Home Health & Hospice Week

PDGM rates will be 8% lower due to cuts.

Most home health agencies are in full-on prep mode for the Patient-Driven Groupings Model that takes effect Jan. 1, but they are going to have to do more with less under the drastic payment model change.

So indicates the 2020 Home Health Prospective Payment System proposed rule that the Centers for Medicare & Medicaid Services released July 11. Despite the industry’s concerted efforts, CMS is not eliminating the cut due to expectations of the way HHAs will change their behavior under PDGM. And in fact, CMS is significantly increasing the reduction — from an estimated 6.42 percent to a whopping 8.01 percent, according to the rule published in the July 18 Federal Register.

Background: CMS first proposed the preemptive cut in last year’s HH PPS rulemaking cycle for 2019, and hung onto the idea in the 2019 final rule (see Eli’s HCW, Vol. XXVII, No. 39-40). The reduction is based on the assumption that under PDGM, HHAs will:

• “change their documentation and coding practices” and “put the highest paying diagnosis code as the principal diagnosis code in order to have a 30-day period of care be placed into a higher-paying clinical group,” CMS says in the 2020 rule.
• “provide 1 to 2 extra visits to receive a full 30-day payment” rather than a Low Utilization Payment Adjustment, CMS says. Agencies will do this for one-third of LUPAs that are one to two visits away from the full period payment, the agency adds.

CMS also assumes that comorbidity coding will increase, but it says the assumption is based on the fact that OASIS reports only five secondary diagnoses, while the home health claim under PDGM will report 24 secondary diagnoses.

The industry has fought back hard against this cut. First, it submitted a plethora of comment letters decrying the strategy. When those fell on deaf ears at CMS, it then enlisted members of Congress to introduce legislation to avert the cut (see Eli’s HCW, Vol. XXVIII, No. 18) and write a letter to CMS Administrator Seema Verma seeking the same (see Eli’s HCW, Vol. XXVIII, No. 24).

Majority Of Behavioral Assumption Cut Due To Primary Diagnosis Upcoding

Despite those moves, CMS doubles down on the cut by retaining it and even increasing its magnitude. The agency now estimates that the LUPA-avoiding behaviors would increase payments 1.86 percent, the principal diagnosis upcoding would increase payments 5.91 percent, and the comorbidity code increases would bump up payments 0.37 percent, the 2020 rule indicates. After figuring in some “overlap and interactions between the behavior assumptions,” CMS puts the new adjustment at 8.01 percent — up from an estimated 6.42 percent in the 2019 proposed rule last year.

CMS’s “past experiences” show “there is a substantive connection between the data and the behavior assumptions made,” the agency says in reply to the heavy criticism it received in the 2019 rulemaking cycle. The primary diagnosis coding assumption “is based on decades of past experience under the case-mix system for the HH PPS and other case-mix systems,” the agency insists in the 2020 rule.

For the comorbidity coding assumption, “ICD-10 coding guidelines require reporting of all secondary (additional) diagnoses that affect the plan of care,” CMS points out. “Because the comorbidity adjustment can increase payment by up to 20 percent, it is a reasonable assumption that HHAs would encourage the accurate reporting of secondary diagnoses affecting the home health plan of care to more accurately identify the conditions affecting resource use,” the agency insists.

And when CMS launched HH PPS in 2000, it expected LUPAs to account for 16 percent of episodes. Now, that figure is 7 percent. “It appears that HHAs changed their practice patterns such that, upon implementation of the HH PPS, more than half of 60-day episodes that would have been LUPAs received the full 60-day episode payment amount,” CMS concludes.

Further, under PDGM, many of the 432 case mix groups have a LUPA threshold of only two visits, CMS says. “We believe it to be a reasonable assumption that some HHAs would provide a second visit to receive the full 30-day payment amount” in those cases, the rule maintains.

CMS also points to the Medicare Payment Advisory Commission’s support of the cut to bolster its position.

But the industry remains unpersuaded by the agency’s arguments. The National Association for Home Care & Hospice is “very concerned” by the cut, NAHC President William Dombi says in a statement. “Rate reductions based on behavioral changes that have not yet occurred create significant dangers for home health patients,” Dombi warns. “The risks of disruptions in access to care are compounded by the institution of a dramatically modified payment system model along with an across-the-board rate cut that is based on conjecture.”

CMS maintains that it must implement the cuts due to a requirement in law to make PDGM budget-neutral. “Assumption-based rate calculation should not occur because of the high risks of error and the creation of an incentive to change behavior solely to maintain Medicare revenues,” Dombi argues. Instead, CMS should make “adjustments only after actual behavioral changes have occurred,” he continues.

Making it worse: This rule provision may create “a perception that the adjustment actually gives license to agencies to behave in such a way that meets the CMS expectation,” worries reimbursement expert M. Aaron Little with BKD in Springfield, Missouri.

Congress Is HHAs’ Only Hope

Industry experts were not shocked to see CMS stick to its guns on the behavioral adjustment. CMS’s “comments last year did not give much hope they would be reasonable,” says attorney Robert Markette Jr. with Hall Render in Indianapolis. “They took positions that the industry understood as assuming we would all behave fraudulently.”

But increasing it to such a significant amount did come as a surprise to many. The 8.01 percent figure was “shocking,” Markette judges.

“An over 8 percent reduction in payment based on an assumption that home health agencies will chase the dollars via upcoding, comorbidity, and utilization changes seems excessive, when CMS has full ability to make later corrections if the other changes are found to be inaccurate or insufficient to obtain budget neutrality,” says Joe Osentoski, reimbursement recovery & appeals director with Quality in Real Time in Sterling Heights, Michigan.

Little says he’s skeptical of CMS’s estimation. “In theory, the ‘behaviors’ of agencies will be such to mitigate the impact of the reduction,” Little says. “But, I have a hard time buying into that theory.”

“This behavioral adjustment, based on a presumption of changes and the MedPAC recommen­dation, seems to be ‘piling on’ with the change to PDGM,” Osentoski judges. “The other changes to how the payment itself is generated would be sufficient to gauge if the payment amounts under PDGM were sufficient to meet their objectives.”

PDGM contains some sensible reforms, but “the behavioral adjustment is neither sensible nor warranted,” Dombi criticizes. It’s a “serious flaw in the new payment model.”

The adjustment increase over last year seems to indicate, “without any additional evidence or explanation, that the industry would engage in more ‘bad behavior’ than originally predicted,” Markette observes. “A cynic might view this increase as simply a response to the fact that the projected rate for 2020 based upon the more recent data was higher than last year. Of course, that would imply that the take-back is not about industry behavior, but setting the total Medicare spend at something other than a budget neutral manner.”

The figure for the cut seems “completely arbitrary,” Markette criticizes. “CMS gives lots of examples to support their conclusions about bad behavior, but never really appears to articulate a basis for the 8.01 percent calculation.”

Bottom line: PDGM’s “foundation is severely weakened by the unwarranted and unsupported rate reduction based on nothing but pure assumptions that home health agencies will abuse the payment process,” Dombi blasts.

The industry now must turn to its elected representatives to pass legislation that will prevent the cut from taking place in 2020. “Congress has limited time to intervene and preserve access to vital home health care,” Dombi notes.

But that may be an uphill battle. CMS’s proposed rule comments defending the assumptions seem “intended to make it clear that they are not backing down on this,” Markette believes. They also seem “aimed, at least in part, at Congress and trying to convince Congress to stand aside on this issue.”

Watch out: CMS may be just getting started with its behavioral adjustment cuts. “If CMS under-estimates the reductions to the 30-day payment amount necessary to offset behavior changes and maintain budget neutrality, larger adjustments to the 30-day payment amount would be required in the future, by law, to ensure budget neutrality,” the rule insists.

On the other hand: “Likewise, if CMS overestimates the reductions, we are required to make the appropriate payment adjustments accordingly.” In other words, CMS would have to increase payments. Industry experts say that would be highly unlikely, however.

Note: The rule is at https://www.govinfo.gov/content/pkg/FR-2019-07-18/pdf/2019-14913.pdf.