Recent developments in federal reimbursement for home health-care services and products.

The current status of reimbursement for home health-care (HHC) products and services is described, and the influence of competition and consolidation on the HHC industry is discussed. Despite inadequate financing and reimbursement pressures, the demand for HHC services continues to grow. The degree of competition in the HHC industry is reflected in bundling of services (gathering payments for services into a single per-capita rate), prospective price negotiations, and competitive bidding. This competition within the home-care industry and pressure on operating margins have spawned a flurry of recent mergers, acquisitions, and corporate restructuring. HHC agencies and suppliers, particularly durable medical equipment suppliers, have been squeezed by inadequate Medicare cost-finding methods, low reimbursement rates, and a high number of denials of Medicare coverage. Three important recent federal measures revised definitions of Medicare coverage, established minimum and maximum payment periods for Medicare reimbursement, reduced payments for services and products covered under Medicare Parts A and B, resurrected prospective-pricing demonstration projects, reduced payments for durable medical equipment and home oxygen supplies, and expanded coverage of services for AIDS patients. State Medicaid program budgets are threatened by recurring administration proposals to cap federal matching payments and by the adoption of a competitive-bid approach to health-care contracting. To survive over the next few years, home health agencies and home-care suppliers will need to monitor operating costs even more closely and pay attention to the patient (payer) mix.