On October 29, 2015, the Centers for Medicare & Medicaid Services (CMS) issued the final home health prospective payment system (PPS) rule for calendar year (CY) 2016. CMS projects that the impact of the final rule will result in a 1.4 percent (or $260 million) reduction in Medicare payments to home health agencies (HHAs) from 2015 payment levels. 

The final rule reflects a 2.3 percent market basket update and a 0.4 percent percentage point cut for productivity, as mandated by the Affordable Care Act (ACA). In addition, CMS finalized a 0.97 percent reduction to the national, standardized 60-day episode payment rate for CY 2016, CY 2017, and CY 2018 to account for nominal case-mix growth between CY 2012 and CY 2014. The final rule also implements the third year of the four year phase-in of the rebasing adjustments to the home health payment rates as required by the ACA with a 2.4 percent cut.

The final rule also implements the Home Health Value-Based Purchasing (HHVBP) model in nine states (Massachusetts, Maryland, North Carolina, Florida, Washington, Arizona, Iowa, Nebraska, and Tennessee) beginning January 1, 2016. Under the HHVBP Model, Medicare-certified HHAs in those nine states will be required to compete for payment adjustments to their current PPS reimbursements based on quality performance. The baseline year for the new program will be 2015, and the first performance year will be 2016. Payment adjustments for each year will be calculated based on a comparison of how well each HHA performed during the performance period for that year with its performance on the same measures in 2015. The maximum quality-based payment adjustment will be 3 percent in 2018, 5 percent in 2019, 6 percent in 2020, 7 percent in 2021, and 8 percent in 2022.

The final rule was published in the Federal Register on November 5. It can be viewed here.