Home Health & Hospice Week

Plus: Outlier formula tweak will make them a little easier to obtain.

Not surprisingly, home health agencies are consumed with the details of the payment reform model included in the 2019 Home Health Prospective Payment System Final Rule. But that focus shouldn’t come at the expense of agencies’ attention to their financial fate for next year.

HHAs welcomed the Centers for Medicare & Medicaid Services’ proposal in July to increase HH PPS rates by 2.1 percent. And they are pleasantly surprised to see that boost tick up a bit further in the final rule released Oct. 31, to 2.2 percent. The increase puts the 2019 60-day episode base rate at $3,154.27, up from $3,039.64 this year.

The figure, which CMS estimates will cause a $420 million increase in HH payments compared to this year, is calculated using the 2016-based HHA market basket update of 3.0 percent, minus 0.8 percentage point for multifactor productivity; a 0.1 percent increase due to decreasing the fixed-dollar-loss (FDL) ratio (a $20 million increase), and a 0.1 percent decrease in payments due to the new rural addon policy mandated by the Bipartisan Budget Act of 2018 for CY 2019 ($20 million decrease), CMS says in the final rule scheduled for publication in the Nov. 13 Federal Register.

The 2.2 percent rise comes after eight straight years of rate cuts — 0.4 percent in 2018; 0.7 percent in 2017; 1.4 percent in 2016; 0.3 percent in 2015; 1.05 percent in 2014; 0.01 percent in 2013; 2.3 percent in 2012; and a whopping 5 percent in 2011. In 2010, the last Medicare payment rate increase was 1.75 percent.

While the first rate increase in nine years is good news, some agencies don’t think it goes far enough. “Several commenters stated they do not believe the CY 2019 home health market basket adequately reflects compensation pressures faced by home health providers,” CMS notes in the final rule. “A commenter recommended that CMS build into the 2019 market basket update an increase to reflect general health care wage increases.”

CMS dismisses the idea, noting that “the CY 2019 market basket update of 3.0 percent reflects the expected compensation price increases that home health agencies will face in CY 2019.”

Outlier Threshold Comes Down Again

Back in 2017, CMS bumped up the Fixed Dollar Loss ratio from 0.45 to 0.55 to meet its target of paying out 2.5 percent of home health payments in outliers with a 0.80 loss sharing ratio.

How it works: Under the calculation, once an agency exceeds the FDL figure, Medicare kicks in 80 percent of costs based on average per unit calculations. “A high FDL ratio reduces the number of episodes that can receive outlier payments, but makes it possible to select a higher loss-sharing ratio, and therefore, increase outlier payments for qualifying outlier episodes. Alternatively, a lower FDL ratio means that more episodes can qualify for outlier payments, but outlier payments per episode must then be lower,” CMS explains in the final rule.

Remember, 2017 was also the year CMS moved the outlier calculation to a 15-minute unit as opposed to per visit (see Eli’s HCW, Vol. XXV, No. 39-40). CMS made that change over some industry opposition.

Now CMS says that based on updated 2017 claims data, it can drop the FDL figure back down to 0.51, as it proposed earlier this year.

Add-On Phase-Out Threatens Rural Agencies

As expected, CMS finalizes its rural add-on modification and phase-out in the final rule. That’s because the move was mandated by the Bipartisan Budget Act of 2018 enacted earlier this year.

The law, and now final rule, reduce the addon to 1.5 percent in 2019 and 0.5 percent in 2020 for agencies “in the highest quartile of all counties ... based on the number of Medicare home health episodes furnished per 100 individuals.” But in areas with “a population density of 6 individuals or fewer per square mile,” the add-on will be 4 percent in 2019, 3 percent in 2020, 2 percent in 2021, and 1 percent in 2022. All agencies not fitting in those two categories will see an add-on of 3 percent in 2019, 2 percent in 2020, and 1 percent in 2021 (see chart, p. 312).

The Medicare Payment Advisory Commission praised the change in its proposed rule comments, noting it “is an improvement that better targets Medicare’s scarce resources,” according to the rule.

HHAs were not as sanguine about the change. CMS responds to commenters’ requests to extend the add-on, redefine the categories, and more by noting that it doesn’t have the authority to modify elements that are required by law.

Add-on elimination is a “real concern,” acknowledged National Association for Home Care & Hospice President William Dombi in a video about the rule. But “what Congress created, Congress can change,” Dombi said. HHAs should work to secure that change and continued additional funding for rural providers.

Note: The rule is at https://s3.amazonaws.com/public-inspection.federalregister.gov/2018-24145.pdf.