Final Rule Issued for Home Health PPS - prospective payment system - Brief Article - Statistical Data Included

Healthcare Financial Management, August, 2000

On July 3, HCFA published in the Federal Register the final rule governing the new prospective payment system (PPS) for home healthcare services. The rule, which becomes effective October 1, 2000, replaces the home healthcare interim payment system (IPS) that has been in effect since October 1997.

Under the final home health PPS, Medicare will pay home health agencies for 60-day episodes of care. For each episode of care, the agency will receive the national payment rate (ranging from about $1,100 to $5,900, depending on the intensity of care required), adjusted for area wage differences. Outlier payments will be made for beneficiaries whose resource needs are unusually large.

Under the home health consolidated-billing requirements, payments for 60-day care episodes will cover skilled nursing and home health aide visits, certain therapies, medical-related social services, and supplies. Durable medical equipment (DME) services are excluded from the consolidated billing requirements. Home health agencies and suppliers will receive separate fee-schedule payments for DME under the Medicare home health benefit.

HCFA was required to make payments budget-neutral under the home health PPS. Nonetheless, the results of an impact analysis included in the final rule suggest that the effect of the home health PPS will vary widely among home health agencies. Provider-based agencies will see a 1 .03 percent decrease in their Medicare payments under the new PPS. HCFA compared Medicare payment rates under the new PPS with current payment rates under the home health IPS. Freestanding, for-profit home health agencies will be hit with a 12.77 percent decrease in payments, while government and not-for-profit home health agencies will receive payment increases of 26.50 percent and 17.88 percent, respectively. Overall, rural home health agencies will see a 5.94 percent increase, while their urban counterparts will endure a 0.08 percent decrease in payment.