Home health providers must deal with increasingly complicated operational, regulatory, quality and financial requirements that add layers of cost and complexity to daily operations. In addition, most home health providers juggle the management and administrative challenges of a dispersed workforce with dozens — often hundreds — of remote, part-time employees. Add to that the intricacies of compliance management and securing government reimbursement for services, and it becomes readily apparent that home health management is a balancing act that has become increasingly strenuous.
With the implementation of the Patient Protection and Affordable Care Act and the regulations being mandated by CMS, the challenges faced by home health organizations are becoming more difficult and costly with each passing year. Next year will be especially challenging for hospitals as they attempt to mitigate readmission penalties expected to reach $428 million. Home health providers are among those who will play an integral role in helping acute-care providers address readmission risk. This is precisely why the financial challenges being faced by home health agencies, including those that are hospital-affiliated, should be carefully watched by all in the industry.
Complexity and cost
The 2015 Home Health Final Rule, which was officially published in early November, contains several new rules and policy guidance that together give us a very good idea of where CMS is headed in terms of reimbursement for home health services. CMS has clearly stated that it intends to more closely align payments with costs, and there are a number of measures in the works to achieve this aim.
By the end of 2015, agencies will be only halfway through the four-year rebasing project implemented as a result of the ACA. Margin shrinkage as a result of rebasing, which will total 17 percent between 2014 and 2017, together with the effects of recalibrated case mixes and wage index changes for 2015, will place significant strain on the operational viability of some providers.
For example, while CMS indicated in the 2015 Final Rule that the overall payment change for home health providers is expected to be a 0.3 percent payment reduction, a more careful and isolated analysis of the components of the payment equation (base rate and the applicable case mix weight and wage index) renders a vastly different result depending on where agencies are located and the volume and types of services they provide. A more detailed analysis shows us that the payment changes may actually come in the form of very slight payment increases for a lucky few, but payment declines of 5 percent or more for many others.
The question that each home health agency should be answering for itself is this: Based on case mix volume, what is my 2015 reimbursement likely to be? More often than not, it won’t be a mere reduction of 0.3 percent.
Face-to-face encounters
The news on face-to-face encounters is mostly welcome, but something of a mixed bag for providers. CMS dropped the physician narrative requirement for Medicare episodes beginning on or after Jan. 1, 2015, and clarified when updated face-to-face encounter information must be obtained. This is good for agencies that have had to forego payments for services rendered to homebound individuals with clear skilled service needs simply because the physician’s narrative was found by a reviewer to be inadequate.
On the other hand, CMS now expects that the contents of the home health agency’s medical record — relative to diagnoses supporting the need for skilled care, documentation of homebound status and overall medical necessity — will be mirrored in the physician’s records or those of the facility from which the patient was referred. And, CMS expects that, upon request by a reviewer, the home health agency will be readily able to produce the physician or facility record that establishes that the encounter happened in a timely way and clearly supported an order for Medicare home health services.
There will be at least some cost associated with this new rule, and agencies need to think carefully about processes, accountabilities and technology to ensure that the needed records are not only in hand but adequately constructed to defend Medicare reimbursement.
Data submission requirements
Agencies have long been required to participate in patient satisfaction surveys. In 2015, the data submission thresholds will be expanded to include qualified Outcome and Assessment Information Set (OASIS) information equal to at least 70 percent of an agency’s “Quality Assessments.” The submission measures will take effect in July 2015. While most agencies, particularly those using robust software platforms, are actually meeting and even exceeding the required threshold, the new requirement creates an added burden for calculating and monitoring compliance levels. Let’s not lose sight of the fact that CMS intends to use the information gained to further review and tighten Medicare expenditures for home health services in the future.
Clues for the future
Speaking of the future, the Final Rule also contained significant clues that provide insight as to where the home health industry is headed in the next few years.
The Rule clarified that Administrative Law Judges or other hearing officers will be precluded from significantly reducing monetary penalties during hearings convened to consider home health survey deficiencies. This is clearly an indication that CMS expects agencies faced with such penalties to waive their hearing rights and take advantage of 35 percent penalty reductions that are already built into the rules rather than pursuing the hearing with hopes that penalties will be forgiven or reduced. Since penalties can go up to $10,000 per day, some agencies — even with the discount — could be hard-pressed to pay and many will simply succumb to the financial pressure.
CMS also talked in the Final Rule about the concept of Value-Based Purchasing, which has already been implemented for some hospitals. The ACA calls for a plan by which payments for home health services will be linked with quality of care as a means of rewarding high performing agencies and penalizing low performers. CMS has indicated that the model could be implemented as early as 2016 in five to eight states, in which all home health agencies in those states would be required to participate. Payment adjustments could range from 5 percent to 8 percent, based on performance. Because many agencies are already strapped, this will be a project to watch carefully.
What the home health changes mean for the healthcare industry at large
The operational requirements and payment changes being implemented for home health agencies are significant and have far-reaching implications for the entire healthcare industry. As post-acute care increases in a nationwide effort to control costs and improve health outcomes, strong home health providers will play a key role. For home health agencies to continue building business momentum while ensuring top quality care and health outcomes, they will need to be able to fully and quickly implement the new regulations and adapt operational processes accordingly.
Fortunately, as complexity increases, there are more tools available to enable providers to cope effectively with the changes. Cloud-based applications with robust and easy-to-use functions, decision support tools, up-to-the-minute informational dashboards and reports will be must-haves for every home health provider who expects to thrive in what will be a very challenging and complex operating environment.
Russel Krengel is product manager for Kinnser Agency Manager, Kinnser’s web-based solution for home health agencies. With a history of business leadership that includes the acquisition, growth and sale of a home health agency to Vanguard Health, Krengel brings the mindset of the owner to the development of home health’s leading software.
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