposes to further reduce Medicare home health funding by instituting a rebasing rate set at the maximum level permitted by law, as well as the elimination of 170 diagnostic codes resulting in further losses to home health agencies.

Section 3131 of the Affordable Care Act (ACA) authorizes the adjustment of home health rates between 2014 and 2017 by a percentage determined appropriate by the Secretary. The ACA grants the Secretary broad discretionary authority in implementing the rebasing provision and does not direct her to use it to reduce Medicare home health payments. However, the ACA, the Medicare statute, and Executive Orders direct that a series of steps be taken to ensure that any changes made by CMS are appropriate and “provide for continued access to quality services.” (SSA § 1895(b)(2))

The proposed rule raises questions that are being explored as part of the Partnership’s analysis, including:

  • Whether the proposed rule includes a complete analysis of its impact. It appears that the rule only assesses its impact in one year (2014) and does not include a cumulative impact analysis. As CMS correctly notes on page 111 of the proposed rule, “rebasing must be phased-in over a 4-year period in equal increments”¦.” Rather than assess the impact of its proposed rebasing adjustment of -3.5 percent in each of the four years in which it will be applied, CMS’ “analysis describes the impact in 2014 only.” Further, the proposed rule appears to exclude quantitative analyses on the cumulative effect of the proposed funding cuts as well as the $72.5 billion in legislative and regulatory cuts already impacting the home health sector. Such cumulative analysis is required under Executive Order 12866 (Clinton), which was reaffirmed by Executive Order 13563 (Obama). In light of these factors, it appears that the draft HHPPS rule does not provide any projection of its impact in 2015, 2016 or 2017 on states or on rural, non-profit, hospital-based and other home health subsectors.
  • Whether the “most reliable available data” were utilized. Existing statute and extensive case law require CMS to use the “most reliable available data” in undertaking the rulemaking process. In the draft HHPPS rule, CMS states that “we use the most recent, complete data available — typically two to three years prior to the payment year”¦.” It appears, however, that such data may not be the most reliable data available to CMS. For example, fuel costs — which constitute the second largest expense for many home health providers and are a particularly significant expense for providers serving seniors in rural settings — have risen nearly 30 percent since 2011, but the draft rule does not take this cost increase into account. (The data are available from the U.S. Energy Information Administration and judged to be reliable.) Similarly, it does not appear that the draft rule takes into account the cost of employee health benefits that are borne by home health operators currently and will continue to be an important factor during 2014-2017 as the Affordable Care Act is implemented. Finally, if the draft rule is based on data from 2011, it is therefore presumed to exclude the impact of reimbursement cuts instituted by CMS via rulemaking in 2012 and 2013, as well as the impact of sequestration in 2013-2017 and of productivity adjustments in 2015-2017.

“In order to preserve seniors’ access to Medicare home health services, we believe the full consideration of all pertinent factors is vital,” said Eric Berger, CEO of the Partnership. “Already, without these proposed reimbursement reductions, 10 states are projected to suffer negative Medicare margins in the near future, and the deep payment reductions proposed in the draft rule would make matters even more precarious.”

According to a detailed analysis conducted by Avalere Health and Dobson & DaVanzo Associates, the $72.5 billion in cuts already in current law will cause 10 states — AK, HI, ID, MT, NV, NY, OR, SD, WI and WY — to experience net Medicare home health losses. The analysis further projects that the 3.5 percent rebasing adjustment proposed by CMS will cause all 50 states and the District of Columbia to experience net Medicare home health losses by 2017. According to the data analysis, 13 states will fall into negative territory in 2014, another 13 will go negative in 2015, 17 more will experience net losses in 2016, and the remaining seven will be negative by 2017. Avalere Health and Dobson DaVanzo Associates analyzed Medicare data using Medicare Payment Advisory Commission (MedPAC) methodology to develop projections for each of the years in which rebasing is to take effect: 2014, 2015, 2016 and 2017.

To help inform the discussion that will now be taking place concerning the draft HHPPS rule, the Partnership is releasing a legal and policy analysis developed by Greenberg Traurig LLP and Cozen O’Connor P.C. for the Partnership. According to the authors, “it appears well settled that the Secretary must use her authority to ensure that section 3131 of the ACA is implemented in a manner that is based on detailed analysis and will preserve beneficiary access to Medicare-covered services.” The authors further note that “It also appears clear that this undertaking must include a careful assessment of the home health sector’s economics in each of the years 2014, 2015, 2016 and 2017 to ensure that the rebasing adjustment’s equally-applied increments are appropriate.”

“On a proportional basis, Medicare home health services have suffered the deepest cuts of any provider sector in the Medicare program,” said Chairman Billy Tauzin, senior counsel to the Partnership. “When the impact of these cuts are taken into account, the prospect of even more reductions is alarming. In an effort to preserve patient access to already cost-effective home healthcare, we look forward to presenting comprehensive analyses that will demonstrate the risks posed by this draft rule.”

“In place of further across-the-board cuts that pose a threat to millions of seniors and many states, we urge policymakers to advance pro-patient solutions that will achieve Medicare savings while securing beneficiary access to clinically advanced, cost-effective, patient preferred home healthcare,” added Mr. Berger.

Home health leaders have developed an alternative proposal, estimated to save nearly $20 billion in Medicare funds, entitled the “Skilled Home Health and Integrity Program Savings” (SHHIPS) Act. SHHIPS offers pro-patient solutions such as targeted program integrity reforms that combat waste, fraud and abuse. These reforms are based on outlier payment reform, which was successfully implemented in 2010 and is on track to achieve more than $11 billion in savings over a 10-year period.