HR 4229: The industry’s PPS plan wouldn’t fly
The home care industry’s proposal for establishing a Medicare Prospective Payment System (PPS) for home care, introduced in the 104th Congress as HR 4229, was one of the few issues the home health industry has ever agreed upon. But it will not be part of the budget bill the president signs. The PPS plan that made it through Congress was the one suggested by the Department of Health and Human Services and supported by the Clinton administration.
What went wrong? Comments in recent correspondence and testimony by William Scanlon, the General Accounting Office’s (GAO) director of health financing and system issues, give some insight.
In a May 28 letter addressed to Congressman Bill Thomas (R-TX), Chairman of the House Ways and Means Subcommittee on Health, Scanlon says while the payment methods proposed in HR 4229 would give home health agencies incentives to reduce costs per visit, the methods "provide little if any incentive for many agencies to control the number of visits furnished."
The industry proposal called for two transitional two-year phases before implementation of a PPS.
The increased number of visits per beneficiary, combined with the increase in the number of beneficiaries served, has been the primary driver of home health costs, Scanlon says, pointing out that the cost per visit increased an average of 4.6% per year while home health costs grew an average of 33% per year (1989-1996). Because the definition of a visit is not clear in HR 4229, Scanlon says, "HHAs could gain by responding to the incentives to reduce cost per visit by actions such as merely reducing the length of visits."
Another problem with HR 4229 is its use of the 18 case-mix categories from the Health Care Financing Administration PPS demonstration project. "HCFA has stated that these categories are not sufficiently developed for general use and explain less than 10% of the variation in cost across patients," the GAO official argues. "In addition, HCFA does not routinely collect the data on patient activities of daily living (ADLs) that are necessary for this case mix system."
Scanlon also notes that "substantial amounts" of non-covered care are probably included in HCFA’s home care utilization data bank. Also, says Scanlon, HCFA’s cost data are unlikely to reflect only reasonable costs given the "questionable costs" found in cost reports by the GAO and other federal agencies. These problems suggest using these data could result in "windfall profits" for home health care providers.
[Editor’s note: To order GAO/HEHS-97-144R, A Home Health Prospective Payment System, call (202) 512-6000.]
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