Home Health CY 2018 PPS Proposed Rule: Here Comes a New Payment Model

The single largest and most unexpected change proposed in the 2018 Proposed PPS Rule is the announcement that the Home Health Groupings Model (“HHGM”) will be implemented as of January 1, 2019. Although the Centers for Medicare & Medicaid Services (“CMS”) released a detailed technical report on the HHGM last fall, the industry did not anticipate the HHGM would be implemented so quickly. Although still a prospective payment system, the HHGM represents a significant change in how home health care will be reimbursed. The financial impact of this new model is projected to be a reduction in home health reimbursement of up to $950 million.

In order to prepare for the HHGM, providers need to understand the HHGM and how it differs from the current system. The HHGM will differ significantly from the current PPS model. Unlike the current model, the HHGM utilizes 30-day episodes rather than 60-day episodes for payment. This was done because the claims data showed that visits were front-loaded in the episode and that 25 percent of episodes were less than 30 days in length. The RAP will continue to be available, but CMS believes, based upon data showing providers delay submitting RAPs, that the RAP may no longer be needed. CMS is seeking comments about eliminating the RAP in the future.

One of the biggest changes in the HHGM is the elimination of the use of therapy service thresholds to case-mix adjust payments. This change is significant but not terribly surprising. CMS has signaled its intent to do this for a number of years as CMS has concluded that these payments created an improper incentive to offer therapy. CMS thinks that the therapy utilization numbers support this concern. In 1997, only 9 percent of home health visits were for therapy, but by 2015, 39 percent of all home health visits were for therapy. The breakdown of episodes by number of therapy visits has also fluctuated based upon the therapy visit thresholds. CMS will now eliminate that. Providers that provide therapy to their patients will need to carefully analyze how their patients would be scored under the HHGM.

The HHGM “scores” episodes in a very different manner than the current PPS system. First, each episode is placed into one of two groups: early or late. Episodes are then further divided by admission source: community or institutional. An episode is then placed into one of six clinical categories based upon principal diagnosis: (i) musculoskeletal rehabilitation; (ii) neuro/stroke rehabilitation; (iii) wounds; (iv) medication management teaching and assessment; (v) behavioral health; or (vi) complex nursing interventions. An episode is then placed into one of three functional level groups. The number of available functional level groups for an episode depends upon the clinical group into which the episode is placed. Finally, there are two comorbidity adjustments. The results of this structure are 144 possible payment groups under the HHGM. It is a slight increase from the ABT technical report, which only provided for 128 groups.

A key proposed change to the PPS system under the HHGM is a reduction in the length of an episode from 60 days to 30 days. CMS proposes to utilize 30-day episodes in order to better align payment with resource utilization. CMS concluded, based upon data analysis, that, on average, the first 30 days of an episode were more resource intensive. From this, CMS concluded that a 30-day episode better aligns payment and resource utilization. For 2019, CMS will determine the 30-day episodic payment by calculating the 2019 Standardized Episodic 60-day payment, adding in the NRS payment and then dividing by two.

Under the HHGM, episodes will still be designated as early or late, but only the first 30-day episode will be considered an early episode. The second and all later 30-day periods will be considered late episodes. This will result in more payments being for “late episodes” and receiving lower reimbursement. Furthermore, if a patient is readmitted to home health within 60 days of a previous episode, the new episode would still be late. The practical impact of this change is that more days of patient care will fall into a late episode and be reimbursed at a lower amount.

Cases are further subdivided by whether the patient is admitted from a facility or the community. CMS concluded that patients admitted from a facility are more resource-intensive but have shorter stays. In contrast, community admissions tend to utilize fewer resources during an episode but stay on home health longer.

From there, the HHGM will use the patient’s principal diagnosis to place the patient into one of the six clinical categories. In the 2018 PPS rule, CMS notes that 19 percent of episodes they reviewed in preparing this model could not be assigned to a clinical group based upon principal diagnosis alone. This raises the possibility that agencies will find a significant portion of their claims denied because the principal diagnosis does not result in placement in a clinical category.

The comments state that a when an encounter cannot be categorized based upon the principal diagnosis, “the claim for that 30-day period would remain a questionable encounter and be returned to the provider for more accurate or definitive coding.” Providers who utilize a principal diagnosis code that does not map to a clinical category will, at a minimum, see a delay in payment. This may be a significant additional impediment to timely payment because 20 percent of claims reviewed would have qualified as questionable encounters. Avoiding questionable encounters, and the related interruption in cash flow, will require providers to identify principal diagnoses utilizing only codes that map to clinical categories.

It is not clear what will happen when a provider who has a claim rejected as a questionable encounter clarifies the claim by changing the principal diagnosis to one that corresponds to a clinical category. A provider who resubmits a claim with a different primary diagnosis will have changed the primary diagnosis listed on the claim in response to a CMS request for clarification. However, the principal diagnosis will result in the claim getting paid, and there may be circumstances where an auditor views this as upcoding.

Accurately identifying and coding principal diagnoses will be extremely important in this system. This will make the practice of 100 percent pre-submission audits even more important as a tool to avoid submitting claims that become “questionable encounters.”

Claims are then adjusted for co-morbidity. The co-morbidity adjustment is a single adjustment available to any episode that has at least one secondary diagnosis that falls into the identified co-morbidity subcategories. There are not levels to this adjustment based upon number of co-morbidities or other factors. The episode receives, or does not receive, a single adjustment.

The HHGM will radically revise the home health PPS system. The HHGM will significantly reduce home health payments and impact the availability of home health. Including therapy reimbursement in the episodic payment raises the very real possibility that homebound patients will no longer have access to therapy services at home. CMS’s admission that 20 percent of principal diagnoses did not map to a clinical category may mean that the HHGM will lead to delays in home health payment or, worse, a defacto change in home health eligibility for patients. This proposal raises a number of very serious concerns and will require agencies to begin preparing now.

Practical Takeaways

Implementing the HHGM in 2019 is, at this point, a proposal. The initial reaction to it has been uniformly negative. Home health agencies need to submit comments pointing out the many problems with this proposal from the incorrect assumptions underlying the costs, the change to a 30-day episode, the apparent reduction in qualifying diagnoses, the reduced number of early episodes and the proposal to potentially end the RAP, etc. The industry underestimated the speed with which CMS was moving forward on the HHGM, and many providers had, due to a number of other pressing issues such as the new CoPs, overlooked this issue. As a result, CMS did not receive significant negative feedback on this proposal. CMS estimates that it will only receive 85 comments on this proposal. The industry must exceed this number significantly. Eighty-five comments from an industry with more than 10,000 providers gives the indication that the industry is not concerned.

If the HHGM, as currently conceived, is to be avoided, the industry must provide a large volume of specific, data-driven responses. Merely complaining about the potential negative financial impact is not sufficient. Comments will need to specifically challenge a number of the questionable analyses and assumptions put forth by CMS in this proposed rule and articulate why the HHGM does not more accurately connect payment to patient care. Showing that patient care will be negatively impacted by this rule will be extremely important.

Providers must also begin analyzing the HHGM and how their current patient census would be treated under this system. For example, providers with higher levels of therapy utilization will certainly see a significant impact and may struggle to survive under the HHGM. Providers need to consider how the HHGM will reduce the amount of reimbursement they receive and what action will be required to respond. Providers will also want to consider changes in claims processing and similar procedures to address principal diagnosis accuracy, prompt completion and submission of RAPs, etc.

If you have any questions regarding this article, please contact: