Home Health & Hospice Week

PPS revisions will leave you scrambling at year's end -- if the deadline holds.

The 2.75 percent rate cut proposed for 2008 will hurt even more if you haven't tightened up your OASIS practices since the prospective payment system began.

The Centers for Medicare & Medicaid Services wants to cut next year's PPS rates by 2.75 percent for so-called case mix creep. The cut, which is only the first in a series of three, is part of the massive PPS refinements proposed rule issued April 27 (see Eli's HCW, Vol. XVI, No. 16).

The average case mix weight for home health patients has increased a whopping 23 percent from 1997 to 2003, CMS explains in the rule.

CMS allows that the increase between 1997 and 2000 was probably a "real change" in patients' conditions because of program changes such as the elimination of venipuncture as a qualifying service and introduction of the interim payment system. But 8.7 percent of that 23 percent, the part that happened mainly after PPS began in 2000, isn't due to patient acuity differences, CMS maintains.

Millions cut: Therefore, the agency calls for an 8.25 percent cut phased in over three years. The first 2.75 percent cut will strip $400 million from home health reimbursement in 2008 alone, CMS details in the rule.

CMS points to PPS' financial incentives and increased OASIS accuracy as reasons for the alleged upcoding of patients. Because of those changes, CMS should reduce the rates to bring the average case mix weight back to 1.00 from the 1.23 found in 2003 data, the agency proposes.

Consultant Pat Laff doesn't buy CMS' rationale behind the cut. CMS isn't placing enough emphasis on how drastically OASIS information-gathering has improved, Laff argues.

"Agencies appropriately place a big focus on OASIS accuracy," observes consultant Mark Sharp with BKD in Springfield, MO. It's only natural for HHAs to do so when both their Medicare reimbursement and outcomes scores are based on OASIS data, says Sharp, who's presenting an Eli-sponsored teleconference on the PPS changes Thurs. May 17 (for details, go to http://goto.elinetwork.net/go/6766. Use coupon code PPSSAVE10P to receive 10 percent off the conference price).

CMS' case mix creep cut and accompanying budget neutrality factor may be "excessive," worries consultant Tom Boyd with Rohnert Park, CA-based Boyd & Nicholas. But CMS seems very firm in its upcoding assumption and may be hard to sway, predicts Boyd.

Take action: If you haven't kept up to speed on OASIS accuracy, you'd better amp up your improvement efforts quickly, experts urge. "Imagine how the impact of the case mix creep adjustment is for those agencies that haven't focused on accurate scoring," Sharp says. They "haven't seen their case mix (and payments) increase consistently with the industry."

Adjustment Changes Meet With Approval

While providers don't like the case mix creep cut, they are welcoming some of the other PPS changes. For instance, eliminating the significant change in condition (SCIC) is a positive development.

Even though CMS designed SCICs to help agencies get better reimbursement for patients who get suddenly worse during an episode, it rarely works out that way. "SCICs confused more than they helped," Boyd maintains. "Few agencies used SCICs well and enough to merit keeping them."

Sharp is glad CMS left partial episode payments (PEPs) in place to curb too-early discharges of patients, he says.

Missed chance: But CMS really should have taken the opportunity to rebase PEPs so that they pay more at the beginning of the episode, Laff chides. Agencies usually don't provide care equally over the 60-day episode, but furnish much of it at the outset. In contrast, PEPs pay a prorated amount spread equally over the episode.

"It's just easiest for CMS to do it that way," Laff concludes.

Providers are glad that CMS proposes increasing payment rates for low utilization payment adjustments (LUPAs).

Not enough: But the $92.63 CMS sets for initial, stand-alone LUPA episodes still isn't enough, Boyd protests. "The LUPA visits should be paid even more than that, given related efforts and costs," Boyd tells Eli.

The LUPA underpayment may be partially the industry's own fault, Laff laments. That's because the cost report and claims data CMS used to set the LUPA increase probably wasn't very accurate.

Under PPS, agencies are much sloppier with their cost reports and often complete them in-house, Laff notes. That's in contrast to using highly trained experts as they did before PPS, when reimbursement was linked directly to the reports.

Just like with nonroutine supplies, the data problems shortchange HHAs.

Don't Wipe Out On The PPS Learning Curve

Home health agencies have major payment changes to learn between now and CMS' projected implementation date of Jan. 1. Expanding the home health resource groups (HHRGs) from 80 to 153 categories will mean a system with a lot more complexity. The change in therapy and early versus later episode reimbursement will be especially tricky, experts warn. (See Eli's HCW, Vol. XVI, No. 16 for a PPS refinements overview.)

Waiting game: And the information isn't complete yet. CMS has yet to issue billing instructions for the new HHRGs, some of which have the same case mix severity code but different payment levels, Sharp says.

Agencies will have to wait until the PPS refinements final rule to receive the final word on PPS changes. Software and IT vendors will have a huge challenge to make changes in time for the rule's projected implementation, experts predict.

Although the HHRG expansion will be more confusing, it's worth it to have a payment system that more fairly and equitably distributes Medicare reimbursement, Laff maintains. The PPS refinements aren't perfect, but outside of the case mix creep cut, "CMS has done a pretty darn good job," Laff lauds.

The rule aims at curbing gaming of the system, Laff believes. That may lead to changes in current profit margins across the industry, which now show nearly one-quarter of agencies with negative margins and more than another quarter with margins of more than 25 percent.

HHAs should be glad that the learning curve won't be as steep as when PPS began in 2000, Boyd points out. "Those with good billing software should adapt quickly," he forecasts.

Agencies and vendors may even get more breathing room than they think. With all the changes afoot, Sharp views the Jan. 1 deadline as "questionable."

Note: For a copy of the PPS refinements proposed rule, email editor Rebecca Johnson at rebeccaj@eliresearch.com with "PPS Rule" in the subject line.