Changes affecting home health agencies


The Health Reform law (otherwise known as the “Patient Protection and Affordable Care Act” or “PPACA”) contains numerous provisions relevant to home health agencies (“HHAs”).

Reimbursement changes

Perhaps most important to HHAs themselves are a number of reimbursement changes.  The HHA prospective payment system (“PPS”) will be rebased starting in 2014.  HHA rates will be adjusted  by a percentage determined appropriate by the Secretary of Health and Human Services, to reflect such factors as changes in the number of visits in an episode, the mix of services in an episode, the level of intensity of services in an episode, the average cost of providing care per episode, and other factors that the Secretary considers to be relevant. The Secretary may also consider differences between hospital-based and free­standing agencies, between for-profit and nonprofit agencies, and between the resource costs of urban and rural agencies.

The new rates will be phased in over four years, in equal increments, with full implementation in 2017.  During each year of the phase-in, the rate of adjustment cannot exceed 3.5 percent of the amounts that would have been applicable without this amendment.

This adjustment is to be made prior to application of the following reductions in the market basket updates.

Starting in 2015, the otherwise-applicable market basket increase will be reduced by a  productivity adjustment.  (See here for details.)   For each of 2011, 2012, and 2013, it will be reduced instead by 1 percentage point.

In some previous years, Congress provided a percentage add-on to the PPS rates paid to rural HHAs.  PPACA provides for a 3 percent add-on for rural HHAs for visits and episodes of care ending after on or April 1, 2010, and before January 1, 2016.

The final change being made to HHA reimbursement is to reduce the total amount of outlier payments to HHAs from 5 percent to 2.5 percent of the total funds allocated to HHA payment and to add a program-specific outlier cap. Starting in 2011, the outlier cap will limit the amount of outlier payments any HHA can receive to no more than 10 percent of that HHA’s total PPS payments for the year.

Physician certification

In order to qualify for Medicare coverage, HHA services must be ordered by a physician or other appropriate practitioner.  Effective January 1, 2010, prior to making such certification, the physician must document either that the physician him/herself, or a nurse practitioner or clinical nurse specialist who is working in collaboration with the physician in accordance with State law, or a certified nurse as authorized by State law, or a physician assistant  under the supervision of the physician, has had a face-to-face encounter  (other than with respect to encounters that are “incident-to” services involved) with the Medicare beneficiary during the 6-month period preceding such certification, or such other reasonable timeframe set by the Secretary.  The face-to-face encounter may be by telehealth in circumstances under which the telehealth services would otherwise be reimbursable by Medicare.

Studies and reports

PPACA directs the Medicare Payment Advisory Commission (“MedPac”) to conduct a study on the implementation of the HHS PPS rebasing. The study must include an analysis of the impact of such amendments on access to care, quality outcomes, the number of home health agencies, and rural agencies, urban agencies, for-profit agencies, and nonprofit agencies.  MedPac must submit its report to Congress by January 1, 2015, together with “recommendations for such legislation and administrative action as the Commission determines appropriate.”

In addition, the Secretary of Health and Human Services is to conduct a study on HHA  costs involved with providing ongoing access to care to low-income Medicare beneficiaries or beneficiaries in medically underserved areas, and in treating beneficiaries with varying levels of severity of illness. In conducting the study, the Secretary may analyze items such as:

  • Methods to potentially revise the HHA PPS to account for costs related to patient severity of illness or to improving beneficiary access to care, such as —

(1) Payment adjustments for services that may involve additional or fewer resources;

(2) Changes to reflect resources involved with providing home health services to low-income Medicare beneficiaries or Medicare beneficiaries residing in medically underserved areas; and

(3) Ways outlier payments might be revised to reflect costs of treating Medicare beneficiaries with high levels of severity of illness.

  • Operational issues involved with potential implementation of potential revisions to the home health payment system, including impacts for both HHAs and administrative and systems issues for the Centers for Medicare & Medicaid Services, and any possible payment vulnerabilities associated with implementing potential revisions.
  • Whether additional research might be needed.

In conducting this study, the Secretary may consider whether patient severity of illness and access to care could be measured by factors, such as, for example –

  • Population density and relative patient access to care
  • Variations in service costs for providing care to individuals who are dually eligible under the Medicare and Medicaid programs
  • The presence of severe or chronic diseases, which might be measured by multiple, discontinuous home health episodes
  • Poverty status, such as evidenced by the receipt of Social Security SSI benefits.

In conducting this study, the Secretary is required to consult with appropriate stakeholders, such as groups representing HHAs and groups representing Medicare beneficiaries.

The Secretary must shall submit to Congress a report on this study by March 1, 2014, together with recommendations for such legislation and administrative action as the Secretary determines appropriate.

Based on the results of the study, the Secretary may choose to provide for a demonstration project to test whether making payment adjustments for home health services under the Medicare program would substantially improve access to care for patients with high severity levels of illness or for low-income or underserved Medicare beneficiaries.  If the Secretary decides to conduct such a demonstration project, it will run from project for a four-year period beginning no later than January 1, 2015.

The PPACA also contains a lengthy provision that requires the Secretary to develop a plan to implement a “value-based purchasing program” for skilled nursing facilities and HHAs.  That program may be discussed in a later post.

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