CY12 Home Health PPS Final Rule Fact Sheet

The Centers for Medicare & Medicaid Services (CMS) has released a final calendar year 2012 (CY12) update to the home health prospective payment system (HH PPS). The rule will decrease overall Medicare payments by some 2.31 percent compared to current 2011 amounts-or by $430 million-as a result of a negative 3.79 case-mix adjustment to account for increases unrelated to changes in “real” case mix. The final rule sets forth updates to the HH PPS rates, including: the national standardized 60-day episode rates; the national per-visit rates; and the low utilization payment amount (LUPA). The rule applies a 1.4 percent update factor to the episode rates, reflecting a 1 percent reduction applied to the 2.4 percent market basket update factor, as mandated by the Affordable Care Act (ACA). The rule also updates the wage index used under the HH PPS.

CMS’s proposed rule estimated that the net impact of updating the HH PPS for CY12 would have been approximately $640 million in savings to the Medicare program. This estimate reflects the distributional effects of an updated wage index ($20 million increase) plus a net 1.5 percent HH market basket update ($290 million increase), for a total increase of $310 million, less a $950 million decrease resulting from a case-mix adjustment that would have been 5.06 percent applicable to the national standardized 60-day episode rates. The combined wage index and market basket ($310 million) increase and case-mix adjustment (-$950 million) would have resulted in a total savings of $640 million in CY12. The final rule market basket update is 1.4 percent, 0.1 percent less than proposed, and the wage index adjustment is now only a $10 million increase. CMS has not abandoned its overall savings estimate. Rather, the proposed negative 5.06 percent reduction will be phased in over 2 years; a 3.79 percent reduction for CY12 and a 1.32 percent reduction for CY13.

The final rule is effective January 1, 2012. 

Case-Mix Adjustment

CMS says that “when taking into account the total case-mix change from 2000 to 2009 (22.59 percent) and the 15.76 percent of total case-mix change estimated as real from 2000 to 2009, we obtained a final nominal case-mix change measure of 19.03 percent from 2000 to 2009 (0.2259 * (1 – 0.1576) = 0.1903). In each of the years 2008, 2009, and 2010, we reduced payment rates by 2.75 percent and in 2011 we reduced payment rates by 3.79 percent to account for nominal case-mix change from 2000. In the proposed rule, we stated that a payment reduction of 5.06 percent would be needed to account for the outstanding amount of nominal case-mix change we estimated based on the real case-mix change analysis updated through 2009 and we proposed to implement a 5.06 percent reduction to the national standardized 60-day episode rates to account for the entire residual amount of nominal case-mix change through 2009 in one year.” CMS is finalizing a phased-in implementation of a 5.06 percent reduction over 2 years. 

Case-Mix Revision to the Case-Mix Weights

CMS is removing two hypertension codes from its case-mix system, and is reducing weights for episodes with high therapy while increasing weights for episodes with no or low therapy to maintain budget neutrality. The codes being removed are ICD-9-CM code 401.1, Benign Essential Hypertension, and ICD-9-CM code 401.9, Unspecified Essential Hypertension. The revised FY12 case-mix weights for the 153-category case-mix classification to assign patients to a home health resource group (HHRG) are available in Table 11 of the final rule.

Outlier Policy

CMS says that “to ensure that we adhere to our statutory mandate to expend no more than 2.5 percent of expected total HH PPS payments in outlier payments, we are maintaining our current policies of a FDL ratio of 0.67 and a loss-sharing ratio of 0.80 for CY12.”  However, CMS notes that preliminary analysis of partial 2010 claims indicates outlier payments to be approximately 1.91 percent of total HH PPS payments.    

CY12 Rate Changes

The final estimated HH PPS market basket update for CY12 is 2.4 percent. The CY12 market basket update of 2.4 percent is reduced by 1.0 percent to 1.4 percent for those home health agencies (HHAs) submitting quality data, and to -0.6 percent for those that do not (1.4 minus 2.0 percent). Following are the steps CMS takes to compute the case-mix and wage adjusted 60-day episode rate:

• Multiply the national 60-day episode rate by the patient’s applicable case-mix weight.
• Divide the case-mix adjusted amount into a labor portion (77.082 percent) and a non-labor portion (22.918 percent)
• Multiply the labor portion by the applicable wage index based on the site of service of the beneficiary.
• Add the wage-adjusted portion to the non-labor portion, yielding the case-mix and wage adjusted 60-day episode rate, subject to any additional applicable adjustments.

These calculations, reflected in Tables 13 and 14 of the final rule, are as follows:

Table 13: CY12 National 60-Day Episode Payment Amount Updated by the Home Health Market Basket Update, Before Case-Mix Adjustment and Wage Adjustment Based on the Site of Service for the Beneficiary

Table 14: HHAs that Do Not Submit the Quality Data CY12 National 60-Day Episode Payment Amount Updated by the Home Health Market Basket Update Before Case-Mix Adjustment and Wage Adjustment Based on the Site of Service for the Beneficiary  

 National Per-Visit Rates Used to Pay Low Utilization Payment Adjustment (LUPA) and Compute Imputed Costs Used in Outlier Calculations

National per-visit rates are not subject to the 3.79 percent reduction related to the nominal increase in case mix. The six home health disciplines are as follows:

• Home Health Aide (HH aide)
• Medical Social Services (MSS)
• Occupational Therapy (OT)
• Physical Therapy (PT)
• Skilled Nursing (SN)
• Speech Language Pathology Therapy (SLP)

The CY12 national per-visit rates per discipline are shown in Table 15 of the final rule. 

Low Utilization Payment Amount (LUPA) Add-On

LUPA episodes that occur as the only episode or initial episode in a sequence of adjacent episodes are adjusted by adding an additional amount to the LUPA payment before adjusting for area wage differences. The CY12 LUPA add-on is $94.62 for HHAs that report quality data and $92.75 for those that do not. The CY12 LUPA add-on amounts for services provided in rural areas are $97.46 for HHAs that report quality data and $95.53 for those that do not.   

Non-Routine Medical Supply Conversion Factor

Payments for non-routine medical supplies (NRS) are computed by multiplying the relative weight for a particular severity level by the NRS conversion factor. For CY12, the NRS conversion factor is $53.28 (52.54 x 1.014) for HHAs providing quality data, and $52.22 ($52.54 x 0.994) for those that do not. 

Using the NRS conversion factor ($53.28) for CY12, the payment amounts for the various severity levels are shown in Table 18 of the final rule.

The payment amounts for the various severity levels based on the updated conversion factor for HHAs that do not submit quality data ($52.22) are calculated in Table 20 of the final rule. 

Rural Non-Routine Medical Supply Conversion Factor

Payments for non-routine medical supplies (NRS) are computed by multiplying the relative weight for a particular severity level by the NRS conversion factor. For CY12, the rural NRS conversion factor is $54.88 for HHAs providing quality data, and $53.79 for those that do not. The non-routine medical supply conversion factor updates for services provided in a rural area can be found in Table 25 of the final rule. 

Rural (Amounts) Add-On

ACA Section 3131(c) provides an increase of 3.0 percent to the payment amounts for HH services furnished in a rural area ending after April 1, 2010, and before January 1, 2016. There is no budget neutrality associated with this mandate. The 3.0 percent rural add-on is applied to the national standardized 60-day episode rate, national per-visit rates, LUPA add-on payment, and NRS conversion factor when home health services are provided in rural (non-CBSA) areas.The CY12 payment amounts for 60-day episodes for services provided in a rural area before case-mix and wage index adjustments for HHAs that submit quality data is $2,202.68 ($2,138.52 x 1.03), and $2,159.23 ($2,096.34 x 1.03) for HHAs that do not. 

The CY12 national per-visit rates per discipline provided in a rural area are provided in Table 22 of the final rule. 

Quality

Section 1895(b)(3)(B)(v)(II) of the Social Security Act states that “each home health agency shall submit to the Secretary such data that the Secretary determines are appropriate for the measurement of health care quality.” For CY12, CMS will to continue to use a HHA’s submission of OASIS data as one form of quality data to meet the requirement that the HHA submit data appropriate for the measurement of health care quality. HHAs that are certified on or after May 1, 2011, are excluded from the quality reporting requirement for CY12 payments. CMS proposed that the following 13 process and 9 outcome measures, which comprise measurement of home health care quality, will continue to be publicly reported in July 2011 and quarterly thereafter:  

• Timely initiation of care
• Influenza immunization received for current flu season
• Pneumococcal polysaccharide vaccine ever received
• Heart failure symptoms addressed during short-term episodes
• Diabetic foot care and patient education implemented during short-term episodes of care
• Pain assessment conducted
• Pain interventions implemented during short-term episodes
• Depression assessment conducted
• Drug education on all medications provided to patient/caregiver during short-term episodes
• Falls risk assessment for patients 65 and older
• Pressure ulcer prevention plans implemented
• Pressure ulcer risk assessment conducted
• Pressure ulcer prevention included in the plan of care
• Improvement in ambulation/locomotion
• Improvement in bathing
• Improvement in bed transferring
• Improvement in management of oral medications
• Improvement in pain interfering with activity
• Acute care hospitalization
• Improvement in dyspnea
• Improvement in status of surgical wounds
• Increase in number of pressure ulcers

Home Health Care CAHPS Survey (HHCAHPS)

In the final rule for HH PPS rate updates for CY11, CMS stated “that the expansion of the HH quality measures reporting requirements for Medicare certified agencies will include the CAHPS® Home Health Care (HHCAHPS) Survey for the CY12 annual payment update (APU). [CMS] is maintaining our existing policy as issued in the CY 2011 HH PPS Rate Update, and are moving forward with our plans for HHCAHPS linkage to the pay-for-reporting (P4R) requirements affecting the HH PPS rate update for CY 2012.”

CMS says that “HHAs that are not compliant with OASIS-C and/or HHCAHPS reporting requirements for the CY 2012 APU were notified that they were noncompliant with CY 2012 quality reporting requirements. We issued a Joint Signature Memorandum to RHHIs/MACs with a list of HHAs not compliant with OASIS and/or HHCAHPS (TDL-aa453, 08-26-2011 in a CMS Memorandum dated September 2, 2011). The September Memorandum included language regarding the evidence required for the reconsideration process, how to prepare a request for reconsideration of the CMS decision, and that HHAs will have 30 days to file their requests for reconsiderations to CMS. We will examine each request and make a determination about whether we plan to uphold our original decision. HHAs will receive CMS’ reconsideration decision by December 31, 2011. HHAs have a right to appeal under 42 CFR part 405, subpart R, to the Provider Reimbursement Review Board (PRRB) if they were not satisfied with the CMS reconsideration determination.”

HHAs with patient counts of 59 or fewer patients for the period of April 1, 2009, through March 31, 2010, are exempt from the HHCAHPS reporting requirements for the CY12 APU. HHAs that became Medicare-certified on April 1, 2010, or later are exempt from the HHCAHPS reporting requirements for the CY12 APU. Continuous monthly data collection is required for HHCAHPS, as the data collection period of April 2011 through March 2012 comprises the data collection months for the CY13 APU, and the data collection period of April 2012 through March 2013 comprises the data collection months for the CY14 APU. 

Home Health Wage Index

For rural areas that do not have IPPS hospitals, CMS used the average wage index from all contiguous CBSAs as a reasonable estimate. This methodology was used to calculate the wage index for only one state, Massachusetts. “It is well documented that two CAHs in Massachusetts converted back from CAH status even though doing so would not benefit them directly. By giving up their cost based reimbursement, these two hospitals increase the home health wage index in Massachusetts. Due to the budget neutral nature of this methodology, the HHAs in the other 49 states will face a reduction in payments.”

The wage index values are available on the CMS website at https://www.cms.gov/center/hha.asp. 

For More Information

Read the final rule in the November 4, 2011, Federal Register.

Content for this fact sheet was extracted from Washington Perspectives, published by Larry Goldberg, Oakton, Va.