Home Health & Hospice Week

Medicare reimbursement of outlier episodes to be based on 15-minute units starting in new year.

Home health agencies’ pleas to adjust the new outlier calculation methodology fell on deaf ears, and the result may be decreased access for diabetic and medically complex patients.

Old way: Currently, Medicare calculates outlier payments based on visits. Once an agency exceeds a Fixed Dollar Loss (FDL) figure of 0.45, Medicare kicks in 80 percent of costs based on average per visit calculations.

New way: In its 2017 Home Health Pro-spective Payment System final rule released Oct. 31, the Centers for Medicare & Medicaid Services finalizes a new methodology that uses 15-minute visit units to calculate outlier payments. And CMS ups the FDL threshold agencies must reach for outlier payments to kick in to 0.55 (down from the proposed 0.56 amount).

Impact: The new policy that takes effect Jan. 1 will result in about one-third of episodes that currently qualify for outlier payments no longer qualifying, CMS estimates based on historic data.

Combined with case mix recalibration (see story, p. 302), the change “to the outlier payment standards … may have the greatest impact on HHAs,” the National Association for Home Care & Hospice says in its rule analysis.

Overall, this final rule contains no big surprises, notes finance and operations consultant Pat Laff with Laff Associates in Hilton Head, S.C. The outlier provision is no exception, notes attorney Robert Markette Jr. with Hall Render in Indianapolis. Many industry members expected CMS to finalize the outlier policy as-is, which is what it’s done.

But that didn’t stop proposed rule commenters from asking for needed changes. Many agencies and their representatives tried to convince CMS to add extra weight to the first 15-minute unit of a visit to better account for fixed costs such as travel and administrative burdens (see Eli’s HCW, Vol. XXV, No. 38).

CMS shoots down that idea. “Payment for the fixed costs of an episode, such as transportation, are already accounted for under the national, standardized 60-day episode payment rate and the national per-visit payment rates,” the agency says in the rule published in the Nov. 3 Federal Register. “CMS does not track transportation and other administrative costs for each visit or episode.”

Moving to a visit-length-based calculation is necessary, CMS maintains in the final rule. “We have concerns with HHAs that may be developing business models around outlier payments and are trying to make a profit off of these episodes,” according to the rule. “The goal of this proposal is to more accurately pay for outlier episodes.” “The original purpose of the outlier payment was intended for complex patients,” observes

Anna Doyle with Delta Health Technologies. “But it has been used consistently over time for patients that need very simple, short duration visits such as insulin injections.” Now CMS appears to be trying to shift outliers back to their original purpose. CMS also discounts complaints about the administrative burden added by unit-counting.

“The requirement to report visit length in 15 minute units is a statutory requirement that has been in place since the start of the HH PPS,” CMS notes. “We encourage providers to continue to bill visits and visit length according to previous guidance.”

Strike out: But the commenting efforts were for naught. “CMS was very dismissive of concerns about costs of the calculation and seemed to be very unconcerned about the time to calculate units from visit time,” Markette tells Eli.

FDL On The Rise Regardless

CMS also shoots down commenters’ suggestion to preserve the FDL threshold status quo.

Medicare wants to keep the loss sharing ratio at 80 percent to help pay for pricey outlier patients and “preserve incentives” to accept those patients, CMS says in the rule. That means to hit the legally required 2.5 percent outlier target, the FDL must increase to 0.55, based on CMS estimates.

It’s not just the new methodology that is making the FDL shoot up, CMS notes. “Under the current outlier methodology, the FDL ratio would need to be increased from 0.45 to 0.48 to pay up to, but no more than, 2.5 percent of total payments as outlier payments” in 2017 anyway, it says.

If CMS keeps the 0.48 FDL with the new methodology, it would end up overshooting the mark and paying out 2.74 percent in outlier payments. Thus, the FDL needs to go up, CMS contends.

One commenter criticized CMS for habitually underpaying the outlier pool. CMS is on track to pay 2.2 percent of its home health spending in outliers this year, it says.

CMS Brushes Off Concerns About Diabetic, Sickest Patients

Many commenters warned CMS about the dire consequences of risking access for insulindependent diabetics with per unit counting and medically complex, fragile patients with the 8-hour per day and 28-hour per week cap on counting units toward outlier calculations. The results for both groups would be increased hospitalizations, among other problems.

For diabetics: Episodes with short, frequent visits may still qualify for outlier payments, CMS maintains. But “we plan to monitor for any unintended results of this policy on insulin-dependent diabetics,” CMS pledges.

For sicker patients: In 2017, only about 0.3 percent of episodes billed reported hours exceeding eight per day, CMS notes. Of those 17,505 episodes, “only 8,305 would be classified as outlier episodes under the proposed outlier methodology. Therefore, we estimate that only 8,300 episodes or so, out of 6.47 million episodes, would be impacted due to the proposed 8 hour cap and we do not expect a significant impact on patients and providers.” CMS doesn’t disclose how many patients would be outliers under the current methodology.

Nevertheless, “we plan to monitor for any unintended results of this policy as data become available,” CMS says.

More Billing Details Emerge

One of commenters’ complaints about the new outlier policy was a lack of specifics on how it will work. CMS clarifies these items in the final rule:

• “The rural add-on will apply in this calculation,” CMS explains. “We will use rural versus non-rural per unit rates the same way we currently use rural versus non-rural per visit rates to calculate the imputed cost.”
• The new outlier policy will apply based on the end date of the episode, CMS confirms.
• There’s no need to guess when it comes to rounding minutes up or down to count units. A chart for rounding already exists in the Medicare Claims Processing Manual, chapter 11 (Pub. 100-04) (see chart. p. 305).
• CMS updated the cost per unit payment rates based on more complete 2015 claims data (see chart above).