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By Corinne Kuypers-Denlinger

You may or may not have noticed, but on October 31, 2019, the Centers for Medicare and Medicaid Services (CMS) replaced the Home Health Prospective Payment System (PPS) with the Patient Driven Groupings Model (PDGM). Implementation of the new payment system is scheduled for on about January 1, 2020 (see Medicare Establishes New Payment System For Home Health). This is the most significant change to the home health Medicare benefit reimbursement model since the Interim Payment System was introduced in 1998, the precursor to the Prospective Payment System (PPS). PDGM will have a significant impact on organizations providing home health services and organizations referring consumers for home health services.

Under PPS, home health payments were based on a 60-day episode of care and beneficiaries could be recertified for services every 60 days until the condition for which they were receiving services was resolved. Under PPS, provider organizations that submitted a request for anticipated payment (RAP) would receive 60% of the episode payment upfront (prospectively) and 40% at the end of the episode.

Under PDGM, care continues to be provided using a 60-day episode, but billing and payment happens every 30 days. In the new system, RAPs are made for the first 30-day period of care and this amount will be paid 60%/40%. For every 30-day period of care after that, the provider submits a RAP and is paid 50% immediately and 50% at the completion of the month of service. More significantly, the RAPs are scheduled to disappear in 2021. Right now, smaller provider organizations rely on the RAP “float” prepayment for cash flow, and there is some expectation that many smaller provider organizations will discontinue their home health service lines as a result.

In addition to this change in reimbursement and cash flow, there also are significant changes to how the episode of care rates are set. If your organization provides home health services reimbursed by Medicare, here’s what you need to know. Since the PPS was introduced, episode calculation has relied on a consumer’s primary diagnosis described using ICD-10-CM codes (ICD-9, initially) and co-morbidities correctly sequenced to describe the consumer’s condition on intake. Adjustments were made for risk, non-routine supplies, and functional ability for placement in a Home Health Resource Group (HHRG). Under PPS, there were 153 HHRGs.

The new PDGM changes this rate-setting model. Under PDGM, the primary diagnosis places a consumer into one of 12 clinical groupings and the proper reporting of co-morbidities determines whether that episode payment is increased or not (see Medicare and Medicaid Programs; CY 2020 Home Health Prospective Payment System Rate Update; Home Health Value-Based Purchasing Model; Home Health Quality Reporting Requirements; and Home Infusion Therapy Requirements). Each of the 12 clinical groupings has its own episode rate, which is adjusted based on whether a referral came from an institutional setting or a community setting, what the consumer’s functional impairment level is as reported on the Outcome and Assessment Information Set (OASIS), and existing co-morbidities. As a result, there now are a possible 432 HHRGs.

Because the primary diagnosis code determines which clinical grouping the consumer will be placed in and establishes the base episode rate, managers in organizations providing Medicare home health services should plan on some “back and forth” with referral sources. Getting the primary diagnosis correct is critical, but because the episode rates also are adjusted based on functional impairment and co-morbidity, getting complete and accurate documentation is mission critical. Under PPS, six conditions on the OASIS determined adjustment for co-morbidities – and the payment rate. Under PDGM, up to 25 conditions can be reported – one primary and 24 co-morbid conditions. CMS pulls from this information from the claim submitted – not the OASIS document, as in PPS – to determine if a co-morbidity adjustment is warranted.

If your organization refers consumers for home health services, here’s what you need to know. The organizations providing home health services will be clamoring for comprehensive documentation from referral partners. This is due in part to one of the assumptions made by CMS in this reimbursement change – that Medicare home health provider organizations will change their current practices related to therapy and primary diagnosis selection to ensure placement in the highest-paying clinical grouping. CMS is required by law to make behavioral assumptions – and have adjusted rates downward accordingly. Over the last several years, and ongoing, CMS is improving its data mining and predictive modeling capabilities, which is another reason for these payment model changes – and representatives will most certainly know if provider organizations are adjusting their behavior or not.

This is not the only change happening in Medicare benefits. On October 1, 2019, a new Patient Driven Payment Model, or PDPM, for skilled nursing facilities went into effect. (I’ll cover more on the implications of that change in a future piece.)

The implementation of PDGM and PDPM is another signal to provider organization executives in every setting that CMS fully intends to continue down the value path – what used to be called pay for performance – and pay for outcomes, not for volume of services delivered. It’s also a sign that CMS will, sometime in the future, introduce a common consumer assessment form for improved care coordination and population health management. Today, data does not necessarily follow the consumer from setting to setting, but one day it will.

Home health provider organizations and others that provide health care at home to Medicare beneficiaries can expect CMS to keep a close eye on claims going forward. For one, CMS representatives always have believed that home health care delivery is the easiest setting in which to commit fraud and has no fewer than five programs through which fraud and abuse can be identified and pursued (see Preventing Fraud, Waste, And Abuse in Home Health Services And Durable Medical Equipment and The Department of Justice Health Care Fraud & Abuse Control Program Annual Report). When asked, most Medicare beneficiaries will say they prefer to receive care at home. CMS is obligated to ensure that the care provided is appropriate, delivers on quality outcomes, and is cost-effective.

CMS’s stated purpose in changing the factors and weighting of episode payments in SNFs and home health agencies was to put the consumer at the center of all care decisions. Previously therapy minutes in SNFs and therapy visits in home health settings drove payment. It wasn’t the intent, but provider organizations were incentivized to provide more therapy more often to reach the higher payment thresholds. In both PDPM and PDGM, that incentive has been removed. Therapy is not a consideration in the reimbursement calculation in either setting. Instead CMS has formulated a payment model meant to ensure the consumer receives the right care in the right setting and at the level of service that evidence suggests will lead to the best outcome.

For more on home- and community-based service delivery, check out these resources in the OPEN MINDS Industry Library:

  1. The Formula For Success In Long-Term Services & Supports
  2. Leveraging Technology In Community-Based Service Settings
  3. Home & Community-Based Services Toolkit
  4. Key To Community-Based Success—‘Partnerships, Partnerships, Partnerships’
  5. More Community-Based Care + Consumer Empowerment = Self-Directed Care
  6. The Staffing Equation For Community-Based Services
  7. VBR Jumping From Hospital-Centric ACOs To Community-Based Players
  8. A Tale Of Two Community-Based Program Models
  9. Living In The Community—The Landscape For Adults With I/DD
  10. The Most Common Program Innovations Among Specialty Provider Organizations

And join me on February 12 at The OPEN MINDS Integration Summit: New Models For Primary Care, Behavioral Health, & Social Service Integration, featuring John F. Talbot, Ph.D., Vice President of Corporate Strategy at Jefferson Center for Mental Health and OPEN MINDS Senior Associate.


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