WHO – Wisconsin Homecare Organization

Reinstate Rural Add-on for Home Care

June 2008

Congress should permanently extend the payment differential for home health services delivered in rural areas. Access to care has become a critical issue in rural Wisconsin. Prior to the loss of the rural payment improvement, there were already counties that had no home health services, and access to home care for rural patients is further threatened by increased costs of service and decreased support from the federal government. The extra cost to operate and serve rural clients must be recognized as a real problem with a permanent solution.

Legislation has been introduced in the House and Senate to extend the 5% rural add-on. S.3118, introduced June 11, 2008, would reinstate the rural add-on for calendar year 2009. The Health Care Access and Rural Equity Act (H.R. 2860) would extend the rural add-on for five years. The Craig Thomas Rural Hospital and Provider Equity Act (S. 1605) would extend the rural add-on for one year.

Access to care in rural Wisconsin

• An estimated 83% of older Americans who have long-term care needs live in non- institutional, community-based settings.1
• About 23% of older Americans live in rural areas.1
• Eliminating the 5% rural add-on has already had a negative effect on rural home health agencies. These agencies are estimated to experience a decrease in their average case mix from 1.583 to 1.1417.1
• Rural area home health clients are often isolated from health care that is not geographically close to them, thus not allowing easy access. They are often underserved.2,3
• Rural beneficiaries are forced to accept what services are available rather than what they need. Compromising their health or endangering their well-being by failing to provide them with adequate access to service is unacceptable.
• Nurses, therapists and aides will easily travel over 100 miles a day to serve clients living in a rural area, often over difficult roads and in severe weather. The loss of the rural add-on has resulted in reductions in service areas, reducing or eliminating delivery of care to remote areas, and reports that some agencies have had to turn away high resource use patients.
• In the current payment system, where efficiency is crucial to keep agencies solvent, these agencies are penalized because of the time and effort it takes to reach out to and serve rural clients.
• Home health care providers need sufficient funding to recruit and retain quality staff, invest in telehealth technology and meet escalating transportation costs.

Additional Pressures on Rural Home Health

• CMS has failed to help agencies care for rural clients by refusing to fund use of telehealth. 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.
• Agencies have been burdened by increasing regulations and paper compliance, manifested in increased cost to the agency.
• The dramatically increasing cost of gas is limiting agencies from reaching out to the outlying clients.4
• CMS plans to continue to cut rates to agencies rather than address these needs.
• These burdens on agencies will only result in more selective admission policies and possibly the closing of small, rural agencies.

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 (PPS).
• 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.

Rural Costs Often Higher Than Urban

• Agencies in rural areas frequently are smaller than their urban counterparts, which means 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 home- bound 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. Agencies are making decisions to not accept certain patients because of their limited resources, and access will suffer further.

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.
• Recent cost reports reveal that the average Medicare margin for rural agencies is minus 6.74%, according to analysis by the National Association for Home Care.

Affect in Wisconsin

• Wisconsin has more than 5,000 home care providers.5
• Wisconsin has more than 70,000 homebound patients. 5

Legislative Background

In late 2000, as part of the Benefits Improvement and Protection Act (BIPA), Congress enacted a 10% add-on for home health services delivered in rural areas between April 2001 and April 2003. On April 1, 2003, the payment add-on expired. The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 reinstated the rural payment improvement at 5% for a period of one year (April 1, 2004, through March 31, 2005). In February 2006, as part of S. 1932, the Deficit Reduction Act of 2005 (PL 109 – 171), a one-year (calendar year 2006) 5% rural add-on for home health services delivered in rural areas was signed into law. The rural add-on expired on December 31, 2006.

Footnotes

1 Testimony to House Ways & Means Committee, American Association of Homes and Services for the Aging, http://waysandmeans.house.gov/hearings.asp?formmode=view&id=6206

2 Utilization of Home Health Services Among Rural Medicare Beneficiaries Before and After the PPS, NORC Walsh Center for Rural Health Analysis, http://www.norc.org/nr/rdonlyres/4eff1302-bec1-4560-8e89- 0c3508e0f5c7/0/walshctr2005_hhealthreport.pdf

3 Changes in Medicare Home Health Care Use and Practices in Rural Communities, Journal of Aging and Health, Vol. 17, No. 3, 351-362 (2005)

4 Wisconsin Homecare Organization, Fuel Cost Relief for Care Givers, June 2008 position paper

5 Wisconsin Home Health Agencies and Patients http://www.dhfs.state.wi.us/provider/pdf/05hh&p.pdf