CMS Issues Proposed Rule: 2016 Home Health Payment Rates and Value-Based Purchasing Pilot — NAHC Schedules July 15 Analytical Video Broadcast
July 7, 2015 04:13 PM
The Centers for Medicare and Medicaid Services (CMS) issued a proposed rule late Monday, July 6, as most of the United States returned to work from their Independence Day holiday. The proposed rule includes the usual annual payment rate update along with the highly anticipated Value-Based Purchasing pilot program. The payment rule has no real surprises. It simply carries out the third year of a four year phase-in of the rate rebasing plan. Congress required that the rate rebasing be done with equal installments over 2014 through 2017. However, CMS, in its new rule, has proposed additional cuts of 1.72% in each of 2016 and 2017 to penalize agencies for what they call “case mix creep.”
“This is yet another example of CMS being heavy-handed and imposing unwarranted cuts beyond those required by Congress. They will severely affect Medicare patients and participating home health providers,” said Val J. Halamandaris, President of the National Association for Home Care & Hospice. “The impact of the rate rebasing requirement in and of itself will force many agencies already teetering on the brink to close their doors. The additional cuts, along with them the veiled and inaccurate accusation that all home health agencies are abusing the Medicare program, may very well be the straw that breaks the camel’s back.”
Below is a summary explanation of the proposed changes.
2016 HHPPS Payment Rates
The proposed changes to home health prospective payment rates are within NAHC’s expectations given the four year phase-in of rate rebasing that started in 2014. CMS is capped at reducing the base episode rate by no more than $80.95 which is equal to 3.5% of the 2010 base rates. The proposal imposes such a cut offset by the annual Market Basket Index (MBI) and the annual Productivity Adjustment which starts in 2015. While the proposal does not reference the 2% sequestration, it is definitely expected it will continue in 2016.
The proposed MBI is 2.9% offset by the Productivity Adjustment (labeled by CMS as “private nonfarm business multifactor productivity” or MFP) required under the Affordable Care Act. In 2016 the adjustment is proposed at 0.6% leaving the update at a net of 2.3%. The case mix creep adjustment of 1.72% is factored in prior to the MBI adjustment.
The proposed base episode rate for 2016 is set out at $2938.37. In contrast, the 2014 base rate was $2869.27 and the 2015 rate is $2961.38. The 2014 to 2015 rate change looks like an increase, but the reality is that payment rates are actually decreased as CMS also recalibrated the case mix adjustment weights that effectively reduce those weights in the aggregate by 2.37%. The recalibration is offset in the base rates by increasing that rate by 2.37% to achieve budget neutrality. That budget neutrality adjustment is responsible for making the base rate appear bigger than the 2014 rate.
CMS proposes to recalibrate the case mix weights again in 2016, leading to a budget neutrality adjustment of 1.41%. As such, an apples-to-apples comparison between 2015 and 2016 is not easily done. CMS estimates that the net result of all of its rate proposals is a 1.8% reduction in Medicare payments to home health agencies or $350 million in 2016.
Notably, CMS is proposing to reduce rates for its perceived coding creep. CMS alleges that HHAs have up-coded claims to levels that do not reflect actual changes in patients’ clinical condition. Coding creep adjustments have been imposed in the past. In the 2015 rate rule, CMS estimated the coding creep at 2.32%. With an additional data year, the level has risen to 3.44%. CMS proposes to phase-in the creep adjustment at 1.72% in each of 2016 and 2017.
In 2016, CMS proposes to fully transition to the new CBSA area designations. The 2015 blend of old and new CBSA wage index values at 50/50 will end. HHAs are cautioned to review the CBSA wage index tables to evaluate the impact on their final payment outcome. Each year, some geographic areas experience wide swings in values, some going up significantly while others decrease significantly. Generally, the vast majority of CBSAs change only to a minor degree.
The rate rebasing also affects LUPA payment rates. Those rates will rise 3.5% through rebasing and an additional 2.3% through the annual inflation update with a wage index budget neutrality adjustment of 0.06%. Non-routine medical supply rates are also downwardly adjusted through the rebasing by a factor of 2.82% offset by a 2.3% MBI. The NRS conversion factor drops from $53.23 in 2015 to $52.92 in 2016.
With respect to outlier payments, CMS proposes to keep the same 80% loss ratio and 0.45 Fixed Dollar Loss components to the outlier eligibility evaluation. CMS projects that such standards will result in spending 2.34% of the 2.5% outlier budget in 2016.
The 3% Rural Add-On continues in 2016 along with the 2% rate reduction for HHAs that fail to comply with the quality data submission requirements that involve OASIS and HHCAHPS.
Detailed rate tables are available in the proposed rule.
CMS, after several false starts, has unveiled its proposed pilot program on value-based purchasing (VBP) in the proposed rule. The VBP model follows a path previously traveled with hospitals, but with some significant variation. Generally, a VBP program establishes a financial bonus pool funded by payment reductions to the provider group involved. Performance and outcome standards are established to determine which providers receive bonus payments. Those that do not meet the standards are left with lower payment revenues. Those that outperform the standards receive financial rewards.
CMS has proposed to move forward with a VBP pilot program in 2016. CMS proposes to use 2015 as the baseline year for performance with 2016 as the first year for performance measurement. In 2018, HHAs will see the payment consequences of their 2016 performance. NAHC has supported the use of VBP reimbursement provided it is based on reliable, risk adjusted measures and does not pose an access or quality of care problem for beneficiaries. As usual, the devil is in the details of the VBP model.
The VBP model put forward by CMS follows these general guidelines. However, the detailed part of the VBP model deserves special attention. First, the CMS model would reduce or increase Medicare payments in a range of 5-8% over the life of the seven year pilot (ending in 2022) with the first payment years at 5% (2018 and 2019). This is in contrast with the current hospital VBP which puts at risk 1.25% rising gradually to 2.0%. In 2014 comments, NAHC strongly objected to the suggested 5-8% as putting continued access to care in jeopardy. While the pilot program would be budget neutral, CMS projects that 10% of providers (with the exception of small volume providers in two states) will receive payment reductions ranging from 2.26 to 3.33%. As such, while 5% of payment may be at risk in the first years, the payment impact is expected to be less based on an evaluation of the pilot design on prior year’s data. The VBP measures would be based on both achievement and improvement in quality outcomes. CMS proposes to use 10 process measures, 15 outcome measures, and four new measures coming from OASIS, Medicare claims data, and HHCAHPS.
HHAs that reach a minimal threshold level in quality performance would receive the incentive bonus payments with the amount determined by the level of quality above the threshold. Performance and bonus payment determinations would be made based on an HHA’s performance in comparison to other HHAs in the state. CMS proposes to compare the performance based on HHA size, separating smaller-volume HHAs from larger-volume HHAs.
CMS proposes to institute the VBP program in nine states. It would be a mandatory program in all the affected states. The proposed states are: Massachusetts, Maryland, North Carolina, Florida, Washington, Arizona, Iowa, Nebraska, and Tennessee. CMS says it selected these states randomly from the 10 HHS regions. While CMS says that the final states in the pilot may change, there is good reason to question the failure to include such bellwether states as California, Texas, Michigan, Illinois, and New York. The pilot is also deficient in its failure to include more rural states such as Montana, Oregon, Utah, Arkansas, and Mississippi.
“While we support the concept of value-based purchasing in general, it needs to be done in a manner that is fair and rational. From the limited details available, the CMS model is anything but fair and rational,” Halamandaris stated. “It proposes that CMS would take away 5-8% of all payments from the Medicare participating providers in the nine selected states over the seven-year life of the pilot, some of which would be returned to high-performing providers. The level of the take away is punitive, far greater, for example, than the current hospital based value-based purchasing that takes away 1.25% (and gradually 2.0%) from all providers. Although the proposed rule sounds good in its stated goals of improving quality, the mechanics expose it as nothing more than a veiled effort to cut payments by approximately $300 million to home health patients and providers over the seven year term of the pilot.”
Overall, the rule is a combination of expected rate proposals, a Value-Based Purchasing pilot program that looks very much like the one unveiled for consideration last year with a few technical changes, and the highly disfavored case mix creep adjustments. There is a wide distance between the stated goals of VBP, which are to improve and reward quality, and the sober reality, which is yet another effort to reduce access and payments under the Medicare home health benefit. The proposed pilot plan, accordingly and appropriately, will draw fire from both consumer and provider organizations. It will draw the charge that rather than making home care more generally available to the 78 million members of the baby boom generation, CMS is discriminating, preferring institutional alternatives over those which helps care for patients at home where they most prefer to be. CMS projects the overall financial impact of the payment rate changes to be a cut of $350 million in 2016. The VBP pilot program is estimated to reduce overall Medicare spending by just $300 million over its term.
ANALYTICAL BOARDCAST EVENT
The National Association for Home Care & Hospice (NAHC) will be analyzing each of the proposals in depth over the coming weeks and will provide updated analysis on each matter proposed. Public comments are permitted through September 4, 2015 (the 60th day following publication) and NAHC will be issuing draft comments to assist members who wish to submit comments. The full rule is accessible here.
NAHC will be hosting a video broadcast on Wednesday, July 15, 2015 from 1:00-2:00 pm EST to discuss the rule in further detail. The broadcast will be FREE for NAHC members and $150 for non-members. For those interested in participating in the video broadcast please register here.