CMS has released its proposed calendar year (CY) 2016 Medicare home health prospective payment system (HH PPS) update, which CMS estimates would reduce overall Medicare payments to home health agencies (HHAs) by $350 million in 2016 compared to 2015 levels. This decrease reflects a 2.3% home health payment update percentage (derived from a 2.9% market basket update minus a 0.6% multifactor productivity adjustment), that is more than offset by (i) a 1.72% proposed reduction to account for nominal case-mix coding intensity growth, and (ii) a -2.5% rebasing adjustment (the third year of a 4-year phase-in). The proposed CY 2016 national, standardized 60-day episode payment rate would be $2,938.37; the rate for an HHA that does not submit the required quality data would be reduced by 2 percentage points to $2,880.92. The proposed rule also would recalibrate HH PPS case-mix weights and update the CY 2016 home health wage index.

CMS also is proposing to establish a 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. Under this proposal, CMS would randomly select nine states representing each geographic area in the nation (the states initially selected under this methodology are Massachusetts, Maryland, North Carolina, Florida, Washington, Arizona, Iowa, Nebraska, and Tennessee – but this is subject to change in the final rule). All Medicare-certified HHAs delivering services within those states would be required to compete for payment adjustments based on quality performance (both achievement and improvement). CMS explains that it is proposing to mandate participation by HHAs in the selected states because “in our experience, Medicare-providers are generally reluctant to participate voluntarily in models in which their Medicare payments could be subject to possible reduction,” which in turn causes self-selection bias in statistical assessments that may present challenges in evaluating the model. The baseline year for the new program would be 2015, and the first performance year would be 2016. The maximum quality-based payment adjustment (upward or downward) would be 5% in each of the first two payment adjustment years (2018 and 2019), 6% in the third payment adjustment year (2020), and 8% in the fourth and fifth years (2021 and 2022). The proposed rule includes a detailed discussion of the initial set of proposed HHVBP measures, which include both process and outcome measures, and the scoring/payment adjustment methodology. There would be no aggregate increase or decrease in payments to HHAs competing in the model, but CMS projects an estimated $380 million in total savings from CY 2018 through 2022 attributable to a reduction in unnecessary hospitalizations and skilled nursing facility usage as a result of these home health quality improvements. CMS invites comments on the elements of the proposed HHVBP Model.

In addition, CMS proposes updates to the Home Health Quality Reporting Program (HH QRP), including the establishment of 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). CMS seeks feedback on future cross-setting measures under the IMPACT Act. Likewise, CMS proposes establishing a minimum threshold for submission of Outcome and Assessment Information Set (OASIS) assessments for purposes of quality reporting compliance, and submission dates for the Home Health Care Consumer Assessment of Healthcare Providers and Systems Survey (HHCAHPS).

The official version of the rule will be published on July 10, 2015. Comments will be accepted until September 4, 2015.