MedPAC Recommends a 5% Payment Reduction for Home Health Agencies

Posted on Thursday, January 19, 2017 3:16 PM

During a recent meeting, members of the Medicare Payment Advisory Commission (MedPAC) voted to affirm their recommendation of lowering home health payments. The decision is based off the fact that home health payments have been too high for several years.

The commission recommended a 5% payment reduction for home health agencies in 2018, which was passed unanimously. However, Congress and policymakers are not required to act on MedPAC recommendations, and most of the time they do not.

The cut would result in the following:
• Less spending between $750 million and $2 billion in 2018
• Savings of $10 billion over five years

Home health margins were “especially high” over the last 10 years, MedPAC members said during the January meeting, citing averages of more than 15% even after rebasing and payment adjustments were made. Since 2001, average margins for home health have equaled 16.5% under the prospective payment system (PPS), according to MedPAC.

In 2015, margins for home health agencies were 15.6%, according to MedPAC, with marginal profit reaching 18.1%. The commission estimated margins for 2017 will reach 13.7%, on average.

The margins are only reflective for Medicare; they do not reflect the overall profit margin for a home health agency.

“The Commission and others have noted that this incentive distorts decisions about care, and the higher rate of volume growth for these episodes may reflect financial incentives and not patient needs,” Evan Christman, MedPAC Policy Analyst, said.

As such, the commission recommends ending therapy visits as a payment factor and instead basing payments “solely on patient characteristics.”

The commission voted on its hospice recommendations for payments. They advised of the following:
• A decrease in spending between $250 million and $750 million over one year
• Less than $1 billion savings over five years

MedPAC also continued its ongoing discussion on the development of a proposal to overhaul post-acute and fee-for-services payment system.

For the full article, click here.

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