2016 Medicare Home Health Final Payment Rule at a Glance

Thoughtware Article Published: Feb 01, 2016
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The Centers for Medicare & Medicaid Services (CMS) issued the 2016 Medicare home health (HH) prospective payment system (PPS) final rule in the November 5, 2015, Federal Register. Summarized below are some of the most significant changes now affecting HH agencies throughout the country.

The final rule implements the third year of a four-year phase-in of the rebasing adjustments to the HH PPS payment rates, which began in 2014, as required by the Affordable Care Act. Over the four-year phase-in, rebasing guidance allows to reduce the HH PPS rates by a maximum of 3.5 percent, or $80.95, per year.

For 2016, the rule increased the market-basket index by 2.3 percent for inflation, which is offset by the multifactor productivity adjustment of 0.4 percent for a net increase of 1.9 percent.

As implemented in the 2015 final rule, the case-mix weights are now being recalibrated each year based on more current data. Claims data from 2014 was used to recalibrate the 2016 case-mix weights, resulting in adjustments ranging from 0.4758 to 2.2475.

In addition, CMS has again included a “case-mix creep” adjustment to reduce rates for what it estimates has been an increase over time in case-mix weight scoring unrelated to patient acuity. To offset this, CMS has implemented a three-year period of 0.97 percent adjustments, beginning in 2016 and running through 2018.

Rural providers will continue to receive a 3 percent payment rate increase, which will continue to apply to all episodes ending before January 1, 2018.

The final rule didn’t change the outlier policy, and the 2 percent sequestration payment reduction will continue through 2016. Providers failing to meet quality reporting requirements, including Outcome and Assessment Information Set reporting and Home Health Care Consumer Assessment of Healthcare Providers and Systems Survey compliance, will face a 2 percent reduction in payment rates.

The 2016 final rule also implements an HH Value-Based Purchasing (HHVBP) pilot program. The pilot is expected to last seven years—ending in 2022—and is mandatory for all Medicare-certified HH agencies in the nine selected states: Arizona, Florida, Iowa, Maryland, Massachusetts, Nebraska, North Carolina, Tennessee and Washington. The program is intended to test whether incentives for better-quality care can improve outcomes in HH services delivery. CMS will use 2016 as the first year for performance measurement and 2015 as the baseline year for performance. The outcome will affect 2018 payments. Performance measures for the HHVBP will be based on both achievement and improvement in quality outcomes. Per CMS, there will be six process measures, 15 outcome measures and three new quality measures.

In addition, the 2015 blend of old and new wage index adjustment values will be phased out. CMS expects to be 100 percent transitioned to the new core-based statistical area (CBSA) designations in 2016. Although many CBSAs see only minor changes in the wage index adjustment from year to year, some areas can experience significant changes.

Overall, the net effect of the rebasing, updates and adjustments comes to an estimated 1.4 percent decrease in 2016 HH payments. This equates to approximately a $260 million reduction in spending in 2016.

The 2016 Medicare HH payment rates are now available on bkd.com.

HH agencies are encouraged to review the final rule and evaluate how these changes will affect their individual agencies. The final rule fact sheet is available here.

Stay tuned for more BKD Alerts on specific topics within this final rule.

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