NAHC Encourages its Members to Ask Lawmakers to Preserve Access to Rural Home Health Services
October 16, 2014 11:35 AM
In 2010 the Patient Protection and Affordable Care (ACA) reinstated a 3 percent payment add on for home health services delivered to residents of rural areas. Under the legislation the rural add-on payment became effective for visits ending on or after April 1, 2010, and before January 1, 2016. The rural add on is now scheduled to again expire at the end of 2015.
NAHC strongly believes that Congress should extend the 3 percent payment differential for home health services delivered in rural areas. Senator Susan Collins (R-ME) and Representative Greg Walden (R-OR) have championed the rural add-on in the past, and have expressed interest in introducing legislation to extend it for another five years when Congress returns for its “lame duck” session after the election.
NAHC believes that extending the rural add on is necessary for the following primary reasons:
Cut in Reimbursement Will Result in Service Area Reductions
The loss of the rural add on will likely result in reductions in service areas and some agencies may have to turn away high resource use patients in rural areas. Access to care is a critical issue in rural America. Before the rural add on was reinstated in 2010, some agencies reported that they had to eliminate delivery of services to remote areas. For example, some agencies in Maine had to eliminate delivery of services to outlying islands.
Workforce Shortages and Competitive Wages
Rural agencies have greater difficulty hiring or contracting with therapists, and frequently must use nurses instead of therapists to provide rehabilitative services, which could affect a patient’s rehabilitation progress. Additionally, when an agency does not use a physical therapist for therapy services, it cannot qualify for the higher therapy rates allowed by the prospective payment system (PPS).
Home health agencies have difficulty competing with hospitals to hire staff because they are unable to afford the wages, benefits, and large signing bonuses that hospitals offer. Further, home health agencies are not eligible for reclassification of their wage index – an option available only to hospitals. This problem can be even greater for rural agencies in cases where their rural hospital counterparts are eligible to become critical access hospitals or sole community providers, which afford them the opportunity for greater reimbursement.
Despite this, rural home health agencies must offer competitive wages for care workers that are comparable to wages paid in urban areas because of the nationwide nursing and staffing shortages. In certain frontier states, graduating nurses leave the state seeking better wages, thus compounding the workforce shortage.
Costs Often Higher Than for Their Urban Counterparts
Agencies in rural areas frequently are smaller than their urban counterparts, meaning that costs are higher due to smaller scale operations. Smaller agencies with fewer patients and fewer visits means that fixed costs, particularly those associated with meeting regulatory requirements, are spread over a smaller number of patients and visits, increasing overall per-patient and per-visit costs. Smaller agencies have less likelihood of maintaining a high patient volume –which means they have less access to a varied case-mix.
There are not always enough marginally profitable cases to offset the resource-intensive, expensive cases. Outlier payments are not sufficient to cover these costs. A small agency’s census of patients is often inconsistent, which makes it difficult to retain consistent full-time staff.
In many rural areas, home health agencies can be the primary caregivers for homebound beneficiaries with limited access to transportation. This means that rural patients often require more resources than their urban counterparts, and are more expensive for agencies to serve. The cost of a nursing visit is considerably higher in rural areas than in urban areas. In the rural areas of Maine, for example, nursing visits are 37 percent more costly than in urban areas. Before the rural add on was reinstated, agencies often had to make decisions to not accept certain patients because of limited resources, and access suffered.
Very Limited or No Access to Capital Resulting In Inability to Purchase Time-Saving Technology
Rural home health agencies often lack access to the capital needed to take advantage of time-saving technological advances that could increase efficiency, such as home monitoring devices. This problem is compounded by the fact that Medicare payment policy does not allow for reimbursement of such devices.
Rural Agencies Generally Have Lower Margins
Since MedPAC has been studying Medicare home health margins, it has consistently found that the profit margins of rural agencies were below those of urban agencies.
To analyze the financial impact of the home health PPS, NAHC secured nationwide data contained in the annual Medicare cost reports filed by freestanding and hospital-based home health agencies. NAHC projects that the loss of the rural add on, in combination with the ongoing rebasing of home health payment rates and the imposition of a new productivity adjustment in 2015, will result in an average margin in rural areas of MINUS 4.58 percent by 2017. Fifty-seven percent of rural agencies in 2017 will be underwater—that is paid less than their costs by Medicare.
NAHC members who believe one of their Senators or Representative would like to be an original cosponsor of this legislation are encouraged to contact NAHC at firstname.lastname@example.org.
To encourage your Members of Congress to support efforts to extend the rural add-on, you may send a message through the NAHC Legislative Action Network by clicking here: Write your Legislators.
Stay tuned to NAHC Report for more coverage of the rural add-on when the legislation extending it is introduced.