CMS Targets Medicare Payment Reform for Home Health

June 28, 2016 - By 2017, home health agencies could see a 1.0 percent, or $180 million, reduction in reimbursements due to a proposed rule from the Centers for Medicare and Medicaid Services (CMS) that mandates Medicare payment reform.

In a recent fact sheet, CMS announced potential changes to the Medicare home health prospective payment system starting in 2017, which would finalize adjustments to home health payments under the Affordable Care Act.

The proposed payment changes aim to promote efficiency, flexibility, payment accuracy, and advance care quality in the home health industry as well as the greater Medicare provider community, reported CMS.

“The HH PPS [home health prospective payment system] proposed rule is one of several rules for calendar year 2017 that reflect a broader Administration-wide strategy to create a healthcare system that results in better care, smarter spending, and healthier people,” stated the fact sheet.

In 2015, Medicare paid $17.8 billion to almost 11,400 home health agencies that served approximately 3.4 million beneficiaries. In efforts to curb home health spending, CMS plans to enact a combination of adjustments to home health payments that account for number of visits in an episode, various services in an episode, average cost of care, and other patient characteristics.

Specifically, CMS would implement a rebasing adjustment to the national, standardized 60-day episode reimbursement rate, the national per-visit payment rate, and the non-routine medical supplies conversion factor, which amounts to a $420 million decrease in total reimbursements.

The agency would also apply a 0.97 percent reduction to the national, standardized 60-day episode payment rate to reflect nominal case-mix growth that would lead to a 0.9 percent, or $160 million, reduction in home health payments.

These adjustments are stipulated under the Affordable Care Act and have been phased-in over the last three and four years respectively.

To further cut Medicare spending, CMS proposes to increase the fixed-dollar loss ratio that is used to calculate outlier payments from 0.45 to 0.56, which would cause a 0.1 percent, or $20 million, decrease. The rule would also modify the outlier payment methodology by using a cost-per-unit, where one unit equates to 15 minutes of care, rather than a cost-per-visit approach.

However, the agency would update the home health reimbursement model to increase payments by 2.3 percent as required by the Social Security Act. This would offset the $420 million decrease described earlier.

Additionally, the proposed rule contains updates to the Home Health Quality Reporting Program, including the addition of four new measures in 2018.

The proposed measures are composed of three resource-based measures that are determined using Medicare claims data and one assessment-based measure which is calculated using Outcome and Assessment Information Set data. The new measures are all-condition risk-adjusted potentially preventable hospital readmission rates, total estimated Medicare spending per beneficiary, discharge to the community, and medication reconciliation.

All home health agencies are currently required to submit Outcome and Assessment Information Set data in order to qualify for reimbursements. Any agency that does not submit quality measures to CMS faces a two percent reduction in the annual payment update.

Under the proposed Medicare payment reform, home health agencies currently participating in the Home Health Value-Based Purchasing Model would have their payments adjusted upward or downward based on their total performance score.

The rule states that the nine states in the program would have a maximum payment adjustment of three percent in 2018 followed by five percent in 2019. The maximum payment adjustment would increase by one percentage point each year from 2020 to 2022.

CMS also listed several changes to the model in the proposal, including:

• Determining benchmarks and achievement thresholds at the state level rather the size-cohort level and redefining “benchmark” to include the mean of the top decile of Medicare home health agencies performance on the quality measure used during the baseline period for each state;

• Requiring a minimum of eight home health agencies in a size-cohort;

• Increasing the timeframe for reporting New Measure data to 15 calendar days from the end of each reporting period to account for holidays and weekends;

• Eliminating four measures (Care Management: Types and Sources of Assistance, Prior Functioning ADL/IADL, Influenza Vaccine Data Collection Period, and Reason Pneumococcal Vaccine Not Received);

• Changing the reporting period for the Influenza Vaccine Coverage for Home Health Personnel measure to an annual submission rather than quarterly;

• And developing an appeals process that includes the recalculation and reconsideration process.

In addition to this proposed rule, home health agencies have recently been targeted for Medicare payment reform by CMS.

Earlier this month, the agency announced a rule that would require home health agencies in five states to undergo pre-claim reviews to qualify for full Medicare reimbursements. The rule was designed to combat Medicare fraud, waste, and abuse and help home health providers correctly submit claims.

Shortly after the announcement, the Department of Health and Human Services, along with the Department of Justice, reported the largest healthcare fraud takedown in which 301 individuals were charged for various healthcare fraud schemes totaling $900 million in false medical billing. Home health care was one of the top healthcare sectors implicated in the takedown.

Medicare home health agencies have been a significant source of Medicare overpayment as evidenced by mandatory reimbursement reductions under the Affordable Care Act and healthcare fraud cases. The proposed rule intends to carry out reimbursement decreases to reduce Medicare spending and implement new performance payments to increase care quality.

To view the complete proposal, please click here.

Dig Deeper:

• Medicare Payment Reforms Mean Big Bucks for Medicare, Medicaid

• Congress Asks CMS to Scrap Prior Authorization for Home Health