Legislation Introduced to Preserve Rural Home Health Services
Senate bill would extend the 3 percent payment differential for Medicare home health services delivered in rural areas for another five years
December 18, 2015 10:43 AM
Senator Susan Collins (R-ME) and Senator Maria Cantwell (D-WA) have introduced legislation (S. 2389) to extend the rural add-on for Medicare home health services delivered in rural areas, which is currently set to expire at the end of 2017.
In a Congressional Record statement, Senator Collins explained that she introduced the bill to ensure Medicare patients in rural areas continue to receive the home health services they need. “Failure to extend the rural add-on payment would only put more pressure on rural home health agencies that are already operating on very narrow margins and could force some of the agencies to close their doors altogether,” Senator Collins said. “If any of these agencies were forced to close, the Medicare patients in that region could lose all of their access to home care.”
The Affordable Care Act in 2010 reinstated a 3 percent Medicare 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. Subsequently, Congress passed legislation earlier this year repealing the Sustainable Growth Rate (SGR), which included a two-year extension of the rural add-on through the end of 2017.
NAHC strongly believes that Congress should pass S. 2389 extending the 3 percent payment differential for home health services delivered in rural areas for another five years. NAHC, in its 2015 Legislative Blueprint for Action distributed to Congressional offices, asserted 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.
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 encourage your Senators to cosponsor S. 2389, please use NAHC’s Legislative Action Center by clicking here.
Stay tuned to NAHC Report for more coverage of legislation to extend the rural add-on.