CMS’ recent release of the Home Health PPS Proposed Rule outlines the latest attempts to redefine the homecare model with an eye on the sort of cost and quality controls that are employed to manage care content and volumes from other Medicare provider-types. In a manner similar to the refinements seen throughout the rest of the care continuum, CMS and Med Pac have proposed expected reimbursement cuts, the removal of the top hypertension codes from case-mix calculations, and the decrease in payments for high therapy cases. The direction and specificity of the proposed changes can challenge even the most evolved of Home Health providers, and the scope of the proposals will alarm all homecare agencies that hope to employ a “business as usual” approach.
The history of Home Health PPS proposals identifies a consistent and focused attempt to manage areas of concern or inefficiency regarding how the homecare benefit is produced, delivered, and reimbursed. PPS reforms from recent years have included similar payment cuts intended to address the after-cost profit margins seen in the Home Health industry, and this approach continues in the 2012 Proposed Rule. Below, we will examine many of the primary elements of the 2012 Proposal, and how it may affect homecare providers and clinicians as they continue on their care path next year.
Payment Cuts – Payment cuts total a net decrease in Home Health funding of 3.56%, as base episode payment rates are reduced from $2192.07 to $2112.37. This reduction is comprised of the following elements:
- Case-mix creep adjustment – A 5.06% reduction in the case mix to address the previously defined case-mix creep. This Home Health PPS rate reduction accounts for the increase in case mix seen over the last year that is not related to changes in the clinical acuity of the patients. CMS found that ¾ of these coding increases were the result of increases in therapy visits above the 14 and 20 visit thresholds in 2009.
- Market Basket – A 2.5% market basket index inflation update that includes a 1% reduction as mandated by the Affordable Care Act, resulting in a 1.5% net market basket reduction. The market basket addresses the question of how much more or less it would cost to purchase the same mix of goods and services in a future time period.
These two reductions are combined to create a net decrease of 3.56% in 2012 when compared to the 2011 payment levels (-5.06% + 1.5% = -3.56%). This author, while acknowledging the net decrease of incoming funds providers will receive in 2012, views the market basket update as essentially a cost-of-living increase. Though the net payment decrease amounts to 3.56%, the market basket references cost of service increases that are based on inflationary realities. So the 2012 fiscal end-game for the Home Health provider, in reality, represents two cuts; 5.06% in case mix and a 1% market basket update reduction.
Case-mix changes – The removal of two Hypertension codes, 401.1 (Benign Essential Hypertension) and 401.9 (Unspecified Essential Hypertension) from the case-mix model. Coding experts estimate that this change will result in an up to 7% decrease in coding-related reimbursement.
Therapy Payment Re-allocation – CMS has proposed a re-weighted payment schedule for all therapy service delivery. By increasing payment for low-therapy episodes and decreasing payment for high-therapy episodes, Medicare seeks to eliminate any potential of increasing therapy visit totals for financial reasons. This change will result in lower profit margins for patient episodes with high therapy utilization levels, and is a direct response to gaming concerns that have long been associated with therapy delivery under the PPS model.
Face–to-Face Changes – CMS has proposed the following change in face-to-face requirements: Physicians who attend to patients in an acute or post-acute setting, prior to their admission to Home Health, will have the flexibility to inform the certifying physician of their encounters with the patient in order to satisfy the requirement.
These changes result in a net decrease in Home Health payments of $640 million when compared to CY 2011. In addition to the reduction in the costs of homecare for the upcoming calendar year, these changes speak to the very essence of programming and care delivery protocols that have outlived their usefulness in today’s Home Health model. Homecare providers are often confounded by the changes and describe a lack of understanding regarding CMS’ goals with the latest refinements. Those seeking answers may look to similar reforms Medicare has enacted across the care continuum over the last twenty years. The changes are not about homecare; they’re about Medicare, or rather, healthcare as a whole. A prudent response involves the acceptance and integration of the reforms in an attempt to adopt the progressive programming and care delivery techniques that have proved successful for other Medicare providers.
The next HHSM Newsletter will address the therapy payment reforms proposed for 2012, and analyze the changes for the Home Health provider.