CMS Issues Home Health PPS Update, Case Mix Adjustment

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Rhonda Perrin Oakes, RN, CHPN 
Regulatory Analyst, Change Healthcare
CMS Issues Home Health PPS Update, Case Mix Adjustment

The Centers for Medicare and Medicaid Service (CMS) released the CY2018 Medicare Home Health Prospective Payment System (HHPPS) Rate Update on July 24, 2017. The proposed rule includes refinements to the CY2019 case mix adjustment, as well as information on the Home Health Value-Based Purchasing Mode (HHVBP) and requirements for Home Health Quality Reporting.

Overall, the rule is a combination of expected rate proposals, a recalibration of some case mix weights, and a tweaking of the VBP pilot program. Most notably, CMS has advanced the Home Health Groupings Model (HHGM).

Here’s a closer look at the major proposals:

Home Health Groupings Model

We have been watching closely to determine whether CMS would include the Home Health Groupings Model (HHGM) as a proposal for 2018. The National Association for Home Care & Hospice (NAHC) and others have advocated that CMS take a cautious approach to implementing anything in the nature of HHGM. CMS proposes to implement HHGM, but not until 2019. The industry is concerned regarding the model, and NAHC is preparing comments to submit to CMS.  I encourage home health organizations to access the HHGM tool, which was created to help organizations understand how the proposed payment grouping parameters would be used to determine case-mix assignments.

The proposal would be one of the most radical changes in home health payment in years. The model proposes 30-day payment periods, the elimination of the therapy visit volume payment determinant in the current model, and an entirely different case mix model focused on patient characteristics.


A 1% payment update is offset with the third year of a 0.97% case mix creep adjustment, leaving a net of 0.03%. This is the first rate increase since 2013 as the four-year rate rebasing concludes in 2017. CMS estimates that Medicare spending on home health services in 2018 will be $80 million less than would occur without the adjustments, due to some modifications in the current case mix weights.

The proposed base episode rate for 2018 is set out at $3038.43. In contrast, the 2017 base rate is $2,989.97. However, the base rate is only half of the story. CMS proposes to recalibrate the case mix weights again in 2018, leading to a budget neutrality adjustment of 1.0159. The base rates do not show a 0.03% change because of the case mix weight recalibrations that alter the second part of the payment rate calculation. As such, an apples-to-apples comparison between 2017 and 2018 is not easily done.

CMS estimates that the net result of all of its rate proposals is an $80 million reduction in Medicare payments to home health organizations in 2018.


The rate change also affects Low-Utilization Payment Adjustment (LUPA) payment rates. Those rates will rise 1% as the case mix creep adjustment does not affect those per visit reimbursements. Non-routine medical supply rates (NRS) also increase by 1%. The NRS conversion factor changes from $52.50 in 2017 to $53.03 in 2018.

Outlier payments, rural add-on

With respect to outlier payments, CMS proposes to keep the same 80% loss ratio that has been in use since the beginning of HHPPS and maintain the fixed-dollar loss ratio at 0.55. This would reduce the number of episodes that qualify for outlier payments. CMS indicates that such a change is needed to keep outlier spending within the 2.5% spending limit.

The 3% Rural Add-On is not included in the 2018 rate proposal, as it expires at the end on 2017. Legislation is currently pending to extend the add-on for five years. Congress is expected to take up that legislation in the fall.

The proposal continues the 2% rate reduction for organizations that fail to comply with the quality data submission requirements that involve Outcome and Assessment Information Set (OASIS) and Home Health Care CAHPS Survey (HHCAHPS).

Value-based purchasing

The Home Health Value-Based Purchasing (HHVBP) program is moving forward with a proposed pilot, an effort to legislate VBP in all of post-acute care is going on as well. The HHVBP is estimated to save Medicare $378 million in reduced spending for inpatient hospitalization and SNF stays by 2022.

Competing VBP models indicate a potential for conflict, making for an interesting health policy dynamic to see what model prevails. Nevertheless, the signals are clear that VBP is a contender for serious payment reform in Medicare.

For more home health regulatory news updates, visit our Regulatory News blog section.

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