Management Topics: How Accountable Care Will Impact Home Health Agencies

Abstract

Be prepared dear readers—the winds of change are preparing to blow at gale force. You’ve probably heard the term Accountable Care Organization (ACO), but you might not yet realize the impact that an ACO is likely to have on your total operation. In fact, the drive to ACOs is likely to deliver a dramatic change to the way home health agencies operate at all levels of the organization. Certainly the details about ACO structure and requirements are continuing to emerge at the Federal level. Yet we do have some early indication of the key features and likely downstream impacts expected with the drive to ACOs. Let’s be clear. Much of the downstream impacts written in this column represent “educated conjecture” mixed with a tincture of speculation, all based on current knowledge about the ACO requirements. Despite the fact that there are continuing refinements to the ACO program, you should expect that the final impact to home health care agencies to align pretty closely with what is written here. Regardless of the size and market penetration of your individual agency you should expect the way you operate to change fairly dramatically. In many cases, the change will not occur for everyone on a set date—the changes will most likely come as the number organizations moving to accountable care deepens its penetration across the North American health care market. The drive to accountable care is designed to bend the health care cost curve. According to the Congressional Budget Office (CBO) 96% of Medicare spending goes to seniors with four our more chronic illnesses. The most frequently treated conditions among Medicare beneficiaries include hyperlipidemia, COPD/asthma, diabetes mellitus, hypertension, mental disorders, cancer, trauma-related disorders, and heart conditions (Thorpe, Ogden, & Galactionova, 2010). Look at that list again. Think about what constitutes the majority of your visits. What percentage of your agency revenue is driven by these conditions? What would happen if that revenue was suddenly and dramatically reduced or eliminated? Are you prepared for such dramatic changes? These are just a few of the questions we must be prepared to answer. As the various components of Patient Protection and Affordable Care Act progresses (PPACA) the bar will continue to be set higher across the three major areas of coverage expansion, financing, and delivery system reform. At the core of the PPACA is the paradox of giving more care to more people while at the same time paying less for that care. How this paradox is achieved represents the million dollar question. Unfortunately, more questions than answers have emerged. Does the federal government raise taxes or cut benefits? Another possible scenario is to reallocate spending to health care from other federal programs or to simply cut reimbursement to providers. What is not in question is that every provider will need to deliver care differently amid an incentive-based reimbursement system. The focus will be a shift further away from fee for service to capitation and sharedsavings models. The first likely impact for home health agencies will occur in October 2012 when pay-for-performance payment schemes begin. The core focus of pay-for-performance will be readmissions. This program targets those patients readmitted within 30 days of discharge. In contrast to current payment rules, patients readmitted within 30 days will receive no additional payment for additional services. But the program doesn’t stop here. There is an overall payment reduction penalty to those hospitals, which experience “excessive readmissions.” The penalty will be determined by an adjustment factor calculated as the percentage of revenue paid for excessive readmissions divided by total revenue. Overall, it is expected that pay-for-performance will reduce Medicare payments by US$7.1 billion between 2013 and 2019 (Senate Finance Committee, 2009).