President Barack Obamas proposed budget cuts to home health sent shudders through the segment last week as home health administrators worried about the threat of dramatic negative profit margins and fewer resources to meet rising demand.
Proposed cuts rile home health
President Obama calls for $37 billion over 10 years
Late last month, the presidents preliminary budget called for a $37 billion cut in Medicare reimbursement for home health in the next 10 years, a move that the National Association for Home Care & Hospice said was generally in accordance with the Medicare Payment Advisory Commissions recommendation in January. The commissions payment update recommendations for 2010 are scheduled to appear in its March report to Congress.
MedPACs recommendations would result in a 5.5% cut to reimbursement next year, said Kevin Ellich, an analyst with RBC Capital Markets in Minneapolis. What was released last week was an outline and isnt final, Ellich said. Almost every budget has been altered before the final version, he said, adding that home-health stocks fell by 10% after the news.
The proposed cuts are likely to have a negative effect on agencies nationwide, according to the National Association for Home Care & Hospice. The association estimates that in 2010, nearly 40% of agencies will reflect negative profit margins, a number that will increase to nearly 62% in 2011.
Its very crushing because with the number of agencies, were being asked to go into additional counties to spread our service area, said Brad Garpestad, who serves as clinical service manager at Spectrum Medical in Great Falls, Mont. Spectrum offers a wide range of service lines, including home health. Garpestad said two years ago he received a call from a CMS regional office, asking if Spectrum could provide services to another area, a request the company couldnt fulfill. These smaller agencies are closing, Garpestad said, adding that in Montanas 56 counties, 29 do not have a home-care agency and rely on neighboring counties for services. And 14 counties receive no services at all, he said. Meanwhile, Garpestad said its estimated that 60% of Montanas home health agencies will be operating at negative profit margins in 2010, and that is likely to jump to 73% in 2011.
When I read the initial proposal of across-the-board rate freezes, I think it would be drastic to the home health industry and it doesnt come close to addressing the real issue, which is chronic disease, said Marcia Reissig, a registered nurse who is the chief executive officer of Sutter VNA & Hospice in Emeryville, Calif.
Garpestad agreed, saying that three out of every four dollars in healthcare is spent on chronic disease, a lot of which is preventable. And if there is not a prevention model in place, patients at home will be forced out of their homes into a hospital setting. This might be easier to do in, say, suburban Washington, D.C, according to Garpestad, but the situation becomes more complicated for people who live in Montana, which is primarily a farming and ranching state. Then residents are forced to leave farms or ranches that have been in their families for generations.
Were just waiting and seeing and were just going to continue to plug along and provide quality of care to our beneficiaries and just ride with this, Garpestad said of the proposed cuts. Every year there is some threat to the industry.
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