Fact sheet

CMS announces proposed payment changes for Medicare home health agencies for 2016

CMS announces proposed payment changes for Medicare home health agencies for 2016

The Centers for Medicare & Medicaid Services (CMS) today announced proposed changes to the Medicare home health prospective payment system (HH PPS) for calendar year (CY) 2016 that will foster greater efficiency, flexibility, and payment accuracy, and improve quality. These changes reflect a broader strategy to create a health care system that supports better care, smarter spending, and healthier people. Provisions in this and other proposed rules will help move the nation’s health-care system to one that values quality over quantity and focuses on reforms such as measuring for better health outcomes, attention to disease prevention, helping patients return home, managing and improving chronic diseases, and fostering a more-efficient and coordinated health care system.


Medicare pays home health agencies (HHAs) through a prospective payment system that pays higher rates for services furnished to beneficiaries with greater needs. HHAs are paid a national standardized 60-day episode payment for all covered home health services, adjusted for case-mix and area wage differences. Payment rates are based on relevant data from patient assessments conducted by clinicians, as currently required for all Medicare-participating HHAs, and 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.

Based on most recent available data, CMS estimates approximately 3.5 million beneficiaries receive home health services from approximately 11,850 HHAs, costing Medicare approximately $17.9 billion.

To be eligible for the home health benefit, beneficiaries must need intermittent skilled nursing or therapy services and must be homebound and under the care of a physician. Covered home health services include skilled nursing, home health aide, physical therapy, speech-language pathology, occupational therapy, medical social services, and medical supplies.

Payment Policy Provisions

Rebasing the 60-day episode rate
The Affordable Care Act (ACA) directs CMS to apply an adjustment to the national, standardized 60-day episode rate and other applicable 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. CMS is required to 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 the enactment of the ACA (CY 2010), and be fully implemented by CY 2017.

In this CY 2016 proposed rule, CMS is moving forward to implement the third year of the four -year phase-in of the rebasing adjustments to the HH PPS. A finalized in the CY 14 final rule, the CY 16 downward adjustment is $80.95.

Recalibration of the HH PPS Case-Mix Weights
CY 2016 will be the second year that CMS proposes to annually recalibrate the HH PPS case-mix weights. This is identical to CY 2015.

Updates to Reflect Case-Mix Growth
CMS proposes to decrease the national, standardized 60-day episode payment amount by 1.72 percent in each of CY 2016 and CY 2017 to account for nominal case-mix coding intensity growth unrelated to changes in patient acuity between CY 2012 and CY 2014.

Other Updates
CMS will also be updating the HH PPS payment rates by the home health payment update percentage, 2.3 percent in CY 16,as required by the.

Home Health Quality Reporting Program (HH QRP) Update

Section 2(a) of the Improving Medicare Post-Acute Care Transformation Act of 2014 (the IMPACT Act)  requires HHAs, Skilled Nursing Facilities (SNFs), Inpatient Rehabilitation Facilities (IRFs), and Long-Term Care Hospitals (LTCHs) to submit standardized patient assessment data, as well as standardized data on quality measures and resource use and other measures. The data reporting requirements and implementation of standardized patient assessment data is intended to enable interoperability and improve quality, payment, and discharge planning, among other purposes.

The IMPACT Act requires collection of data across eight domains. In keeping with the requirements of the IMPACT Act, CMS is proposing one standardized cross-setting measure for CY 2016 under the skin integrity and changes to skin integrity domain. Measures for the other domains will be addressed through future rulemaking, although CMS is seeking feedback on four future, cross-setting measure constructs to potentially meet requirements of the IMPACT Act domains of:

  • All-condition risk-adjusted potentially preventable hospital readmission rates,
  • Resource use, including total estimated Medicare spending per beneficiary,
  • Discharge to the community, and
  • Medication reconciliation

The Home Health Conditions of Participation (CoPs) require HHAs to submit OASIS assessments as a condition of payment and also for quality measurement purposes. HHAs that do not submit quality measure data to CMS will see a two percent reduction in their annual HH payment update percentage. CMS is also proposing to require all HHAs to submit both admission and discharge OASIS assessments for a minimum of 70 percent of all patients with episodes of care occurring during the reporting period starting July 1, 2015. CMS proposes to incrementally increase this compliance threshold by ten percent in each of the subsequent periods (July 1, 2016 and July 1, 2017)) to reach 90 percent.  

Home Health Value-Based Purchasing (HHVBP) Model

CMS also announced a proposal today to launch a new initiative designed to support greater quality and efficiency of care among Medicare-certified HHAs across the nation. Authorized by the ACA and implemented by the Centers for Medicare & Medicaid Innovation (CMMI), the HHVBP model  supports the Department of Health and Human Service’s efforts to build a health care system that delivers better care, spends health care dollars more wisely, and results in healthier people and communities.

The HHVBP model leverages the successes of and lessons learned from other value-based purchasing programs and demonstrations – including the Hospital Value-Based Purchasing Program and the Home Health Pay-for-Performance and Nursing HomeValue-Based Purchasing Demonstrations – to shift from volume-based payments to a model that promotes the delivery of higher quality care to Medicare beneficiaries.  

CMS proposes to launch the HHVBP model among all HHAs in nine states representing each geographic area in the nation so that there is a fair and equal sample of all Medicare-certified HHAs delivering services within those states.  HHAs in the nine states would have their payments adjusted by 5 percent in each of the first two payment adjustment years, 6 percent in the third payment adjustment year, and 8 percent in the final two payment adjustment years. CMS is also seeking comment on alternative geographic selection methodologies.

For additional information about the HH PPS, visit

The final rule can be viewed at

On 07/10/2015 and available online at: