* ECPN * January/February 2001

Survival Under PPS
Orange Juice and Turnip Blood

Gwen B. Turnbull, RN, BS, CETN

Here's my version of that metaphor with a twist to a familiar saying. Question: If you squeeze a turnip as hard as you can, what comes out of it? Answer: Turnip juice. Question: Why doesn't blood come out of the turnip? Answer: Because there's no blood in a turnip!

Let's take these fruits and vegetables a step further and apply the metaphor to home care under Medicare PPS: Question: If you squeeze a case-mix adjusted PPS payment as hard as you can, what comes out of it? Answer: The quality, cost, and outcomes of all the care provided to an individual at home in a particular geographic location during a 60-day episode of care. Question: Why does the quality, cost, and outcomes of all the care provided to an individual at home in a particular geographic location during a 60-day episode of care come out of a case-mix adjusted PPS payment? Answer: Because that's all that's in the PPS payment.

PPS Payment != Orange or Turnip Juice

So what's actually contained in that PPS payment? What can be extracted from it? What is its essence? What can we expect to come out of it? Bundled into Medicare home care PPS payments are costs for quality and compliance, accountability for outcomes, specialty services, medical supplies (e.g., ostomy supplies, wound dressings, catheters, catheter supplies), home visits, nursing and nursing aide salaries (including overtime), services provided by outside providers and suppliers (e.g., PT, OT, SLP, medical supplies), and travel and transportation.

However, not all costs of running a home care agency (e.g., depreciation, leases, salaries of full- and part-time administrative staff, marketing, computer and other technology) are bundled into the PPS payment. This is the single and over riding reason home care agencies must provide their services for less than the PPS payment. If agencies plan on keeping their financial "boats" afloat and their doors open for business, they must deliver quality care for less than the PPS payment, make a profit, and evaluate how their costs relate to their revenues on an on-going basis.

It has been suggested that a way of matching cost to revenue is to first determine the agency's average net revenue per visit. A baseline "jumping off" figure can be determined through a six-month analysis of OASIS data of closed episodes. Once this figure has been established, it can be updated at the end of each month with the current month's data. This will enable the agency to track and match their costs to revenues on an on-going basis and eventually have a clear and accurate understanding of their net revenues on a per visit basis. "Are we making money? Or, are we losing money?"

Supply Costs: A Bleeding Wound

Medical supplies, such as ostomy and wound care supplies, are bundled to the PPS payment only while the patient is under a home health plan of care. Portions of the PPS payment are designated for medical supplies whether or not the patient requires them. Once the patient is discharged, the agency is no longer responsible for providing those supplies.

It is interesting to note that 70 to 80 percent of overall home care supply costs are related to wound care and can range among agencies from per patient costs of $60 to $1900 with some patients having costs exceeding $10,000. Because of the paucity of data, a lack of a clear unit for wound care supply cost analysis, inconsistencies among agencies, and variances in the way agencies provide wound care, much attention is being paid to the reasons and practices accounting for these wide variations in cost. For example, some agencies use formularies for wound care supplies, some own a home medical equipment company, some track supply costs with bar coding, while others rely on wound care specialists to supervise wound management and supplies for all patients, and others depend on algorithms or clinical protocols to guide treatment.

One thing is crystal clear, however--as long as wound care supply costs are bundled into the PPS payment and subjected to consolidated billing, home care agencies will be unable to generate revenue if these costs are not corralled and scrutinized. Until such time that the reason for these wide discrepancies becomes clear, home care agencies might want to keep a separate accounting of wound care supplies to assist them in determining their case mix and projecting ahead. In the meantime, the National Association for Home Care (NAHC) is working hard to convince Congress to remove nonroutine supplies from PPS payments.

Home Care Agencies Feel the Pressure

Home care agencies continue to wrestle with the impact changes in Medicare payment mechanisms have wrought on their businesses. What is important to remember is that the only change Medicare has made to its policy is how a home care agency is paid. No changes have been made to the Medicare coverage policy for home care or wound care. Inherent in this struggle is a decades-old battle over what wound care to provide. Physicians continue to write orders for protocols of care that have been clinically proven to be toxic to new cell growth or impede the healing process. Nurses continue to recommend wound care treatments that they have used for years and years. Agencies continue to believe the best way to cut wound care supply costs is to select the cheapest product on the market--without regard to its clinical effectiveness. Concurrently, regulators, surveyors, legislators, attorneys, and consumers continue to raise the bar for their expectations of the outcome of care for patients with wounds. And caught in the middle of each of these struggles is the home care agency.

Concentrate on Fresh Squeezed

The only way each of the vested parties in this struggle reach a win-win is to take a fresh look at old problems. It is possible to provide quality wound care at a lower cost. It is possible for savvy home care agencies to thrive. It is possible to heal wounds faster. But for these things to happen, home care agencies must concentrate on squeezing as much juice out of the orange as they can and strain away the pulp. ***

You can't squeeze blood from a turnip.