NAHC’s Preliminary Summary of PPS Rule

The following was prepared and shared by Bill Dombi of the National Association for Home Care:

The Centers for Medicare and Medicaid (CMS) issued the final rule regarding 2013 payment rates late Friday. The proposal includes the 2013 Market Basket Index (MBI) update of 2.3%, the required 1 point reduction under the Affordable Care Act, and the previously set 1.32 percent case mix creep adjustment. CMS retained the 1.32% creep adjustment rather than increasing it to the potential 2.18% level to account for the full coding weight change through 2010. The main change from the July 5 proposed rule is a reduction of the MBI from 2.5 to 2.3%. The change was due to the use of updated, more recent data.

The rule also includes a most of the proposed policy clarifications regarding the face-to-face rule, Hospice quality data indicators, surveys scheduling, and the imposition of intermediate sanctions for CoP noncompliance. CMS estimates that the net impact on HHAs is a $10 million overall reduction in payments in 2013. This is a smaller negative impact than the proposed rule. While the base rates would increase, the impact of the wage index changes lowers total expenditures.

Some of the most notable aspects of the rate rule:


Proposed 2013 payment base episode rates are set at $2137.73 from the current $2138.52. This is a small increase, but better than the decrease if CMS included a full creep adjustment. The base rates are adjusted upwards by 3 percent for services to rural patients. Rates are adjusted downwards by 2 percent for providers that failed to submit compliant quality data.

The rate changes are due to a proposed 2.3 percent market basket index inflation update, a 1 point reduction in the MBI under the health care reform law, and a 1.32 percent case mix creep adjustment.

The case mix creep adjustment is the left-over 1.32 percent from the 2012 rate rule. CMS originally proposed a 5.06 percent adjustment in 2012, but ultimately decided to phase it in over two years with 1.32 percent left for 2013. The adjustment could have been increased as a result of CMS adding another year of claims into the evaluation of changes in coding weights, but CMS held any such action because of all the changes experienced in home health in recent times. The increase would have set the adjustment at 2.18 percent. This is a welcome action from CMS as providers have experienced significantly increased costs with the face-to-face encounter and therapy assessment rules. CMS does not credit is discretion in maintaining a lower creep adjustment based on cost increases, instead indicating it needs more thorough evaluation of coding weight changes.

The LUPA per visit rates are proposed as follows:

For HHAs that DO submit the required quality data

HH Aide $51.79
MSS $183.31
OT $125.88
PT $125.03
SN $114.35
SLP $135.86

For HHAs that did not submit quality data, these rates are reduced by 2 percentage point.

The outlier eligibility standards are changed from 2012. While the loss share remains at 0.80, the Fixed Dollar Loss ratio is lowered from 0.67 to 0.45. This will increase the number of episodes that qualify for outlier payment. The change is due to CMS confirming that the full outlier will not be spent in 2013 if the current FDL of 0.67 is retained.

The rate changes will impact individual providers unevenly. That is because the changes are accompanied by changes in the CBSA wage indices. A provider-specific analysis using the provider’s particular wage index is the only reliable way to assess impact. Some providers will experience a net rate reduction when considering the wage index while others will see an increase greater than the base rate changes display.

HHAs also need to keep in mind that it is highly likely that payments will be subjected to a 2 percent sequestration in 2013 as a result of the deficit reduction law. The sequestration is not a rate change itself, but rather a withhold of 2 percent from the claims payment. The net result is still a reduction for HHAs.

NAHC had recommended that CMS maintain its proposal to keep the case mix creep adjustment no higher than 1.32%. In addition, NAHC recommended a lowering of the FDL on outlier eligibility. While the rates may lead to an overall reduction in Medicare home health spending, CMS’s willingness to recognize industry concerns is greatly appreciated.

CMS rejected NAHC concerns that diagnosis coding changes related to fractures required CMS to recalibrate all the HHRG weights in order to achieve budget neutrality. CMS engaged in several studies on the NAHC contention, concluding that the affect on reimbursement was only a 0.04 percent decrease in reimbursement, a level it deemed immaterial. NAHC will continue to evaluate the impact of this change as its data showed a potential reduction of $200 on 2% of all episodes.

Significant changes are expected for 2014 when CMS rebases the HHPPS rates as required under the ACA. Currently, CMS is engaged in a series of test audits looking at 2010 Cost Report data as part of its effort to design a rebasing method. NAHC has recommended that CMS rebase rate with consideration of the most recently reported cost data combined with cost trend factors that reflect new costs incurred or expected to be incurred in 2014 (face-to-face and the ACA employer mandate/penalty), cost that do not show up on the cost report (telehealth, taxes, and marketing), and needs for capital. The rule issuance offers no insight on how CMS will proceed with rate rebasing in 2014.


With respect to the face-to-face rule, CMS finalized some adjustments that may help. CMS will allow non-physician practitioner in an inpatient setting to perform the encounter and inform the inpatient physician who in turn can certifying physician. NAHC will continue to encourage CMS to further modify the face-to-face rule to reduce unnecessary paperwork burdens. It appears necessary that Congress intervene to bring about any significant changes in the rule.


The Therapy assessment rule receives a modest improvement. CMS revised the regulations to state that if a qualified therapist missed a reassessment visit, therapy coverage would resume with the visit during which the qualified therapist completed the late reassessment, not the visit after the therapist completed late reassessment.

CMS also revised the regulation to state that in cases where multiple therapy disciplines are involved, if the required reassessment visit was missed for any one of the therapy disciplines for which therapy services were being provided, therapy coverage would cease only for that particular therapy discipline. Therefore, as long as the required therapy reassessments were completed timely for the remaining therapy disciplines, therapy services would continue to be covered for those therapy disciplines.

Finally, with respect to the therapy assessments timing, CMS revised the regulations to clarify that in cases where the patient is receiving more than one type of therapy, qualified therapists could complete their reassessment visits during the 11th, 12th, or 13th visit for the required 13th visit reassessment and the 17th, 18th, or 19th visit for the required 19th visit reassessment.


The alternative sanction rule is one of the most significant changes proposed by CMS in years. There has been authority for intermediate sanctions short of termination since 1988, but CMS never implemented the law. Recently, CMS has been under fire by the OIG for the inaction. In the final rule, CMS kept much of its original proposal for alternative sanctions that include monetary penalties, payment suspension, and temporary management. However, there are a few notable improvements.

First, CMS clarified that the sanctions will only be applied in the event of a condition-level deficiency. The proposed rule offered a potential interpretation that would permit sanctions for repeat stand-level deficiencies. The final rule makes it clear that a standard level deficiency would not implicate a sanction unless it is a repeat deficiency at a condition level. Only 260 of over 12,000 HHAs received a condition level deficiency last year.

Second, CMS will withhold the application of civil monetary penalties, payment suspensions, and the Informal Dispute Resolution until July 1, 2014. CMS originally proposed an implementation date of one year from the issuance of the final rule.

Third, CMS widened the range of allowable monetary penalties to reduce the potential amounts for second level offenses.

Finally, CMS indicated that there will be a very open dialogue with the home care industry in the development of interpretive guidelines. In addition, the CMS review of its sanctions provisions indicate that it expects that monetary penalties will be used only in rare circumstances where deemed necessary to instigate provider compliance.

Author: Pat Kelleher

Pat Kelleher is Executive Director of the Home Care Alliance of Massachusetts.

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