Home Health Agencies Will Feel the Pinch in 2012


On July 5, 2011, the Centers for Medicare and Medicaid Services (CMS) published a proposed rule in the Federal Register that would make a number of changes to the Medicare program's home health prospective payment system for calendar year 2012.

Most significantly, the proposed rule would reduce Medicare payments to home health agencies by 3.35% or approximately $640 million in 2012. The reduction reflects the combined effects of (i) a home health market basket update of 2.5%, which is reduced by 1.0% as required by the Affordable Care Act, and (ii) an additional 5.06% reduction in home health payment rates that will be imposed in 2012. CMS believes the additional 5.06% reduction is needed to account for the remainder of the 19.03% nominal case-mix change that occurred from 2000-2009 that is unrelated to patient acuity and that has not been recouped by previous rate reductions.

In addition to the payment rate update, the proposed rule would also make a number of structural changes to the Medicare home health prospective payment system. First, the proposed rule would remove the codes for Benign Essential Hypertension and Unspecified Essential Hypertension from the case-mix system. In the proposed rule, CMS indicated that the removal of these codes was warranted because of the dramatic increase in the use of these codes from 2005-2009 and the Agency's belief that these codes are not accurate predictors of high home health patient resource costs. Second, the proposed rule would also lower the relative weights for episodes with high amounts of therapy and increase the relative weights for episodes that require little or no therapy. CMS stated that these changes were needed because the resource costs reflected in the current case-mix weights for therapy episodes are higher than the costs actually being incurred by home health providers for these services. CMS also noted that the current relative weights have created an incentive for providers to favor high therapy patients and to provide more therapy services than may be medically necessary. The Agency anticipates that its relative weight changes will more adversely impact urban and for-profit home health agencies.

Finally, the proposed rule would also amend existing Medicare regulations to create additional flexibility in meeting the home health face-to-face encounter and certification requirements. In short, for patients who are admitted to home health upon their discharge from a hospital or post-acute care setting, the proposed rule would allow the physician who attended to the patient in that setting to inform the certifying physician about his or her encounter with the patient to satisfy the face-to-face encounter requirement. CMS believes that this policy change would encourage more collaborative communication between the patient's physicians and improve the overall quality of care received by Medicare beneficiaries. This proposed change will be the subject of an upcoming Waller Lansden bulletin that will discuss the current issues surrounding the home health and hospice face-to-face encounter requirements in more detail.

The proposed rule for the Medicare Home Health Prospective Payment System Rate Update for 2012 can be found at this link. CMS has requested comments on these proposals and will consider comments submitted until September 6, 2011. Waller Lansden is soliciting comments on the proposed rule, and we will provide these comments to CMS.

For more information on the proposed rules, or if you would like us to include your comments on the proposed rule changes to CMS contact Brandon Schirg, Stephen Page, Ken Marlow or any member of Waller Lansden's Healthcare Department at 1-800-487-6380.