Home Health Final Rule for cy2018

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2018 Home Health Final Rule

The recently released Home Health Final Rule provides several updates the Medicare prospective payment systems (PPS) rates and wage index for calendar year 2018. Perhaps most notably, included in this update is a 0.4 percent decrease (-$80 million) in home health payments for 2018, but even more surprising is that one of the most notable proposed provisions that was widely speculated to be included in the rule, but wasn’t was the introduction to an alternative payment methodology — the Home Health Groupings Model (HHGM), which many thought was slated to begin in 2019.

The HHGM would have used 30-day periods, rather than 60-day episodes, and relied more heavily on clinical characteristics and other patient information to place patients into more meaningful payment categories. That is not the case for this current rule, which many in home health have said that the industry probably wasn’t ready for anyway.

Given these two updated, many more changes are impacting home health. The most important changes published as part of the 2018 final rule were recently detailed in a DeVero-hosted webinar presented by Jennifer Warfield. Warfield is the education director at PPS Plus in Biloxi, Miss, and she is certified as an official ICD-10 trainer who frequently travels across the country to home health agencies and associations, providing education on important industry topics, including coding, OASIS and documentation.

During her presentation, she also discusses the Home Health Value-Based Purchasing Model and the Home Health Quality Reporting Program.

Provisions included

The final rule updates the home health (HH PPS) payment rates, including the national, standardized 60-day episode payment rates, the national per-visits rates, and the non-routine medical supply (NRS) conversion factor effective for home health episodes of care ending on or after Jan. 1, 2018. The rule updates the HH PPS case-mix weights using the most current, complete data available at the time of rulemaking; and implements the third-year of a three-year phase in of a reduction to the national, standardized 60-day episode payment to account for estimated case-mix growth between CY 2012 and CY 2014.

This rule also makes case-mix methodology refinements, as well as provides a change in the unit of payment from 60-day episodes of care to 30-days periods of care to be implemented from home health services beginning on or after Jan. 1, 2019.

It also changes to the value-based purchasing (HH VBP) model and to the home health quality reporting program (HH QRP).

Payment update

As mentioned above, the new rule means a likely net $80 million reduction in Medicare payments to home health agencies. For calendar year 2018, the market basket percentage increase shall be 1 percent. There also is a -0.97 percent adjustment to the national, standardized 60-day episode payment rate to account for nominal case-mix growth for an impact of -0.9 percent ($170 million decrease). The base episode rate for is set out at $3,039.64.

For all payment updates, agencies risk losing 2 percent in the next calendar year for failure to submit quality data; agencies must submit 90 percent of quality data. For agencies that submit all of their OASIS data, they are never in jeopardy of the penalty, Warfield said.

Table 2: Case-Mix Adjustment Variables and Scores – This is a very important document that all home health agency leaders should be aware of. There are major changes to the case-mix adjustment, specifically, it takes more to the get more from category to category to determine how many point you have for clinical and functional capabilities.

Table 3: CY 2018 Clinical and Functional Thresholds — These numbers help you score points for clinical and functional thresholds.

Table 6: CY 2018 60-day national, standardized 60-day episode payment amount — From 2017 to 2018, there has been an increase from $2,989.97 to $3,039.64. This is a standardized payment. What makes the difference now is where you are location for core-based statistical area (CBSA) and maybe you non-routine supply. This is a standardized rate, everyone sees the same amount.

CY 2017




















CY 2018




CY 2018






$2,989.97 X 1.0004 X 1.0160 X 0.9903 X1.01 $3,039.64


Table 8: CY 2018 National Per-visit payment amounts for HHAS that submit the required quality data — This is what CMS pays you per visit if you bill each on a LUPA.

HH Discipline Type CY 2017 Per-Visit Payment CY 2018 Per-Visit Payment
HHA $64.23 $64.94
MSW $227.36 $229.86
OT $156.11 $157.83
PT $155.05 $156.76
SN $141.84 $143.40
SLP $168.52 $170.38


Table 11: CY 2018 non-routine supplies (NRS) payment amounts for HHAS that do submit the required quality data — If you don’t submit quality data, you risk losing 2 percent per category. Every patient goes into a severity level and every patient gets at least the amount listed here; there are no more points available after receiving 99 points. (You don’t have to do anything to tabulate these numbers – it’s automatically calculated through your software, Warfield said.)

Severity Level Points Relative Weight CY 2018

NRS Payment Amounts

1 0 0.2698 $ 14.31
2 1 to 14 0.9742 $ 51.66
3 15 to 27 2.6712 $ 141.65
4 28 to 48 3.9686 $ 210.45
5 49 to 98 6.1198 $ 324.53
6 99+ 10.5254 $558.16

Case-mix creep

In regard to case-mix creep, the final rule provides for no further mix creep beyond the 2016-2018 reduction of .97 percent. Warfield said that “CMS believes that there has been an increase in the average case-mix weight unrelated to changes in conditions, but that no added adjustment will be imposed in 2018. They think that agencies actually know how to get case mix weight up – that what you call case mix creep.”

However, it’s possible that further adjustment may be expected starting in 2019.

Outlier payments

CMS will keep the same 80 percent loss ratio that has been in use since the beginning of HH PPS and maintain the fixed dollar loss ratio at .55. CMS capped outlier payments to keep agencies from submitting patients as an outlier — outlier patients fall out of the norm for patient care when costs exceed what is required to take care of that patient. The cap was set by CMS because outlier patient care was never meant to be a money making endeavor, she said. Previously, some agencies had abused the “outlier” tag in an effort to make more money through higher reimbursements. “CMS believes that such a change is needed to keep outlier spending within the 2.5 percent spending limit,” she said.

Low Utilization Payment Adjustment (LUPA) and NRS Update

The final rule clarifies LUPA episodes that occur as the only episode or as an initial episode in a sequence of adjacent episodes that are adjusted by applying an additional amount to the LUPA payment (1 percent) before adjusting for area wage difference. Thus, non-routine medical supply rates are adjusted by 1 percent.

Regarding the NRS conversion factor, CMS changed it from $52.50 in 2017 to 53.03 in 2018.

 More on HHGM

The much discussed Home Health Groupings Model was previously proposed for home health care beginning on or after Jan. 1, 2019. CMS’ findings from the Affordable Care Act suggest that the current home health payment systems may discourage home health agencies from serving patients with clinically complex and/or poorly controlled chronic conditions who do not need therapy services, but required skilled nursing care.

Thus, chronic care patients who have trouble getting discharged — but don’t need therapy – but no matter what is done the reimbursement never goes up so the agency loses money. This was meant to be an incentive to reduce agencies from adding visits just for visit’s sake, but treating patients accordingly. So, while HHGM is not totally ruled out for later implementation, it will not be implemented in 2019. Home health agencies will continue to have 60-day episode, but 30-day payment episodes — this model discourages stretching out care over 60 days when most is provided during the first 30 days.

Home health quality reporting

Beginning with calendar year 2020 HH QRP, CMS will adopt three new measures that meet the requirements of the IMPACT Act (the Improving Medicare Post-Acute Care Transformation Act of 2014 — a bill designed to change and improve Medicare’s post-acute care services and how they are reported).

These three new measures are assessment-based and are calculated using Outcome and Assessment Information Set (OASIS) Data. The finalized measures are as follows (designed to create more uniformity for the industry):

  • Changes in skin integrity post-acute care: Pressure ulcer/injury
  • Application of percent of residents experiencing one or more falls with major injury
  • Application of percent of long-term care hospital patients with an admission and discharge functional assessment and a care plan that addressed function

 OASIS changes

The rule removes 235 data elements from 33 current OASIS items, effective Jan. 1, 2018. These OASIS items, or data elements within OASIS items, are not needed to calculate quality measures already adopted in the HH QRP or for other purposed unrelated to the HH QRP, including payment, survey, the HH VBP model or care planning. This is meant to be a streamlining effort.

A list of items being removed can be found at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HomeHealthQualityInits/HHQIQualityMeasures.html

 Value-based purchasing

Currently in nine states — Massachusetts, Maryland, North Carolina, Florida, Washington, Arizona, Iowa, Nebraska and Tennessee – agencies are required to submit quality data and they will be paid for the value they produce as part of the home health Value Based Purchasing pilot. “If we can prove the care we are rendering to our patients and they are getting better, and that we have better outcomes, we will be reimbursed differently,” Warfield said.

The first value-based payment will be realized in January 2018. Based on the scores received, agencies receive 3 percent extra (in the first year) for reimbursement, or fined 3 percent for not meeting their quality measures. A mean measure is set by CMS and if the agency surpasses that mean they receive the extra 3 percent; if not the agency loses 3 percent for that measure.

For those agencies engaged in quality based payment, 2016 was the year of data generation and 2017 was the payment year for the data submitted prior. HH VBP is estimated to save Medicare $378 in reduced spending for inpatient hospitalization and skilled nursing facility stays in 2022.

The specific goals of vale-based purchasing are to:

  • Provide incentives for better quality and efficiency
  • Study new potential quality and efficiency measures for appropriateness in the home health setting
  • Enhance the current public reporting process

This requires all Medicare-certified home health agencies providing services in the nine selected states to participate in the model and ensures that there is no selection bias; participating HHAs are representative of HHAs nationally; and there is sufficient participation to generate meaningful results. If it’s being done in your state, you have no choice but to participate; value-based data will be collected.

 Future CMS considerations

  • CMS is considering a measure for total change in ADL/IADL performance by HHA patients. It would capture all three potential outcomes for home health patients: stabilization; decline; and improvement. The measure would also improve accountability during an episode of care when the patient is directly under the HHA’s care, and would report the average, normalized total improved functioning across the 11 ADL/IADL items on the current OASIS-C2 instrument. The measure is calculated by comparing scored from the start-of-care/resumption of care to scores at discharge or the resumption of discharge.
  • CMS is considering a composite functional decline measure that could track the percentage of episodes where there was decline on one or more of the eight ADL items used in the measure. This would eliminate an agency’s efforts to improve care and prevent functional decline for all patients, including those for whom improvement in functional status is not a realistic care goal. When looking at the composite, it’s unrealistic to set a goal when not functionally independent. Agencies would receive credit when there is no decline at discharge.
  • CMS is considering adding a measure for HHAs to correctly identify patient’s need for mental or behavioral health supervision, to capture a patient’s need for mental or behavioral health supervision based on an identifier. It would assess whether the HHA correctly identifies whether or not the patient needs mental or behavioral health supervision based on the OASIS SOC/ROC assessment item M2102f, Types and Sources of Assistance: Supervision and Safety.

 Learn more

While the information provided here is comprehensive, there’s more to learn since the final home health rule of 2018 is detailed and quite robust. Warfield provides much more information in her breakdown of the rule in the free DeVero hosted webinar. To listen to the recording, visit: Home Health cy2018 Final Rule webinar.


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