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Final Changes to Home Health Payments for 2019

home health payments 2019It’s official. Changes are coming to the payment system for home health agencies and we now know what those changes look like.

Medicare home health agencies have access to the Prospective Payment System (PPS) under the 1997 Balanced Budget Act. Though regularly amended annually, major changes to this system have, until now, been mostly talk. In October 2018, however, the Centers for Medicare and Medicaid (CMS) issued the final rule containing several major changes to the operations, regulations, and payment system for HH PPS for calendar year 2019.

Current System

The current system is based on a case-mix model. Under this system, a home health agency receives payment for each 60-day episode of care, which is adjusted based on the assessment of a patient’s condition and expected therapy needs. Additional payments can be made for the costliest beneficiaries, for cases in which the cost of care exceeds a threshold amount established for each case-mix group. Low-utilization patients who require four or fewer visits in a 60-day episode are paid on a per visit basis.

Major Changes for Fiscal Year 2019

The final rule establishes a 2.2 percent increase for the payment rate in the Home Health PPS which is estimated to be approximately $420 million. According to CMS there will also be a new rural add-on policy that requires CMS to classify rural counties (and equivalent areas) into one of three categories based on:

  1. high home health utilization
  2. low population density
  3. all others

Rural add-on payments for calendar years 2019 through 2022 vary based on counties’ (or equivalent areas’) category classification.  Further notes include a slight tightening on outlier payments with the Fixed Dollar Loss ratio dropping to 0.51% from 0.55%. Lastly, Low Utilization Payment Adjustment (LUPA) stays the same.

Major Changes Looming for Fiscal Year 2020

There are also major changes planned related to how payments will be calculated and distributed. Final refinements to the case-mix methodology, known as the Patient-Driven Grouping Model (PDGM), intend to better estimate cost based on resource use and are to be implemented on January 1, 2020. CMS states “The PDGM removes the current incentive to overprovide therapy, and instead, is designed to reflect CMS focus on relying more heavily on clinical characteristics and other patient information to allow payments to more closely reflect patients’ needs. Using patient characteristics to place home health periods of care into meaningful payment categories is more consistent with how home health clinicians differentiate between home health patients in order to provide needed services.” The PDGM will also change the payment structure to a 30 day payment unit from a 60 day episodic payment. The overall changes seek to remove therapy thresholds, and better incentivize quality of care over quantity.

Finally, the Final Rule defines “remote patient monitoring” as part of the Medicare Home Health Benefit and includes this as an allowable cost on the Home Health Agency (HHA) cost report. The definition would cover the collection of physiological data to include information that is digitally stored and/or transmitted from the patient to the HHA. This is in effort to better utilize emerging technology that has been able to digitally capture data, such as ECG, blood pressure, and glucose monitoring.

Other Changes

CMS plans to change some aspects of their home health quality reporting (HH QRP) program. These changes outline different factors for consideration when removing measures and proposing new reporting features, both for the future and the present changes. The goal is to lower agency costs when it comes to reporting – the current estimate is these measures will reduce agency spending by an estimated $60 million total, or $5,150 per year per agency.


CMS continues to update HH PPS and other related home health policies starting in 2019, with some policies rolling out between 2019 and 2021. Overall, these changes are intended to promote higher-quality treatment while staying budget-neutral. Rural counties will receive a payment add-on by classification based on population and home health use, and agencies will have fewer items to report to Medicare. Finally, new items, such as remote patient monitoring, will be included as an allowable cost starting as early as next year.

jamie dixon gilmore jasion mahlerJamie Dixon contributed this blog. Jamie is a member of the Gilmore Jasion Mahler Healthcare Specialist Team, with an expertise in long-term care, home healthcare and hospice. A member of the Ohio Council for Home Care and Hospice, he has served on the organization’s Financial Issues Committee for close to 20 years. 

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