Industry Insights

CMS Releases Proposed Medicare Home Health Payment Rule

September 2017
Author:  Eimee Wakefield

Eimee Wakefield

Senior Consultant II


910 E. St. Louis Street, Suite 200
P.O. Box 1190
Springfield, MO 65801-1190 (65806)


The Centers for Medicare & Medicaid Services (CMS) recently released the proposed Medicare home health (HH) payment rule for 2018. The proposed rule addressed three major topics:  payment rate adjustments, value-based purchasing (VBP) and the Home Health Grouper Model (HHGM).

Payment Rate Adjustments

CMS has estimated an $80 million reduction in HH Medicare payments in 2018. The market basket index inflation rate is proposed to see its first rise since 2013, increasing by 1 percent, and the annual productivity adjustment is proposed to end. The 1 percent increase is offset by the case-mix creep adjustment of 0.97 percent, which results in an overall increase of 0.03 percent. The sequestration payment reduction of 2 percent is expected to continue.

Base rates per episode are proposed at $3,038.43 for 2018; however, CMS plans recalibration of case-mix weights in 2018, resulting in a budget neutrality adjustment of 1.0159. Consequently, the proposed overall 0.03 percent increase is difficult to truly predict due to this recalibration.

Low utilization payment adjustment and nonroutine medical supply rates are proposed to see an increase of 1 percent, as these rates won’t be affected by the case-mix creep adjustment.

Outlier payment calculations are expected to continue using the 80-percent loss ratio, and the fixed-dollar loss ratio also is proposed to stay at 0.55.

The proposed rule doesn’t include the 3-percent rural add-on payment that ends in 2017. The rural add-on could be extended—Congress will vote on this in the fall.

Quality data submission requirements will continue to affect payment rates at a 2-percent reduction in payment for HH agencies that don’t comply.

Value-Based Purchasing

The HH VBP pilot program is leading the way for Medicare payment reform. VBP is estimated to reduce Medicare spending by $378 million for inpatient hospitalization and skilled nursing facility stays by 2022. While CMS continues to move forward with VBP, legislation over the model is still pending.

Home Health Grouper Model

The most significant matter to come from the proposed rule is the implementation of the HHGM, which proposes to implement 30-day payment periods, eliminate therapy visit volume payment determinants found in the current model and change to a new case-mix model focused on patient characteristics. CMS proposed waiting to implement HHGM until 2019.

While unanswered questions remain around the prospect of HHGM implementation, it would significantly change the industry. Additional analysis is forthcoming to dig deeper into this proposed model.

The proposed rule can be viewed here.

For further information, please contact your BKD advisor.

BKD LinkedIn BKD Twitter BKD Youtube BKD Google Plus