Drastic Payment Cuts for Home Health

CMS has published the Proposed Rule for the Home Health Prospective Payment System update for 2014. It will impact home health payments for the next four years.  The current year impact will reduce home health payments by 1.5 percent or $290 million, but the future impact will be much worse.

There are many moving parts to this rule.  We will cover some of the basics in this update, but will follow it with other updates next week to provide more detailed information.  Below is a brief analysis of the episode rate.  To provide a better comparison we have one column with the new adjustment for episode case mix standardization and another column without the case mix standardization. (Episode standardization will move the average episode case mix weight from 1.3517 to 1.0000 by reducing all case mix weights by 35.17 %.)

Description	With Case Mix Adjustment	Without Case Mix Adjustment
2012 National Standardized 60 Day Episode Rate	$2,138.52	$2,138.52
Inflate Case Mix Adjustment (x1.3517)	$2,890.64	$2,138.52
Reduce for Nominal Case Mix Growth 2013 (x.9868)	$2,852.48	$2,110.29
Payment Update Percentage for 2013 (x1.013)	$2,889.56	$2,137.72
Outlier Adjustment (Divide by .975)	$2,963.65	$2,192.53
Rebasing Adjustment 2014 (x.965)	$2,859.92	$2,115.79
Outlier Adjustment (x .975)	$2,788.42	$2,062.90
Standardization Factor (x1.0017)	$2,793.16	$2,066.41
2014 Market Basket Adjustment (x1.024)	$2,860.20	$2,116.00

Remember your episode case mix rates will be decreased by 35.17% so for example C1F1 with 0 to 5 therapy visits will go from 0.8186 case mix rate in 2013 to 0.6056 in 2014.  There are positive adjustment to LUPA payment rates and negative adjustments to Non Routine Medical Supplies. 

Your episode rates will be reduced by 3.5% for rebasing in 2015, 2016 and 2017.  You will also have a reduction inflation factor adjustment of 1% in 2015, 2016, and 2017.

We sent a note out to home health agencies last week titled “It is Time to Step Up or Fall Behind”.  We stated that your home health agency is currently going up the down escalator.  The current momentum of the health care industry is constantly pushing your company down, just like a down escalator is constantly moving down.  To step up to the next stair, you adapt and embrace the changes or place your head in the sand and move further down the escalator. 

If you would like to step up instead of falling behind attend our Home Health Leadership Conference on September 23^rd to September 25^th at the Hilton Waikoloa Village on the “Big Island” in Hawaii. We will cover the home health proposed PPS Rule and methods to successfully adapt to the changes.

For more information use the temporary link below (The final link will be available on July 3^rd when proposed rule is published in the Federal Register):

https://s3.amazonaws.com/public-inspection.federalregister.gov/2013-15766.pdf