Medicare cost reimbursement limits for home health agencies will be reduced an average of 12% retroactive to Oct. 1, 1997, according to a regulation HCFA released last week.
And it gets worse for home-care providers: It's unlikely those will be the last cuts they'll face this year.
Meanwhile, HCFA released regulations putting new capitalization and surety bond requirements on home health agencies effective immediately. At week's end, it was anticipated the agency also would lift the moratorium on the certification of new home-care providers it implemented last September.
The payment cuts announced last week will mean significant changes for the home health industry.
Larry Goldberg, director of the Washington-based national healthcare practice of accounting firm Deloitte & Touche, said the cuts would "force a lot of organizations to rethink their business. They may need to consolidate, and some may even go away."
According to HCFA estimates, 65% of all home health agencies have per-visit costs greater than the new reimbursement limits. The National Association for Home Care contends the figure is closer to 75%. Either way, most agencies are going to have to reduce thier costs to stay alive, said Cathy Sullivan, an NAHC researcher.
The reductions were called for as part of the balanced-budget law enacted in August 1997 (See chart). Congress included the cuts in an attempt to stem the rapid rise of home healthcare spending.
As for the likelihood of more cuts, HCFA has yet to release new per-beneficiary reimbursement limits, which could further reduce Medicare home health reimbursements.
The budget law also calls for the cost-based reimbursement system for home health agencies to be scrapped in favor of a prospective payment system beginning Oct. 1, 1999. At that time, the law requires another 15% reduction in Medicare home health reimbursements.
HCFA also will require all agencies to hold a surety bond of the greater of $50,000 or 15% of Medicare revenues. A similar bond will be required for the Medicaid program. The agencies also must have reserves sufficient to cover three months of operating costs.