NAHC’s final analysis of all the new rules

The National Association for Home Care (NAHC) in Washington, DC, has reviewed the final prospective payment system (PPS) rule as published by the Health Care Financing Administration (HCFA) on June 28.

The following summary offers a concise but comprehensive comparison of the proposed PPS and the final rule. (For definitions of terms, see article, p. 91.)

Episode Payment Rate

• Proposed Rule

— National standardized rate: $2,037.04 per episode

— Based on budget-neutral calculation of interim payment system (IPS) payment limits minus 15%

— Case-mix adjusted

— Wage index adjusted

• Proposed Rule Concerns

— Budget neutrality adjustment too high ($2599 episode cost reduced to $2037.04)

— Overstated expected number of episodes of care

• Final Rule

— National standardized rate: $2115.30 per episode

— Case-mix adjusted

— Adds one time Outcome and Assessment Information Set (OASIS) adjustment for PPS classification

• Analysis

— The delay in 15% cut increased rates less than 4%

— HCFA significantly revised the budget neutrality calculation

Services in Episode Payment

• Proposed Rule

— All disciplines of care bundled within payment

— All medical supplies used by patient

— Medical equipment included

• Proposed Rule Concerns

— Consolidated billing of medical equipment problematic

— Improper expansion of medical supply responsibilities

• Final Rule

— Medical equipment not subject to consolidated billing

— Agencies are responsible for all supplies within scope of home health benefit

— HCFA rejected the use of a fee schedule for supplies

• Analysis

— Major problems remain regarding medical supplies with an average payment bundled in episode rate

Case-Mix Adjustment

• Proposed Rule

— 80 categories of home health resource groups (HHRGs)

— Lowest case-mix weight C0FS0: 0.5276 multiplier

— Highest case-mix weight C3F4S3: 2.5702 multiplier

— Based on clinical, functional, and service utilization assessment under OASIS

— HAVEN software revisions to assign case-mix group from OASIS data

• Proposed Rule Concerns

— Understates resource needs of wound care and insulin-dependent diabetic patients

— Orthopedic diagnostic codes omitted

— Secondary diagnosis ignored

• Final Rule

— Lowest case-mix weight: 0.5265 multiplier

— Highest case-mix weight: 2.8113 multiplier

— Refinements regarding wound care and diagnoses for burns and trauma

• Analysis

— HCFA changes indicate that case-mix adjuster slightly improved

Episode Definition

• Proposed Rule

— Basic unit: 60-day episode

— Begins first billable visit

— Ends on 60th day

— Unlimited episodes

• Proposed Rule Concerns

— Support 60-day episode

— Inconsistent payment and rate-setting standards

• Final Rule

— Basic unit: 60-day episode

— Unlimited episodes

— Exceptions unchanged

• Analysis

— HCFA did not rectify inconsistency in payment and rate-setting standards

Episode Definition Exceptions

• Proposed Rule

— Beneficiary elects transfer

— Discharge of patient with goals met with later readmission during 60-day period

— Significant change in condition with case-mix assignment

— Transfer or discharge exceptions lead to prorated payment [partial episode payment (PEP)] and new episode

— Significant change exception leads to blended episode payment reflecting status before and after change

• Proposed Rule Concerns

— Exceptions create payment gaps in failing to recognize full 60 days

— PEP for transfer and discharge/readmit cases fails to recognize front-loaded care costs

• Final Rule

— No change from proposed rule except allows transfers to related agency if outside metropolitan statistical area (MSA) or non-MSA

• Analysis

— HCFA refused to address payment gaps and front-loaded care costs

Partial Episode Payment

• Proposed Rule

— Prorated episode payment in transfer and discharge/readmit cases

— PEP determined on portion of episode from first billable visit to date of last billable visit prior to transfer or discharge

— New episode begins with first billable visit for new agency admission or readmit

• Proposed Rule Concerns

— Establishes payment gap in proration

— Fails to recognize that majority of care provided early in episode

• Final Rule

— PEP still determined based on portion of episode from first billable visit to date of last billable visit prior to transfer or discharge

• Analysis

— Inadequacy of PEP payment continues

Significant Changes in Condition (SCIC)

• Proposed Rule

— Payment is a blended proration of case-mix adjusted rate prior and subsequent to change

— Proration is based on the portion of episode from first billable visit to last visit prior to change

— Combined with proration of rate subsequent to change until the 60th day

• Proposed Rule Concerns

— Proration leaves payment gaps

— Proration fails to recognize that majority of care provided early in each stage of the episode

• Final Rule

— Unchanged from proposed rule

• Analysis

— SCIC payment may be inadequate

Low Utilization Payment Adjustment (LUPA)

• Proposed Rule

— Discipline-specific per visit payment (wage index adjusted)

— Applicable to care episodes with four or fewer visits

• Proposed Rule Concerns

— Per-visit payment rates too low

— Payment rates based on per-average visit costs

• Final Rule

— Significant increase in per-visit payment (+20%)

— Aide: $34.44 increased to $43.37

— Skilled nursing: $76.32 increased to $95.79

— Physical therapy: $83.39 increased to $104.74

— Speech language pathology: $90.79 increased to $113.81

— Occupational therapy: $83.57 increased to $105.44

— Medical social services: $123.31 increased to $153.56

• Analysis

— Improved rates will be very helpful

— Many agencies have more LUPAs than expected

Outlier Payments

• Proposed Rule

— Cost outlier

— Modeled on hospital PPS

— Fixed dollar loss amount for eligibility ($2,037.04 x 1.07)

— Shared loss ratio above eligibility threshold (40% agency share of loss)

• Proposed Rule Concerns

— Guaranteed loss problematic

— Reimbursement far short of costs in certain cases

• Final Rule

— Cost outlier

— Fixed dollar loss amount for eligibility (2115.30 x 1.13)

— Shared loss ratio (20% agency share of loss)

• Analysis

— Fewer eligible patients

— Improved shared loss ratio

— Remains far short of full reimbursement for higher cost patients

Billing Process and Payment Method

• Proposed Rule

— Two bills: at start of care and end of episode

— 50% initial payment at start of episode

— Remainder of payment at end of the 60-day episode

— Initial billing requires physician signed and dated orders

— Physician must certify HHRG (case grouper)

• Proposed Rule Concerns

— 50% initial payment creates cash-flow problems

— Physician certification of HHRG impractical

— Final billing should be allowed upon patient discharge

— Initial billing should be allowed on verbal orders

• Final Rule

— Two bills ("request for anticipated payment" at start of care)

— Final claims at end of episode

— 60% initial payment for initial episode

— 50% initial payment for subsequent episodes

— Initial billing on verbal orders

— Final billing requires signed and dated plan of care and certification

— No physician certification of HHRG

— 14-day payment floor not applicable to initial bill

• Analysis

— Significant acceleration of payment likely

— Many cash-flow problems alleviated

Payment Transition

• Proposed Rule

— New episode starts for all patients Oct. 1

— New plan of care (PoC) and OASIS required where earlier OASIS and PoC prior to Sept. 1

— Optional grace period where OASIS and PoC subsequent to Sept. 1

— Open bills for services provided through Sept. 30 must be closed

• Proposed Rule Concerns

— OASIS and PoC time frame impossible

• Final Rule

— OASIS grace period remains for post-Sept. 1 patients

— Pre-Sept. 1 OASIS: allow agency to perform new OASIS throughout September

— Plan of care can cover as long as 90 days

• Analysis

— Burden of OASIS during transition reduced

— Agencies likely to use 30-day OASIS for August patients

Cost Reporting Transition

• Proposed Rule

— No information regarding cost reporting changes

— No contingency plan for periodic interim payment (PIP) and non-PIP providers

• Proposed Rule Concerns

— Full fiscal year cost reporting must be allowed

— No proration of the per-beneficiary limit should occur

— PIP providers require bridge financing

— All providers need HCFA contingency plan

• Final Rule

— Full 12-month cost report

— Statistical break at Sept. 30

— No change in agency fiscal year

— No proration of IPS per visit or per beneficiary limits

— More details to come in manual

• Analysis

— Positive HCFA action on IPS limits

— Await further information on specifics

Medical Supplies

• Proposed Rule

— Average supply cost bundled into PPS rate

— Agency required to provide all supplies during episode

— Part B supply costs incorporated into database

• Proposed Rule Concerns

— Supply costs not case-mix adjusted

— Expands supply provision responsibilities

— Weak database

• Final Rule

— Average supply cost bundled into episode rate

— Further recognition of supply costs

— Agency required to provide all supplies within scope of the benefit

• Analysis

— Lack of case-mix adjustment on supplies unacceptable

— Need further clarification on supply responsibilities

OASIS Cost Reimbursement

• Proposed Rule

— $4.32 per-episode reimbursement

• Proposed Rule Concerns

— OASIS cost reimbursement inadequate

• Final Rule

— Added one time OASIS adjustment for PPS transition costs ($5.50)

— $4.32 per-episode reimbursement

• Analysis

— OASIS reimbursement remains inadequate