2014 PPS Proposed Rule: A Directional Change

On June 27th, CMS released the 2014 Home Health PPS Proposed Rule, designed to outline the annual payment and regulatory updates to the community homecare benefit. The traditional areas of focus on payment cuts and quality reporting are joined by rebasing adjustments to the standardized 60-day episode payment rate, the per-visit payment rates and the non-routine medical supplies (NRS) conversion factor. The rebasing proposals will re-set the 2014 case-mix weight average to 1.00, effectively modifying the income from traditional care programs for the Home Health Provider.

The annual Proposed Rule ritual allows for a public comment phase that expires on August 26th, whereas CMS develops the Final PPS Home Health Rule for 2014. Providers regularly compare the proposed changes to their current level of care delivery to assess the real-time effects of the proposals. Yearly warnings of Providers who will struggle as a majority of their programs are expected to fail financially are followed by increased profit margins when the changes actually take effect. This is due to the modifications to programming that occur in response to any particular changes as Home Health agencies invoke new efficiencies to cut costs and preserve margins. A well-defined track record exists over the past decade as death-knell payment cuts are followed by improved after-cost results.

The 2014 Proposed Rule outlines a new journey for Providers seeking to continue on their care path into the future. Multi-year changes are identified to take effect through 2017, and as a result, the 2014 Proposed Rule should be viewed as a series of progressive payment cuts and programming modifications rather than a single yearly update. These progressive changes occur with an eye on the healthcare reform laws, and they move Home Health Providers forward towards the new care models. By the completion of the proposed multi-year changes, we will be on the verge of Post-Acute Bundling, Accountable Care Organizations, and Home Health patient co-payments, and the community-care service industry will be a different place than it is today.

So the changes in the 2014 Proposed Rule should be viewed as the beginning of a journey that will span the next few years and take the Provider to a new reality of care delivery. Consider changes to your care delivery that will help your clinicians and programs produce the care of the future, as you address the elements of the Proposed Rule:
60-day Episode Rate – As outlined in the Affordable Care Act, the standardized 60-day episode rate will be reduced 3.5% yearly though 2017. These changes are based on the continued reduction in the number of visits in the average Home Health episode; this reduction has been consistent since the introduction of PPS in 2000. The proposed national, standardized 60-day episode payment for 2014 is $2,860.20. The annual reduction to the episode rate will be 3.5% yearly through 2014, and the amount of reduction can be modified by the visit total, mix and intensity of services, and average cost of providing care per episode.

NRS Payment Update – An annual decrease in the NRS conversion factor of 2.58% yearly through 2017 is proposed.

LUPA Update – CMS proposes updating the LUPA add-on amounts by 4.8%, and adding 3 LUPA add-on factors to help determine required changes to the LUPA rate.

Quality Reporting – CMS has proposed adding 2 claims-based quality measures:

  1. Rehospitalization during the first 30 days of a Home Health episode.
  2. Emergency Department Use without Hospital Readmission during the first 30 days of Home Health.

Both of these measures focus Home Health Providers on patient performance as it relates to readmission or ER use in the first 30 days of care, specifically the period of focus for the Post-Acute Bundling models of the Accountable Care Organizations.

Rebasing Per Visit Amounts – The per-visit payment rates will increase 3.5% yearly through 2017 to address changes in the cost of providing services.

Net Payment Reduction – As a result of the above changes, CMS projects that payment reductions for 2014 will amount to a net 1.5% reduction, or 290 Million in total payment cuts. They will be comprised of:

  • National per-visit payment rates
  • NRS Conversion factor changes
  • 2.4% Home Health payment updates
  • Rebasing adjustments to the 60-day episode rate
  • ICD-9 Coding Adjustments

Home Health Providers seeking to continue their care mission would be inclined to look ahead to the changes outlined above not only for the Calendar Year 2014, but also for the ongoing reductions that will follow in the subsequent years. In CMS’ view, these payment changes focus care programs and clinicians to new levels of care delivery and efficiency; they cite industry responses to the death-knell cuts of the past as Providers consistently rewired their processes to elicit comparable clinical outcomes under decreased utilization and costs. Progressive Providers understand this about Home Health, and they can serve both their patients and the Benefit by assertively responding to the latest yearly updates to their PPS model.

Arnie Cisneros, P.T., President of Home Health Strategic Management, is the most progressive speaker in homecare today. He provides coaching and consulting services to providers on a national basis (see www.homehealthstrategicmanagement.com) regarding S.U.R.C.H. and other clinical management protocols for quality outcomes.