HCFA outlines PPS case mix and other key components
By MATTHEW HAY
HHBR Washington Correspondent
BALTIMORE The Health Care Financing Admin istration (HCFA; Washington) last week detailed key provisions of its 376-page draft proposal for a home health prospective payment system (PPS), which is to replace the highly controversial interim payment system (IPS) on Oct. 1, 2000.
HCFA officials noted that the Balanced Budget Act of 1997 (BBA) permits the agency to transition to PPS by mixing the current cost-based system with the new prospective system. But agency officials declined that option due mainly to concerns about IPS.
The BBA also establishes the total amount of money that will be paid out by the new system. In FY01 that amount is equal to the amount that would have been paid out under the current IPS with both the per visit and per beneficiary limit reduced by 15%. That required HCFA to apply a budget neutrality factor to the rate that would have been paid in order to reach the budget target established by the statute.
According to agency officials, budget neutrality was especially difficult to meet given the multiple changes taking place in the home health industry. But on the whole, HCFA officials argued that the PPS is preferable to the current system because it allows payment to be adjusted to case-mix based on patient needs and maximizes the ability of agencies to stay within a budget to deliver the services a patient needs. Agency officials also point to the outlier provisions included in the new methodology as an additional protection for agencies and beneficiaries.
The payment system would use national payment rates with adjustments to reflect area wage differences and the intensity of care required by each beneficiary. Home health agencies will receive 50% of the payment as soon as it establishes a case-mix with the balance paid at the end of the 60-day episode.
Agency officials note that the BBA gave HCFA broad discretion in developing the PPS. Here are some of the specific areas highlighted in a technical briefing by HCFA officials last week:
Case mix adjusted payment. HCFA officials report that research revealed that a per-visit PPS did not achieve any of the desired affects but that a per-episode PPS would achieve the desired affect. Under the latter, the number of visits and costs were both reduced while quality was maintained, agency officials said.
The demonstration used a 120-day episode, but agency officials report that 60% of the episodes ended at 60 days or less. That prompted HCFA to opt for a 60-day episode, especially in view of the fact that physician certification, plan of treatment, and OASIS data are all already required at 60-day intervals.
However, instead of paying agencies strictly on a 60-day episode of care, the agency proposed a series of adjustments to create "positive incentives." Those include a low utilization payment adjustment to provide a low-end threshold. If an episode consists of four visits or fewer, agencies will receive a payment based on the number of visits actually provided.
In addition, the agency concluded that a strict 60-day episode of care would not respond readily to significant changes in patient condition. For example, a patient might suffer a stroke and suddenly require physical therapy and speech therapy. To address that problem, the agency developed a significant change in condition adjustment that breaks the episode into two or more segments.
The agency also proposed a partial episode payment adjustment to split payment among multiple agencies if a patient transfers from one agency to another. In some cases, that means agencies will be required to share an episode payment based on an assessment made by the first agency.
As a result, when sequential transfers occur, the agency will make a proportional payment to the initial agency and begin a new episode under the new agen cy based on that agency’s own assessment and case-mix.
Outliers. The BBA requires that HCFA limit that to 5% of the total payments projected based on the PPS in that year. The agency determined that it would not require length of stay outliers because it would pay for as many 60-day episodes as required by the patient. That preserved the 5% funding for high-cost outliers.
In order to distance the new payment methodology as far as possible from the current cost-based system, the agency will make payments based upon the utilization of the patient. HCFA will multiply the actual visits a patient receives by discipline by a standardized prospective payment per visit rate to determine the approximate costs for that case.
Maximizes the number of agencies that would be eligible for outlier payments. HCFA based that decision on concerns that patients that require extensive care might be avoided.
The case-mix settled on by HCFA includes 80 groups based upon the assessment of the patient in three broad areas: clinical severity, functional status, and service intensity. Each one of those domains is broken into sub-categories.
The clinical domain is broken into four categories from minimal to high. The functional status domain is broken into five categories, from minimal to maximum. Finally, service intensity is broken into four groups, from minimal to high.
That gives HCFA 80 possible cells. According to HCFA officials, the results were similar to what the agency finds in PPS’ developed for hospitals and skilled nursing facilities.
According to HCFA officials, the wage index adjustment included in the PPS allows for an appropriate adjustment to recognize differences in salary costs across the country. The statute also required that HCFA build the system from the most recent audited cost report data. To accomplish that, the agency drew a statistical sample from 645 home health agencies nationwide, stratified by census region. HCFA officials report they will perform another review of those cost reports to make sure they have the most complete file of audited cost report data prior to completing the final rule.
Included in that rate are all the discipline costs and overhead costs of home health agencies as well as all routine and non-routine medical supply costs. However, according to the consolidated billing provision, durable medical equipment (DME) will not be rolled into the rate. Instead, agencies will be required to bill Medicare regardless of who supplies the DME.
According to agency officials, that creates the potential for disruption in the provision of DME because there is no requirement that home health agencies deal with all DME suppliers or that home health agencies pass 100% of the payment they receive to DME suppliers.
The 60-day comment period on the proposed rule will expire Dec. 27. A final rule is expected in February 2000. The proposal was published in the Federal Register Oct. 28.
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