National Update on Home Care and Hospice

1. National Update on Home Care and Hospice William A. Dombi National Association for Home Care & Hospice wad@nahc.org Minnesota Home Care Association May 18, 2012

2. CHALLENGES or OPPORTUNITIES for HOME CARE? • Are you surprised?---It’s both! • Changes are sudden, gradual, and distant • Political environment subject to change that could trigger more change • Many opportunities in home care combined with business challenges with health care reform and workforce issues • Overall environment favors home care • Demographics • Value proposition • Low capital costs • Technology advances

3. PROGRAM FOCUS • Health care reform: How will it impact home care and your business • Fair Labor Standards Act (FLSA) • Companionship Services exemption: update • Worker classification • Current compliance issues • Medicaid home care • Medicare changes • Factors impacting on home care’s future

4. Health Care Reform Structure • Medicaid expansion • Employer tax credits and penalties • Wide variations between bills • Individual mandate/penalties • Tax credits • “Cadillac Plan” tax in Senate • Medicare cuts as financing source • Insurance reforms, e.g. pre-existing illness • Limited health care delivery/cost reform

5. 2012 Congressional Action • It’s an Election Year! • Flank attack on health care reform legislation • Withhold funding supports • Repeal CLASS provisions • Proposed alternatives? • Criticism abounds but no real action anticipated • House budget block grants Medicaid and changes Medicare to a premium support program • Looking to the Supreme Court

6. Administrative Action • CLASS implementation suspended • Insurance exchanges developing • State flexibility enhanced • Medicaid expansion toned-down with flexibility added • Basic benefit package • General criteria • State flexibility

7. U.S. Supreme Court • Six cases pending review • Four issues • Individual mandate (minimum coverage provision) • Anti-injunction Act applicability (ripeness of litigation) • Severability (does the unconstitutionality of part doom the whole) • Medicaid expansion (voluntary or coercive mandate)

8. U.S. Supreme Court • Briefing completed • Oral argument completed: 3 days-- 5.5 hours • Decision expected by end of June • Myriad of outcomes possible • Tough questioning on constitutionality • Employer responsibility requirements affected only through Anti-Injunction Act and Severability issues

9. 2011-2 Medicare Home Health & Hospice Legislative Activity • Deficit reduction risks (end of 2011) • Home Health Beneficiary copay • MedPAC proposal • CBO: 10% per episode • Deficit Commission: 20% all sectors with annual cap • President: $100 per episode except post-inpatient care • Accelerated rate rebasing • Freeze on rates • 2% “fail-safe” payment reduction in 2013 for all providers

10. 2012 Medicare Extenders and Doc Fix • Legislation passed Congress on 2-17-12 • Covers through 12-31-12 • No home health or hospice cuts • No home health copay • Cuts to hospital and SNF bad debt allowances • DSH payments • LA Medicaid • Labs

11. 2012 Election and Health Care Reform • HCR key issue in 2012 election • Democrats (including President) holding steady in defense) • Focus on health insurance improvements already in place • Medicare also an issue • Republicans (including the candidates for President) unified against) • Repeal effort highly likely if WH control taken • Not without complications

12. 2012 Congressional Action • Posturing pre-election • Development of policies for lameduck session post-election • Alternatives to sequestration • Defense cuts the driver • Tax cut extenders come with a cost • Physician rate fix---AGAIN!!!!

13. Home Care and Hospice Legislative Priorities (and options) • Nurse practitioner certification authorization • Telehealth pilot program • Case mix creep process improvement • Hospice piloting of any new payment model • Program integrity changes • Toughened participation standards • Payment safeguards • Episode caps??

14. 2013 Health Care Reforms???? • Republican Alternative Reforms • Individual tax credits • No individual mandate/No employer mandate • Insurance plans available across state lines • Purchasing cooperatives for individuals • Some state-based reforms • Medicare vouchers replaces existing insurance program • Medicaid block grant

15. 2012 Medicare Home Health Rate Rule • CMS Final Rule; 76 F.R. 68526 (November 14, 2011) • http://www.gpo.gov/fdsys/pkg/FR-2011-11-04/pdf/2011-28416.pdf. • 2.4 % MBI • 1 point MBI reduction (Affordable Care Act required) • 3.79% case mix weight change adjustment in 2012 (proposed at 5.06%) • Not applicable to non-routine medical supplies • HHRG scoring changes

16. HH PPS 2012 Payment Rates • Case Mix Weight Change Adjustment • CMS proposed 5.06% reduction to account for changes in 2007-2009 • Adjustment for 2012 reduced to 3.79% with remainder set for 2013 • Risk remains that additional future reductions/adjustments will be imposed • CMS now capable of annual calculations

17. HH PPS 2012 Payment Rates • Therapy • Increased rates where 0-6 therapy visits by 3.75% • Reduced rates where 14-19 visits by 2.5% • Reduced rates where 20+ visits by 5% • Hypertension • CMS drops two hypertension codes from HHRG scoring claiming data showed no connection to resource use • Recalibrated all case mix weights in budget neutral manner

18. HH PPS 2012 Payment Rates • $2192.07 2011 episodic base rate • X 1.014 Market Basket Index minus 1 point • X 0.9621 3.79% case mix case weight change adjustment • $ 2138.52 2012 Base Episode Rate • $2,202.68 2012 Rural Base Episode Rate • Minus 2% w/o quality data submission

19. HH PPS 2012 Payment Rates • non-rural rural • HH Aide $51.13 $52.66 • MSS $180.96 $186.39 • OT $124.26 $127.99 • PT $123.43 $127.13 • SN $112.88 $116.27 • SLP $134.12 $138.14 • These per visit rates are reduced by 2 percentage points if the HHA did not submit quality data.

20. HH PPS 2012 Payment Rates • Severity Level Non-Rural NRS Rural NRS Amount • 1 $14.37 $14.81 • 2 $51.91 $53.46 • 3 $142.32 $146.60 • 4 $211.45 $217.80 • 5 $326.06 $335.85 • 6 $560.79 $577.63 • These amounts are reduced by 2 percentage points if the HHA did not submit quality data

21. HH PPS 2012 Payment Rates • LUPA ADD-ON • $94.62 non-rural • $97.46 rural • 2% reduction w/o quality data

22. Future HH PPS Payment Rates • 2014 rebasing • May result in varied rates • Expect proposed rule in 2012 • CMS study on vulnerable populations • Case mix weight change adjustment analysis • New MedPAC case mix adjustment model in development: looking to drop therapy threshold element

23. Medicare Rate/Payment Forecast • 2013-- minus 3.5% from 2012. Based on a 2.5 MBI , 1 point reduction under current law, a 3 point creep adjustment, and a 2% payment reduction as part of the deficit reduction law • 2014-- minus 4% from 2013 based on a 2.5 MBI and a 3.5 rebasing reduction, a 1 point creep adjustment, and the 2% deficit reduction. • 2015-- minus 5% from 2014 same basis as 2014 except an added 1 point productivity adjustment • 2016-- minus 5% as above • 2017-- minus 5% as above.

24. Current Medicare Financial Outcomes • National Average Medicare Margins (2010) • Total HHAs---16.12% • Freestanding HHAs---18.8% • Hospital-based HHAs---(6.29%) • State Average Medicare Margins (2010) • Total HHAs---11.47% • Freestanding HHAs---18.35% • Hospital-based HHAs---(7.16%)

25. Current Medicare Financial Outcomes • Margin National Minnesota • > 50% 3.1% 6.6% • 50% - 25% 24.9% 25.6% • 25% - 20% 8.9% 4.1% • 20% - 15% 9.3% 6.6% • 15% - 10% 8.4% 5.0% • 10% - 5% 7.9% 2.5% • 5% - 0% 7.5% 6.6% • 0% - -5% 6.6% 4.1% • -5% - -10% 4.3% 5.8% • -10% - -15% 3.4% 2.5% • -15% - -20% 2.7% 3.3% • -20% - -25% 2.2% 5.8% • -25% 11.0% 21.5%

26. Future Medicare Home Health Changes • Copayments • Ongoing risk, but previous success in stopping • Payment/benefit restrictions • May be alternatives to copay, e.g. episode payment caps • Program integrity measures • Market entry restrictions • Oversights • New case mix adjustment model • Elimination of any therapy thresholds???

27. 2012 Medicare: Other Regulatory Developments in Home Health Services • Face-to-face encounter • Therapy assessments and documentation • Provider revalidation screening

28. Face-to-Face: Policy and Enforcement • Contractors expecting physician documentation to fully justify coverage w/o review of whole record • CMS modifies stance on documentation • CMS allows inpatient physician to conduct F2F and community physician to certify and document • CMS allows “drop down” electronic documentation menu • CMS permits attachments in lieu of original documentation • Post-admission F2F after 30 days allows for 30 day look-back potential on coverage

29. Face-to-Face Advocacy • Reduce documentation requirements • Allow separate physicians/NPPs to do encounter and certification • Expand telehealth F2F allowance • Data on impact • CMS request • HHA survey • Physician survey

30. Therapy Clarifications: Timing Where missed assessment, visits are noncovered Where late assessment, assessment visit noncovered, coverage going forward, assessment clock reset

31. Home Health Revalidation Surveys • National effort to determine valid existence of providers • Paperwork due by end of February • Administrative complications • Site visits have not yet occurred • Must be open and staffed • At site listed in PECOS or through 855A reporting

32. Companionship Services FLSA Exemption • US Department of Labor issued a proposed rule eliminating overtime exemption for personal care aides • Proposed changes in definition and application of companionship services exemption • Limited to fellowship and minor personal care (20%) • Exemption not applicable to third-party employees • Proposed changes in live-in domestic services exemption • Not applicable to third-party employees • Potential cost increases or business volume reduction • 16 states dropped FLSA exemption already

33. NAHC Study Findings • Moderate to significant increases in business costs • Restricting or expecting to restrict overtime hours • Loss of service continuity, weakened staff competencies, and a shift of clients to unregulated gray market caregivers • Costs would be passed on to elderly and infirm clients/patients in private pay purchases while services covered by federal or state programs cannot thereby pushing business to avoid overtime costs.

34. Other Labor Issues • DoL efforts on: • Worker classification as “independent contractors” • “hours worked” • Litigation on per visit compensation to LVNs, LPNs, home care aides • FLSA litigation on personal care attendants • Arguing inapplicability of “companionship service” exemption • Housekeeping exceeding limits • Medical care

35. 2012: The Medicare Health Care Delivery Reforms Begin! • Significant home care opportunities!!!!! • Chronic care management • Transitions in care • Accountable Care Organizations • Post-acute care bundling • Contra: payment rate cuts under Medicare continue

36. Post-Acute Bundling • CMS CMMI in applications process • Two options • Post-acute only • Hospital + post-acute • HHAs are likely proponents

37. CHRONIC CARE MANAGEMENT • Independence at Home Pilot • Focus on certain diagnoses • Interdisciplinary team • Physician/NP directed • Shared savings • RFP in process • HHA-based CCM demo • Monitoring, teaching, coaching, and telehealth • HH coverage criteria Not Applicable • Shared savings

38. TRANSITIONS in CARE • Re-hospitalization prevention and avoidance • Commercial opportunity • Hospital is the customer • Select discharge monitoring and oversight

39. Accountable Care Organizations • Partner, participant, or outsider • Value defines role and opportunities • Creativity and connections creates opportunities • Large physicians groups and/or health systems are likely candidates to establish ACOs • Home care=cost avoidance and cost effectiveness • BUT—home health not included in F&A waiver • CMS approved 27 new ACOs—some directly include home health

40. Medicaid Home Care • Rebalancing of LTC spending continues • Risks to home care support with strained budgets • PPACA incents home care • Major home care expansion through federal money (FMAP) • Community Free Choice Option (Proposed Rule stage) • Removal of barriers to HCBS services • Money Follows the Person Demo extension • Movement to managed care Medicaid

41. Medicare Hospice: FY2012 Rates • Payment rates: wage index adjusted • Routine home care-$151.03 • Continuous home care-$36.71 hourly • Inpatient respite-$156.22 • General inpatient-$671.84 • Annual cap-$24,527.69 • Applied in the aggregate • Election of method: streamlined or proportional—42 CFR 418.309 • Not wage index adjusted

42. Hospice Regulatory Developments • Bereavement counseling • Patient and immediate family • Up to 1 year after death • All hospice physicians, employed or contracted, subject to medical director supervision • Physician certification must include a narrative on clinical findings in support of terminal illness expectancy • Face to face encounters for certification

43. Meeting Both Challenges and Opportunities • Significant opportunities in Private Pay home care • Demand exceeds supply • Staff competencies and staff satisfaction key • Value proposition for consumers • Credentials matter • Outcome driven decision-making by all • Inevitability

44. CONCLUSION: Forecast • 2010 was a very busy year for home health and hospice legislation and regulatory changes • 2011 was a “high threat” legislative year with virtually no real action • 2011 was a very busy regulatory year with implementation of PPACA • 2012 early legislative activity on “doc fix” • 2012 expected to be a big regulatory year