Annual Update to the CY 16 Home Health Prospective Payment System Rate

August 2015

The Centers for Medicare and Medicaid Services (CMS) recently issued the Calendar Year 2016 Home Health Prospective Payment System rate update via Federal Register CMS-1625-P. The release addresses payment rates, Value-Based Purchasing models for the industry and, if that wasn’t enough, added new Quality Reporting Requirements.

In the wake of the Affordable Care Act, CMS continues to modify the home care delivery system with the installment of the Phase 3/Year 3 Payment Reduction, a restructuring of case mix coding intensity, sensitivity adjustments to case-mix creep and productivity.

The proposed changes takes some $350 million off the Medicare home health line for CY 16. Rural providers will see the biggest economic impact to aggregate payments sliced by 2.4% over prior year. Urban providers will see a 1.7% cut. The difference is largely due to wage index factoring.

Other significant and relevant changes are as follows:

  • CMS continues to recalculate the case mix weights assigned to the various Home Health Resource Groups based upon current claims/available OASIS data.
  • CMS is also continuing payment adjustments as a result of case-mix creep, or up-coding as billed and paid estimates for care exceed expectation for no apparent reason.
  • The National Standardized 60-Day Episodic Payment Rate has also been decreased, largely because of the 4 year phased in CMS payment reduction to HHRG payments. CY 2016 proposes a rate of $2,938.37 compared to $2,961.38 in CY 2015.
  • Low Utilization Payment Adjustment Add-On Factors, LUPAs, will remain in place, but unchanged from prior years.
  • Non-routine Medical Supply Payment Rates will move down slightly.
  • The Rural Add-On has been sustained via current legislation at 3% annually through 2018.
  • A Home Health Value-Based Purchasing Model has been proposed in demonstration from for Calendar Year 2016 for five years. All agencies in the demonstration states – Arizona, Florida, Iowa, Maryland, Massachusetts, Nebraska, North Carolina, Tennessee and Washington – will be required to participate in the model. The programs seeks to obtain “value” for their purchase of services to Medicare beneficiaries by service providers rather than the existing fee for service volume based payment system. Demonstration Providers will be given a target price and final payments, up and down, will be sensitive to performance and quality.
  • The Home Health Care Quality Reporting Program (HHQRP) has several proposed revisions to its content, the introduction of a new quality standard and seeks provider input.

If you would like to discuss these matters further, contact your BNN advisor at 1.800.244.7444.

Disclaimer of Liability: This publication is intended to provide general information to our clients and friends. It does not constitute accounting, tax, or legal advice; nor is it intended to convey a thorough treatment of the subject matter.