Home health agencies keeping an eye on Medicare PPS

Beginning Oct. 1, home health agencies will be reimbursed for services to Medicare patients according to the Prospective Payment System, which pays based on the patient's diagnosis. PPS will replace the Interim Payment System (IPS) that went into effect with the Balanced Budget Act of 1997 and paid a set dollar amount for home care services.

When the Balanced Budget Act was passed into law, it had a goal of balancing the federal budget by the year 2002 and extending the solvency of the Medicare program to 2010. The act resulted in a budget package that cut Medicare expenditures by $115 billion over a five-year period, including a cut of $16.2 billion for home health, according to the National Association for Home Care.

Prior to the Balanced Budget Act, a home health care agency was compensated for each patient visit, and a patient was allowed an unlimited number of visits providing the patient met the qualifying guidelines for home care.

Jim Goff, president of Health Force, a home health agency in Springfield, said that changed with IPS.

"Every agency has a different set dollar amount for an IPS," Goff said. "It depends on how long you've been certified as a home health agency, your geographic location, the number of visits you average and so on. All of these things are determined by the Health Care Finance Administration. Any expense above that is an out-of-pocket expense for the home health agency."

Mary Schantz, executive director for the Missouri Alliance for Home Care, based in Jefferson City, said that more than 100 Missouri home health agencies have closed their doors since January of 1998.

During that time, Schantz said, some agencies' Medicare payments were cut by 30 percent to 40 percent.

Randy Rogers, administrator of Integrity Home Care, said his company, which was formed just seven months ago, decided not to accept Medicare initially because of the changes that were coming with the PPS.

"We're sitting back, for now, and seeing what everyone else does," he said. "But I've talked to home health aides who work for companies that take Medicare. These employees are disgruntled by the changes. For example, one aide said they're serving a patient who gets a daily bath as part of his home care. But with the PPS being based on a patient's diagnosis, this same patient will only receive a bath three times a week."

Rogers said he is unsure when, if ever, the company will take Medicare. For now, it is taking Medicaid, private insurance and private pay.

Schantz said, "While there are some concerns with the PPS, I think it will be better for meeting client's health care needs," adding, "We need to make sure seniors have access to home health care. They deserve this. People want to stay home and get better."

Melanie Markham, administrator of Access Home Health Agency, agreed.

"People really want to stay home as opposed to being institutionalized. The PPS won't restore the lost revenue but will hopefully allow better care management. Agencies will be reimbursed per disease episode. We will focus people more on disease management," Markham said.

With money tight and demand for services under Medicare destined to increase, local home health professionals say survival will be based on business acumen and diverse revenue sources.

Goff said that prior to the Balanced Budget Act, a home health company could successfully enter the market if it had exceptional clinical skills.

"But now, in addition to having exceptional clinical skills, they must be professional business managers and have a solid business plan that includes constant attention to the bottom line," he said. "They must also have a fiscal accountability associated with each patient from admission to discharge. We have to monitor our admissions very closely and monitor our clinical service while each patient is on service."

Markham added that the successful agencies are those that have diversified and responded to market changes; "those that have become stronger in private pay, supplemental staffing and becoming a provider for the state Division of Aging programs."

Goff said he believes that even after PPS is begun, it will be a year to a year-and-a half before new companies enter the home health care market. "I believe it will be that long because the market is so restrictive," he said.