Medicare Cuts End Personal Touch of ‘Mom and Pop’ Business Serving Seniors

For Robert and Susan Blair, it was time for an exit strategy.

The couple had been in the business of home health care for three decades, and retirement looked more and more attractive.

The Blairs’ history of working in the home health care industry began as Ronald Reagan’s presidency was winding down. In 1998, they opened their own agency, Riverside Home Health Care, in Grants Pass, Ore. Come 2005, though, they began to set their sights on retirement.

Across the Pacific Ocean, their son, Michael Blair, was maintaining and repairing electronics, weapons systems, and vehicles for a government contractor in Waimanalo, Hawaii, and living with his wife, Liz, and son, Machenna.

The family made annual trips to Grants Pass every Christmas to visit family.  In 2006, Robert and Susan Blair asked their son if he would be interested in taking over the family business.

“Let’s either do this or not,” Michael Blair, now 44, recalls his parents saying.

But Liz was born and raised in Hawaii, and had never left the state until she met her husband. The decision, Michael Blair said, eventually fell to her. He told his wife:

I want you to look at this town. I want you to see if this is someplace you can live … and see what you think. It’s up to you.

Six months later, in July 2007, the family of three made the 2,600-mile move to Grants Pass, population 34,000, and Michael Blair began working side-by-side with his father. Two years later, he took the helm as administrator of Riverside Home Health Care.

Feeling the Squeeze

The home health care industry is no stranger to cuts to Medicare.

Michael Blair, like his father before him, was active on the board of directors of Oregon’s Association for Home Care, and with home health programs continuing to feel the squeeze, he made annual trips out to Washington, D.C., to meet with members of Oregon’s congressional delegation. He recalled:

I wanted to tell the small business side of the story and show how the cuts were impacting us. We were the small, family, mom-and-pop company. We didn’t have corporate profits to fall back on.

But the cuts kept coming.

In his years at Riverside, Blair worked to keep his business out of the red as Medicare payments to home health companies fell and fell. Blair stalled raises to his employees and reduced their health benefits, and his nurses stopped seeing “heavy-hitter” patients, or those with serious ailments that are resource intensive.

>>> Infographic: How Medicare’s Home Health Cuts Particularly Hurt Women

“There always are some patients you make money on and some you lose money on,” Blair said. “As cuts kept getting deeper and deeper, you lost money on more.”

His employees, though, liked the way Riverside operated compared to its corporate competitors. During every visit, nurses would sit for five to 10 minutes talking with patients before stethoscopes and blood pressure cuffs left their bags, learning about their lives, experiences and stories from another time. Doing so, Blair said, helped Riverside’s nurses gain their patients’ trust.

Then, the home health care industry learned it would have to brace for a cut of 14 percent to Medicare home health programs through 2017 — the maximum amount allowed under the Affordable Care Act. Blair recalled:

Everyone figured there’s no way in hell they’ll do a full 14 percent. The data doesn’t support it.

Blair decided to make the trip out to the nation’s capital once more in March 2013 to make the rounds of the state’s delegation to Congress. That, he said, was an “eye-opener.”

“They are going to do the full 14-percent,” Blair said he realized after meeting with lawmakers:

And I couldn’t cut anymore. I had nowhere else to go. … With good conscience, I couldn’t operate and treat people with what we were getting paid.

On the flight back home to Oregon, Blair made up his mind — he would have to sell Riverside.

By that time, his two dozen employees hadn’t had a raise in four years.

A History of Cuts

Upward of 3.5 million elderly Americans are beneficiaries of home health care, and the vast majority — close to 90 percent — are covered under Medicare.

To qualify, an individual must be homebound, require skilled nursing care or rehabilitation services, and be under the care of a doctor who established home visits as medically necessary.

The majority of home health beneficiaries, according to industry analysis, are older, sicker, and poorer than the typical Medicare recipient. Many live in rural areas like Oregon and lack immediate access to hospitals and other care facilities.

But the cost of home health care has long been a sore on the federal budget, Robert Moffit, senior fellow at The Heritage Foundation’s Center for Health Policy, told The Daily Signal.

Though home health care keeps elderly Americans out of hospitals and in the comfort of their homes, the program historically has been vulnerable to fraud and abuse, despite heavy regulation at the federal and state levels.

Congress has a history of making drastic cuts to Medicare, as the legislative body did in 1997 with the Balanced Budget Act when it capped payments per patient to agencies and replaced the industry’s cost-based reimbursement system with a prospective payment system in which a fixed amount is designated for a specific service.

The result, Moffit said, was disastrous for home health agencies.

>>> Commentary: The Funding Problem Threatening Medicare’s Future

More than 2,500 home health agencies went out of business as a result of the 1997 budget cuts, and Congress later reversed them.

Moffit contends that slowing the growth of Medicare spending is necessary because it will reduce the huge Medicare debt already facing taxpayers. However,  he said better policies could accomplish the same savings without putting such a tight squeeze on struggling home health agencies serving seniors.

For example, the health policy expert suggested introducing a 10 percent copay for Medicare home health beneficiaries. Home health care is one of the few Medicare benefits that doesn’t include a copayment, and savings from one should be put back into “Medicare and Medicare only,” Moffit said, to increase the solvency of the program.

Home Health and Obamacare

The Affordable Care Act, popularly known as Obamacare, gave then-HHS Secretary Kathleen Sebelius the power to make cuts to Medicare. Most of the money saved was to be put toward funding the Medicaid expansion and insurance subsidies included in the new health care law.

Just months after Blair decided to sell Riverside, HHS announced a proposed rule to cut home health care just as he suspected — 3.5 percent per year until 2017, or a total of 14 percent.

In November, HHS quietly issued its final ruling, solidifying the funding cuts despite public comments calling for input from health health agencies. The cuts — which are a drop in the rates Medicare pays home health businesses — went into effect in January.

According to an analysis conducted by Avalere Health, the cuts left more than 1 million seniors without access to home health care services. And by the Obama administration’s own calculations, roughly 40 percent of the nation’s more than 11,000 home health care agencies could be operating in the red by 2017.

The industry really began to feel the squeeze.

In December, one month after HHS’ final ruling, the Bureau of Labor Statistics reported the loss of 3,700 jobs in the home health sector.  February saw approximately 3,800 job losses in the industry — the single highest monthly jobs loss the industry has experienced in more than a decade. From March to July, however, the industry bounced back, adding jobs.

Reforming Medicare is a thread typically woven through Republican agendas, and two GOP lawmakers are looking to roll back the major cuts in Medicare home health services by introducing a new payments system to home health agencies.

Last month in the House, Oregon’s Greg Walden — who, Blair said, always made time to sit down with him — and Georgia’s Tom Price introduced a bill to repeal the 14 percent cuts under Obamacare. In place of the slashed funding, the bill would implement a system of value-based purchasing, or pay-for-performance.

>>> This Bill Would Undo Medicare Home Health Cuts Under Obamacare

Value-based purchasing earned bipartisan support in February when the payment system was included in a bill on nursing home facilities. In the home health care industry, agencies would be rewarded monetarily for meeting or exceeding goals set by HHS’s Centers for Medicare and Medicaid Services for keeping patients out of hospitals. Agencies failing to meet the goals would face a penalty.

Walden and Price argued that  the same savings would be achieved without putting  the squeeze on home health agencies, patients, and employees. Walden said:

We’ll get more for our money and better care for patients without these across-the-board cuts. This common-sense bill will stop the administration’s cuts to home health care, and allow Oregon seniors to continue to receive the care they need and … depend on.

Leaving Medicare Behind

One week after deciding to sell Riverside as he flew from coast to coast, Michael Blair ran into an old industry friend, Ben Garber, at a local nursing home.

Garber’s father, Mark, owned a larger company called Pinnacle that operated nursing and rehabilitation services. Garber pulled Blair aside and told him if he ever wanted to sell, to let Garber know.

With that, Robert Blair, now 70 and retired to Phoenix with wife Susan, 69, flew to Oregon for a meeting with his son and the Garbers.

Over lunch, the two father-son teams discussed a deal. Seven months later, Riverside — one of the last remaining home health care companies in Oregon without corporate backing — was sold to Pinnacle.

For Michael Blair, the sale was bittersweet. Having to deal with the day-to-day hassles of Medicare wore on him, but he thought Riverside provided a “personal touch” that corporate operations don’t offer.

Now, less than a year after leaving the business, Blair owns a non-medical home health care agency, Caring Senior Service of Grants Pass. It is a franchise of San Antonio-based Caring Senior Service.

Blair is able to operate without relying on Medicare, and he still views himself as making an impact on the community — just like he did at Riverside:

We were the ones they like to deal with because of what was a lot more of a personal touch. They knew that their patients were going to be taken care of. They don’t feel that from the bigger boys. … We did provide a great service in town.