Medicare Compliance & Reimbursement

Home health agencies should take the coming prospective payment system (PPS) changes very seriously.

That's according to the attendees of the National Association for Home Care & Hospice's (NAHC) annual meeting in Denver in October. Home health agency (HHA) representatives packed sessions detailing the PPS refinements that will hit Jan. 1.

In a PPS overview held in the 5,000-seat Wells Fargo Theater, NAHC's William Dombi asked how many agencies were worried about the coming changes. The vast majority of the session's hundreds of attendees raised their hands.

As long as agencies prepare diligently for the changes, they shouldn't fear, Dombi assured HHAs. "If you survived IPS [interim payment system], this is going to be a cakewalk," he told the crowd.

Providers should realize that the coming refinements are much smaller in scope than when PPS began in 2000, urged the Centers for Medicare & Medicaid Services' (CMS) Wil Gehne in a separate session. Tweaking existing PPS structure is a far cry from implementing a brand new system from scratch, Gehne maintained.

HHAs that are urban or in the northern part of the country will see the biggest gains under the PPS refinements, CMS says in its impact estimates. "Urban agencies tend to do better than rural agencies," Dombi noted, pointing to a projected 0.80 percent increase for such providers.

And there is a severe difference in monies distributed between the North and South, he explained, pointing to an estimated 4.57-percent increase in Medicare reimbursement for agencies in the North. New England agencies expect a 3.83-percent increase and Mid-Atlantic agencies will see a 4.96-percent bump on average.

That leaves rural HHAs with a 1.77-percent drop projected in 2008, agencies in the South with a 2.91-percent decrease and providers in the "West South Central" region with a whopping 6.32 percent cut forecasted.

"The smaller agencies are at greater risk than larger agencies," Dombi added. HHAs with 20 to 29 new episodes per year are projected to see a 1.93-percent drop in payments, while those with 200 or more episodes per year expect a 0.36-percent increase. Smaller agencies are more vulnerable because they often cater to a specialized patient population, Dombi theorized in the session.

Freestanding proprietary HHAs are the only providers by ownership type that CMS expects to see reimbursement losses, with an estimated 2.49-percent decrease next year.

Providers should realize that PPS impact will vary greatly depending on the individual agency's characteristics and patients, observers warn.

One of the biggest surprises in PPS includes the increased payment for later (third or later) episodes, noted NAHC's Mary St. Pierre in the Oct. 8 session. Conventional wisdom predicted that early episodes, which require more visit front-loading and administrative preparation, would be more resource-intensive.

NAHC also was surprised to see the fixed dollar loss (FDL) ratio for outlier payments shoot up significantly between the proposed and final rules, Dombi pointed out. The proposed rule called for a 0.67 FDL, which sets the reimbursement level agencies must absorb before outliers kick in. But the final rule set a much higher ratio of 0.89.

"Bad things are happening in Miami-Dade," Dombi told attendees. "You are being penalized for that abuse."

HHAs were disappointed that CMS not only decided to keep its reimbursement cuts for so-called case mix creep, but also increased the cuts nearly another 3 percent to 10.96 percent total.

The across-the-board cut that will strip $410 million for HHA Medicare payments next year hits everyone equally, Dombi noted.

NAHC also wants to see CMS reform its wage index system, which causes wild swings in limited areas each year, Dombi said.

Learn more: The PPS final rule is online at http://www.cms.hhs.gov/quarterlyproviderupdates/downloads/cms1541fc.pdf.