Home Health & Hospice Week

And 2020’s RAP payments will be reduced by 2/3.

Medicare is finishing what it started when it comes to Request for Anticipated Payment elimination — and the result will be a cash flow catastrophe for some home health agencies.

In the Home Health Prospective Payment System proposed rule released July 11, the Centers for Medicare & Medicaid Services proposes to reduce RAP payments to 20 percent of the expected episode payment in 2020 (down from the current 60 percent for initial episodes), and to eliminate RAPs altogether in 2021. CMS also wants to replace RAPs with a Notice of Admission requirement instead, similar to hospices’ Notice of Election filings (see related story, p. 201).

Elimination of RAPs isn’t exactly a surprise, since CMS discussed it in last year’s payment rule. The agency also already eliminated RAP payments in 2020 for newly enrolling agencies and implemented an “enhanced oversight” period of newly enrolling HHAs in 2019, under which they don’t receive RAP payments (see Eli’s HCW, Vol. XXVIII, No. 8).

“CMS was pretty clear last year that they don’t like it,” attorney Robert Markette Jr. with Hall Render says of paying agencies for RAPs.

The proposed rule’s RAP phase-out is “not a total surprise, as CMS last year took steps in that direction,” National Association for Home Care & Hospice President William Dombi tells Eli.

“The handwriting for total RAP phase-out was clearly on the wall last year,” agrees Joe Osentoski with Quality in Real Time in Sterling Heights, Michigan. (See experts predicting the elimination in Eli’s HCW, Vol. XXVII, No. p. 39-40).

However: “The speed is a surprise — and a disappointment,” Dombi says.

The rule severely limits RAP payments starting in just six months, and eliminates them altogether after just one year under the Patient-Driven Groupings Model. “Perhaps naively, I thought [CMS] would get through the first year of PDGM, assess data, and then decide how to proceed,” says reimbursement expert M. Aaron Little with BKD in Springfield, Missouri. “Clearly, that is not the direction CMS is heading based on the proposed rule.”

Even if CMS did propose a RAP phase-out, Dombi was “hoping there would be much more time and better phasing in,” he says.

RAP Fallout Includes Cash Flow Crunch

RAP elimination will result in multiple adverse affects on HHAs, experts agree.

For example: The change will be “highly disruptive and costly, as providers will need to acquire and tap lines of credit,” Dombi predicts.

“It’s a lot to pile onto agencies, to change the payment model — which in itself is a change to cash flow — and then at the same time start a RAP phase-out,” Little says.

Keep in mind that the 20 percent figure also applies to the 30-day period payment, which should figure roughly to about half of what the 60-day episode payment would have been, Markette points out. “That’s like getting a 10 percent payment” compared to 60 percent now, he says.

The elimination also puts “even more emphasis on getting orders and all other documen­tation signed/completed timely,” Little adds.

Consider this scenario: Even in an ideal world with an HHA operating at peak efficiency, cash flow will be seriously delayed without RAPs, Little warns. “Without a RAP, if a HH patient is admitted the 25th day of the month and the patient stays on service the full 30 days or more, the claim for the period cannot be billed until day 31 at the earliest — assuming orders and documentation are complete,” Little offers. “And then it takes 14 days to pay, which puts the agency in a position with no cash flow for the first 44 to 45 days of care,” he says.

Compare that to billing procedures for skilled nursing facilities, which also must bill Medicare monthly. “When a patient is admitted on the 25th day of the month, the claim for days 25 to 30 can be submitted in the new month as soon as the related documentation is complete,” Little relates. “Then, the claim pays in 14 days, offering the ability to receive some cash to cover the early care costs.”

CMS heard many of these criticisms — and more — when it first broached the idea in last year’s 2019 HH PPS proposed rule. But this year’s proposed rule lists numerous reasons why elimination should happen anyway.

CMS frames the elimination as addressing “potential Medicare fraud by phasing out pre-payments for home health services,” according to a release about the rule. “CMS and our law enforcement colleagues have seen a marked increase in [RAP] fraud schemes perpetuated by existing HHAs that receive significant upfront payments, never submit final claims and then close for business.”

The rule lists four examples of such fraud, including a case in which a Michigan agency submitted $50 million in RAP claims, receiving $37 million in payments, including for patients in far-distant states. “CMS discovered that the address of record for the HHA was vacant for an extended period of time” and “although the HHA had continued billing and receiving payments for RAP claims, it had not submitted a final claim in 10 months.”

All four examples involved cases in which an agency was acquired, then showed a significant spike in RAPs after the change of ownership. Before authorities could catch up with the agencies, Medicare had paid them quantities ranging from $1.3 million to $12 million in the other three examples.

“We have attempted to address these types of vulnerabilities through extensive monitoring and investigations. However, there continues to be cases of individual HHAs causing large RAP fraud losses,” CMS admits in the rule.

Reasons for that include fraudster owners “failing to disclose ownership changes for those HH entities to CMS,” the rule says. “CMS has monitored numerous schemes … where an existing HHA undergoes an unreported ownership change and CMS identifies a massive spike in RAP submissions with no final claims ever being submitted.”

The problem: Such RAP fraud cases “are difficult to investigate because the actual owners perpetrating the fraud are often not the owners identified in PECOS due to a failure to disclose ownership changes,” CMS continues. “This complicates investigations and results in the need for additional resources to perform extensive manual research of Secretary of States’ (SOS) and licensing agencies’ websites. In several cases, the individuals perpetrating the fraud have been found to be located outside the country.”

The solution: Instead of targeting such shady cases, CMS proposes eliminating the cash flow help RAPs provide to legitimate agencies. That will address the “significant program integrity risk” RAPs represent, the rule argues.

Is RAP Fraud Risk Charge A Stretch?

“The idea that RAPs pose a significant program integrity risk is really hard to understand, despite the four examples cited in the proposed rule,” Little judges. “Obviously, those are extreme examples, but does it really pose so significant of a threat that RAPs need to be eliminated?” he asks.

Cutting RAPs altogether after a significantly reduced phase-out year is “a disappointment, as we had hoped CMS understood better the cash flow problems that [the elimination] creates, given nearly 20 years of HHAs operating in a RAP structure,” Dombi says.

CMS’s “rationale this year is just as questionable as it was last year,” Markette blasts. “They are taking back the RAP for program integrity reasons, based upon the intentional, criminal activity of a handful or providers.” The elimination “is especially frustrating, because they already have other tools for this job,” Markette charges. “They can suspend a provider’s ability to submit RAPs, for example.”

Bottom line: CMS is pursuing total RAP elimination “because it is easier,” Markette contends. “Much like face-to-face, the vast majority of HHAs, who are law-abiding, compliant operators, are being saddled with new problems, so that CMS can address a handful of bad actors.”

Contributing factor: Another reason CMS may favor RAP elimination is that it would “prefer to not have a two-tier billing/payment system for home health agencies that was created with the loss of RAPs by new home health agencies,” Osentoski theorizes.

On a more optimistic note, Osentoski hopes that the shift to PDGM “is enough of a change that adding in the RAP phase-out may not mean much difference,” he says. “Sort of like ripping a bandage off in one motion, adapting to changes to the RAP and implementing PDGM all at once can be consol­idated into one large painful adjustment.”

Take These Steps Now To Prepare

RAP elimination has serious cash flow and work process implications for your agency. Follow this expert advice to weather the fallout:

• Start building a war chest. HHAs got their biggest pay bump in over a decade in 2019 with a 2.2 percent payment increase. Between now and Jan. 1, HHAs should try to sock away as much of that increase as possible — if not more — to build a cash reserve that will help them weather the PDGM transition — including cash flow problems related to RAP changes, Markette advises. HHAs that don’t may find themselves unable to make payroll in early 2019, he warns.

HHAs should also consider arranging lines of credit, Dombi suggests.

• Polish your billing procedures. RAP elimination “will put more pressure on agencies to tighten up their office processes to get all the parts needed for billing in place, accurate, and submitted,” Osentoski observes.

As with current PPS billing, the factor holding back timely billing is likely to be physician documen­tation. The earlier you begin working on that issue with your referring physicians, the better shape you’ll be in when PDGM and RAP changes hit.

• Don’t delay. Start thinking about cash flow now,” Markette urges. “This will be a bigger impact than most providers realize.”

The phase-out including a 20 percent RAP payment “eases the burden a little, but the faster providers get their operations in-line with no RAPs, the better,” he says.