Those of us involved in various segments of health care know that the landscape is drastically changing and will continue to do so in the years ahead. The ways we have done business in the past may not exist 10 years from now. The Medicare benefit has not substantially changed during the past years; it’s the manner of reimbursement and the population numbers that have changed. When Medicare was signed into law in 1965, it was not designed to handle today’s patients with more complex illnesses, higher needs and greater life expectancies. In 1965, the average life expectancy was 70.2 years. In 1996, it was 79.1 years and in 2025, it is expected to be 82.6 years. We now have people living longer with dramatically improved methods of treating and curing illnesses, not to mention what we now know about health and disease. In addition, as approximately 8,000 to 10,000 baby boomers become 65 every day for the next 15 years, the Medicare trust fund is being depleted very quickly year by year. Those individuals now exiting the workforce at retirement no longer contribute through payroll deductions to the Medicare system; they become beneficiaries themselves who are now eligible to access care and services. These baby boomers are not being replaced in the workforce in great numbers, so the payroll contributions are no longer at such a high rate, yet the expenditures continue to increase exponentially. As mentioned, since 1965, medical care and treatment has dramatically improved and changed. In 1965, who could have imagined the services and treatments that we now consider routine? We have greater technologies available, as basic as CT scans, MRIs and sophisticated laboratory testing that could only have been a dream in 1965. We have found ways to manage conditions that were both previously unmanageable and always terminal. With the increase in treatment and success comes some interesting information regarding today’s health care environment. As has always been the case, the highest utilizers of health care dollars are the acute-care hospital providers. The Medicare home health and DME benefits account for only 4 percent of the Medicare dollars spent. This tells us that even if we entirely eliminated the Medicare home health and DME benefit, it would only reduce Medicare spending by 4 percent. But we know that it would drive up costs by sending more beneficiaries to the ER, hospitals and nursing homes. So, if we are going to materially reduce Medicare spending, the reductions will have to come from where most of the spending is—the hospital. We have a health care delivery system that is designed to treat acute conditions and we have done nothing to convert it to a system that treats the number one cost driver—chronic illness. It is important to realize that the future of services/items provided in the home is bright because the health care delivery system will have to conform to the demographics of the population. Currently, and in the years ahead, we are going to see new “outside the box” programs evolving to manage this population by reducing inpatient acute days and re-hospitalizations while preserving Medicare funds without billing Medicare and without winning competitive bidding contracts in CBAs. Today, there are many available programs that are working to reduce these costs, and they did not exist just a few years ago. All were created to provide management of care for the beneficiary, such as the case management services that third-party insurance companies provide. Management of care helps keep the patient well and out of the hospital and emergency room, rather than just treat illnesses when they occur. We will review one of the fastest growing programs: Transitional Care or Community-Based Care Transition Programs (the names are used interchangeably).
Transitional Care Programs
Nearly one in five Medicare patients discharged from the hospital —approximately 2.6 million seniors—are readmitted within 30 days at a cost of more than $26 billion every year, and data has shown that up to 76 percent of these hospital readmissions are preventable. On January 1, 2013, financial penalties that were implemented through The Affordable Care Act began to be imposed on the acute-care hospitals for readmissions of Medicare beneficiaries (for most conditions) within 30 days of discharge. Payments for re-hospitalizations within 30 days of discharge that were made in 2013 are now subject to an overall review. Now, in 2014, CMS will review that number and dollar amount per facility, and monetarily fine (as in thousands of dollars) the acute-care facility 1 percent of all of the payments they received above a set threshold. Next year (in 2015), it will be 2 percent for 2014 re-admissions and in 2016, 3 percent for 2015. Prior to 2013, hospitals were focused on discharge and, other than referrals to post-acute providers, were not concerned with those in the community who did not qualify for some level of care or service. But now the tide has turned. Rather than being discharged, we now refer to these beneficiaries as being transitioned into the community. Hospitals are creating Transitional Care Programs generally with home health agency partners, to manage these beneficiaries in the community and reduce the opportunities for readmission. And who pays for the items and services? The hospital. Nationally, the average cost for a two- to three-day hospital stay is $7,600. Because the hospital is now subject to fines on re-hospitalized beneficiaries, they are willing to pay for equipment and home visits to help the beneficiary remain safe in the community for 30 days after discharge when the beneficiary does not meet Medicare criteria for home visits or DME. If a hospital bed or the rental of a portable oxygen concentrator would safely maintain a beneficiary in his/her home and reduce the chances of a readmission within 30 days, the hospital is jumping at the chance to provide it. Invoices from the DME supplier for these types of items are much less than the fines that will be imposed each year, should the beneficiary need to return to the hospital within 30 days. As of now, the legislation imposes the penalty on 30-day readmissions, but the future plan is to extend it to readmissions within 60 days of discharge. If you think hospitals are not creating and using these programs now, you are sadly mistaken. As we look forward to the anticipated payer landscape, Medicare and third-party payers will only pay for a base level of HME. If a boomer, or their children, desires a higher quality item, they will need to dig into their own pockets and pay for it themselves. They are doing it now and we expect that they will continue to do so. As a positive sign of out-of-pocket payment, one can look at the reimbursement for physician office services. During the last 10 years, in major metropolitan areas, we have seen a mass exodus of physician practices from participation in Medicare and some of the poorly reimbursed third-party payer networks. Practices simply cannot afford to participate with many plans that offer very low reimbursements for services due to the now-high administrative costs involved in running the office, staying compliant and collecting these funds. Patients who want to see these particular physicians must pay cash for their visits and then submit for reimbursement from their insurer, if applicable. We will certainly see the boomers —and those who follow them—who are accustomed to paying cash for what they want continue to not be tied to a selection allowed by their insurance. Are the new programs going to be a windfall of business for you? Probably not right away, but don’t you want to be a part of these networks and care delivery teams as they are being formed? I can promise that your competitor does. Are you one who is now kicking yourself because you turned down Managed Care contracts years ago? Talk to your area home health agencies, who are the main contractors of these services with acute-care facilities, as home care is a natural leader in managing these community services. Find the ones who are managing the non-qualifying (non-skilled) patients for the hospitals, and become their DME supplier of choice. Bring these programs to your referral sources now, before your competition does, or you will be left out in the dark. Many new programs provide innovative solutions and decrease your reliance on payment directly from Medicare. They offer “outside the box” solutions without worrying about the current payment requirements for these newly addressed issues while providing you with significantly reduced administrative collection expenses and, in particular, significantly reduced (or no) audit process. And as far as Medicare goes, it looks like competitive bidding (either in the current form or another) will always be around, but so will new payer models. Our industry will adapt and conform to the current and even newer models as we continue to serve this population. These programs are going to take companies through the next 30 years of business. Your business-savvy peers are working with new programs and nontraditional payer models right now to manage post-acute services and reduce unnecessary hospital readmissions. Shouldn’t you? Now is the time to reevaluate your business, look to new payer sources, reengineer and retool where you can in order to survive this wave of change and accommodate these 78 million boomers. Your business may have to change or adjust, but ultimately, your future can be bright.
