Home Health PPS

The Balanced Budget Act (BBA) of 1997, as amended by the Omnibus Consolidated and Emergency Supplemental Appropriations Act (OCESAA) of 1999, called for the development and implementation of a prospective payment system (PPS) for Medicare home health services. The BBA of 1997 put in place the interim payment system (IPS) until the PPS could be implemented. Effective October 1, 2000, the home health PPS (HH PPS) replaced the IPS for all home health agencies (HHAs). The PPS proposed rule was published on October 28, 1999, with a 60-day public comment period, and the final rule was published on July 3, 2000.

Beginning in October 2000, HHAs were paid under the HH PPS for 60-day episodes of care that included all covered home health services. The 60-day payment amount was adjusted for case-mix and area wage differences. The case-mix adjustment under this system included: a clinical dimension; a functional dimension; and a service dimension, in which payment would increase if certain therapy visit thresholds were met.

The Bipartisan Budget Act of 2018 (BBA of 2018) included several requirements for home health payment reform, effective January 1, 2020. These requirements included the elimination of the use of therapy thresholds for case-mix adjustment and a change from a 60-day unit of payment to a 30-day period payment rate. The statutorily required provisions in the BBA of 2018 resulted in the Patient-Driven Groupings Model, or PDGM. The PDGM removes the current payment incentive to overprovide therapy, and instead, is designed to focus more heavily on clinical characteristics and other patient information to better align Medicare payments with patients’ care needs. While payment is adjusted for each 30-day period of care to reflect the beneficiary’s health conditions and care needs, a special outlier provision exists to ensure appropriate payment for those beneficiaries that have the most expensive care needs.

In March 2020, Section 3708(f) of the CARES Act amended the regulations to allow nurse practitioners (NPs), clinical nurse specialists (CNSs), and physician assistants (PAs) to certify and order home health services. This means that in addition to a physician, these “allowed practitioners” may certify, establish and periodically review the plan of care, as well as supervise the provision of items and services for beneficiaries under the Medicare home health (HH) benefit.

Additionally, Section 3707 of the CARES Act encouraged use of telecommunications systems for home health services furnished during the COVID-19 Public Health Emergency (PHE). In response CMS amended § 409.43(a), allowing the use of telecommunications technology to be included as part of the home health plan of care, as long as the use of such technology does not substitute for an in-person visit ordered on the plan of care.

30-Day Periods of Care under the PDGM

Beginning on January 1 2020, HHAs are paid a national, standardized 30-day period payment rate if a period of care meets a certain threshold of home health visits.  This payment rate is adjusted for case-mix and geographic differences in wages. 30-day periods of care that do not meet the visit threshold are paid a per-visit payment rate for the discipline providing care.  While the unit of payment for home health services is currently a 30-day period payment rate, there are no changes to timeframes for re-certifying eligibility and reviewing the home health plan of care, both of which will occur every 60-days (or in the case of updates to the plan of care, more often as the patient’s condition warrants).

Case-mix adjustment -- Adjusting payment for a beneficiary's condition and needs

After a physician or allowed practitioner prescribes a home health plan of care, the HHA assesses the patient's condition and determines the skilled nursing care, therapy, medical social services and home health aide service needs, at the beginning of the 60-day certification period. The assessment must be done for each subsequent 60-day certification. A nurse or therapist from the HHA uses the Outcome and Assessment Information Set (OASIS) instrument to assess the patient's condition. (All HHAs have been using OASIS since July 19, 1999.)

Certain OASIS items describing a patient’s condition, and other information reported on Medicare claims are used to determine the case-mix adjustment to the national, standardized 30-day payment rate.  30-day periods are categorized into 432 case-mix groups for the purposes of adjusting payment under the PDGM. In particular, 30-day periods are placed into different subgroups for each of the following broad categories:

Information obtained from Medicare claims:

  • Admission Source (two subgroups): Community or Institutional
  • Timing of the 30-day period (two subgroups): Early or Late
  • Clinical Grouping based on the reported principal diagnosis (twelve subgroups): Musculoskeletal Rehabilitation; Neuro/stroke Rehabilitation; Wounds; Medication Management, Teaching, and Assessment (MMTA) - Surgical Aftercare; MMTA - Cardiac and Circulatory; MMTA - Endocrine; MMTA - Gastrointestinal Tract and Genitourinary System; MMTA - Infectious Disease, Neoplasms, and Blood-forming Diseases; MMTA - Respiratory; MMTA- Other; Behavioral Health; or Complex Nursing Interventions
  • Comorbidity Adjustment based on the reported secondary diagnoses (three subgroups): None, Low, or High

Information obtained from the OASIS assessment:

  • Functional Impairment Level (three subgroups): Low, Medium, or High

In total, there are 2*2*12*3*3 = 432 possible case-mix adjusted payment groups.

Outlier payments - Paying more for the care of the costliest beneficiaries

Additional payments will be made to the 30-day case-mix adjusted period and associated payments for beneficiaries who incur unusually large costs. These outlier payments will be made for periods of care where imputed cost exceeds a threshold amount for each case-mix group. The amount of the outlier payment will be a proportion of the amount of imputed costs beyond the threshold. Outlier costs will be imputed for each period of care by applying standard per-visit amounts to the number of visits by discipline (skilled nursing visits, or physical, speech-language pathology, occupational therapy, or home health aide services) reported on the claims. Total national outlier payments for home health services annually will be no more than 2.5 percent of estimated total payments under home health PPS.

Consolidated billing

For individuals under a home health plan of care, payment for all services (nursing, therapy, home health aides and medical social services) and routine and non-routine medical supplies, with the exception of certain injectable osteoporosis drugs, DME, and furnishing negative pressure wound therapy (NPWT) using a disposable device is included in the HH PPS base payment rates. HHAs must provide the covered home health services (except DME) either directly or under arrangement, and must bill for such covered home health services.

Page Last Modified:
02/24/2021 02:01 PM