Medicare Cuts Payment Rates to Home Health Care Companies
About half the cut in payment rate in 2012 - 2011 was result of provision in
2010 health law that lowered the fees
By Phil Galewitz, Capsules: The KHN Blog
Nov. 2, 2011 - Medicare will
cut payment rates to home health agencies by 2.3 percent in 2012 — the sixth
consecutive annual decrease in fees to the industry. The decision, which will lop off an estimated $430 million from the program next year,
follows concerns by a congressional advisory panel that the agencies are overpaid.
Home health advocates decried the cut, saying it would lead some agencies to close. The decreased funding, announced
Monday, lowers the average base payment to home health agencies for a 60 days “episode of care” to $2,138 in 2012 from $2,192 in 2011.
About half the cut in the payment rate in 2012 and 2011 was the result of a provision in the 2010 health law that lowered
“We have not seen the closures of agencies, but we are reaching that breaking point,” said Bill Dombi, an association
Nearly 12,000 home health agencies serve Medicare, and the number has steadily increased in the past decade, mostly as a
result of generous payment rates, according to the
Medicare Payment Advisory Commission, an oversight group that reports to
Dombi acknowledges that some home health agencies have profits that exceed 25 percent, but he said averages can be
deceiving. “If you walk in a room and it is 50 degrees and walk out when it’s 90, it doesn’t mean it’s been comfortable,” he said.
The change announced Monday allows physicians who saw a patient in a hospital or other inpatient facility to certify to
their doctor in the community about their need for home health services. Dombi said the change should help, because doctors in hospitals have
been reluctant to order home health because they don’t follow their patients once they go home. “It mitigates the problem, but its not a game
changer,” he said.
CMS Finalizes 2012 Medicare Home Health Payment Changes
Oct. 31, 2011 - The Centers for Medicare & Medicaid Services (CMS) today issued a final rule to update the Home Health
Prospective Payment System (HH PPS) rates for Calendar Year (CY) 2012. Payments to home health agencies (HHAs) are estimated to decrease by
approximately 2.31 percent or $430 million in CY 2012, the net effect of a 1.4 percent payment update, the wage index update, and the case-mix
This final rule reflects the ongoing efforts of CMS to support Medicare beneficiary access to home health services while
continuing to improve payment accuracy.
The Affordable Care Act applies a 1 percentage point reduction to the CY 2012 home health market basket amount. As the CY
2012 market basket is equal to 2.4 percent, the payment update for HHAs in CY 2012 will be 1.4 percent.
CMS also reduced HH PPS rates in CY 2012 to account for additional growth in aggregate case-mix that is unrelated to
changes in patients’ health status. CMS has finalized a 3.79 percent reduction to the home health PPS rates for CY 2012 and an additional 1.32
percent reduction for CY 2013.
This rule also finalizes structural changes to the HH PPS by removing two hypertension codes from the case-mix system,
lowering payments for high therapy episodes, and recalibrating the HH PPS case-mix weights to ensure that these changes result in the same
amount of total aggregate payments. These changes are intended to increase payment accuracy and reduce the growth in aggregate case-mix that
is unrelated to changes in patients’ health status.
Under current Medicare policy, a certifying physician or an allowed non-physician practitioner must see a patient prior
to certifying a patient as eligible for the home health benefit. The rule also finalizes added flexibility to allow physicians who cared for
the patient in an acute or post-acute facility to inform the certifying physician of their encounters with the patient in order to satisfy the
Finally, this rule describes planned improvements to the home health publicly reported quality measures.
To qualify for the Medicare home health benefit, a Medicare beneficiary must be under the care of a physician, have an
intermittent need for skilled nursing care, or need physical or speech therapy, or continue to need occupational therapy. The beneficiary must
be homebound and receive home health services from a Medicare approved home health agency.
Medicare pays HHAs through a system of prospective payments that pays at higher rates to care for those beneficiaries
with greater needs. Payment rates are based on relevant data from patient assessments conducted by clinicians as currently required for all
Home health payment rates are updated annually by the home health market basket percentage increase. CMS uses the home
health market basket index, which measures (and tracks) inflation in the prices of an appropriate mix of goods and services included in home
Section 5201(c) of the Deficit Reduction Act (DRA) of 2005 provides for an adjustment to the home health market basket
percentage update for CY 2007 and subsequent years depending on HHAs submission of quality data. HHAs that submit the required quality data
would receive payments based on a payment update of 1.4 percent for CY 2012. If an HHA does not submit quality data, the home health market
basket percentage increase is to be reduced by 2 percentage points, resulting in a payment update of -0.6 percent for CY 2012.