On July 6, CMS issued a pre-publication copy of its Proposed Home Health PPS CY 2016 Rule (the “Proposed Rule”). The Proposed Rule addresses a number of updates and changes for Home Health PPS in 2016. The primary issues in the Proposed Rule are the annual update to the standard nationalized payment rate, CMS’s assessment of rebasing its impact in continuing forward, implementation of a new coding creep take back and some revisions to home health quality reporting. However, the most dramatic change in the Proposed Rule is the project for value-based purchasing in home health.

Rebasing Continues

In the Proposed Rule, CMS assesses the impact of the rebasing to determine whether or not it continues to be appropriate. After reviewing data, CMS concludes that the rebasing amount, based on CY 2013 data, should actually be a 5.02 percent reduction in home health reimbursement in order to properly bring reimbursement in line with costs. However, the ACA limits rebasing to a reduction of no more than $80.95 per year. CMS also reviewed data on access to determine the impact rebasing has had on home health availability. In its review of the data, CMS concludes that outside of the sixth highest utilization states, there has been a net loss of one home health agency since rebasing started, although in these states there has been a reduction in home health utilization. CMS attributes this reduction to a reduction in hospital and SNF utilization, not rebasing.

In contrast, CMS found that in the six highest utilization states, there has been a 3.7 percent decrease in home health agencies and a 4.3 percent decrease in home health patients. CMS recognizes this is a significant decline. However, CMS believes the reason for the decline in the six highest utilization states is the moratoria imposed in Florida, Illinois and Texas. CMS concludes that this decline is not a result of rebasing.

Because it concludes rebasing has not impacted home health agency availability or patient access, CMS proposes to continue with the rebasing reduction originally proposed last year. Although CMS thinks a higher number is appropriate, CMS announces it will continue with the proposed rebasing reduction of $80.95. This is the largest rebasing adjustment it may impose under the ACA.

CMS proposes to recalibrate the case mix waits again this year, which will result in changes across the board. CMS then returns to another industry favorite – nominal case mix growth. CMS did not address this last year because of rebasing. However, CMS has concluded that over the last two years, nominal case mix growth was 3.41%. Because of this growth, CMS proposes a 1.72 percent reduction in reimbursement for CY 2016 and CY 2017.

When all of the changes are factored into CY 2016, CMS predicts the impact of these changes will be to reduce home health payments in 2016 by 1.8 percent, which translates into a $350,000,000 reduction in home health reimbursement.

Home Health Value-Based Purchasing

Although the significant cut to home health reimbursement is a concern to providers, home health value-based purchasing (“HHVBP”) is a bigger issue in the Proposed Rule. CMS sought comments from the industry on value-based purchasing in home health in last year’s rule. CMS notes that none of the comments they received provided any strong arguments against going forward with the HHVBP proposal. Therefore, in 2016, it plans to implement a pilot HHBVP program. The initial project will run from 2016 to 2022 and will be limited to nine states. The states included in the pilot project are Massachusetts, Maryland, North Carolina, Florida, Washington, Arizona, Iowa, Nebraska and Tennessee. These states may change if the selection methodology changes based on comments it receives. All providers in the nine states will be required to participate. Participation is based upon Medicare provider numbers. For a provider that operates in both a state(s) covered by the project and non-project state(s), the only provider numbers impacted by the HHVBP proposal will be the provider numbers in the nine listed states. CMS notes that there is an exception for providers in states with reciprocal agreements, but this is an exceedingly small group of providers.

The proposal will rank providers against other providers within their state. Within each state, the providers will be divided into two groups – a higher volume cohort and a lower volume cohort. This is to ensure that providers are competing against similar providers. Data for measuring performance on the defined benchmarks will be collected beginning CY 2016 and for each year thereafter. Providers will be given quarterly reports showing their performance results. The quarterly reports will be issued in July for Q1 data, October for Q2 data, January for Q3 data and April for Q4 data. Each August, providers will receive their annual report showing their performance for the preceding calendar year, their adjustment and the rationale for the adjustment. The adjustment will then be applied beginning January 1 of the next year, although CMS does mention the possibility of more frequent adjustments.

Scoring will be based upon 29 metrics. There are 25 metrics selected from current measures. In addition, CMS is proposing four new measures. For the 25 metrics, providers will be able to score points not only for absolute performance relative to benchmarks but also for improvement in relation to each provider’s own baseline during the period. The higher of the two-point totals will be used to measure performance. Providers’ performance will be ranked against other providers in their state cohort to determine whether they receive a positive or negative adjustment. Because performance and adjustments are determined based upon comparisons with other providers, a provider who performs well but not as well as others in their cohort could still, conceivably, receive a negative adjustment.

The adjustments will begin to take effect in 2018 and are perhaps the most concerning aspect of this program. The adjustments start out in CY 2016 and CY 2017 at +/- 5 percent. In calendar year 2020, the adjustment will be +/- 6 percent and then in CY 2021 and CY 2022 it would be +/- 8 percent. These adjustment percentages are significantly larger than other Medicare value-based purchasing programs. Providers who are measured on the low end of the performance spectrum, in relation to the agencies, may be subject to significant negative adjustments, and they will find it difficult to survive.