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Home Health Agencies Want Warning Before Reimbursement Cuts

Managed care organizations oppose bill that would impose advanced alerts about cuts, dismissing it as flawed, impractical

wardell sanders
Wardell Sanders

Two years ago, Horizon NJ Health cut reimbursements to home health providers by 10 percent, leaving those agencies fuming -- and alleging that the cuts would affect their ability to attract and retain workers to what were already low-wage positions.

In fact, the home health agencies say Horizon wouldn’t meet with them to discuss the reductions. That’s one reason why they’re supporting a bill that would require Medicaid managed-care organizations (MCOs) -- large insurers like Horizon that oversee long-term care for Medicaid recipients -- to discuss cuts at least three months before implementing them.

It’s the second attempt at a legislative solution to the problem, after Gov. Chris Christie vetoed an earlier bill that would have required state approval for reimbursement cuts.

The home health agencies also say that without them, New Jersey would be forced to move more residents into nursing homes, which contradicts the intent of the state’s Medicaid comprehensive waiver. Under the waiver, more individuals are to receive healthcare services at home or in community-based settings, rather than in nursing homes.

The bill lays out the rules under which agencies and an MCO would have to meet when the latter plans to cut reimbursement rates. While it wouldn’t have to meet every agency, since there are more than 100 in the state, it would have to meet individually with a group of agencies that serve at least 25 percent of the MCO’s clients. During the meetings, the two parties to discuss possible alternatives to rate cuts.

But the details of the bill (A-3549/S-2284) are raising concerns with insurance industry advocates.

They have identified what they see as a problem with the language of the bill. The meeting requirement would be triggered any time an MCO proposes a cut to any agency, but doesn’t require the MCO to meet with the agencies that would be the target of the cuts. For example, an MCO could actually meet with the rival of an agency receiving the proposed cut, rather than the agency itself.

Cuts, backlash and a pocket veto

In the summer of 2012, Horizon informed home health providers that it was cutting their reimbursements by 10 percent, from $15.50 to $13.95 per hour and required them to quickly decide whether to agree to the change or leave the Horizon network.

The move prompted a backlash, with providers saying that with workers receiving $9 to $10 per hour, it left them little money to operate. The Legislature passed a bill that would have required MCOs to seek state approval before making cuts to reimbursements.

But Gov. Chris Christie gave the bill a pocket veto by declining to sign it by the January 2013 deadline.

The new bill requires an MCO to meet individually with providers that serve at least 25 percent of MCO’s clients before any reduction to reimbursement rates. It wouldn’t be able to cut the rates until 90 days after it notified the state that it had met with providers, giving the agencies time to make their case against the cuts and to prepare for the repercussions.

It also requires the MCO and agencies to discuss possible alternatives to a rate cut.

Irma Camaligan, chairwoman of the Home Health Services and Staffing Association of New Jersey, said the reimbursement rates set by the MCOs don’t reflect the actual costs for the providers. She and other spoke at a recent hearing on the bill.

“We wanted to speak to the managed care organizations and explain to them the reasons why their rates did not make any sense and they wouldn’t sit with us,” Camaligan said.

She questioned how the agencies would meet the needs of residents with fewer home health aides and nurses “because we can’t afford to pay them.”

Impact on hiring, keeping good workers

Home Care Association of New Jersey CEO Chrissy Buteas said the industry already pays workers a low wage and faces challenges with any cuts.

“We need to be able to retain and train qualified home health aides,” Buteas said.

There are more than 100 home health agencies in the state. Buteas’ group represents larger organizations; Camaligan’s, smaller agencies. Both associations support the bill.

Wardell Sanders, president of the New Jersey Association of Health Plans, noted that the MCOs take on risk when they contract with the state Medicaid program, since the contracts can’t be based on the costs they incur or let them build in profit margins.

Instead, they draw on their experiences from earlier years, as well as those of the MCOs that have managed their costs most efficiently. Sanders’ association includes five MCOs: Aetna, Amerigroup NJ, Horizon NJ Health, UnitedHealthcare Community Plan, and Wellcare.

He said the fundamental problem that the industry has with the bill is that it could require an MCO to meet the rival of an agency that it’s proposing cuts to. For example, an MCO could propose cuts to several smaller providers and not to Bayada, but it would fulfill the requirements of the bill by notifying Bayada and other large agencies of the cuts.

“We would argue that not only is that not optimal, but it’s probably inappropriate to talk about rates for a competitor with another entity,” Sanders said.

Sanders said that it would be similar to requiring a company that wants to lower payments to Ford and Chevy to meet with Honda to talk about the cuts.

“We fundamentally think this is a problematic way of going about setting up a meeting process,” he said.

Assemblyman Craig J. Coughlin (D-Middlesex) said that individual meetings with agencies that aren’t affected by a proposed change could be brief, adding that state regulators could minimize the possibility of inappropriate or unnecessary meetings through the rulemaking process.

Sanders also argued that there are already protections in place regarding reimbursement rates. For example, the state could set reimbursement rates for all providers in its annual budget, as it did this year. In addition, MCOs must notify the state of rate changes.

Bayada Home Health Care, which is the largest agency; The Arc of New Jersey, which represents organizations that serve residents with disabilities; and the New Jersey Hospital Association also support the measure.

The Senate passed its version of the bill in June. The Assembly Insurance and Financial Institutions Committee released its version in a 9-0 vote last week. However, Republican committee members expressed skepticism toward the bill and said they wanted to discuss Sanders’ concerns further.

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