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Home Health & Hospice Week

Prospective Payment System:

HHAs WIN ONE-YEAR TRANSITION TO NEW WAGE INDEX AREAS

Published on Mon Oct 03, 2005

CMS announces final 2006 payment levels.

Home health agencies will see a 2.8 percent increase in Medicare spending in calendar year 2006--a bit higher than the 2.5 percent increase originally proposed earlier this year.

The Centers for Medicare & Medicaid Services has set the home health prospective payment system base rate at $2,327.68, up nearly $7 from the PPS proposed rule published in July (see Eli's HCW, Vol. XIV, No. 25). That's about a $63 increase over the current 2005 rate, CMS indicates in the PPS final rule scheduled for publication in the Nov. 9 Federal Register.

Like last year, the new rates will take effect on Jan. 1, CMS points out.

The rates increase by 2.8 percent instead of the full market basket index increase of 3.6 percent because the Medicare Modernization Act of 2003 mandates a 0.8 percent reduction to the inflation update in 2006. Calendar year 2007 is slated to have the full MBI increase, if Congress doesn't change its mind (see related story, later in this issue).

Wage index gains: Like hospices before them, HHAs have won a one-year transition to the new Core-Based Statistical Areas for wage index. In 2006, agencies will have their wage index set on 50 percent of the old Metropolitan Statistical Area (MSA) designation and 50 percent of the new CBSA designation, CMS explains.

Wage index losses: But agencies did not win the right to obtain reclassification to higher wage index designations as their hospital neighbors may do. CMS continues to claim it doesn't have the authority to allow such reclassifications.

Easier outliers: Finally, CMS is making it yet easier to qualify for outlier payments. An analysis of 2004 payments has shown that outlier payments still haven't reached the 5 percent mark set out in the original PPS proposed rule. Therefore, CMS is lowering the Fixed Dollar Loss ratio from 0.70 to 0.65.

With that FDL ratio, providers must absorb about $1,513 in costs before qualifying for outlier payments for a patient, the final rule says. Under the current FDL ratio of 0.70, that figure is $1,629.

Bottom line: The 2.8 percent increase represents an additional $370 million in Medicare payments to agencies next year, with rural agencies seeing the biggest gains. "Rural home health agencies will experience an estimated 3.4 percent increase in payment, while urban agencies will see a 2.5 percent increase in payments," CMS Administrator Mark McClellan notes in a Nov. 2 press release. 

Note: The final rule is at www.cms.hhs.gov/providers/hha/cms-1301f.pdf.

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