National Advisory Committee on Rural Health and Human Services

Supplemental Testimonial Material
Submitted by Julia Jardine, BSN, MHSA,
Interim Director of Nursing
Livingston (MT) HealthCare
Submitted to the National Advisory Committee
on Rural Health and Human Services
Field Meeting, Pray MT Sept. 2-4th, 2002

Editor's Note: This submission of testimony to the Committee is from a portion of earlier testimony to a field hearing of the Senate Finance Committee held in Bozeman Montana on May 28, 2002. Julie represented the Montana Association of Home Health Agencies in providing this testimony. The testimony was submitted to refute the findings of a GAO study that supposedly showed that home health agencies are making money under Medicare home health prospective payment.

"The 15% cut in PPS reimbursement to become effective October 1, 2002. I would be remiss in my testimony if I did not at least touch upon one additional issue that weighs heavily on home health providers nationwide--that of the 15 percent cut currently scheduled for October 2002. This related to regulatory reform because our regulations continue to increase without adequate reimbursement to cover the costs of education, implementation, follow-up and the data analysis that comes with cumbersome regulations. The GAO recently released data analyzing the potential impact of the scheduled 15 percent cut affecting Medicare PPS rates. As a result, CMS is in favor of keeping this 15 percent cut; as they assert that home health agencies are making a profit of $700 per episode. I can tell you that this is not the experience of Montana home health providers. I would like to respond to the problems with this GAO study.

"First of all, I find it truly incomprehensible that the GAO thinks it can accurately predict the costs per episode of care under PPS, since the cost reports have been postponed for months now, due to inaccurate data on the PS&R statements supplied by Medicare Intermediaries. They can't and their projections are dangerously flawed.

"The GAO analysis is a result of wholesale reliance on data proxies and assumptions, using statistics that, do not relate to actual costs or revenue. In the GAO's hasty attempt to analyze the financial status of home health agencies under PPS, the GAO relies on averaging. The diversity of home health patients, the variation of agency costs, and the inconsistency of the home care market place makes averaging extremely dangerous. The GAO data sources have inherent errors and weaknesses. For example, the visit volume data is suspect given that CMS has expressed that accurate data is not available. Over the last five years, CMS, the Congressional Budget Office (CBO) and GAO have consistently based analyses on faulty assumptions regarding home health agency behavioral reactions to reimbursement changes. The GAO relies on an inflation rate applied to 1996-97 data. That approach ignores significant changes in home care including the increased use of information technology, telehealth services, specialist nurses, and alternative profession disciplines. The GAO uses a simplistic approach that fails to account for basic crucial revenue adjustment. These include partial episode payment (PEP) adjustments, significant change in condition (SCIC) adjustments, case mix downcoding, and low utilization payment adjustment (LUPA) losses. Home Health Agencies are experiencing that these adjustments affect approximately 25 percent of all episodes. In summary, the GAO understates expenses, overstates payments and we believe the $700 profit figure is inaccurate."