Home Health Update

As is/was the case with SNFs and Hospices, CMS and Congress have formulated a series of proposed rules and legislation that reflects the ongoing trend under Medicare of reimbursement reductions.  On July 30 (followed by the August 6th Federal Register publication), CMS announced its proposed rule for FY 2010 for Home Health PPS reimbursement and other rate refinements.

  • A 2.75 percent reduction to the national standardized 60 day episode rates and the NRS conversion factor to account for the case-mix change – savings of $480 million (est).  This is the third year of a four year phase in to the national standardized 60 day episode rates.
  • A negative wage-index adjustment (-$10 million).
  • A 2.2 percent adjustment (increase) to the market basket – an increase of $390 million.  The net of the market basket adjustment, the 2.75% reduction and the negative wage adjustment produces an annualized savings of $100 million.
  • A cap on outlier payments totaling no more than 10% of Home Health PPS payments to an agency (fraud and abuse targets), updating the fixed dollar loss ratio to .67, and target outlier payments to 2.5% of total HH PPS payments, returning 2.5% back to the base rate.
  • CMS is also looking to require submission of the OASIS as a condition of payment and plans to introduce a new version, OASIS-C in January of 2010.

The impact, according to CMS, of the proposed 2010 changes hits free-standing, proprietary Home Health Agencies the greatest – negative 3.2% or rate reduction equal to 3.2%.   CMS estimates that free-standing and facility-based non-profits will see modest increases – 3%.  Programs in Urban areas, especially those that are proprietary, experience the worse pain – a reduction of 4%.  Rural programs do better across the board, averaging rate increases of just below 3%.  Facility based programs, regardless of location, tend to fare better under the proposed rule, averaging improvements slightly better than 3.5%.  Overall, CMS is projecting lower spending across the industry by .86% with small to medium sized agencies bearing the brunt of the rate reductions and larger agencies (200 plus episodes) experiencing a modest increase of 2%.  Geographically, the regions CMS notes as the West and the South are the most heavily (negative) impacted.

What is unknown at this point is the impact Congress and the current yet unresolved Health Care Reform movement will have on the industry.  The House bill (HR 3200) foretells drastic (negative) changes to the industry – almost $57 billion in cuts.  As in other industry segments (SNF and Hospice), the recommendations from MedPAC are literally interwoven in the House bill.

  • Freezes the market basket update for 2010.  Under the CMS proposed rule, the market basket update is worth $390 million.
  • Accelerates the regulatory adjustment to case mix to 2010.  The legislation further directs the Secretary of HHS to rebase the PPS for home health in 2011.
  • Incorporates a productivity adjustment to the market basket calculation (an offset to inflation) while establishing a floor in this calculation that is equal to but not less than, zero.
  • Directs the Secretary to provide a plan to Congress within three years, for bundling post-acute payments.  This bundling incorporates home health.

The total of the above referenced changes is an estimated spending reduction/saving of $57 billion over 10 years. The mystery that remains however, is where the Senate proposal will fall in comparison to the House bill.  Additionally, the political wind at the moment seems to be blowing harder against reform of the magnitude put forth by the House.  What is certain is that the weeks and months following the summer recess period will be extremely interesting to watch as health policy will be front and center and the health care industry will need to be fully engaged if there is to be progress in crafting economically viable alternatives.

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