On July 10, 2015, CMS published in the Federal Register the CY 2016 Home Health Prospective Payment System proposed rule effective for episodes ending on or after January 1, 2016.  CMS estimates that the net impact of the proposed rule would result in a decrease in Medicare payments to home health agencies of 1.8 percent (a $350 million decrease).  Comments on the proposal are due September 4, 2015. 

The proposed rule sets forth a Home Health Value-Based Purchasing model designed to test whether incentives for better care can improve outcomes in the delivery of home health services.  The model will begin January 1, 2016 and will apply to all agencies delivering services within nine states to be selected randomly by CMS.  Under the model, CMS would apply a reduction or increase to current Medicare-certified home health agency payments, depending on a home health agency’s quality performance.  The payment adjustments would be applied on an annual basis starting at five percent and increasing to eight percent in later years.  CMS states that participants in the model will be representative of home health agencies nationally, and there will be no selection bias.

In addition to initiating the value-based care delivery model, the proposed rule updates Medicare payments and requirements for home health agencies.  Consistent with the Affordable Care Act, the proposed rule reflects the third year of the four-year phase in of the rebasing adjustments, and for CY 2016, would reduce the national, standardized 60-day episode payment rate by $80.95, increase the national per-visit rates by 3.5 percent of the national per-visit payment amounts in CY 2010 with the increases ranging from $1.79 for home health aide services to $6.34 for medical social services, and reduce the non-routine medical supply conversion factor by 2.82 percent.  Among other things, the proposed rule sets forth the following updates and proposals:

• Reduces the national, standardized 60-day episode payment rate in CY 2016 and CY 2017 by 1.72 percent in each year to account for estimated case-mix growth unrelated to increases in patient acuity (nominal case-mix growth) between CY 2012 and CY 2014;
• Updates the payment rates under the Home Health PPS by the home health payment update percentage of 2.3 percent;
• Updates the CY 2016 home health wage index solely using the new geographic area designations; and
• Changes the home health quality reporting program to include a new quality measure, the establishment of a minimum threshold for submission of Outcome and Assessment Information Set (OASIS) assessments for purposes of quality reporting compliance.

The proposed rule is available here.  CMS’s press release regarding the proposed rule is available here.  More information is available on CMS’s home health agency website, available here. 

Reporter, Juliet M. McBride, Houston, +1 713 276 7448, jmcbride@kslaw.com.