National Government Services, Inc. Medicare Monthly Review Part A and B
A Combined Part A and Part B Newsletter

Home Health Prospective Payment System (HH PPS) Refinement and Rate Update for CY 2008

MLN Matters Number: MM5879
Related Change Request (CR) #: 5879
Related CR Release Date: February 7, 2008
Effective Date: January 1, 2008
Related CR Transmittal #: R1443CP
Implementation Date: March 7, 2008

Provider Types Affected
Home Health Agencies (HHA) who bill regional home health intermediaries (RHHI) or Medicare Administrative Contractors (A/B MAC) for services provided to Medicare beneficiaries.

What You Need to Know
CR 5879, from which this article is taken, updates the 60 day national episode rates and the national per-visit amounts under the home health prospective payment system (HH PPS) for CY 2008. It also refines the case mix methodology and rebases and revises the home health market basket for CY 2008.

For CY 2008 (Effective January 1, 2008), Medicare home health payments for HHAs that report quality data (described below) will be increased by 3.0 percent, while payments for those HHAs that do not report quality data will be increased 1 percent.

Background
Section 5201 of the Deficit Reduction Act (DRA) requires that Medicare home health payments be updated by the applicable market basket percentage increase for CY 2008. CR 5879, from which this article is taken announces that this increase for CY 2008 is 3.0 percent (effective January 1, 2008).

CR 5879 also announces that the Centers for Medicare & Medicaid Services (CMS) is revising:

• The fixed dollar loss ratio (which is used in the calculation of outlier payment) from 0.67 in CY 2007 to 0.89 for CY 2008. The loss-sharing ratio of 0.80 remains unchanged.
• The labor and non-labor percentages applied in the wage-index adjustment (in addition to the new case-mix adjustment that will be applied to 60-day episode payments).
  
  The labor portion applied will be .77082, and the non-labor portion applied will be .22918. The labor adjustment to the PPS rates will continue to be based on the site of service of the beneficiary as set forth in 42 CFR 484.220 and 484.230.

Notes: The labor adjustment is applied to both 60-day episode and per-visit payments and the CY 2008 payment rates apply to episodes that end on or after January 1, 2008, and before January 1, 2009.

CR 5879 also discusses the HHAs’ reporting of quality data.

Section 5201 of the DRA also requires that HHAs report quality data (as determined by the Secretary of Health and Human Services (HHS)), or be subject to a 2 percent reduction to the home health market basket percentage increase applicable to HH PPS payments for CY 2008 (as described above).

The following sets of tables display the payments to HHAs that do report the required quality data (tables 1, 2, and 3), and to those that do not (tables 4, 5, and 6).

Payments to HHAs That Do Report Required Quality Data

1. National Standardized 60-Day Episode Payment Rate for Episodes Beginning in CY 2007 and Ending in CY 2008 Made To HHAs That Do Report Quality Data

The annual CY 2008 update is for all episodes that end on, or after, January 1, 2008 and before January 1, 2009. Therefore, for episodes that begin in CY 2007 and end in CY 2008, the new 153 home health resource group (HHRG) case-mix model (and associated Grouper) will not yet be in effect; and these episodes will be paid at the rate of $2,337.06, and be further adjusted for wage differences and for case-mix, based on the CY 2007, 80 HHRG case-mix model.

This payment methodology appropriately recognizes (by paying $2,337.06 for episodes that begin in CY 2007 and end in CY 2008) that these episodes are entitled to receive the CY 2008 home health market, even though the new case-mix model will not yet be in effect. This payment is displayed in Table 1.

Table 1
National Standardized 60-Day Episode Payment Rate for Episodes Beginning in CY 2007 and
Ending in CY 2008 (HHAs That Report Quality Data)

2. CY 2008 National Standardized 60-Day Episode Payment Rate for Episodes Beginning and Ending in CY 2008
In order to establish new rates based on a new case-mix system, the CY 2007 national standardized 60-day episode payment rate is increased by the rebased and revised home health market basket update (3.0 percent) ($2,339.00 multiplied by 1.030 = $2,409.17). The dollars associated with the outlier targeted estimates are then put back into the base rate.

In the July 3, 2000 HH PPS final rule (65 FR 41184), the base rate was divided by 1.05 to account for the outlier target policy (multiplying the $2,409.17 by 1.05, resulting in $2,529.63). This amount is then reduced to pay for each of CMS final policies (as noted previously, based upon the change to the low utilization payment adjustments (LUPA) payment, the non-routine supplies (NRS) redistribution, and the elimination of the Significant Change In Condition (SCIC) policy, the amounts needed to account for outlier payments, and the reduction to account for the 2.75 percent case-mix change adjustment). Therefore, the national standardized 60-day episode payment rate is reduced by $5.51, $44.38, $10.61, $123.09, and $75.72, respectively; and the CY 2008 updated national standardized 60-day episode payment rate, for episodes beginning and ending in CY 2008, is $2,270.32. These episodes would be further adjusted for case-mix based on the 153 HHRG case-mix model for episodes beginning and ending in CY 2008. As noted in the August 29, 2007 final rule with comment, the case-mix weights were increased by a budget neutrality factor of 1.238848031. This payment is displayed in Table 2.

Table 2
CY 2008 National Standardized 60-Day Episode Payment Rate for Episodes Beginning and Ending in CY 2008
(HHAs That Report Quality Data)

3. Low Utilization Payment Adjustments (LUPA) and Outlier Payments.
The national standardized per-visit amounts are used to calculate LUPAs and outlier payments. These payments are displayed in Table 3.