Home Health & Hospice Week

PPS final rule brings major changes to reimbursement for therapy, supplies, coding.

You'll have to do more with less under the prospective payment system makeover that just became final.

The Centers for Medicare & Medicaid Services issued the home health PPS refinements final rule Aug. 22 and it will take effect Jan. 1. CMS published the rule earlier than the October timeframe industry experts originally projected.

"The speed with which the final rule was released, ahead of deadline, alerted everyone that changes would be few and not favorable," warns reimbursement consultant Tom Boyd with Rohnert Park, CA-based Boyd & Nicholas.

One of the biggest complaints: Home health agencies are ruing bigger cuts to PPS rates due to supposed upcoding of patients since the system took effect in 2000. In the April proposed rule, CMS wanted an 8.25 percent cut for case mix creep, staggered at 2.75 percent over three years. In the final rule, CMS keeps those cuts and adds a 2.71 percent cut in 2011 for a total of 10.71 percent.

Agencies had argued vociferously against the case mix creep cut in their comments submitted on the proposed rule. But when CMS updated the data comparison from 2003 to 2005, it found even more alleged upcoding, it says in the rule.

The 33 percent bigger cut took Boyd by surprise, he says.

But it follows CMS' previous logic. "As soon as I heard [CMS was] using 2005 data, I knew it would go up," sighs reimbursement consultant Pat Laff with Laff Associates in Hilton Head, SC. Patients' case mix scores have increased every year under PPS.

"It is a political administrative adjustment probably dictated by the White House," notes consultant Mark Sharp with BKD in Springfield, MO. "Make no mistake about it, this is a political cut."

"The government is looking for ways to reduce overall Medicare spending," Sharp continues. "In their eyes, there is no better place than home health as [the Medicare Payment Advisory Commission] continues to suggest high margins."

Industry representatives were quick to decry the payment decrease. "Cuts of this magnitude cannot be absorbed without negatively impacting patient services," warns Bob Wardwell of the Visiting Nurse Associations of America in a release.

The cut is "undermining access to care in patients' homes," adds the National Association for Home Care & Hospice. HHAs provide far more cost effective care than institutions, saving Medicare money overall.

"Patients who lose access to home care seek out health care services in much more expensive institutional settings," NAHC's Val Halamandaris says in a release. "It makes no sense."

There were good reasons for the case mix and therapy utilization increase, Sharp maintains, such as the increased focused on quality and patient outcomes under PPS.

Watch For Further 2008 Cuts

And the 2.75 percent cut for 2008 may not be all. Congress is still considering eliminating the inflation update for HHAs too, reps remind providers. "The VNAA and its members will be asking Congress to block both the legislative and regulatory cuts and provide a fair increase in home health payments," VNAA says.

Other tweaks: The finalized episode base rate is about $30 lower than the proposed rate. That change is due to "changes in the adjustments to SCIC, LUPA and non-routine supply add-ons, and the outlier payment policy," NAHC notes in its newsletter for members.

And the labor portion of the rate has increased slightly from 76.775 percent to 77.082 percent, CMS notes in its PPS fact sheet. That will lend a bit more weight to agencies' wage index.

More major changes in the PPS final rule are:

• Therapy threshold. CMS sticks with its proposal to move from the current 10-visit therapy threshold to a three-tier threshold at six, 14 and 20 visits. And the agency keeps the graduated payments for visits between seven and 19 to further discourage HHAs from basing patient treatment on therapy's financial incentives.

Expect therapy scrutiny: CMS stresses throughout the rule that it will be watching agency behavior closely to avoid therapy-related abuse. The agency will "monitor administrative data for indications of gaming, which could include shorter lengths for prior therapy visits and increased frequencies of episodes with 14 or more visits," it says in the rule.

Adjust to new reality: "Managing profits by M0825 is over," Laff declares.

But therapy still matters. "The therapy piece still has a significant bearing on revenue," even if an agency furnishes only six or seven visits, notes consultant Lynda Laff, also with Laff Associates.

In fact, agencies that regularly furnish between six and nine visits under current PPS will make financial gains under PPS refinements, Pat Laff points out.

• Supplies. After the increase in the cut for case mix creep, the non-routine supplies (NRS) changes are the most prominent between the proposed and final rules. CMS adds one more NRS severity category for a total of six and redistributes the reimbursement for the new revenue item.

Most episodes (63.7 percent) will fall into the lowest severity rating, CMS expects. That level will pay $14.12 for the episode's NRS. Only 0.3 percent of episodes will score at the highest severity level, CMS predicts. That level will pay $551.00.

Big billing change: The final rule also sets out a new requirement--reporting NRS on HHA claims.

"Claims that do not report NRS costs, unless explicitly noted [on the claim] by the HHA that NRS was not provided, will be returned to the provider (RTP)," the rule says. The HHA must then resubmit the claim with either the NRS costs or the fact  noted on the claim that NRS were not provided, CMS explains.

(For more news, analysis and tips on the PPS non-routine supplies changes, see next week's issue of Eli's Home Care Week.)

• OASIS. CMS will add new OASIS item M0110 on whether the patient is in an "early" (first or second) or "later" (third or later) episode. In the new four-legged case mix model, all payments depend on which episode the patient is in.

CMS will also revise and change the numbers for M0 items on replacement diagnosis codes (M0246) and therapy (M0826) and revise the items for primary and secondary diagnosis codes (M0230 and M0240).

CMS drops M0175 (prior inpatient stays), M0440 (skin lesions), M0530 (urinary incontinence) and M0610 (behavioral problems) and adds M0800 (injectable medications) to the case mix calculation.

Dropping an OASIS item doesn't mean the topic it measures isn't considered in the new case mix model, CMS points out in the final rule. For example, the model drops M0610 but adds diagnosis codes for behavioral issues that better capture the resource use.

Under the new system, OASIS accuracy will be your most important tool in receiving your rightful reimbursement, experts say. 

• Diagnosis coding. The final rule adds gastrointestinal, pulmonary, cardiac, hypertension, cancer, blood disorders, and affective and other psychoses diagnosis groups, CMS notes in its fact sheet. Those groups contain hundreds of new diagnosis codes that will count toward payment starting Jan. 1.

The case mix model also assigns points for some secondary diagnoses.

Change from proposed rule: The model now will count late effects CVA codes (438) toward case mix, not the acute CVA codes (430-437) listed in the proposed rule. CMS also jettisoned codes for constipation, first-degree burns, and some kinds of heart disease as not specific enough.

CMS added more specific heart disease codes, as well as V codes for ostomies. (For a list of added and deleted codes, see Table 2C on pp. 139-145 of the rule.)

• Other case mix items. PPS will have 153 case mix groups instead of the current 80. CMS will eliminate the "0" category for the HHRG clinical, functional and service domains. Instead, the groups will start with "1"s, so C1F1S1 in an early episode would be the lowest-severity category.

The HHRGs will also reconfigure category levels, thanks to the expanded therapy threshold and case mix changes. The clinical domain will cut one severity level for a total of three (C1-C3). The functional domain will drop two severity levels also for a total of three (F1-F3). The service domain will add one severity level for a total of five (S1-S5). So the highest-severity category in a later episode will now be C3F3S5.

This leads to a much more complex payment system, Pat Laff says. "It's a huge change." Points often will rely on interaction of case mix items, such as a diagnosis code coupled with a functional domain score.

New emphasis: Under the new PPS, the functional domain seems to weigh heavier while the clinical domain weighs less, Laff judges.

Start studying: Agencies really must learn the intricacies of the new payment methodology and not rely on their IT vendors to tell them what their reimbursement is, Laff argues.

Do this: Get your clinical and financial people together to go through case studies and score them manually under the new system, he suggests. That way they will start to learn how different case mix items interact with one another and affect payment.

"It's very complex," agrees Lynda Laff. "There's no one thing to hang your hat on. It's all so interwoven with everything else."

And don't think you know the final system if you went over the proposed rule with a fine toothed comb. CMS revamped a lot of the case mix scoring, Sharp tells Eli. "I thought that with the years of research and design prior to the release of the proposed rule, that the scoring model would have been pretty set."

• Payment adjustments. CMS lowered its low utilization payment adjustment (LUPA) add-on a bit from the proposed $92.63 to $87.93. That will apply to sole or initial LUPA episodes only.

The significant change in condition (SCIC) adjustment is gone, to most agencies' delight. Partial episode payment (PEP) adjustments stay the same.

• Outliers. Over industry protests, CMS hikes the fixed dollar loss (FDL) ratio from a proposed 0.67 to 0.89. CMS determined that the current 0.67 FDL is likely to lead to spending in excess of the 5 percent outlier budget, NAHC notes. That's despite the fact that "historically, the outlier spending has fallen short of the budgeted amount," according to the trade group.

"The 5 percent pool will continue to be underutilized" under the new FDL, Sharp predicts. CMS "might as well do away with the outlier provision."

The change was another one motivated by politics, Boyd suspects.

• Timeline. Many commenters were adamantly opposed to such a quick start date for PPS, but HHAs still will have to scramble to get prepared before the drastic PPS changes hit Jan. 1, experts agree. "They need to start training immediately," urges Lynda Laff. Agencies should start with the OASIS changes that frontline clinicians will have to fill out and also furnish an overview of the new system, she suggests. 

Note: The 437-page final rule is online at www.cms.hhs.gov/homehealthPPS/downloads/CMS-1541-FCdisplay.pdf and in the Aug. 29 Federal Reg-ister at www.access.gpo.gov/su_docs/fedreg/a070829c.html. Or you can email editor Rebecca Johnson at rebeccaj@eliresearch.com for a pdf copy of the rule--include "PPS Final Rule" in the subject line.

For more PPS news and analysis, see future issues of Eli's Home Care Week and register for Eli's PPS teleconference series, including sessions by Mark Sharp and Judy Adams.