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Cash flow, supply issues already are affecting home health
Credit home health industry experts with calling it right. October’s rollout of the new Medicare prospective payment system (PPS) has led many agencies into a severe short-term cash crunch, just as predicted.
The decision of the Baltimore-based Health Care Financing Admini-stration (HCFA) to bundle supply costs into the payment and require agencies to pick up the tab for supplies unrelated to the plan of care has caused problems for agencies, just as anticipated.
As agencies strive to be more efficient, they’re starting to see changes in visit patterns that many in the industry had forecast early on.
But some say it’s still too early to predict whether PPS will ultimately work — allowing home care providers to get needed care to their clients and be compensated fairly.
Joe Hafkenschiel, president of the California Association of Health Services at Home in Sacramento, says his member agencies are saying they don’t yet know how well they’re doing under the new system, in part because computer glitches and other start-up problems still are being worked out.
"This is a massive change," he says. "The point of comparison is, was it better than IPS [the interim payment system]? Well, anything would have been better than IPS. But is this a good system for paying providers to deliver home care? The jury’s still out on that one."
Mary St. Pierre, director of regulatory affairs for the Washington, DC-based National Association for Home Care (NAHC), says reports to her organization have been mixed. Many have encountered problems submitting requests for anticipated payment (RAPs) because of software problems. The resulting slowdown in payments has forced agencies to rely on lines of credit they established before Oct. 1.
But others are able to transmit RAPs and final claims with relative ease. So far, no agency, she says, has indicated that it will have to shut its doors because it can’t meet expenses.
St. Pierre says agencies are beginning to adjust to the different expectations of the new system. "Providers I’ve talked to who really feel like they did their homework and prepared for PPS feel that they are doing very well with it," she says.
Glitches in the system
The experience of Home Health Group-Decatur (AL), shows how dependent agencies are on a smooth flow of data between them and their fiscal intermediaries.
Director Jimmie Galbreath, RN, MSN, says his hospital-based agency couldn’t even send RAPs until Dec. 28, and was attempting unsuccessfully to transmit its first final bills in mid-January.
"The biggest problem was our computer software vendor was not prepared for the most part," he says. "HCFA was late sending out the final [rule], and then the software vendors not only had to write the program, but test the software at the same time."
As the vendor found problems with the software, it would issue fixes and upgrades — Galbreath estimates he’s seen 18 upgrades since October. "We were getting two or three upgrades a week, and at some point we were saying, We can’t wait for the next upgrade; we’ve got to go ahead and do something.’ And the vendor was saying no, don’t do anything yet because we’ve got a fix coming for this and a fix coming for that."
Galbreath says his agency had warned the hospital financial team ahead of time that billing was going to be a problem. But the software glitches ended up affecting more than just Medicare payments.
"With our software vendor, if you can’t close your month, you can’t bill anything," he says. "So we not only couldn’t bill Medicare, but we couldn’t bill any pay source of any kind.
"We had no billing going out after Oct. 1 for anybody, so there was no revenue coming in."
Complicating the issue was his agency’s merger with another home health agency, effective Jan. 1. Both were hospital-based and were using the same software vendor.
Now, with payments finally coming in from last year’s RAPs, that money is supposed to go back to the two hospitals. Revenue from 2001 bills will be applied to the newly merged home health entity.
Galbreath says he’s been dissatisfied with the response of the software vendor, but doubts at this point that the agency could afford to make a change.
"These things are expensive — it would probably cost us $500,000-$600,000 for a new vendor. And when your reimbursement has been cut and slashed, it’s not a good time to start going to your financial gurus asking for a $500,000 capital outlay. You usually don’t get it."
But even smoothly running software hasn’t guaranteed agencies a steady flow of income in the early months of PPS.
Cash flow a problem
H. Kenneth McNulty, vice president of finance for the Visiting Nurse Association of Boston, says cash flow has been a "significant problem," but not because of transmission difficulties. "We’ve probably sent in close to 4,000 RAPs, but the real issue is they’re not really paying for the RAPs on the time frame they had led us to believe," he says. "It’s running seven to 10 days to get a RAP."
Other factors can drag out the process longer. First, McNulty says, it can take time to get verbal orders and other documentation necessary to even submit a RAP. "Obviously, you can’t do all the things they want to have you do in one day from the date of admission," he says. "So you have the start of care date and then you have to do all of the OASIS [Outcome and Assessment Information Set]."
If a patient requires the participation of multiple disciplines — a physical therapist, for example — that requires another visit to complete the OASIS, he says. "You’ve got all those complexities, and then you submit the RAP and it takes seven to 10 days to get your credit. So it’s taking a long time."
He’s finding the same kinds of issues in submitting final claims. Billing has to wait while documentation for all the visits trickles in, for example, from per diem aides who don’t report to the office every day.
McNulty estimates that final claims can’t be filed until another seven to 10 days after the end of the episode. While he concedes that his agency’s fiscal intermediary is getting the payments back in 14 days, the process is still interrupting the immediate cash flow.
"We had a line of credit, and we’re tapped out on it," he says. "I’m overdrawn at the bank as we speak. So far, the bank has covered us because we’ve given them all the documentation about what’s going on. But we’re not paying bills. We’re making the payroll, but that’s all. And they’re letting me go overdrawn to do that."
In January, he was pleading with his fiscal intermediary to expedite payments under the temporary extension of the periodic interim payment (PIP) approved late last year.
St. Pierre says the PIP extension may have helped some agencies hold things together a while longer, depending on when their cost reporting period ended.
When the final rule was published last year, home health providers objected to its handling of supply issues — specifically the bundling of supplies into the episodic payment and the requirement that agencies provide all nonroutine supplies used by the client, even those unrelated to the plan of care.
At the time, there was concern that the arrangement would put a burden on agencies with a high volume of certain types of cases, such as patients with wounds. And agencies were unsure how they’d keep track of supplies that arrive from other sources.
In its initial months, providers agree, the effect of the supply requirements has been pretty much as expected. And some agencies have established plans to help keep a handle on rising supply costs (see story, p. 27).
Lucy Lee, RN, MHA, CHCE, owner of Lee Health Care Inc. in Hamilton, TX, says because her agency is small, she thinks the problem is manageable — as long as she doesn’t have a lot of wound care patients.
"But especially with small agencies like we are, it doesn’t take many to skew the numbers to the point that it would be a big problem," she says. "We’re maintaining control at this point; it’s all we can do."
St. Pierre says that when NAHC queried members to prepare the association’s regulatory blueprint for action for 2001, medical supplies were ranked as the top issue among 35 issues surveyed. "It’s their biggest concern that they want us to take some action on."
While she doesn’t think HCFA will change its interpretation of the rules, the agency may support the industry’s position in Congress.
In fact, while Hafkenschiel overall advises holding back on many changes to PPS for the next few years while things shake out, he says supplies are the big exception.
"The medical supply issue is still very confusing and very problematic," he says. "Certainly, we don’t feel the agencies should be responsible for medical supplies that are not part of the plan of treatment for a specific patient, so we’ll be pushing for that."
Already signs of change
Although analyzing the effects of PPS has temporarily taken a back seat to working out its mechanics — it’s hard to note trends when one hasn’t yet been able to transmit claims — agencies already have seen some changes in their visit patterns.
Some are the results of concerted pre-PPS efforts to emphasize efficient delivery of care. But others are not as easy to explain.
Lee says she noticed soon into the PPS rollout that her agency didn’t have as many episodes as she had expected. "Primarily, we have found that in most of our areas, the intakes are remaining pretty steady in number, but we’re not recertifying people as much as we thought we would. It’s hard to know whether it’s a market change or a market shift. And I’m wondering if our nurses’ thinking has shifted, perhaps."
She’s not alone. Galbreath, too, saw fewer recertifications for the second episode than he had expected, and thinks the staff’s mindset may have something to do with it.
"I think they’re getting out there teaching and being more aggressive," he says. "There was not a strong reason for having to be superaggressive before; because as long as that patient was homebound, you were showing improvement and you could justify your visit, then you were going to be okay and you were going to be paid.
"Now you’re paid per diagnosis, so the sooner you get in there, the sooner you get taught and the sooner you get out, the better your reimbursement."
Galbreath says he’s also seen a decrease in the number of visits per patient — from an average of 30-35 last summer to 14 in November. Those decreases have been consistent across disciplines.
McNulty believes that one factor in changing visit patterns is the 60-day episode and the process required to recertify a patient for the next episode.
"Where in the past they might have held off on discharging a patient, now the discharges are getting done on a more timely basis," he says. "It looks to us like the total unduplicated census will go down, but on a 12-month rolling average basis, it will not. We’ll still have the same number of patients a year; they just won’t all be out for more than one month, so their length of stay will be shorter. But the number of visits won’t."
From an operational end, McNulty is noticing another change — an emphasis on tightening up procedures to make sure things get done quickly. That has become more important as many agencies change their billing practices from monthly to weekly and even daily.
"You’ve got to have procedures in place to be sure that everything that needs to be done gets done, and it gets done within the time frame that is appropriate and is required," he says. "Once we get over the hump of the working capital problem, I think it should work. But it’s important that everybody’s got to understand the sense of urgency of getting everything done, done on time and done right the first time."
• Jimmie Galbreath, Director, Home Health Group-Decatur, 1602 Church St. S.E., Decatur, AL 35601. Telephone: (256) 350-4182. Fax: (256) 341-2656. E-mail: email@example.com.
• Joe Hafkenschiel, President, California Association for Health Services at Home, 723 S St., Sacramento, CA 95814. Telephone: (916) 443-8055. Fax: (916) 443-0652. E-mail:firstname.lastname@example.org. Web site: www.cahsah.org.
• Lucy Lee, Owner, Lee Health Care Inc., 114 E. Main St., Hamilton, TX, 76531. Telephone: (254) 386-8971. Fax: (254) 386-5040. E-mail: email@example.com.
• H. Kenneth McNulty, Vice President of Finance, Visiting Nurse Association of Boston, 320 Washington St., Brighton, MA 02135. Telephone: (617) 779-3359. Fax: (617) 779-3324.
• Mary St. Pierre, Director of Regulatory Affairs, National Association for Home Care, 228 Seventh St. S.E., Washington, DC 20003. Telephone: (202) 547-7424. Web site: www.nahc.org.