WASHINGTON–Home health care agencies in Connecticut are bracing for steep Medicare payment cuts that they say could seriously hamper their ability to serve the state’s neediest patients.

Despite a last-minute plea from Connecticut’s congressional delegation, Medicare officials are preparing to impose a nearly 6 percent cut on state providers who deliver a gamut of in-home health services to elderly, poor and privately-insured patients.

“In Connecticut alone, you’re looking at in excess of $18 million in lost revenue,” said Bill Sullivan, CEO of the Visiting Nurse Services of Connecticut, one of the state’s largest nonprofit home health providers. “The potential consequence… is denial of patient access.”

At issue is a pending federal rule, set to go into effect on Jan. 1st, that will reduce Medicare payments to home health care agencies in Connecticut by an average of 5.9 percent. (Other states will also see cuts, but the exact amount varies by region.)

At the same time, the federal Medicare agency will impose a new mandate requiring doctors to certify, after an in-person consultation, their patients’ need for home health care services. If they fail to do so, the home health agency will not get reimbursed for any services it provides.

A portion of the payment cuts are mandated by the new health reform law. But another big slice stems from efforts in Congress and the federal Medicare agency to root out fraud in the burgeoning home health industry.

“By advancing patient care, improving quality and fighting fraud, this final rule addresses important concerns shared by the home health industry and all Medicare stakeholders,” Jonathan Blum, director of the Center for Medicare, said in a statement announcing the rule earlier this year. “This final rule will help us ensure more accurate payments and retain prudent financial stewardship of the Medicare trust funds.”

Home care agencies typically provide skilled nursing services and other care for patients after a hospitalization for surgery or another medical issue. For example, a patient who has had a hip replacement might get a home visit from a physical therapist, or from a nurse to change the dressing on the wound.

No one disputes that the home health industry has mushroomed in recent years, including some illegitimate providers who have sought Medicare reimbursements but never delivered any services.

The number of home health providers has grown nationally by about 50 percent since 2002, with nearly 500 new outfits being set up every year, according to the Medicare Payment Advisory Commission (MedPAC), an independent agency created to advise Congress on the Medicare program. There are currently 90 licensed home care and hospice agencies in Connecticut, a figure that has inched up in recent years, although not as dramatically as in other areas of the country.

Spending on these services has shot up substantially across the country–from $8.5 billion in 2000 to $16.9 billion in 2008, a nearly 100 percent increase over that eight-year period, according to a March MedPAC report.

Who so many eager new providers? In part, it’s because Medicare is a good payor. In its report, MedPAC noted that the profit margin on home health services for many Medicare providers was 17.4 percent.

Such hefty payments have served as an inducement to fraud. Florida has been among the hotspots for shady new providers who have allegedly bilked Medicare for millions of dollars in home health payments.

In June of last year, for example, eight Miami residents were charged in a $22 billion home health care fraud scheme. And last December, Miami prosecutors arrested a doctor on charges that he had referred more than 1,000 patients for home health services they didn’t need–part of what officials said was a $40 billion ruse.

Other cases have involved attempts to bribe federal officials and paying kickbacks to recruit patients.

“Home health care appears to be experiencing fraud and abuse issues that are significantly increasing spending on home health care,” the March 2010 MedPAC report states. “The number of agencies has increased dramatically in areas that have generated program integrity concerns in the past–including the states of California, Texas, and Florida.”

Connecticut providers pointedly note they are not on that list. And they say Medicare’s efforts to clamp down on fraud by cutting payments for everyone sweeps up the majority of legitimate providers to catch a few bad actors.

“This is the wrong way in which to go about dealing with fraud,” said Sullivan. The new Medicare rule “penalizes the entire population of providers who are out there giving very important needed care.”

Medicare officials say the cuts are less about attacking fraud than about making adjustments for “upcoding.” That’s a bureaucratic term for when providers code patients’ conditions as more severe than they actually are, resulting in higher reimbursements than are warranted.

“We’re paying more for patients who aren’t sicker,” said Lori Anderson, who directs Medicare’s home health division.

She said Connecticut providers do this as much as agencies in other states. “To say that Connecticut is being unfairly targeted is really inaccurate,” she said.

That doesn’t mean these providers are doing anything wrong, Anderson said. Some may be trying to squeeze extra money from Medicare, but others may just be trying to code patient illnesses more accurately; either way, Medicare needs to adjust payments downward to make sure its costs don’t spiral.

In addition to the cuts, Sullivan and others have objected to a provision in the new rule requiring an in-person consultation with a doctor to certify that home-health services are needed. The appointment has to happen within 90 days of a hospital discharge or within 30 days of starting home care. The goal again is to reduce malfeasance, as well as to encourage physicians to be more involved in a patient’s continuum of care.

But home health providers say the burden will fall on them to make sure that appointment happens, because if it doesn’t, they won’t get paid.

Kim Skehan, a lobbyist with the Connecticut Association for Home Care and Hospice, said physicians already write and sign a “plan of care” that spells out what follow-up their patients need, including any home care services.

“They’re requiring that the home care agency assure the physicians have a face-to-face encounter with the patient,” Skeen said, because officials believe that will enhance the physician’s involvement with follow-up care.

“In theory, it sounds really good,” Skeen said. But in practice, “it’s a logistical nightmare.”

She noted that many patients who are just being discharged from a hospital and in need of home care don’t have a community doctor, don’t have reliable transportation to get to an appointment, and may not have the money for pay for such a visit.

This rule, Skeen added, “is going to create a real problem for agencies to continue to service clients, especially those who are most needy–Medicare and Medicaid patients.”

Sullivan and others note that while Medicare provides good reimbursement rates for home care services, no one else does. Medicaid reimbursements fall about 30 percent short of the cost of home care, and private insurers also do not cover the full bill.

For nonprofits like Sullivan’s VNS, Medicare has helped to subsidize the agency’s other clients, including those with no insurance at all.

As the Medicare rule was taking shape, Sullivan and others appealed to Connecticut’s congressional delegation to intervene, as the national home care association made a similar plea to others. Rep. Joseph Courtney, D-2nd District, and about 90 other lawmakers signed on to a letter asking the federal Centers for Medicare and Medicaid Services (CMS) to delay implementation of the rule.

“Patients could be left with no alternatives for post-acute and long-term care other than more costly institutional care,” such as nursing homes or hospitals, the lawmakers argued in an October letter.

CMS issued a final version of the rule last month. But Sullivan said he is still pushing for a delay in  implementation–and girding for a fresh fight over additional payment changes that could come in 2012.

He said in addition to the survival of nonprofit home health agencies, there’s a broader issue at stake. In his view, the cuts will undermine two central elements of health reform: increasing access to care and reducing health care costs.

“We are designing a system that may be impressive on paper, but in reality, regardless of the available coverage, there will be few or no providers to serve and bring forth the needed change of health care delivery for all,” he said.

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