What is the IPS all about?
July 1, 1998
What is the IPS all about?
NAHC discusses IPS and its problems
The National Association for Home Care (NAHC) in Washington, DC, has been trying for months to convince Congress to make changes in the interim payment system (IPS) because of the potentially devastating effect it will have on the home care industry.
"The Balanced Budget Act of 1997 (BBA) cut home health spending by $16.2 billion over five years," William A. Dombi, vice president for law for NAHC and director of NAHC's Center for Health Care Law, told senators when he testified about the IPS before the U.S. Senate on March 31, 1998. "Although home care represents only 9% of Medicare, it was slated for about 14% of the cuts in Medicare spending."
The IPS was designed to slow growth in home health utilization and limit increases in expenditures until the Health Care Financing Administra tion (HCFA) implements a full prospective pay - ment system (PPS) by Oct. 1, 1999. But IPS has created some problems, which Dombi outlined at the U.S. Senate hearing:
o IPS reduced the per-visit cost limits. First, it calculated the limits based on 105% of the median per-visit costs of freestanding home health agencies, rather than the previous method of 112% of the mean. The median of a set of numbers is the midpoint, which half the numbers are below and half above. The mean is the same as the average, in which all the numbers are added together and then divided by their total. Statistic ally speaking, averages, or means, typically are higher than medians. Therefore, the difference between the old method of calculating the costs and the new method could be considerable, Dombi says. Plus, the new limits are based on older data that don't take into account the market price increases between mid-1994 and mid-1996. Dombi estimates the new cost limits represent a 21% reduction.
o Per-beneficiary limits are inequitable. The per-beneficiary limit is a blended limit, consisting of 75% agency-specific data and 25% census region data. These use fiscal year 1994 as the base year, which means payments are based on five-year-old data that don't reflect changes in an agency's population or changes in its services.
"Over this time period, there has been an increase in the number and percentage of higher-cost patients in the system," Dombi says. "There has also been a rise in the number of home health agencies, which further disperses patients."
The limits have been divisive in the home care community because new agencies sometimes receive higher limits than older agencies in the same communities. That's because agencies formed after 1994 receive a median of the limits based on national averages, which are higher than average limits in certain areas of the country.
o Limits will be reduced by 15%. On Oct. 1, 1999, home health expenditures are to be reduced by 15%, regardless of whether HCFA has developed the PPS. Dombi told Congress the 15% reduction is unnecessary because the budget target will be achieved without it.
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