PPS might be a concrete life jacket, so don’t be too eager for IPS to vanish
Here’s preview of regs HCFA is expected to release this month
The adage "Be careful of what you ask for because you might just get it" is particularly appropriate when it comes to the home care prospective payment system (PPS).
Several experts who have been working closely with officials from the Health Care Financing Administration (HCFA) say what has been discussed so far is not likely to be a lifesaver for home care agencies. Some agencies may wish they could go back to the interim payment system (IPS) once they see the proposed rules, which are expected to be released this month.
Home care administrators and quality managers will need to carefully read the proposed rules and begin now to make changes that will help their agencies stay afloat when PPS is implemented, as is expected in October 2000.
"My mantra has been that the cash flow will be much worse and not better with PPS; PPS is not the panacea that everybody thinks it is," says H. Kenneth McNulty, vice president for finance for the Visiting Nurse Association of Boston. McNulty’s agency, which makes about 800,000 visits a year, has been involved in the prospective payment demonstration project (PPDP) for four years; and he has attended meetings with HCFA and home care industry officials to discuss PPS.
"For some agencies, PPS will be better," McNulty says. "But for others, it will be a heck of a lot worse."
PPS, 15% cut are one-two punch
On top of PPS problems, the industry still has to worry about what will happen if the Balanced Budget Act’s additional 15% cut in Medicare reimbursement, which was postponed until Oct. 1, 2000, goes into effect. The home care industry is lobbying Congress to eliminate that cut because of the devastating impact it will have on home care agencies. Even if PPS is implemented by that deadline, the current legislation requires a 15% reduction in home care expenditures by Medicare, McNulty says.
The key to survival under PPS will be similar to what agencies have already been doing under IPS, including continuing to foster independence among patients and their families, says Mary St. Pierre, RN, BSN, director of regulatory affairs for the National Association for Home Care (NAHC) in Washington, DC. NAHC has lobbied hard on behalf of the home care industry to convince HCFA officials to soften the PPS blow. However, if HCFA’s answer in a July letter to NAHC is any indication, the home care industry still has a tough fight ahead once the proposed rule is published. (See HCFA’s letter to NAHC, inserted in this issue.)
"We would like to see agencies when the regulation is published to take that information and try to do some modeling to see how it will impact their agencies," St. Pierre says.
Write letters to HCFA about proposed rule
Once agencies find out how they would have been impacted last year if PPS had been implemented, they can write a letter to HCFA during the regulatory comment period describing PPS’ impact and any problems they uncovered, she adds. "We also urge them to send us a copy of what they write to HCFA."
NAHC will put a link to the proposed rule on its Web site (www.nahc.org) as soon as it is published.
In the meantime, agencies should be aware of several potential problem areas that are expected to be a part of the proposed regulations. Quality managers, along with home care administrators, will become quite familiar with the terms cash flow, consolidated billing, case mix distribution, 60-day episode period, and the national case rate methodology.
Which way the wind blows
While none of the experts contacted by Homecare Quality Management were certain of what HCFA will propose, they had a pretty good idea of which way the administration was heading. (See story on potential problems with HCFA’s proposed regulations, p. 119.) They say the biggest problem area could be cash flow. Agencies might find that under PPS, they are paying out money for expenses in treating patients far faster than they are being paid for the care they provide. The lag time could extend to months, and this might create a major cash flow crisis, McNulty says. (See story on cash flow problem, p. 121.)
What are the positive elements of PPS? From a home care agency’s perspective, the main benefit is that IPS and PPS are forcing agencies to examine any stale standard operating procedures to find more efficient ways of providing high-quality care to patients.
The prospective payment demonstration project, which ran from 1991 to 1998, showed that home care agencies could become more efficient and still maintain quality, says Henry B. Goldberg, senior associate with Abt Associates Inc. in Cambridge, MA, the social science research firm that contracted with HCFA to design and implement the demonstration project.
"Some people felt at the beginning of the project that agencies wouldn’t be able to make a change because they were already being as efficient as they could, or if they made a change it would create problems or have negative impacts on quality of care," Goldberg says. "But the evaluation found that agencies reduced their visits, reduced their cost per episode, and it didn’t have any significant impact on the quality of care or patient outcomes."
PPS likely will reduce costs, utilization
The evaluation, conducted by Mathematica Policy Research in Princeton, NJ, compared agencies that operated the usual way with agencies that operated under a PPS. During the first year, the PPS group had 4.4 fewer visits per episode of 120 days for skilled nursing than did the control group. Home health aide visits were 3.1 visits less for PPS agencies, and physical therapy visits were 0.7 lower.
Plus, the percentage of episodes that lasted more than 120 days was 34.5% for the control group and 24.4% for the PPS group. Likewise, the average length of stay was nearly 10 days less for the PPS group.
All of those efficiencies led to a lower cost per episode of $2,751 for the PPS group, when compared with $3,170 for the control group.
Some agencies made money during the project, and others lost money, and their profitability was not related to their initial service patterns.
"There was one theory that only expensive agencies with high utilization would be able to respond and others would not be able to, but in fact that wasn’t the case," Goldberg says.
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