CMS Proposed Rule for Home Health Prospective Payment System Seeks to Protect Beneficiaries in the Medicare Program from Potential Fraud and Abuse

11 August 2009 Publication
Authors: Maria E. Gonzalez Knavel

American Health Lawyers Association

By Maria E. Gonzalez Knavel

In the August 6, 2009, edition of the Federal Register, the Centers for Medicare & Medicaid Services (CMS) published a proposed rule updating the Home Health Prospective Payment System (HH PPS). The proposed rule will update the following, effective January 1, 2010:

  • National standardized sixty-day episode rates;
  • National per-visit rate;
  • Non-routine medical supply conversion factor; and
  • Low utilization payment amount (LUPA) add-on payment amount.

The proposed rule also seeks to change the HH PPS outlier policy and to require the submission of OASIS data as a condition of payment under the HH PPS. CMS proposes additional program safeguards to improve the provider enrollment process for home healthcare agencies (HHAs) in an effort to improve the quality of care that Medicare beneficiaries receive from HHAs and reduce Medicare's vulnerability to fraud. Further, the proposed rule seeks to clarify the meaning of the term "skilled services" in making eligibility decisions for coverage under the home health benefit and the Conditions of Participation for HHAs.

CMS is proposing a 2.2% home health market basket update to the HH PPS rates for calendar year (CY) 2010. Under the proposed rule, HHAs will also experience a change in the additional payments (outlier payments) they receive for sixty-day home health episodes of care that carry unusually high costs. CMS is proposing to cap outlier payments at 10% per agency and target total aggregate outlier payments at 2.5% of total HH PPS payments. Presently, the target for outlier payments is 5% of total HH PPS payments. Additionally, CMS proposes to reduce the fixed dollar loss (FDL) ratio to 0.67 for CY 2010. CMS believes the combination of a 10% agency level outlier cap, a reduced FDL ratio of 0.67, and allowing for future growth in outlier payments results in a projected target outlier payment outlay of approximately 2.5% of the total HH PPS payments in outlier payments. CMS states its analysis demonstrates that approximately 2% of HHAs may experience an average 7.9% decrease in payments. CMS contends this decrease will be mitigated by a 2.5% increase in the HH PPS rates, as a result of lowering the outlier pool from 5% to 2.5%.

The proposed outlier policy change is a CMS response to overwhelming evidence showing that a small but growing number of home health providers have been abusing the system. CMS expressed concern regarding the increased number of home health agencies and the increasing amount of payments for home health services, relative to the number of beneficiaries, being provided in certain parts of the country (e.g., southern Florida, Texas, and California). CMS is further seeking to reduce its vulnerability to fraud, abuse, and improper payments by proposing to add payment and provider enrollment safeguards.

In the proposed rules, CMS proposes adding a new version of OASIS, called OASIS-C, to collect data on all episodes of care beginning on or after January 1, 2010. For CY 2010, CMS will evaluate home healthcare quality by continuing to rely on the submission of OASIS assessment and publicly report the twelve nationally accepted and approved quality measures through the CMS Home Health Compare website. HHAs that submit required quality data will receive payment based on the full proposed home health market basket update of 2.2% for CY 2010. The proposed home health market basket percentage would be reduced by 2% to 0.2% for CY 2010 for those HHAs that do not submit the quality data. CMS is proposing to expand the home health quality measures reporting requirements to include the Consumer Assessment of Healthcare Providers and Systems Home Health Care Survey (HHCAHPS) (pending Office of Management and Budget approval). CMS proposes that beginning in the first quarter of CY 2010, all Medicare certified HHAs will begin to collect the HHCAHPS survey data in accordance with the Protocol and Guidelines Manual. HHAs must contract with approved HHCAHPS survey vendors to conduct the surveys on behalf of HHAs.

In response to suggestions by MedPAC, the HHS Office of the Inspector General, and Medicaid state agencies, CMS is clarifying the Medicare home health coverage criteria regarding the skilled services specified at 42 C.F.R. § 409.42. CMS is proposing that in the home health setting, management, and evaluation of a patient care plan is considered a reasonable and necessary skilled service only when underlying conditions or complications are such that only a registered nurse can ensure that essential non-skilled care is achieving its purpose. Further, CMS is clarifying that in order to be considered skilled, the complexity of the necessary unskilled services that are a necessary part of the medical treatment must require the involvement of licensed nurses to promote the patient's recovery and medical safety in view of the overall condition.

In hopes of enhancing physician accountability and involvement in home healthcare plans, CMS is proposing to require a written narrative of clinical justification on the physician certification and recertification for the targeted condition where the patient's overall condition supports a finding that recovery and safety could be ensured only if the care was planned, managed, and evaluated by a registered nurse.

Finally, the proposed rule contains additional proposed safeguards to ensure CMS' ability to verify that HHAs meet minimum enrollment criteria and ensure that HHAs which are changing ownership meet and continue to meet the Conditions of Participation for HHAs. The proposed change to the enrollment process for HHAs will prohibit an HHA from sharing, leasing, or subleasing its practice location or base of operations with another HHA. The proposed practice location restriction is similar to that already in place for independent testing facilities and suppliers of durable medical equipment, prosthetics, orthotics, and supplies.

CMS is encouraging comments from the public. All comments must be received by CMS no later than 5:00 p.m., September 28, 2009, to be considered.


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