Get Ready Home Health: 8% Behavior-Based Rate Cut Under PDGM Is a Blow

Posted on 30 Jul, 2019 |comments_icon 0|By Rebecca L. Johnson

CMS defends cut by claiming HHAs will change coding and visit practices under Patient-Driven Groupings Model.

When you’ve got a major payment model change like the Patient-Driven Groupings Model coming Jan. 1, a downward rate adjustment based on expected behavioral changes does not make your job easier. But the CMS 2020 Home Health Prospective Payment System (HH PPS) proposed rule indicates that rate cut is approaching, and it’s even bigger than expected.

The HH PPS proposed rule, published in the July 18 Federal Register, announced that CMS plans to adjust rates downward 8.01 percent to make up for behaviors CMS assumes HHAs will employ under the new payment system. This adjustment goes deeper than the 2019 proposed rule estimate of 6.42 percent. The proposal came despite home health industry efforts to fight the cut by sending comment letters, enlisting members of Congress to introduce legislation to avert the cut, and engaging U.S. senators to write a letter to CMS Administrator Seema Verma.

CMS argues the cut is warranted based on expectations that HHAs will change their behavior under PDGM:

    • CMS predicts in the 2020 rule that HHAs will “change their documentation and coding practices” and “put the highest paying diagnosis code as the principal diagnosis code in order to have a 30-day period of care be placed into a higher-paying clinical group.”
    • CMS also states HHAs are likely to “provide 1 to 2 extra visits to receive a full 30-day payment” rather than a Low Utilization Payment Adjustment (LUPA). Agencies will do this for one-third of LUPAs that are one to two visits away from the full period payment, the agency adds.
    • CMS also assumes that comorbidity coding will increase because OASIS reports only five secondary diagnoses, while the home health claim under PDGM will report 24 secondary diagnoses.

Blame Primary Diagnosis Upcoding Speculation

Here’s the CMS math on the rate cut: The agency now estimates that the LUPA-avoiding behaviors would increase payments 1.86 percent, the principal diagnosis coding would increase payments 5.91 percent, and the comorbidity code increases would bump up payments 0.37 percent, the 2020 rule indicates. After figuring in some “overlap and interactions between the behavior assumptions,” CMS puts the new adjustment at 8.01 percent.

CMS’s “past experiences” show “there is a substantive connection between the data and the behavior assumptions made,” the agency says in reply to the heavy criticism it received in the 2019 rulemaking cycle. The primary diagnosis coding assumption “is based on decades of past experience under the case-mix system for the HH PPS and other case-mix systems,” the agency insists in the 2020 rule.

For the comorbidity coding assumption, “ICD-10 coding guidelines require reporting of all secondary (additional) diagnoses that affect the plan of care,” CMS points out. “Because the comorbidity adjustment can increase payment by up to 20 percent, it is a reasonable assumption that HHAs would encourage the accurate reporting of secondary diagnoses affecting the home health plan of care to more accurately identify the conditions affecting resource use,” the agency insists.

And when CMS launched HH PPS in 2000, it expected LUPAs to account for 16 percent of episodes. Now, that figure is 7 percent. “It appears that HHAs changed their practice patterns such that, upon implementation of the HH PPS, more than half of 60-day episodes that would have been LUPAs received the full 60-day episode payment amount,” CMS concludes.

Further, under PDGM, many of the 432 case mix groups have a LUPA threshold of only two visits, CMS says. “We believe it to be a reasonable assumption that some HHAs would provide a second visit to receive the full 30-day payment amount” in those cases, the rule states.

CMS maintains that it must implement the cuts due to a requirement in law to make PDGM budget-neutral. (See Eli’s Home Care Week for more information about how CMS claims the 8 percent behavioral cut factors into their estimated 1.3 percent increase overall.) CMS also points to the Medicare Payment Advisory Commission’s support of the cut to bolster its position.

What Does the Home Health Industry Say?

Industry experts remain unpersuaded by the agency’s arguments.

The National Association for Home Care & Hospice is “very concerned” by the cut, NAHC President William Dombi says in a statement. “Rate reductions based on behavioral changes that have not yet occurred create significant dangers for home health patients,” Dombi warns. “The risks of disruptions in access to care are compounded by the institution of a dramatically modified payment system model along with an across-the-board rate cut that is based on conjecture.”

“An over 8 percent reduction in payment based on an assumption that home health agencies will chase the dollars via upcoding, comorbidity, and utilization changes seems excessive, when CMS has full ability to make later corrections if the other changes are found to be inaccurate or insufficient to obtain budget neutrality,” says Joe Osentoski, reimbursement recovery & appeals director with Quality in Real Time in Sterling Heights, Michigan.

This rule provision may even create “a perception that the adjustment actually gives license to agencies to behave in such a way that meets the CMS expectation,” worries reimbursement expert M. Aaron Little with BKD in Springfield, Missouri.

Face the Reality of This PDGM Rate Cut

The industry now must turn to its elected representatives to pass legislation that will prevent the cut from taking place in 2020, but that may be an uphill battle.

CMS’s proposed rule comments defending the assumptions seem “intended to make it clear that they are not backing down on this,” says attorney Robert Markette Jr. with Hall Render in Indianapolis. They also seem “aimed, at least in part, at Congress and trying to convince Congress to stand aside on this issue.”

And CMS may be just getting started with its behavioral adjustment cuts. “If CMS under-estimates the reductions to the 30-day payment amount necessary to offset behavior changes and maintain budget neutrality, larger adjustments to the 30-day payment amount would be required in the future, by law, to ensure budget neutrality,” the rule states.

“Likewise, if CMS overestimates the reductions, we are required to make the appropriate payment adjustments accordingly.” In other words, CMS would have to increase payments. Industry experts say that would be highly unlikely, however.

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Rebecca L. Johnson
Executive Editor, Newsletters

Rebecca has covered the ever-evolving home health and hospice markets for 20 years, starting about the time the Balanced Budget Act ushered in the devastating Interim Payment System. Under a myriad of payment and regulatory changes, Rebecca has helped home health agencies and hospices thrive and stay compliant. She has also covered markets ranging from internet banking to managed care to physicians. She is an expert on legislation, regulation, reimbursement, operations, business strategies, and more. Rebecca received her Bachelor of Science degree from University of Illinois Urbana-Champaign.

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