In a final rule published in the Federal Register on November 4, 2011,1 the Centers for Medicare & Medicaid Services (“CMS”) announced it will decrease payments to home health agencies (“HHAs”) by $430 million in 2012. The home health prospective payment system (“HH PPS”) final rule also revises case-mix weights in response to concerns that HHAs are overcompensated for therapy services and incentivized to provide unnecessary therapy services, and adds flexibility to the face-to-face encounter requirement for patients discharged to home health from hospitals or post-acute facilities.

Payment Reductions

The calendar year (“CY”) 2012 HH PPS update set forth in the final rule will result in an overall decrease of $430 million in payments to HHAs, a 2.31 percent decrease from CY 2011 payments. The payment reductions are the combined result of an updated wage index ($10 million increase), a 1.4 percent market basket payment update ($280 million increase), and a 3.79 percent case-mix adjustment to the national standardized 60-day episode rates ($720 million decrease).