Medicare Compliance & Reimbursement

Outlier, wage index changes most significant in new PPS rule.

Outlier patients may be less of a drain on HHAs' bottom line starting Jan. 1.

The Centers for Medicare & Medicaid Services has proposed lowering the threshold patients must exceed before qualifying for extra outlier payments under the prospective payment system. That will mean more episodes would qualify for the outlier payments, and those episodes that already qualify would see higher payments, explains Vern Peterschmidt with Albuquerque, NM-based Peterschmidt & Associates.

CMS wants to change the "fixed dollar loss" amount home health agencies must hit from 1.13 percent of the episode payment to 0.72 percent of the payment, the agency explains in its new PPS rule published in the June 2 Federal Register. PPS was designed for 5 percent of payments to go to outlier patients, but only about 3 percent of expenditures have gone toward outliers so far, CMS says.

The basics: Using the 2005 episode payment amount of $2,268.70, HHAs would have to eat $1,663 of the outlier costs before extra payments would kick in with the 0.72 fixed dollar loss. Medicare will continue to cover those extra payments at 80 percent of costs.

Under the current 1.13 fixed dollar loss amount, HHAs would have to absorb $2,564 of the patient's costs before the PPS outlier payments began, CMS explains in the proposed rule.

After taking into account the 80 percent loss sharing ratio, HHAs will see about an extra $700 per outlier episode, estimates consultant Mark Sharp with BKD in Springfield, MO. "It will put some money in agencies' pockets," Sharp notes.

"The outlier change is helpful," comments reimbursement consultant Rick Ingber with ZAConsulting in Jenkintown, PA.

The result: "Now more HHAs should be willing to take some [outlier patients] on," adds reimbursement consultant Tom Boyd with Boyd & Nicholas in Rohnert Park, CA.

"The change of the outlier threshold should act to alleviate financial pressures on home health agencies that provide care to higher-cost patients," agrees the National Association for Home Care & Hospice. "In turn, the proposed improved outlier payment should help to reduce any actual or perceived barrier to access to care for higher-cost patients."

"Agencies are generally doing a pretty good job at minimizing outliers," Ingber notes. While CMS claims 3 percent of PPS payment have gone to outliers, Sharp's clients are running at outlier rates more like 1 and 2 percent, he tells MLR. CMS estimates 6 percent of episodes will reach outlier status under the new fixed dollar loss figure.

HHAs still will lose money on outlier patients, however, Boyd points out.

It would help HHAs more to change the low per-visit rates that calculate outliers than to change the fixed dollar loss figure, Sharp says. Many HHAs' per-visit costs have increased significantly under PPS as they have cut visits and implemented efficiencies. As a result, CMS' per-visit rates are often much lower than what it really costs agencies to make a visit, Sharp contends. That means in calculating outliers, HHAs are really losing more money than the numbers show.

Other changes in the PPS reg include: