Agencies grapple with Medicare cuts
Finding a way through the maze of change
With the ink now dry from the Balanced Budget Act’s (BBA) August signing, Hospital Home Health hit the streets to hear first-hand how this landmark legislation is affecting agencies. We got an earful.
The providers we talked with tell us that despite funding cuts and uncertainty about key aspects of the BBA, they have taken steps to manage today’s reductions and prepare for tomorrow’s prospective payment system (PPS). Stymied by missing details on some issues, they have nonetheless taken the cuts in stride, given other sweeping industry changes.
The sources for this article all sound confident of their institutions’ home care commitments and continued Medicare participation, but they expect a fundamental shift in the way patients are managed within their systems once home care PPS arrives, probably in 1999.
Passed by two-thirds of both the House and Senate and signed into law by President Clinton on Aug. 5, the Balanced Budget Act of 1997 hit home care hard, with $16.2 billion in projected Medicare cuts over five years. Exactly how hard individual agencies will be affected remains to be seen, as various provisions, including revised cost limits, per beneficiary caps, and "normative standards" on duration and frequency of home health services have yet to be defined, despite an Oct. 1, 1997, effective date.
The BBA calls for reduced reimbursement based on the lower of reasonable costs up to:
• 105% of the median (down from 112% of the mean);
• an agency-specific per beneficiary cap based 75% on 98% of a provider’s per patient cost of services in cost reporting periods ending in 1994, and 25% on 98% of the regional average cost per home health patient in the provider’s base year. (HCFA is not mandated to develop the revised limits until Jan. 1, 1998, and the per beneficiary caps until April 1, 1998.) Cost limits for cost reporting periods between July 1, 1994, and July 1, 1996, will remain at 1994 levels.
The BBA also authorizes HCFA to develop "normative standards" on duration and frequency of home health services, for Oct. 1, 1997, implementation. The legislative language gives HCFA discretion to develop such standards, but stipulates that if they are developed, services that exceed the norms will be denied.
Frances Lekwart, MSN, RN, assistant vice president, Memorial Home Health, Houston, cited a number of mechanisms for dealing with new reimbursement rules, including: good financial reporting, increased volume (overhead spread over more visits), lowering field staff pay-per-visit rates, lean operations (minimal overhead), and patient management-savvy field staff. All have helped her position her agency well.
Lekwart also noted that Memorial’s per-patient Medicare utilization is below both national and Texas averages, placing the agency in good stead for "normative standards" definition. Experience gained from Medicare managed care patients Memorial’s fastest growing managed care segment also helps.
According to HCFA, the national average in 1995 (the latest data) was 72 visits per patient, but the agency has not yet decided what a normative standard will be.
Like Memorial, North Mississippi Medical Center Home Health Agency in Tupelo has already implemented changes to address the BBA cuts.
Paula Turner, customer advocate, explained that North Mississippi has invested in both RN and home health aide training to maximize each staff member’s effectiveness with fewer patient visits. Specially trained RNs now open specialty cases, as opposed to the agency’s past practice, when, for example, a generalist may have opened a chronic obstructive pulmonary disease case.
The specialty nurse manages the primary diagnosis from the first visit, and also incorporates other skilled needs in the Plan of Treatment. Similarly, home health aides, who often have more frequent patient contact than other field staff members, have been retrained to note and communicate changes in their patients’ statuses immediately.
The agency also is implementing the use of laptop computers and a software package that will tighten physician-nurse communication by allowing each on-line access to the other’s patient interactions.
Smaller size and effective communications are advantages, according to Dolores Martin, BSN, RN, administrator of Greater Southeast Community Hospital Home Health in Oxon Hill, MD. With 38,000 annual visits, Martin finds direct communication with her field staff easier than in larger agencies. Having field staff understand and buy into necessary practice changes is critical. Her message: "We must do business differently. Adapt to changes quickly."
Sylvia Maher, MN, RN, vice president of patient care services at Bethany Medical Center in Kansas City, MO, says newness has worked in her agency’s favor. The agency was launched in February 1997. Bethany’s field staff leaped from the starting block armed with current knowledge in care management, documentation, and utilization. As a result, the agency’s culture is already in sync with today’s stringent reimbursement requirements.
Most providers’ optimism is tempered by uncertainty regarding the BBA’s ultimate financial impact on their programs. This is where good financial reporting becomes critical, according to Lekwart. Timely financials with per-visit direct and indirect costs enable immediate operational adjustments, which may be required once the full force of HCFA’s revised cost limits and per benefit caps hits.
Patients lost in the shuffle
Though financials are on everyone’s mind, the BBA’s impact on patient care also is a major concern. Situated in the northeast corner of Mississippi, North Mississippi Medical Center’s Home Health performs over 500,000 visits annually in 17 mostly rural counties. The agency is a vital link between its patients and other health resources.
Turner worries that a restrictive homebound status definition could deprive some truly needy patients of home care. The agency has notified those patients now receiving only monthly venipuncture services that absent a clinical status change, they will be ineligible for home care in February. This has caused consternation and upset among affected patients.
Memorial’s Lekwart echoes Turner’s concern that a narrow homebound status definition could create significant hardships for patients. However, she emphasizes that it will force agencies to closely evaluate and document each patient’s care needs.
In addition to intermittent services, Memorial also provides durable medical equipment. Lekwart warns that the BBA’s reduced oxygen and oxygen equipment reimbursement (25% reduction beginning in 1998 and an additional 5% beginning in 1999) may force her agency to discontinue "loss leader" liquid oxygen, though it is essential to ambulatory patients.
The BBA provision requiring each participating agency to post a $50,000 surety bond did ot ruffle any feathers, though several concurred with Bethany’s Maher that this may force smaller freestanding agencies out of the Medicare business.
The Freedom of Choice provision, which requires hospitals to provide discharging patients with a list of community home health agencies and report referrals made to entities in which the hospital has a financial interest, will not affect any of the agencies we contacted. All report that their affiliated hospitals now provide homebound patients a list of community providers, and maintain referral records on all agencies, not just their own.
Even before all the BBA cuts take effect, provi ders have their sights on prospective pay, and expect to work closely with hospital executives to navigate the rapids downstream. With PPS, Bethany’s Maher notes, HCFA "puts risk back on the providers to know what happened with a patient [even] before they entered our system."
HCFA’s message, she says, is "you didn’t lose as much money as we wanted you to."
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