Medicare Proposes to Cut Home Health Payments in 2014

On June 27, the Centers for Medicare & Medicaid Services (CMS) issued Proposed Rule CMS-1450-P regarding an update to the Home Health Prospective Payment System (PPS) rates which would cut Medicare payments to home health agencies (HHAs) in calendar year (CY) 2014 by 1.5% or $290 million.

The changes reflect the effects of the 2.4% home health payment update percentage ($460 million increase); rebasing adjustments to the national, standardized 60-day episode payment rate, the national per-visit payment rate, and the non-routine medical supplies (NRS) conversion factor ($650 million decrease); and the effects of the International Classification of Diseases, Ninth Revision (ICD-9) coding adjustments ($100 million decrease).

60-Day Episode Rate
The Affordable Care Act requires CMS to apply an adjustment to the national standardized 60-day episode rate and other applicable amounts to reflect factors such as changes in the number of visits in an episode; mix of services in an episode; level of intensity of services in an episode; average cost of providing care per episode; and other factors. The adjustment must be phased in over a four-year period in equal increments not to exceed 3.5% of the amount in any given year and be fully implemented by CY 2017.

ICD-10 Conversion
CMS identified two categories of codes made up of 170 ICD-9 diagnosis codes which would be removed from the home health PPS Grouper. The rule proposes to remove codes that are "too acute," meaning the condition could not be appropriately cared for in the home health setting and codes for conditions that would not affect the home health plan of care or would not result in additional resources when providing home health services.

ICD-10 codes will be included in the home health PPS Grouper starting October 1, 2014, and the new codes will replace the existing ICD-9 codes.

Quality Provisions Updated
The Proposed Rule would add two claims-based quality measures for reporting:

• Rehospitalization during the first 30 days of a home health stay; and
• Emergency department use without hospital readmission during the first 30 days of home health.

Cost Allocation for Home Health Surveys
The Rule also proposes to specify that Medicaid responsibilities for home health surveys be explicitly recognized in the state Medicaid plan. A comment is sought on the methodology for calculating state Medicaid programs' fair share of HHA survey costs.

The changes would take effect January 1, 2014. The Proposed Rule will be published in the Federal Register July 3 and comments are due August 26.