A proposed $180 million drop in Medicare reimbursement may not be a surprise to home healthcare agencies—but that doesn't necessarily make it any easier to digest, industry leaders say.
The Affordable Care Act mandated the cut, along with reductions over the last three years, to make up for overpayments for home health services dating back to 2000.
This time around, the CMS is proposing a 1% drop in Medicare reimbursement to home healthcare agencies in 2017. The CMS cut payments by $260 million for 2016, $60 million for 2015 and $200 million for 2014.
"It's been very tough," said Dean Chalios, CEO of the California Association for Health Services at Home. "The cost of providing care continues to increase while the reimbursement decreases."
The cuts generally haven't led large numbers of agencies to close their doors, said William Dombi, vice president of the National Association for Home Care & Hospice. But they have “forced new management techniques,” he said.
Such strategies have included freezing staff salaries, reducing the number of visits with patients per episode of care and delaying investments in new technologies, among other things.
“It's taken monies that could be used for building a future and prevented those agencies from modernizing,” Dombi said.
Nationwide, about 11,400 home health agencies are caring for Medicare beneficiaries—down from 11,781 in 2014, according to the CMS.
Dombi said the dip in the number of Medicare home health agencies might be due to increasing consolidation within the industry and/or because agencies are having a difficult time coping with the reduced Medicare payments.
Margins for home health agencies—the difference between agencies' costs and Medicare's payments—averaged 17.2% for free-standing home health agencies, according to the CMS. Dombi said the 2015 margin per MedPac is much lower at about 12%, and his group estimates that the margin could actually be a bit below 10%. That's still higher than, for example, most hospitals, which mostly operate with single-digit margins.
Agencies in some areas of the country, such as New York and Oregon, are having a particularly tough time, Dombi said.
New York Medicare-certified providers have been operating at a loss on Medicare payments for several years in a row, said Roger Noyes, a spokesman for the Home Care Association of New York State. Noyes said 60% of New York agencies have reported having to reduce staff or cut other costs to function, and half have used a line of credit or borrowed money for operating expenses over the last two years.
He said the reimbursement cuts haven't fully accounted for regional variations, such as higher wages for workers and high concentrations of hospital-based certified agencies and dual-eligibles in some areas of the country.
Some New York agencies have had to close, Noyes said, while others have cut staffing or are looking at consolidating. Chalios said some California agencies have had to close.
Industry groups have also been dealing this week with the U.S. Supreme Court's decision not to hear a case challenging a new Labor Department rule requiring higher wages for many home care workers. The decision affects providers of home care services (which often include cooking, cleaning and bathing), not home healthcare providers, but such providers fall under some of the same industry groups. Such home care providers are often private pay or Medicaid.
Most states have not boosted Medicaid funding to help pay for the new wage requirements, leaving many home care providers also having to make adjustments.
In November, shortly after the rule went into effect, Home Care Pulse conducted a survey of 444 home care providers. Nearly 68% of those who responded to the survey said they had cut caregiver hours to avoid overtime. More than 55% said they were rescheduling cases to avoid paying overtime. And more than half said they were raising fees to cover the additional costs. Home Care Pulse does research for the home care industry and helps them measure client satisfaction.
Workers groups have praised the new rule, saying workers deserve fair pay, and that boosting wages will help stabilize the workforce, benefiting patients and the industry.
The new rule means that more workers will be entitled to overtime, minimum wage and pay for time spent traveling between clients. Such workers, who are mostly minority women, have otherwise been making $10.11 per hour on average, Angelina Del Rio Drake, executive coordinator with the Paraprofessional Healthcare Institute, said in a call with reporters Monday.
“It is the necessary precursor to the broader reform the workers and industry so desperately need,” Sarah Leberstein, senior staff attorney at the National Employment Law Project, said during the call with reporters.
But seniors may have a more difficult time affording such care, said Phil Bongiorno, executive director of the Home Care Association of America.
That comes at a time of increasing demand. A recent Home Care Association report (PDF) noted that the number of Americans over age 65 is expected to rise from 56 million in 2020 to 84 million in 2050, and 40% of such adults need daily assistance.
“We're concerned, bottom line, it will be more expensive for seniors, and having to pay out-of-pocket, they're not likely to use the services,” Bongiorno said. That could, in turn, lead to higher healthcare costs because without such care, some seniors may not be able to remain healthy in their homes for long, he said. The association's report noted that older adults who receive home care generally need fewer trips to doctors and hospitals, saving as much as $25 billion in 2008.