Home Health Reimbursement Reductions by Medicare

According to recent Medicare news, home health care agencies will be reimbursed at a lower rate from Medicare beginning in November 2014.

The reimbursement rate currently provided by Medicare will be reduced by 14 percent over the next four years, the maximum reduction allowed under the Affordable Care Act.

While the owners of home health care agencies state that they fully expected some form of a reimbursement reduction, they did not expect or prepare for the cut to reach 14%.  Some owners state that this reduction will result in their profitability margins crossing over to the negative side and ultimately result in the closure of their agencies over this time.  Senior citizens and advocates for senior citizens fear that this reduction will result is less availability of home health aides to care for them.  One such advocate, AARP, has responded to this announcement by lobbying Medicare to reconsider this reimbursement reduction to ensure senior citizens are able to access home health care.

According to a Bloomberg Businessweek article, in previous years the federal government reports that Medicare “spent more than $18 billion to send nurses, therapists, and health aides to the homes of about 3.5 million Americans too sick or frail to leave the house.”  The same article also reports that from “2004 to 2012 the number of home health agencies in the U.S. increased by 57 percent.” And that these for-profit companies “have been paid well in excess of their costs” and have “added an average 4,500 jobs a month in 2013.”

However, according to data from the Department of Labor, this past December 2013 the home health industry recorded a large reduction of home health positions.  3000 jobs were eliminated, the industry’s first such decline in some time.

In response to this reduction, the home health industry, led by the Partnership for Quality Home Healthcare, has hired a lobbyist to “press Congress to roll back at least some of the Medicare cuts."
 
In the interim, we have recommended to our Home Health Care clients that they take a hard look at their business model to see if it is sustainable in a soon-to-be high-volume, low-margin industry as well as ensure they have a cash-flow monitoring plan put into place immediately.