Home Health & Hospice Week

First major PPS refinements tackle hot button issues like therapy, LUPAs.

Home health agencies may alternately cheer and boo as they read through the massive proposed rule on the prospective payment system released April 27, but the boos will likely win out.

Good news: The Centers for Medicare & Medicaid Services addressed many of the industry's concerns with the proposed changes, notes Bob Wardwell with the Visiting Nurse Associations of America.

The rule proposes action on significant changes in condition (SCICs), the therapy threshold, low utilization payment adjustments (LUPAs), M0175, uneven allocation of payment to key home health resource groups (HHRGs), non-routine medical supplies and long-stay patients, points out Wardwell, who headed up PPS' creation and implementation when he was a top official at CMS.

"While it's hard to say yet if they have been handled well, at least [CMS has] tried," Wardwell tells Eli.

"Hallelujah!" exclaims consultant Mark Sharp with BKD in Springfield, MO, regarding the proposed elimination of M0175 as a case mix driver and SCIC episodes altogether. Both M0175 and SCICs "were widely misunderstood and resulted in a lot of confusion and inaccurate payments to providers," says Sharp, who's presenting an Eli-sponsored teleconference on the PPS changes Thurs. May 17 (for details, see ad p. 115 or go to http://goto.elinetwork.net/go/6766. Use coupon code PPSSAVE10P to receive 10 percent off the conference price).

Bad news: But the rule also includes some serious problems for HHAs. As Eli's HCW reported in March, CMS wants to make payment cuts over successive years to make up for supposed upcoding of home health patients over time (see Eli's HCW, Vol. XVI, No. 10).

The proposal to cut rates 2.75 percent each year for three years is a "poison pill inserted by the White House on case mix creep," Wardwell blasts.

Shocker: "While the administrative adjustment for case mix creep was expected, the magnitude of the downward adjustments was a big shock," Sharp maintains. "A 2.75 percent reduction in base payment rates for each of the next three years was a greater cut than anyone expected."

Leaving caregiver and Medicaid variables out of new case mix calculations and leaving the partial episode payment (PEP) adjustment untouched is also disappointing, Wardwell adds.

Hidden cost: And CMS proposes paying for changes like LUPAs and SCICs by taking the cost out of the PPS base payment rate.

Bottom line: The case mix creep cut "greatly offsets" some positive refinements, Sharp concludes.

Here's a rundown of the most important changes in the 311-page proposed rule:

Therapy Threshold

As expected, CMS proposed changing the way it counts therapy towards case mix from the current, single 10-visit threshold to a new, gradual threshold at six, 14 and 20 visits with additional increments within the threshold categories (see related story, p. 116).

Case Mix

CMS made sweeping changes to how it will determine and structure the payment categories, resulting in a proposed increase from the current 80 HHRGs to 153 categories.

A major reason for the drastic increase is taking long-stay patients into account. CMS will pay differently based on whether a beneficiary is in an "early" (first or second) episode or a "later" (third or later) episode.

Details: For these definitions, episodes don't have to directly follow one another, but can be "adjacent"--spaced apart up to 60 days, CMS says. And the definitions apply whether the subsequent or adjacent episodes take place at one home health agency or across multiple HHAs.

Industry observers expected some sort of long-stay differential. But "it was very good to see that the additional payment for third-plus episodes will cross over providers if a change is made by a patient to a new agency," Sharp cheers.

No more M0175 confusion: CMS also proposes cutting from the case mix calculations the OASIS item on prior inpatient stays. HHAs recently had to pay back about $23 million due to M0175 mistakes for the first year of PPS alone.

CMS wants to add a number of new case mix diagnosis codes, as well as OASIS items M0470 on stasis ulcers, M0520 on incontinence, M0610 on cognitive/neuro/emotional behaviors and M0800 on inject-able medications.

Name change: The case mix categories will also receive a makeover. CMS proposes eliminating the "0" category for the HHRG clinical, functional and service domains. Instead, the groups will start with "1"s, so C1F1S1 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 will now be C3F3S5.

Winners and losers: Non-profit agencies will prosper and proprietary agencies will lose out under the new case mix configuration, CMS projects. The average case mix for non-profits will increase from 1.1404 to 1.1716, CMS highlights in a PPS fact sheet. On the other hand, the average for proprietaries will decline from 1.2601 to 1.2227, CMS predicts.

Urban agencies will make gains under the proposed changes, with average case mix increasing from 1.2032 to 1.2074. Rural HHAs will see a decline with average case mix increasing from 1.1583 to 1.1417.

Payment Adjustments

CMS wants to cut SCICs altogether. "HHAs have had difficulty in interpreting when to apply the SCIC adjustment policy," the rule says. In fact, SCIC episodes studied by PPS contractor Abt Associates had average negative margins.

Getting rid of SCICs has little payment impact on agencies, CMS concludes.

More money: And CMS proposes increasing payments for LUPAs. In addition to the usual per-visit rate Medicare now pays for episodes with four or fewer visits, CMS would add $92.63, adjusted by wage index, to the LUPA payment. The increase wouldn't apply to subsequent episodes.

CMS arrived at that figure by calculating the labor costs for nurses and therapists who have to spend an extra 40 minutes filling out OASIS paperwork on the initial visit, the rule explains.

"I was surprised to see the additional LUPA payment for single episodes and initial episodes," Sharp notes. "This will help make LUPA episodes a little less painful from a profitability standpoint."

The catch: The LUPA increase will come out of the PPS base payment rate.

Payment Levels

CMS makes a modest addition to base payment rates for outliers, but otherwise deducts amounts from the base rate. Those deductions are for LUPA and SCIC refinements, changes to the non-routine medical supply reimbursement, and for costs of keeping the fixed dollar loss ratio for outliers the same.

And the 2.75 percent decrease for the hotly contested upcoding charges take a big chunk out, resulting in a fiscal year 2008 rate of $2,300.60. That's down from the current $2,339.00.

"Applying a creep adjustment in an across-the-board fashion is group punishment extended without regard to whether an agency is upcoding or not," Wardwell criticizes.

"The administrative adjustment for case mix creep is extremely damaging to the industry," Sharp laments. "For those 20 percent of agencies already operating in the red, this could be their death blow."

Wage index problems magnified: CMS also ups the labor portion of the base rate from 76.775 percent to 77.082 percent. That means even more of the payment will be adjusted by wage index. Since CMS made no changes to wage index, agencies unhappy with it--particularly that hospitals get to reclassify while they don't--will see those problems magnified.

P4R: As required by law, CMS will reduce payment rates for HHAs that don't report OASIS data.

Supplies

PPS will pay separately for nonroutine supplies (NRS) if the proposal is finalized. But not outright ...quot; instead, CMS will implement five new case mix categories for five levels of nonroutine medical supplies.

The base NRS conversion factor is $52.30. CMS pays for that by reducing the PPS base pay rate.

Quality Measures.

CMS wants to add two measures to the 10 already reported on Home Health Compare: "Emergent Care for Wound Infections, Deteriorating Wound Status" and "Improvement in Status of Surgical Wound."

"Adding new measures to the currently available outcome measures could broaden the patient population we can assess, expand the types of quality care we can measure, and capture an aspect of care directly under providers' control," CMS says in the rule.

Timeline: CMS proposes to implement all the changes on Jan. 1, 2008. However, the agency admits that the complexity of the proposals means some PPS refinements might end up taking effect later, resulting in split implementation dates.

Give your two cents: Comments on the regulation, available at www.cms.hhs.gov/HomeHealthPPS/downloads/CMS-1541-P.pdf, are due June 26, a CMS spokesperson says.

"I recommend all agencies perform a impact assessment on how all the proposed adjustments affect their individual operations," Sharp urges. Then use that assessment to shape your comments.

Note: For continuing analysis and news regarding PPS  refinements, see upcoming issues of  Eli's Home Care Week.