Medicare Compliance & Reimbursement

It looks like the Centers for Medicare & Medicaid Services plans to gradually nibble away at home health agencies' reimbursement over the next year rather than taking one big bite now for PEP recoupments.

The recoupment process for partial episode payment (PEP) adjustments has been repeatedly delayed, CMS admits in a statement announcing the new implementation date. The claims processing system accidentally failed to make the PEP adjustments in the first few years of the prospective payment system in certain cases.

HHAs have forgotten about the PEP take-backs with all the false starts, perhaps believing CMS would never make them, says Abilene, TX-based financial consultant Bobby Dusek. "It's going to be a surprise to a lot of people."

And that surprise will begin the week of May 5, when CMS says regional home health intermediaries will start taking money out of agencies' reimbursements a little at a time to make up for the PEPs the system originally should've made.

RHHIs will process "small batches," up to 4,000 claims per week, of PEP adjustments, CMS explains. That's less than 5 percent of the home health claims the RHHIs pay in a week, so should relieve any cash flow problems the recoupments could cause. "CMS recognizes that a sudden and immediate recovery of these funds could create a hardship on some HHAs," it says.

At that rate, some RHHIs may take up to a year to recoup all the PEP funds, CMS expects.

To further head off financial hardship, software randomly selects the claims to be processed in those small batches "to ensure that a small number of these adjustments are recovered against any single agency on a given week," CMS adds.

If despite these precautions agencies still experience cash flow difficulties, they can make special arrangements with their RHHI, CMS says.

"This is better than the original idea" of taking the money all back at once, grudges Dusek. But it's still going to be a nightmare for agencies to verify that the PEP adjustments are valid, he expects. Although it appears the RHHIs will furnish claim-by-claim adjustment data rather than one lump sum, it's unclear exactly where that information will be - perhaps electronic remittance ad-vices, perhaps paper RAs.

"It will be almost impossible to determine" whether the takebacks are justified, and many agencies will probably just ignore the recoupments altogether, Dusek predicts.

The recoupment process is especially problematic for HHAs, because they have no way to gauge how much they will owe for PEPs, notes Burtonsville, MD-based attorney Elizabeth Hogue. That leaves them unable to "establish reserves or take other appropriate steps to plan for them in a fiscally responsible way." However, HHAs that see more transfer patients can expect more PEPs, Hogue predicts.

HHAs served by RHHI Associated Hospital Service of Maine already have seen hardship from the project. When CMS ran a computer program to identify all the adjustments to be made, the system for the intermediary accidentally processed a "large number" of the recoupments instead of holding them for analysis as intended, CMS says.

The RHHI is taking action "to restore affected HHAs to their cash position prior to the accident," CMS says. "After these actions are completed, AHS will begin a gradual recovery process along with the other RHHIs."