Home Health & Hospice Week

Final rule brings no reprieve for HHA reimbursement rates.

The budget ax has fallen and it's home health agency heads that will be rolling.

Back in July, the Centers for Medicare & Medicaid Services proposed a 4.75 percent cut to Medicare prospective payment system rates for 2011. The cut CMS finalizes in a rule released Nov. 2 makes an even steeper 5.2 percent cut, thanks to a lower inflation update than expected, bringing the current PPS base rate of $2,312.94 down to $2,192.07. For patients served in rural areas, the base rate with the 3 percent add-on will be $2,257.83.

The 5.2 percent cut includes wage index changes and a legislatively mandated 1 percent cut to the market basket inflation update, making the MB increase only 1.1 percent ��" 0.3 percent less than in the proposed rule. It also includes a 2.5 percent reduction due to outlier calculation changes.

"The reduced market basket increase is a blow," observes Chicago-based regulatory consultant Rebecca Friedman Zuber.

But most of the cut is due to CMS's reduction for so-called "case mix creep" at 3.79 percent. In previous rules, CMS had set the case mix creep cut for 2011 at 2.71 percent.

Despite a volley of industry criticism of case mix creep calculation methodology, CMS sticks by its guns with the 3.79 percent reduction, according to the final rule that will be published in the Nov. 17 Federal Register. But the agency does agree to revisit the issue for 2012.

Good coding news: "We are ... withdrawing our proposal to eliminate ICD9-CM diagnosis codes 401.1, Benign Essential Hypertension, and 401.9, Unspecified Essential Hypertension, from the HH PPS case-mix model's hypertension group, pending the results of a more comprehensive analysis of the resource use of patients with these conditions," CMS says in the final rule. The proposed elimination had drawn strident comments from the industry. The agency seemed especially impressed with a commenter's point that while agencies have to wait for hypertension documentation from the physician, they often have to code the patient as 401.9.

Financial consultant Mark Sharp with BKD in Springfield, Mo. applauds this change, noting "the elimination would have been duplicative of some of the case mix creep reduction."

Restoring the hypertension codes in the case mix calculation probably staved off a 1.8 percent reimbursement reduction, estimates the National Association for Home Care & Hospice.

While agencies might not be happy with everything in the rule, "it was very good to see CMS back off on some of the proposed provisions," such as the hypertension change, Sharp tells Eli. "It appears that CMS listened to the comments on some of the matters and made positive revisions from the proposed rule."

The fact that CMS heeded input from providers and industry experts "magnifies the importance of being involved in advocacy as an industry," Sharp stresses.

Watch out: CMS may have backed off of removing the hypertension codes from the case-mix methodology this year, Zuber says. "But they'll do it next year," she predicts.

Good news: "We are withdrawing the proposal to apply the case-mix change reduction to the [non-routine supply] conversion factor," CMS says in the final rule. NRS rates will be safe from case mix creep cuts, at least for this year.

Sharp was happy to see this provision go, since "it was not part of their study and should not be impacted at this point," he says.

Beware: But CMS appears to be eyeing adjustments to NRS rates. Thanks to the HIPPS codes that now indicate supply usage, "we will soon have the improved data on NRS, providing us with a much better capability to analyze and evaluate payment to HHAs for NRS in the future," CMS says.

Outliers: As proposed, 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 target paid outlier payments to be no more than the 2.5 percent of total HH PPS payments as required by ... the Affordable Care Act," CMS says in the final rule.

Unfortunately, based on that law, 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. 