Medicare :: CMS announces payment changes for Medicare home health services

The Centers for Medicare & Medicaid Services (CMS) issued a final rule to refine and update the Home Health Prospective Payment System (HH PPS) for Calendar Year (CY) 2008.

This final rule reflects the ongoing efforts of CMS to support beneficiary access to home health services and improve the quality and efficiency of care provided to Medicare beneficiaries through more accurate payments for services rendered.

Refinements to the Medicare HH PPS as well as the annual update to the Medicare payment rates for home health services will disburse an estimated additional $20 million in payments to home health agencies in CY 2008.

?This rule continues the agencies effort to improve the efficiency and quality of care for Medicare beneficiaries,? said CMS Acting Deputy Administrator Herb Kuhn. ?And when combined with payment system rules we recently released for inpatient hospitals, inpatient rehabilitation facilities, and skilled nursing facilities, we are demonstrating our commitment to ensure that the Medicare program is sustained for future generations by paying accurately and efficiently,? added Kuhn.

Medicare pays home health agencies through a prospective payment system (PPS) which provides for higher payment rates to care for those beneficiaries with greater needs. Payment rates are based on relevant clinical data from patient assessments required to be performed by all Medicare-participating home health agencies (HHAs).

Home health payment rates have been historically updated annually by either the full home health market basket, or by the home health market basket as adjusted by Congress. The home health market basket index measures inflation in the prices of an appropriate mix of items and services furnished by HHAs. Section 5201(c) of the Deficit Reduction Act (DRA) of 2005 requires an adjustment of the home health market basket percentage update for CY 2007 and subsequent years based on the submission of quality data. The home health market basket increase for CY 2008 is 3.0 percent, which results in $430 million in additional payments to home health agencies in CY 2008.

HHAs collect and report Outcome and Assessment Information Set (OASIS) data. For CY 2008, CMS plans to evaluate home health quality of care by using the submission of the OASIS assessments. Continuing to use the current OASIS instrument ensures that providers avoid the additional burden of reporting through a separate mechanism and the extra costs that are associated with the development and testing of a new reporting mechanism.

The final rule will continue to provide for an adjustment to the payment rates for the non-reporting of OASIS assessment quality data. HHAs that submit the quality data as required under current regulations will receive payments based on the full home health market basket update of 3.0 percent for CY 2008. If a HHA does not submit quality data, the home health market basket percentage increase will be reduced by 2.0 percentage points and the HHA will only receive a 1.0 percent update for CY 2008. CMS posts the nationally accepted and approved quality measures on the Medicare Home Health Compare website located at This final rule adds two new National Quality Forum (NQF) endorsed measures, Emergent Care for Wound Infections, Deteriorating Wound Status and Improvement in Status of Surgical Wound, to the 10 measures that are currently reported for a total of 12 measures to be reported by HHAs in CY 2008.

CMS analysis of the latest available home health claims data, from CY 2005, indicates a 12.78 percent increase in the observed case mix since 2000. The case mix represents the variations in documented conditions of the patient population served by the HHAs. For the final rule, more detailed analysis was conducted on the 12.78 percent increase in case mix to see if any portion of that increase was associated with a real change in the actual clinical condition of home health patients. CMS examined data on demographics, family support, pre-admission location, clinical severity, and non-home health Part A Medicare expenditure data to predict the average case mix weight for 2005. As a result of this analysis, CMS recognizes that an 11.75 percent increase in case-mix is due to changes in coding practices and documentation rather than to treatment of more resource-intensive patients.

To account for the changes in case mix that are not related to home health patients? actual clinical conditions, this final rule implements a reduction in the national standardized 60-day episode payment rate for 4 years. That reduction will be taken at 2.75 percent per year for three years beginning in CY 2008 and at 2.71 percent for the fourth year in CY 2011. CMS is requesting comment on one aspect of the final rule concerning the fourth year?s 2.71 percent reduction to the payment rates. CMS will continue to monitor for any further increase in case mix that is not related to a change in patient status, and may adjust the percentage reductions and/or implement further case-mix change adjustments in the future.

Currently HHAs are paid prospectively for 60-day episodes of care. HHAs are paid at different rates for patients, depending on their care needs based upon their clinical severity, their level of function, and their usage of HHA rehabilitation services. This final rule implements an improved case-mix model that accounts for comorbidities and the differing health characteristics of longer-stay patients. The model also accounts more precisely for the impact of rehabilitation services on resource use. The revised case mix system replaces the current therapy threshold of 10 visits per episode with three new therapy thresholds at 6, 14, and 20 therapy visits, with graduated payment levels between the thresholds, to reduce the impact of financial incentives on the delivery of therapy visits. These improvements increase the ability of the case-mix model to predict the intensity of resources used to treat home health beneficiaries over a 60-day period, and thus enhance the accuracy of Medicare?s payments to HHAs.

This rule also implements a modification to the low utilization payment adjustment (LUPA) and eliminates the significant change in condition (SCIC) payment adjustment. The rule implements an increased payment for LUPA episodes that occur as the only episode or the first episode during a period of home health care to account for front-loading of costs in an episode.

In light of concerns raised by providers and an analysis of recent home health data, CMS is changing the way we account for non-routine medical supplies (NRS) in the standardized 60-day episode payment rate. This rule implements a payment model for NRS based on 6 severity groups, similar to the clinical case-mix model, to more accurately reflect home health agency costs. CMS added a sixth severity level, to the 5 levels described in the proposed rule, to address episodes with extremely high NRS costs.

Taken together, these budget-neutral refinements will more accurately match HHA costs with payments received while maintaining the fiscal integrity of the Medicare system and encouraging quality care for beneficiaries.

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