CMS published its final CY 2016 Medicare Home Health Prospective Payment System (PPS) rule on November 5, 2015. CMS projects that overall Medicare payments to home health agencies (HHAs) will be reduced by 1.4% — or $260 million - in CY 2016 compared to 2015 levels as a result of the policies finalized in the rule.

The final 2016 home health payment update is 1.9%, reflecting a 2.3% home health market basket update that is reduced by a 0.4% multifactor productivity adjustment. This update is offset, however, by: (i) a 0.97% reduction to account for estimated case-mix growth unrelated to increases in patient acuity (this “nominal case-mix growth” adjustment also will be applied in CYs 2017 and 2018), and (ii) a -2.4% rebasing adjustment (the third year of a four-year phase-in). The final CY 2016 national, standardized 60-day episode payment rate is $2,965.12; the rate for an HHA that does not submit required quality data is reduced by 2 percentage points to $2,906.92. 

CMS also is finalizing its new Home Health Value-Based Purchasing (HHVBP) Model, which is intended to shift from volume-based payments to a framework that promotes the delivery of higher quality care to Medicare beneficiaries. Beginning January 1, 2016, CMS will implement the HHVBP model in the following nine states representing each geographic area in the nation: Massachusetts, Maryland, North Carolina, Florida, Washington, Arizona, Iowa, Nebraska, and Tennessee. All Medicare-certified HHAs delivering services within these states will be required to compete for payment adjustments based on quality performance. The baseline year for the new program is 2015, and the first performance year is 2016. The maximum quality-based payment adjustment (upward or downward) will be 3% in 2018 (down from 5% in the proposed rule), 5% in 2019, 6% in 2020, 7% in 2021, and 8% in 2022. The final rule includes a detailed discussion of the initial set of HHVBP measures (six process measures, 10 outcome measures, and five Home Health Care Consumer Assessment of Healthcare Providers and Systems Survey (HHCAHPS) measures), and the scoring/payment adjustment methodology. While there will be no aggregate increase or decrease in payments to HHAs competing in the model, CMS projects an estimated $380 million in total savings in CY 2018 through 2022 from the HHVBP program. Specifically, based on what CMS contends is a “very conservative savings estimate,” CMS expects a 6% annual reduction in unnecessary hospitalizations and a 1% drop in skilled nursing facility admissions as a result of greater quality improvements in the home health industry.

In addition, the final rule updates the Home Health Quality Reporting Program (HH QRP) to establish a standardized “cross-setting measure” related to skin integrity as authorized by the Improving Medicare Post-Acute Care Transformation Act of 2014 (the IMPACT Act). The final rule also establishes a minimum threshold for submission of Outcome and Assessment Information Set (OASIS) assessments for purposes of quality reporting compliance. The initial threshold is set at 70% of all patients with episodes of care occurring during the reporting period starting July 1, 2015, increasing by 10 percent in each of the subsequent periods (July 1, 2016 and July 1, 2017) to reach 90%.