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«DEPARTMENT OF HEALTH AND HUMAN SERVICES Centers for Medicare & Medicaid Services 42 CFR Parts 409, 424, and 484 [CMS-1560-F] RIN 0938-AP55 Medicare ...»

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In recent years, our analysis has revealed excessive growth in outlier payments, primarily the result of suspiciously high outlier payments in a few discrete areas of the country. In our CY 2009 payment update, we did not raise the FDL ratio, given the statistical outlier data anomalies that we identified in certain targeted areas, because program integrity efforts, such as payment suspensions for HHAs with questionable outlier billing activities, were underway to address excessive, suspicious outlier payments that were occurring in these areas.

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0.89 in CY 2009 while actions to remedy inappropriate outlier payments in these target areas of the country were effectuated.

In our CY 2010 HH PPS proposed rule, we expanded our outlier analysis to assess the appropriateness of adopting a lower target percentage of outlier payments to total HH PPS payments. We performed an analysis of all providers who receive outlier payments, focusing our analysis on total HH PPS payments, total outlier payments, number of episodes, number of outlier episodes, and location of provider. Specifically, our analysis incorporated a 10 percent per-agency cap on outliers and looked at outlier payments as a percentage of total HH PPS payments with that 10 percent per-agency cap in place. That analysis revealed that with a 10 percent per-agency outlier cap in place, outlier dollars accounted for approximately 2.1 percent of total HH PPS payments. Additionally, we performed a separate analysis on CMS data using Medicare provider numbers of members of a major association of home health agencies who claim to be safety-net providers, serving sicker, more costly patients. The average outlier payment to these agencies was found to be less than 2 percent.

In the proposed rule we recognized that although program

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continue in targeted areas of the country, we continue to be at risk of exceeding the 5 percent statutory limit on estimated outlier expenditures. Therefore, we focused our analysis on whether a broader policy change to our outlier payment policy might also be warranted, to mitigate possible billing vulnerabilities associated with excessive outlier payments, and to adhere to our statutory limit on outlier payments. Our analysis revealed that a 10 percent per-agency cap in outlier payments would mitigate potential inappropriate outlier billing vulnerabilities while minimizing the access to care risk for high needs patients.

Therefore, to mitigate possible billing vulnerabilities associated with excessive outlier payments, and to adhere to our statutory limit on outlier payments, we proposed to implement an agency level outlier cap such that in any given calendar year, an individual HHA would receive no more than 10 percent of its total HH PPS payments in outlier payments. Additionally, we proposed to reduce the FDL ratio to 0.67 for CY 2010. This combination of a 10 percent agency level outlier cap, and reduced FDL ratio of 0.67, and allowing for future growth in outlier payments, resulted in a projected target outlier payment

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outlier payments.

Currently, we reduce the national standardized 60-day episode payment rates, the national per-visit rates, the LUPA add-on amount, and the NRS conversion factor by 5 percent in order to create an outlier pool that accommodates estimated outlier payments of 5 percent of total HH PPS payments.

Targeting the percentage of outlier payments at approximately

2.5 percent would allow us to create a smaller outlier pool and return the remaining 2.5 percent to the HH PPS rates. In the proposed rule, we proposed to retain a 2.5 percent reduction to the national standardized 60-day episode rates, the national per-visit rates, the LUPA add-on payment amount, and the NRS conversion factor to fund the proposed target of approximately

2.5 percent of total estimated HH PPS payments in outlier payments, adhering to the statutory requirement in section 1895(b)(3) of the Act.

Comment: Most commenters were very supportive, and in favor of the overall proposed HH PPS outlier policy. Commenters stated that anomalous outlier trends in recent years are compelling evidence that abusive and possibly fraudulent practices are widespread in many areas of the country and that

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activity as it relates to the billing of outlier episodes under the HH PPS. Commenters further stated that the proposed changes were reasonable areas of focus for additional safeguards against fraud and abuse in the area of billing for outliers in the HH PPS. Other commenters stated that they strongly supported CMS in its efforts to curb fraud and abuse and are not opposed to the proposed implementation of these changes to the outlier policy. Several commenters found the proposed outlier policy to be fair and expect the policy to be effective.

Response: We appreciate the overwhelming support from commenters that we received on our proposed HH PPS outlier policy. We would like to point out that fraudulent activity is not widespread in many areas of the country. These sort of fraudulent activities are occurring in a few discrete areas of the country. We continue to believe that an agency-level outlier cap is the appropriate policy, at this time, to mitigate possible billing vulnerabilities associated with excessive outlier payments and to adhere to our statutory limit on outlier payments. As such, in conjunction with the 10 percent agency level outlier policy, we proposed to target a new 2.5 percent outlier pool (as opposed to the existing 5 percent outlier

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standardized 60-day episode rates, the national per-visit rates, the LUPA add-on payment amount, and the NRS conversion factor, with a 0.67 FDL ratio. For reasons outlined later in this final rule, we are finalizing this outlier policy for CY 2010 only.

Comment: Several commenters supported the new, lower, outlier target of approximately 2.5 percent, and applauded CMS for restoring dollars to the HH PPS payment rates. A commenter commended CMS for thoughtfully considering the negative impact on patient access, should outlier payments be completely eliminated. A few commenters urged CMS to monitor outlier expenditures and further reduce the FDL if outlier payments drop below the new 2.5 percent target. A commenter asked CMS to explain the methods that would be used to monitor these outlier payments.

Response: We appreciate the support of the proposed outlier target of approximately 2.5 percent and returning 2.5 percent back into the HH PPS rates. As a commenter stated, CMS did give thoughtful consideration to eliminating the outlier policy altogether, and although we reserve the right to eliminate the outlier policy in the future, should circumstances make that necessary, we believe that an outlier target of

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the HH PPS rates, for CY 2010, is the appropriate policy at this time. As part of our final outlier policy, in addition to returning 2.5 percent back into the HH PPS rates, because of the 10 percent cap on outlier payments, CMS is also lowering the FDL from 0.89 to 0.67, making it easier for episodes to qualify for outlier payments. Thus, in addition to the fact that few nonfraudulent providers are expected to be impacted by the 10 percent cap, all providers will benefit from the 2.5 percent increase in the base rate and will also be helped by the lowering of the FDL ratio. As stated above, CMS plans to analyze overall national spending on outlier payments relative to the new 2.5 percent outlier pool by geographic area and provider type. CMS also plans on looking at outlier payments, per HHA, relative to the 10 percent cap on outlier payments at the agency level by geographic area and provider type.

Comment: There was a commenter who was opposed to returning a portion of the current 5 percent pool to the HH PPS rates, stating that doing so would reduce resources to provide for sicker patients and increase funds paid for lost-cost/lowutilization patients who are already well provided for. Another commenter was concerned about reducing the outlier pool to 2.5

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difficult and hard-to-place patients.

Response: For the past several years, CMS has updated the FDL ratio in attempts to estimate outlier dollars to be no more than 5 percent. However, because outlier payments in certain areas of the country continue to increase at alarming rates, updating the FDL on an annual basis has proven to not be enough to keep outlier dollars at no more than 5 percent of total HH PPS payments. As we described in the proposed rule, our analyses show that when we remove from our analyses HHAs in areas of the country with high suspect outlier payments, as well as small agencies that are not representative of the types of agencies we suspect of suspicious billing activities, outlier payments for the rest of the country account for less than 2 percent of total HH PPS payments. As described in the proposed rule, our analyses have shown that in simulating payment for CY 2010, imposing an outlier cap of 10 percent at the agency level, we would pay approximately 2.32 percent of total HH PPS payments in outlier payments.

Additionally, in our separate analysis of CMS data using provider numbers from a major home health agency association’s agencies, which claim to service a sicker, more costly

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10 percent outlier cap. Further analysis shows us that approximately 70 percent of all HHAs receive between 0 percent and 1 percent in outlier dollars as a percentage of their total HH PPS payments. Consequently, we believe that a final outlier policy for CY 2010 that includes a 10 percent agency level outlier cap, a target of approximately 2.5 percent for outlier dollars as a percentage of total HH PPS payments, returning 2.5 percent back into the HH PPS rates, and a 0.67 FDL ratio is the appropriate policy, and that it appropriately pays for legitimate outlier episodes as well as all other types of episodes under the HH PPS. Because our trend analysis shows that outlier expenditures continue to grow, we proposed and are finalizing as part of our final outlier policy, an outlier target of approximately 2.5 percent.

Comment: Most commenters were in support of lowering the FDL ratio to that of 0.67, but urged CMS to carefully monitor the effects of reducing the FDL ratio to gauge whether there is an increase in inappropriate outliers and if increasing the FDL ratio might be necessary in the future. A commenter asked CMS to keep the FDL ratio at 0.89 because lowering it to 0.67 would make it easier for episodes to become outliers, thereby making

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cap to meet the requirement and still deliver care. Another commenter stated that the proposal to reduce the FDL to 0.67, which would increase the number of episodes that qualify for outlier payments, is a “futile gesture” in the face of a 10 percent cap.

Response: We appreciate commenters’ support of lowering the FDL ratio to 0.67. As stated above, CMS plans to analyze overall national spending on outlier payments relative to the new 2.5 percent outlier pool by geographic area and provider type. CMS also plans on looking at outlier payments per HHA relative to the 10 percent cap on outlier payments at the agency level by geographic area and provider type. At the same time, we will be looking at how the FDL ratio of 0.67 affects the percentage of outliers, and consider adjustments to the FDL ratio (up or down) if appropriate. We are decreasing the FDL ratio from 0.89 to 0.67 because the latest data and best analysis available tell us that in conjunction with an outlier policy that invokes a 10 percent agency level outlier cap and a target outlier pool of approximately 2.5 percent (returning 2.5 percent to the HH PPS rates), a FDL ratio of 0.67 is appropriate. As we stated in the proposed rule and throughout

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with respect to suspected fraudulent billing practices as they relate to HHA outlier payments, CMS may consider eliminating the outlier policy entirely in future rulemaking.

Comment: A number of commenters supported the “rolling basis” in determining whether outlier payments should be made at any given time during the year. However, another commenter cautioned CMS not to create a tracking nightmare for fiscal intermediaries and providers that is overly burdensome or complicated to administer. Yet another commenter was concerned about a delay in payments to HHAs, for services that have already been provided, and expenses that have already been incurred. That same commenter suggested that to address cash flow issues, CMS should delay the process of identifying and withholding outlier payments until the end of the first or second quarter of the calendar year, making it easier to HHAs to absorb early outlier cases. Another commenter was concerned that the “rolling cap’ would result in accounting challenges, and suggested a quarterly look-back with a lump sum whenever outlier payments exceeded the 10 percent cap. A commenter stated that a rolling method could create excessive outlier down-scores until the next calculation. The commenter believed

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HHAs to reconcile revenue. Another commenter expressed concern about a retrospective recoupment, particularly an annual one, and the impact such a recoupment could have on the cash flow of smaller agencies and agencies with lower Medicare margins.

Response: Implementing the cap by a post-payment recoupment process, either quarterly or annual, would delay impact of the cap on HHAs that are billing outlier episodes inappropriately. Under a lump sum recoupment, there could be a total disruption to an HHA’s cash flow. That is, if the amount of outlier dollars paid in excess of the cap and scheduled for recoupment is greater than the amount due to the HHA for other claims, the HHA’s payment could stop completely for a time while the recoupment was made. We believe this sort of payment disruption is undesirable.

Under our planned implementation approach, for each home health provider, the claims processing system will maintain a running tally of the year-to-date (YTD) total home health payments. The claims processing system will ensure that each time an outlier claim for an agency is processed, actual outlier payments will never exceed 10 percent of the agency’s YTD total payments. While an agency will always receive its base episode

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