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Exploring Medicare Home Health in 2018 and Beyond

9/11/17 – Dave Macke

On July 28, 2017, the Centers for Medicare and Medicaid Services (CMS) released the proposed rule for the 2018 payment update.

In addition to the normal annual payment rate updates, the rule contains a proposal for a new payment model called Home Health Grouping Model (HHGM).  This is being proposed for implementation in 2019.  This is the most significant change to Medicare Home Health payment since PPS was implemented on October 1, 2000. 

The proposed rule contained the normal annual payment rate update for 2018.  Changes are proposed for case mix weights for all HHRGs, wage index update, national standard payment rates, elimination of the rebasing adjustment of $80.95 per episode and elimination of the rural add-on. 

The case mix weights range from 0.4628 to 2.1329.  All weights have decreased except for five payment groups.  The largest decrease is 5AHK (C1F3S1) at 4.43%.  With regards to the wage index values, there are many increases and decreases ranging from -29.87% to +13.36%.  The new national standard rate per episode is $3,038.43.  This will be the same for rural areas due to the elimination of the rural add-on. 

The current rates are $2,989.97 for Urban and $3,079.67 for rural.  Senate Bill 353 has been introduced to extend the rural add-on till 2022.  In order to determine the impact for a specific agency, you would have to take into account all changes – case mix weight, wage index and standard payment rates.  The payment rates were also reduced by a case mix creep adjustment of 0.03%.  The 2% reduction still applies for agencies that do not submit the required quality data.

LUPA and non-routine supply add-on rates have been increased by 1% as case mix creep does not apply.  The fixed dollar ratio has been changed to 0.55 for outliers.

CMS estimates that the net impact on home health spending for 2018 is a reduction of $80 million.

As we look ahead to 2019, CMS has proposed a new home health payment model called Home Health Grouping Model (HHGM).  Some of the highlights include reducing the number of payment groups from 153 to 144.  Episodes would continue to be early and late but on the initial episode would be considered early.  The biggest change is a conversion of the episode length from 60 days to 30 days.  There would still be one 60 day OASIS certification period that would apply to the two 30 day payment periods.  Patients can still be re-certified for subsequent episodes.  Some additional payment factors would be admission source – community versus institutional (prior hospital or PAC stay in the prior 14 days) and a comorbidity adjustment for secondary diagnosis.  There are proposed 6 clinical groupings and 3 functional levels.   The number of therapy services is also being eliminated as a payment variable. 

The payment rates would be based on a cost per minute plus non-routine supply factor.  CMS is proposing to pay 60% on the initial RAP and 40% on the second RAP and 50% for initial subsequent periods.  CMS is requesting comments on the need to continue to pay RAP’s since agencies will be billing every 30 days.  The number of visits for a LUPA will be variable based on the specific HHGM ranging from 2 visits to 7 visits.  

Agencies should review these changes to determine the financial impact on their agency going forward.  We also encourage agencies to submit comments to CMS before the deadline of September 25, 2017.  The proposed rule can be found on the CMS website here

There are many changes coming in 2018 and beyond for Medicare home health.  Please feel free to contact us with any questions or concerns or if you need any assistance.  We can be reached at 859-331-3300 or dmacke@vlcpa.com.