On June 27, 2013, CMS announced proposed changes to the Medicare home health prospective payment system (HH PPS) for calendar year 2104.  Overall, CMS projects that Medicare payments to home health agencies in calendar year 2014 will be reduced by 1.5 percent, or $290 million.  To get there, CMS proposes, among others, the following:

• ICD-9 Grouper Refinements: As part of its work to transition to ICD-10-CM, CMS is proposing to remove 170 ICD-9-CM diagnosis codes from the HH PPS Grouper.  The 170 codes are comprised of two categories.  The first category includes codes that, based on clinical judgment, reflect conditions that are “too acute,” meaning that the condition is not appropriately cared for in the home setting.  The second category includes codes that reflect conditions that would not require home health intervention, would not impact the home health plan of care, or would not result in resource use when providing home health services to the patient.  The vast majority of the 170 codes fall into the first category of “too acute” for home health care.  If this proposal is finalized, the codes will be removed from the Grouper effective January 1, 2014.
• ICD-10 Conversion Schedule: CMS proposes to replace ICD-9-CM codes with ICD-10-CM codes in the HH PPS Grouper beginning October 1, 2014.  CMS intends to post a draft ICD-10-CM HH PPS Grouper on the CMS website on or before July 1, 2014.  
• Rebasing the National 60-day Episode Rate: As required by Section 3131(a) of the Affordable Care Act (ACA), CMS must apply an adjustment to the national, standardized 60-day episode payment rate and other amounts to reflect factors such as changes in the number of visits in an episode, the mix of services in an episode, the level of intensity of services in an episode, the average cost of providing care per episode and other relevant factors.  This “rebasing” must be phased-in over a four-year period in equal increments, not to exceed 3.5 percent of the amount in any given year, and be fully implemented by CY 2017.  To fulfill this mandate, CMS reports having performed extensive analysis of cost report and claims data.  Based on that analysis, CMS proposes to reduce the national, 60-day episode rate by 3.5 percent in each year CY 2014 through CY 2017.  The 60-day rate for CY 2013 is $2,963.65.  The proposed rate for CY 2014 is $2,860.20.  According to CMS, the rate reduction reflects fewer visits per episodes since establishment of HH PPS in 2000. 
• Rebasing the LUPA Per Visit Payment Amounts: For home health episodes with four or fewer visits, Medicare pays on the basis of a national per-visit amount by discipline (i.e., skilled nursing, home health aide, physical therapy, occupational therapy, speech-language pathology, and medical social services).  These per visit amounts by discipline are known as “Low Utilization Payment Adjustment,” or LUPA payments.  CMS proposes increasing LUPA payments by 3.5 percent every year from 2014-2017.  The proposed CY 2014 rates are set forth below. 

CMS also intends to update the LUPA add-on payment, which is used to account for the front-loading of costs in an episode of care.  Rather than use a single LUPA add-on payment amount, CMS would use three add-on factors.  CMS proposes to multiply the per-visit amount for the first skilled nursing, physical therapy, or speech-language pathology visit in LUPA episodes that occur as the only episode or an initial episode in a sequence of adjacent episodes by 1 + the proportional increase in minutes for an initial visit over non-initial visits.  The proposed LUPA add-on factors are: 1.8714 for skilled nursing; 1.6841 for physical therapy; and 1.6293 for speech-language pathology.

• Rebasing the Nonroutine Medical Supplies (NRS) Conversion Factor: The NRS conversion factor is used to determine payment amounts for NRS by episode.  CMS is proposing to reduce the nonroutine medical supplies (NRS) conversion factor in each year from 2014-2017 by 2.58 percent.  The conversion factor 2013 is $53.97.  The proposed NRS conversion factor for 2014 is $53.84. 
• Adding Two Quality Measures: CMS is proposing to add two claims-based measures to its quality reporting program requirements: (1) Rehospitalization during the first 30 days of home health; and (2) Emergency Department Use without Readmission during the first 30 days of home health measures.

Comments on the proposed rule changes are due to CMS by August 26, 2013.

To access CMS’s press release and the inspection copy of the proposed rule, click here and here.

Reporter, Tracy Weir, Washington, D.C., +1 202 626 2923, tweir@kslaw.com.