Home Health & Hospice Week

CMS expects to fund more outlier episodes.

The 2022 home health final rule may not contain everything on home health agencies’ wish lists, but it does have some perks.

For example: The final rule the Centers for Medicare & Medicaid Services released on Nov. 2 contains “a surprise payment boost,” notes the American Physical Therapy Association in its analysis of the rule.

In its proposed rule back in July, CMS floated a 1.7 percent payment increase totaling an estimated $310 million. In the final rule published in the Nov. 9 Federal Register, CMS finalizes a 3.2 percent bump equaling $570 million. The 30-day base payment amount will be $2,031.54, up from $1,901.12 this year.

“The slight uptick in the payment rate for 2022 takes a modest step in recognizing the increased labor costs home health providers are continuing to experience,” says Joanne Cunningham, executive director of The Partnership for Quality Home Healthcare, in a release about the final rule.

The payment increases are not an apples-to-apples comparison, however. In the proposed rule, CMS included a 1.8 percent home health payment update percentage ($330 million increase) and a 0.1 percent decrease in payments due to reductions made in the rural add-on percentages for CY 2022 ($20 million decrease).

In the final rule, CMS lays out a “home health payment update percentage of 2.6 percent ($465 million increase), an estimated 0.7 percent increase that reflects the effects of the updated fixed-dollar loss ratio ($125 million increase) and an estimated 0.1 percent decrease in payments due to the changes in the rural add-on percentages for CY 2022 ($20 million decrease),” CMS says in its fact sheet on the rule.

“The bump in the rate increase was definitely welcomed, especially with the expectation that sequestration will return in January, which will offset much of 2.6 percent increase,” points out reimbursement expert M. Aaron Little with BKD in Springfield, Missouri.

Reminder: “The FDL ratio and the loss-sharing ratio are selected so that the estimated total outlier payments do not exceed the 2.5 percent aggregate level” as required by law, CMS notes in the rule. “Historically, we have used a value of 0.80 for the loss-sharing ratio, which, we believe, preserves incentives for agencies to attempt to provide care efficiently for outlier cases. With a loss-sharing ratio of 0.80, Medicare pays 80 percent of the additional estimated costs that exceed the outlier threshold amount.”

CMS used data through March 2021 to propose a FDL ratio of 0.41 back in July — down from 0.56 earlier. Now, data through July 2021 shows that the FDL ratio should be even lower at 0.40.

The lower FDL ratio means “that more periods will be eligible for outlier payments in CY 2022,” notes the National Association for Home Care & Hospice in its final rule analysis.

The $20 million decrease due to rural add-on changes reflects that 2022 is the final year of the rural add-on phase-out. While three categories of HHAs used to receive an add-on, this year only the “low population density” areas with a density of 6 individuals or fewer per square mile of land area receive one, at 1 percent. Next year the rural add-on will phase out altogether.

HHAs Disappointed In Recalibration, Wage Index Provisions

Many commenters on the proposed rule asked CMS to hold off on recalibrating the Patient-Driven Groupings Model’s case mix weights in 2022 (see HCW by AAPC, Vol. XXX, No. 34). “These commenters expressed concerns about the influence of the COVID-19 PHE on the types of patients receiving home health care, and the use of CY 2020 data,” CMS acknowledges in the final rule.

But CMS rejects those concerns. “We continue to believe that it is important to base the PDGM case-mix weights on actual PDGM utilization data and patient resource and shift away from the use of data prior to the implementation of the PDGM, where utilization was influenced by different incentives, such as the therapy thresholds used in case-mix adjustment prior to the PDGM,” the agency maintains.

“CMS believes that the COVID-19 PHE would have impacted utilization within all case-mix groups similarly,” it says. “Therefore, the impact of any reduction in resource use caused by the COVID–19 PHE on the calculation of the case-mix weight would be minimized since the impact would be accounted for both in the numerator and denominator of the formula used to calculate the case-mix weight,” CMS reasons in the rule.

Plus: “If we chose not to recalibrate for CY 2022, it would be the third calendar year without an update to the case-mix weights,” CMS notes. “Prolonging recalibration could lead to more significant variation in the case-mix weights than what is observed using CY 2020 utilization data,” the agency cautions.

“While most HHAs will see little impact in the aggregate, some will experience higher or lower payments than would have happened without recalibration,” NAHC notes. “NAHC holds to its position that applying 2020 service utilization to set 2022 case mix weights falls short on logic,” it adds in its rule analysis.

HHAs and their representatives also appealed to CMS to address the volatility in wage index changes, including those stemming from adoption of the revised Office of Management and Budget (OMB) delineations in 2021. Last year, CMS put a 5 percent cap on downward swings.

HHAs asked CMS to continue the 5 percent cap, like it has for other provider types. But CMS declines to implement the same cap again. “We did not propose changes to the HH PPS wage index methodology for CY 2022, and therefore we are not finalizing any changes to that methodology in this final rule,” CMS says in the regulation. “However, we will take these comments into consideration to potentially inform future rulemaking,” the agency adds.

CMS has a similar response to other suggestions to improve wage index equity with other provider types, noting that such changes would be outside the scope of this rule.

“The removal of the 5 percent limitation on any reduction in the wage index from the prior year” could be a big problem for some HHAs, warns The Health Group in Morgantown, West Virginia. “Home health agencies could see a significant impact if their patients are physically located in specific geographical areas with a significant decline in the wage index,” stresses the accounting and consulting firm in its electronic newsletter.

One more reimbursement change HHAs will see starting Jan. 1 is related to a regulatory change in the rule. Medicare now will allow occupational therapists “to conduct initial and comprehensive assessments for all Medicare beneficiaries under the home health benefit when the plan of care does not initially include skilled nursing care, but includes either Physical Therapy (PT) or Speech-Language Pathology (SLP),” CMS notes in the fact sheet.

“Since OTs can now conduct the initial and compre­hensive assessments, CMS is establishing a LUPA add-on factor for calculating the LUPA add-on payment amount for the first skilled occupational therapy visit in LUPA periods that occurs as the only period of care or the initial 30-day period of care in a sequence of adjacent 30-day periods of care,” CMS explains. “Currently, there is insufficient data” so “CMS will utilize the physical therapy LUPA add-on factor as a proxy until CY 2022 data is available,” according to the fact sheet.

A new CR issued Nov. 8 describes the OT LUPA add-on addition and some other system changes, a CMS official noted in the Home Health Open Door Forum on Nov. 10. “No new actions are required by home health agencies, but you may want to review the new CR just for your information,” he advised forum attendees.

Note: The 192-page rule is at www.govinfo.gov/content/pkg/FR-2021-11-09/pdf/2021-23993.pdf.