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CMS releases final rule on home health payment rates

The Centers for Medicare & Medicaid Services (CMS) has issued its final rule updating the Home Health Prospective Payment System (HH PPS) for 2012. In a press release, CMS noted that the final changes are a result of the agency seeking to "improve payment accuracy" while still supporting patient access.

The updates include a payment decrease of about 2.31 percent, or $430 million. The 2.31 percent decrease is the consummation of a 1.4 percent payment update, the wage index update and the case-mix coding adjustment.

Part of the final rule includes the removal of two codes for hypertension, more flexibility regarding face-to-face encounters, lowering payments for high therapy episodes and recalibrating the HH PPS case-mix weights "to ensure that these changes result in the same amount of total aggregate payments. These changes are intended to increase payment accuracy and reduce the growth in aggregate case-mix that is unrelated to changes in patients' health status."

CMS took the advice of some of the rule commenters and decided to phase in the HH PPS rates over two years: A 3.79 percent reduction in calendar year 2012 and an additional 1.32 percent in CY 2013.

"We believe that by phasing-in the reductions over CY 2012 and CY 2013, we allow (home health agencies) an opportunity to adopt process efficiencies associated with the CY 2011 mandates prior to imposing the full 5.06 percent payment reduction," CMS said in its final rule.

In the run-up to the final rule release, home health agencies have been warning that CMS' proposed changes to Medicare payments to home health agencies will have disastrous results for them. An analysis done earlier this fall by home health industry trade group, the National Association for Home Care & Hospice (NAHC), found that half of home health agencies would face negative Medicare financial margins if CMS' proposed rule was finalized without changes.

[See also: Cuts to home health will be detrimental to the industry.]

In its final rule, CMS addressed commenters, such as NAHC, who claimed dire impacts on home health care agencies' margins, saying "Regarding the commenters' concerns about the effect of the proposed reductions on providers' viability and the resultant access risks, we note that in their March 2011 Report to Congress, MedPAC projected an average of 14.5 percent margins for HHAs in 2011, when taking into account various payment adjustments such as the CY 2011 payment reduction for nominal case-mix growth. We also note that in proposing the reductions, we analyzed the combined effects of all of the policies proposed and believe that a 5.06 percent reduction would not impede access to care."

CMS also noted that "the payment reduction to the base rate is not the only policy affecting payment to HHAs described in the proposed rule. The effects of the payment update, wage index update and revision of case-mix weights also need to be taken into account when assessing the impact of the proposed provisions."

The NAHC did not respond to a request for comment for this story.

The final rule becomes effective on Jan. 1, 2012.

Follow HFN associate editor Stephanie Bouchard on Twitter @SBouchardHFN.

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