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Home health-care industry fears health reform will come at its expense

This article first appeared in the St. Louis Beacon, Dec. 17, 2009 - With plenty of experience and a passion for patient care, Ann Ritter ventured into the home health business in 1983. It turned out to be a good move, making her part of a service that's still regarded as one of the most effective and least expensive ways to care for some patients.

But Ritter got cold feet after some hospitals began expanding into the business. "I didn't think I could compete," she says, explaining why she sold the business to Barnes Hospital a few years later.

Still, she regarded free-standing home health agencies as an opportunity to provide care because she noticed that many patients continued to be discharged from hospitals without "really hearing the teaching and what they need to do when they get home."

That conviction led her to open another home health business, Nurses & Company, in St. Peters, 18 years ago. With about 250 clients, the company is one of the area's largest free-standing home health agencies. But Ritter, along with home health providers in general, are beginning to worry about the financial stability of the industry as they watch health-reform legislation wind its way through Congress.


What alarms them most is that Congress is talking about underwriting an expansion of health insurance partly by taking large sums from the home health portion of Medicare. Home health represents about 3.7 percent of Medicare's budget, but the House version of health reform would take away $54.7 billion, a cut of 10.2 percent, in a decade; one Senate proposal calls for trimming home health's budget by $42 billion, a cut of 9.4 percent.

In a key vote last week, Sen. Christopher S. Bond, R-Mo., was the only Missouri or Illinois senator to oppose the $42 billion plan to slow down the growth of home care over the next decade. Democrats say the proposed reductions would help pay for the overall cost of health-care reform. But opponents of both the Senate and House proposals say home health budgets are being asked to absorb a disproportionate share of the cuts even though the industry gets fewer federal dollars today than it did in 1997, while serving about the same number of people.

And home health care is one of the issues that is preventing Senate leader Harry Reid, D-Nev., from getting a filibuster proof majority for his bill. According to The New York Times, Sen. Ben Nelson, D-Neb., said he was concerned that the bill would raise taxes, impose costly new requirements on states and reduce access to health care by curbing Medicare payments to some providers, including nursing homes and home-care agencies.

That anxiety about home care is shared by people in the business. 

"I have concerns," Ritter says. "I'm worried because the proposal would make large cuts in home health care, which is also the most cost effective means of caring for the elderly. That doesn't make sense to me."

Her company is among 180 home health providers in Missouri, ranging from hospitals' systems, such as BJC, to providers much smaller than Ritter's firm.

One industry group, the National Association for Home Care and Hospice, says efficiency is on home health's side. It says daily Medicare charges for hospital care averaged $4,765 in 2007; skilled nursing facilities charged an average of $544 a day, and home health visits by a nurse averaged $132 a day.

Medicare is only one source of funding for home health care. In 2006, Medicare represented 37 percent of the source of payments; state and local governments, 20 percent; Medicaid, 19 percent; private insurance, 12 percent; and patients, 10 percent. The rest came from other payments not identified by the industry. In the event that Congress cuts home health spending further in the next decade, individual patients could be asked to pick up more of the tab.

Medicaid's role in home health care is a cost cutter, too, in some instances. For example, hospital care of a low birth weight baby can run into the thousands of dollars monthly. But the price drops sharply in cases where some of that care can be provided at home by the mother and a visiting nurse through Medicaid.


Even so, some critics complain of waste in the home health system, due to overpayments. Mary Schan, executive director of the Missouri Alliance for Home Care in Jefferson City, and other industry leaders, take issue with that argument. The industry concedes that some providers are not as efficient as others, but Schan and others say Missouri agencies already operate under very narrow profit margins, and that underpayments are a bigger issue than overpayments.

"The government may pay you more for caring for sicker patients, but it isn't necessarily enough to cover the costs of caring for the patient," she says.

Under House and Senate legislation as now written, the home health industry projects that Missouri would lose between $633 million and $832 million in Medicare reimbursements in the next decade. During the same period, according to the projections, at least 66 percent of all home health providers in Missouri would receive less in Medicare payments than they would need to cover the cost of services.

In Illinois, the industry projects that 50 percent of providers would get less than needed to cover their costs.

In the St. Louis area, the amount of underpayments would range from 46 percent to agencies in the district of U.S. Rep. William Lacy Clay, D-St. Louis, 52 percent to agencies in the district of U.S. Rep. Todd Akin, R-Town and Country, and 54 percent in the district of U.S. Rep. Russ Carnahan, D-St. Louis.

The industry adds that hospital groups, unlike free-standing home health companies, might be able to absorb some cuts through cost shifting, just as some already shift costs from one medical facility to another inside a hospital group to cover uninsured patients.

"We send nurses and therapists to your home on a short-term basis to help you recover," Schan says. "In almost all cases, the patient is happier when recovering at home. When you're happier, and you're in your own environment, you are going to get better quicker."

Under the home health model, a nurse visits a patient and develops a care plan for up to 60 days. On average, Schan says, a home health agency is paid about $1,800 for all services, including an aide who might clean around a bandaged wound; a nurse who, among other things, might monitor vital signs and change bandages; and a therapist who might help patients get back on their feet after hip or knee surgery.

The payment varies, depending on the services the agency provides. But Schan says the treatment is becoming more expensive because agencies are seeing patients who are "older, more frail and probably sicker." In rural areas, where patients are spread out, she adds, agencies have the added cost of reimbursing visiting nurses for mileage.


If Congress must cut, Schan suggests that cuts should be across the board, rather than targeted at one industry over another. Congress should consider cutting the Medicare Advantage program, she argues, because the managed care companies in the program are paid higher rates for doing, in her view, the same services people get under regular Medicare. At the very least, she says Congress should stop paying Medicare Advantage providers more for services.

A final issue for home care is Washington's talk about bundling payments for care rather than paying providers separately. That might mean, for example, that a hospital and home health provider would be paid as a group. In that case, some providers fear that hospital systems would get most of the payment with little left for home health providers.

"It amounts to cutting off your nose to spite your face," a frustrated Schan says of the legislative proposals, reflecting a feeling of the rest of industry members.

"You can't do everything," she says. "You can't do open heart surgery in your kitchen, which is to say that you need hospital care, and that some people need 24-hour nursing care. But most people don't need that. Home health offers an alternative not only because it can be done at a lower cost but because it's the place most people want to be."

Robert Joiner has carved a niche in providing informed reporting about a range of medical issues. He won a Dennis A. Hunt Journalism Award for the Beacon’s "Worlds Apart" series on health-care disparities. His journalism experience includes working at the St. Louis American and the St. Louis Post-Dispatch, where he was a beat reporter, wire editor, editorial writer, columnist, and member of the Washington bureau.