Calculations Changing for Home Health Outlier Payments

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Rhonda Oakes By Rhonda Oakes 
Regulatory Analyst, Change Healthcare
Calculating outlier payments

CMS plans to change the criteria under which home health organizations receive outlier payments for calendar year 2017. The proposal from the Centers for Medicare & Medicaid Services (CMS) also would cap the number of hours counted toward outlier payments per day to eight hours. The payment change is included in the “CY 2017 Home Health Prospective Payment System Rate Update.”

Outlier payments are based on the estimated cost of an episode, which is calculated by multiplying the national wage-adjusted per-visit payment amounts for each discipline by the number of visits per discipline. Claims analysis for CY 2015 shows a large variation among outlier episodes for length of visit by discipline.

The analysis shows that home health organizations in the 10% category for outlier payments provide shorter, but more frequent, skilled nursing visits than organizations with outlier payments of less than 10% of total payments. Compared to other disciplines, the number of skilled nursing visits was “significantly higher,” leading to the conclusion that outlier payments are being driven by skilled nursing services.

Cost-Per-Unit Approach

Under the proposal, outlier payments would be calculated with a cost-per-unit approach, rather than a cost-per-visit approach. This approach would convert national per-rate visits into 15 minute increments. Each 15 minutes equals one unit. The change is expected to be budget neutral, with outlier payments not to exceed 2.5% of total Home Health Prospective Payment System payments.

According to the proposal, it is believed the change “will result in more accurate outlier payments where the calculated cost per episode accounts for not only the number of visits during an episode of care, but also the length of the visits performed. This, in turn, may address some of the findings from the home health study, where margins were lower for patients with medically complex needs that typically require longer visits, thus potentially creating an incentive to treat less complex patients.”

Comparing payments using both approaches showed that about two-thirds of outlier payments under cost-per-visit still would be made under cost-per-unit. Much like the overall shift in healthcare payments from volume to value, however, it is believed that cost-per-unit will better account for the intensity of each visit rather than the volume of visits performed.

The comparisons showed several vulnerable patient populations that could benefit from the new methodology. Comparing both methods, increased outlier payments were seen for the following services:

  • Needs caregiver assistance
  • Fragile-serious overall status
  • Needs assistance with bathing
  • Parenteral nutrition
  • Poorly controlled cardiac dysrhythmia
  • Poorly controlled pulmonary disorder
  • Surgical wound

Daily Cap on Cost Calculations

In addition to moving to a per-unit calculation for outlier payments, the proposal would limit the amount of care received for determination of outlier payments to 32 units, or eight hours daily. That would include all disciplines.

When care exceeding 32 total units (eight hours) is delivered, the higher per-unit costs are included first. For example, if a patient received 4.5 hours of skilled nursing and a similar amount of home health aide services in the same day, the eight hours would be calculated by using all of the skilled nursing time and 3.5 hours of the aide time.

Analysis using 2015 data showed that only 0.28% of all episodes included more than eight hours of care in a day. However, the proposal noted that data entry errors could have accounted for the minuscule total since visit length is current a factor for payment.

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