Home Health & Hospice Week

Get ready to tighten your budget belt even further, if hundreds of millions of dollars worth of proposed cuts to your Medicare payment rates become final.

In its proposed prospective payment system rule for home health agencies published in the July 23 Federal Register, the Centers for Medicare & Medicaid Services sets out a 4.75 percent cut to Medicare payment rates for 2011. That would bring the current PPS base rate of $2,312.94 down to $2,198.58, and will cut about $900 million from Medicare HHA payments next year.

Why? The 4.75 percent cut includes wage index changes and a legislatively mandated 1 percent cut to the market basket inflation update, making the MB increase only 1.4 percent. It also includes a 2.5 percent reduction due to outlier calculation changes. But most of the cut is due to CMS ratcheting up the reduction for so-called "case mix creep" to 3.79 percent. In previous rules, CMS had set the case mix creep cut for 2011 at 2.71 percent.

According to CMS's calculations, the average case mix amount for home health patients has grown 19.4 percent from the start of PPS in 2000 through 2008 -- from 1.0959 to 1.3085. Only a little more than 10 percent of that increase is for "real" case mix changes, CMS estimates. The rest is due to factors such as increased coding accuracy, increased utilization, and upcoding.

Case mix creep sped up from 2007 to 2008, largely due to therapy utilization and therapy coding, CMS says in the rule. An "unexpected" shift to episodes with more than 14 therapy visits occurred.

That's why CMS has to account for an additional 7.43 percent of upcoding, which it is splitting up  between 2011 and 2012. That means agencies can expect another 3.79 percent creep decrease for 2012, if CMS doesn't adjust the amount upwards again due to 2009 calculations.

"The new HH PPS provisions will help ensure more accurate payments under Medicare and reflect prudent financial stewardship of the Medicare Trust Fund," CMS Deputy Director Jonathan  Blum says in a release.

HHAs and their industry representatives aren't taking the changes lying down. "The impact of therapy utilization on coding weights should be disregarded in evaluating coding creep," insists the

National Association for Home Care & Hospice.

"First, the provision of therapy reflects changes in patients that may not be demonstrated in the assessment model used by CMS. Second, increases in therapy are accompanied with increased care costs for home health agencies -- unlike typical coding weight increases where resource use does not change corresponding to payment change."

The bottom line: "If there is any overutilization of therapy, the remedy for CMS is targeted claims review and denial of payment, not across the board rate cuts," NAHC argues.

Another cut: In its case mix examination, CMS also found that agencies were using hypertension diagnosis codes more often once they became case mix codes in 2008.

"Our analysis of 8 years of claims shows that reporting of this diagnosis grew exceedingly quickly in 2008," CMS says in the rule. "The data indicate a sudden jump of approximately 12 percentage points in reporting of unspecified hypertension when the refined HH PPS added hypertension as a case mix code in 2008. Annual changes in use of this code were small up until 2005 (in the range of 0.1 to 2.4 percentage points), after which there were two years of 6-percentage point increases, followed by the 12-percentage point increase coincident with the 2008 refinements."

Accordingly, CMS proposes dropping two hypertension codes -- 401.9 and 401.1 -- from the case mix list. "The services utilization associated with the most commonly reported hypertension diagnosis code, hypertension, unspecified, no longer is responsible for added resource requirements in home care," CMS maintains.

Implementing a general case mix cut and cutting these two codes is a "double hit," NAHC protests. "If the hypertension scoring element is removed, CMS should not impose a permanent rate reduction through the coding creep adjustment," the trade group says. "It is one or the other that is the appropriate approach, not both."

Bright side: The low utilization payment adjustment (LUPA) amounts, including the LUPA add-on, are not affected by the case mix cut. And the 3 percent rural add-on still will apply to those  rates.

The 2.5 percent outlier adjustment also doesn't affect LUPA or NRS rates. (See LUPA and NRS rates, boxes this page.)

The proposed rule also address PPS outlier payments. CMS plans to keep the outlier fixed dollar loss (FDL) ratio the same for 2011. "We estimate that maintaining a FDL ratio of 0.67, in conjunction with a 10 percent cap on outlier payments at the agency level, would pay no more than the 2.5 percent target of outlier payment," the rule says.

Unfortunately, based on the Patient Protection and Affordable Care Act, in 2011 HH PPS will have 5 percent cut from its base PPS rate, even though outlier payments are supposed to make up only 2.5 percent of outlays. Lawmakers used the difference to fund health care reform and other PPACA provisions.

Timeline: Comments on the proposed rule are due Sept. 14. Final payment changes will take effect Jan. 1.

Sign up for an Aug. 24 Eli-sponsored audioconference on the PPS proposed rule provisions with speaker Mark Sharp of BKD in Springfield, Mo. Information is at www.audioeducator.com -- click on "Home Health" in the "Select Conference" box for the link. (See ad, p. 210, for $20 discount code.)