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CMS Finalizes Payment Changes for Medicare Home Health Agencies for 2014

CMS Finalizes Payment Changes for Medicare Home Health Agencies for 2014
For Immediate Release
Friday, November 22, 2013

CMS Finalizes Payment Changes for Medicare Home Health Agencies for 2014

On November 22, 2013, the Centers for Medicare & Medicaid Services (CMS) issued CMS-1450-F, a final rule updating and revising the Medicare home health prospective payment system (HH PPS) for calendar year (CY) 2014.

Based on the final policies, CMS projects that Medicare payments to home health agencies in CY 2014 will be reduced by 1.05 percent, or $200 million. The decrease reflects a 2.3 percent increase in the home health payment update percentage ($440 million); a 2.7 percent decrease due to rebasing adjustments mandated by the Affordable Care Act (-$520 million); and a 0.6 percent decrease due to the effects of HH PPS Grouper refinements (-120 million).  This final rule also updates the home health wage index for CY 2014.

In 2012, an estimated 3.5 million beneficiaries received home health services from nearly 12,000 home health agencies, costing Medicare approximately $18.2 billion.

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 therapy, speech-language pathology; 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 home health agencies through a prospective payment system that pays higher rates for services furnished to beneficiaries with greater needs. Payment rates are based on relevant data from patient assessments conducted by clinicians as currently required for all Medicare-participating home health agencies. Home health payment rates are updated annually by the home health payment update percentage. The payment update percentage is based, in part, on the home health market basket, which measures inflation in the prices of an appropriate mix of goods and services included in home health services.

Rebasing the 60-day Episode Rate
The Affordable Care Act requires that, beginning in CY 2014, CMS apply an adjustment to the national, standardized 60-day episode rate and other amounts that reflect factors such as changes in the number of visits in an episode, the mix of services in an episode, the level of intensity of services in an episode, the average cost of providing care per episode, and other relevant factors. Additionally, CMS must phase in any adjustment over a four-year period in equal increments, not to exceed 3.5 percent of the amount (or amounts) as of the date of enactment of the Affordable Care Act, and fully implement the rebasing adjustments by CY 2017.

Because the statute specifies that the maximum rebasing adjustment is to be no more than 3.5 percent per year of the CY 2010 rates, the maximum adjustment to the national, standardized 60-day payment rate is calculated to be $80.95  (CY 2010 payment rate of $2,312.94 x 0.035 = $80.95).  The rule finalizes a fixed-dollar reduction to the national, standardized 60-day episode rate of $80.95 in each year CY 2014 through CY 2017, a reduction of 2.81 percent compared to a reduction of 3.5 percent each year in the proposed rule.

Rebasing Per-Visit Amounts
Medicare pays on the basis of a national per-visit amount by discipline, referred to as a Low-Utilization Payment Adjustment (LUPA) for episodes of care that require four or fewer visits.  Given the statutory requirement that maximum rebasing adjustments are limited to no more than 3.5 percent of the CY 2010 rates each year from CY 2014 through CY 2017, the six per-visit payment rates will be increased by the maximum adjustments allowed by statute, reflected in the table below:


2010 National Per-Visit Payment Rates

Maximum 3.5% Adjustment Per Year to Per-Visit Rates

Skilled Nursing



Home Health Aide



Physical Therapy



Occupational Therapy



Speech- Language Pathology



Medical Social Services



Rebasing and Updating Other Components of the HH PPS
This final rule also finalizes a rebasing adjustment to the non-routine medical supplies (NRS) conversion factor of -2.82 percent in each year for CY 2014 through CY 2017, and finalizes three separate LUPA add-on factors for skilled nursing, physical therapy, and speech-language pathology (the three disciplines that can perform an initial assessment of the patient according to Medicare Conditions of Participation).

HH PPS Grouper Refinements and ICD-10-CM Conversion
The final rule removes two categories of ICD-9-CM codes from the HH PPS Grouper, effective January 1, 2014: diagnosis codes that are “too acute,” meaning the condition could not be appropriately cared for in a home health setting; and diagnosis codes for conditions that would not impact the home health plan of care, or would not result in additional resources when providing home health services to the beneficiary. Beginning October 1, 2014, ICD-10-CM codes will be included in the HH PPS Grouper. The new ICD-10-CM codes will replace the existing ICD-9-CM codes used to report medical diagnoses and inpatient procedures.

Quality Reporting
The rule finalizes the addition of two claims-based quality measures: Re-hospitalization During the First 30 Days of a Home Health Stay, and Emergency Department Use Without Hospital Readmission During the First 30 Days of Home Health.  In addition, this rule reduces the number of home-health quality measures currently reported to home health agencies to simplify their quality improvement activities. The rule finalizes a policy to continue using Outcome & Assessment Information Set (OASIS) data, claims data, and patient experience of care data to meet the requirement that home health agencies submit data appropriate for the measurement of home health care quality for Annual Payment Update 2014 and each subsequent year thereafter until further notice.   

Cost Allocations for Home Health Agency Surveys
This rule finalizes a policy in which Medicaid responsibilities for home health surveys will be explicitly recognized in the state Medicaid program and each state’s allocation of costs for home health agency surveys will be reviewed for adherence to OMB Circular A-87 principles in 2014, with the goal of ensuring full adherence no later than July 2014.  For the portion of costs attributable to Medicare and Medicaid, CMS will assign 50 percent to Medicare and 50 percent to Medicaid, the same methodology that is used to allocate costs for dually-certified nursing homes.  

For additional information about the Home Health Prospective Payment System, visit The final rule [CMS-1450-F] can be viewed at: This link will change once the final rule is published in the Federal Register on December 2, 2013.