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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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unlikely to have outliers because of therapy dominance. He added that agencies with a high proportion dual eligibles have different visit profiles due to the more acute needs of dual eligibles. This commenter believes that these issues suggest that a uniform fixed loss threshold and loss ratio across all HHRGs may not be appropriate policy. The commenter suggested that a more customized policy should be examined and may obviate the need for a cap altogether. Another commenter suggested that good HHAs may easily exceed the cap, but fraudulent HHAs may use outlier clients as a method of getting cross-referrals from other fraudulent HHAs for non-outlier patients. The commenter stated that the proposed policy will not eliminate fraud/abuse or save Medicare dollars because most outlier patients would be spread to all providers in an area. CMS would still be paying for just as many outlier cases, but they would be spread amongst more providers. The commenter suggested that a better approach would be to increase the FDL ratio so that estimated outlier dollars were close to the 5 percent allowed under statute. The commenter also suggested that another approach could be to cap payment based on the published per visit rates, multiplied by the number of visits billed, or the outlier payment, whichever

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current patients, as HHAs shouldn’t abandon patients already receiving services. The commenter also recommended grandfathering in each HHA’s current percentage of outliers and using that percentage as the cap for that HHA. A few commenters also suggested that in setting caps, CMS should consider the population of the county.

Response: The premise of the new outlier policy is not that the case-mix model is not accurately capturing the cost of resources in providing care for these patients. Rather, the new outlier policy is being implemented due to the frequency of inappropriate and possibly fraudulent billing practices. The commenter’s suggestion of increasing the FDL to pay 5 percent in outlier dollars is precisely what CMS had been doing in past years, before the highly suspect, and possibly fraudulent, billing activities became so prevalent. As we stated in a previous response to comments, our analysis shows us that minus the suspect fraudulent activity, we believe that 2.5 percent is a more appropriate target for outlier payments as a percentage of total HH PPS payments. As such, we do not believe that simply increasing the FDL to pay outlier payments at 5 percent of total HH PPS payments is the appropriate policy at this time.

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cases from being considered as such, essentially hurting the larger majority of HHAs that are billing appropriately. The commenter’s suggestion that we pay HHAs the lower of the published per-visit rates multiplied by the number of visits billed, or the current calculated outlier payment, would not be an acceptable alternative, as the end result would be to pay the outlier payments as currently calculated. Using a HHA’s current outlier percentage as the cap for that HHA would ignore the problematic billing that has been occurring, and would do nothing to control the problem that exists today with outliers in home health.

Comment: A commenter stated that there exist a number of negative effects, which are significant and should be modified/addressed, if the proposed outlier policy were implemented, which include: 1) Legitimate benefits would decrease due to lack of access resulting in a poorer quality of care due to the incentives to restrict care to diabetics to avoid outlier status; therefore, people would not receive care at home due to outlier status, resulting in an increase in the use of hospitals, nursing homes and emergency rooms; 2) Costs will increase; 3) Increasing number of patients will be

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on patients and families, yet patients respond best in a comfortable home environment; 4) It would be more cost-effective and promote better care if the HHA were to specialize in diabetic care, as long as such care was medically necessary and the patient was homebound.

Response: As stated in an earlier response to comments, based on our analysis (which excludes HHAs in certain areas of the country involved in suspicious billing practices), we expect that less than 2 percent of all Medicare HHAs will be affected by a 10 percent cap on outlier payments, and that of this group of HHAs who may be affected by the 10 percent outlier cap, a vast majority are located in urban areas where beneficiaries have other choices. Thus, an overwhelming majority of HHAs will not be affected by the 10 percent outlier cap, and will be in a position to accept patients who legitimately need these services, and meet the eligibility requirements for the Medicare home health benefit. As such, we do not believe that increased costs will occur as a result of increases in hospital or nursing home stays, or visits to emergency rooms.

To summarize, we believe that our final outlier policy, for CY 2010 only, that includes a 10 percent cap on outlier

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outlier pool (as opposed to the existing 5 percent outlier pool), and returning 2.5 percent back into the national 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, to be the appropriate policy at this time.

We will continue to monitor the trends in outlier payments and any related policy effects. Specifically, we plan to analyze overall national spending on outlier payments relative to the new 2.5 percent outlier pool by geographic area and provider type. We also plan to look at outlier payments, per HHA, relative to the 10 percent cap on outlier payments at the agency level by geographic area and provider type. So far as activities related to high suspect outlier payments, CMS is continuing with program integrity efforts including possible payment suspensions for suspect agencies. We will re-examine this policy in future rulemakings, and will consider further adjustments to this policy for CY 2011 and future years.

Implementation strategy for a 10 percent agency level cap on outlier payments.

CMS plans on implementing the 10 percent cap policy by

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payment exceeds the 10 percent cap on a “rolling” basis. 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 payment timely, the outlier portion of the claim will be paid as the agency’s YTD payments support payment of the outlier. We plan to utilize a periodic reconciliation process under which outlier payments that were withheld are subsequently paid if the HHA’s total payments have increased to the point that its outlier payments can be made. This reconciliation process will always result in additional cash flow to HHAs, and so we believe it is preferable. With regard to revenue tracking, distinct coding will be used on the HHA’s remittance advice when outlier payments are withheld, assisting receivables accountants in identifying and accounting for the differences between expected and actual payments.

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In the CY 2008 HH PPS final rule with comment period, we stated that we would continue to monitor case-mix changes in the HH PPS and to update our analysis to measure change in case-mix, both nominal and real. As stated in the proposed rule, we have continued to monitor case-mix changes and our latest analysis supports the payment adjustments which we implemented in the CY 2008 HH PPS.

The case-mix analysis used for this rule uses PPS data from

2007. As discussed in the proposed rule, this analysis indicates a 15.03 percent increase in the overall observed casemix since 2000. We next determined what portion of that increase was associated with a real change in the actual clinical condition of home health patients. As was done for the CY 2008 final rule, using Abt Associates’ 6-phase model, we examined data on demographics, family support, pre-admission location, clinical severity, and non-home health Part A Medicare expenditure data to predict the average case-mix weight for

2007. Our best estimate is that approximately 9.77 percent of the 15.03 percent increase in the overall observed case-mix between the IPS baseline and 2007 is real; that is, due to

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The estimate of real case-mix change continues to decrease for a number of reasons: First, because the nominal change in case-mix continues to grow, real case-mix as a percentage of the total change/increase in case-mix becomes less. With each successive sample, beginning with 2005 data(in the CY 2008 final rule), the predicted average national case-mix weight is moving very little because the variables in the model used to predict case-mix are not changing much. At the same time, the actual average case-mix continues to grow steadily. Thus, the gap between the predicted case-mix value, which is based on information external to the OASIS, and the actual case-mix value, grows with each successive sample. Consequently, as a result of this analysis, CMS recognizes that a 13.56 percent nominal increase ((15.03 – (15.03 x 0.0977)) in case-mix is due to changes in coding practices and documentation rather than to treatment of more resource-intensive patients.

We stated in our CY 2008 HH PPS proposed and final rules that we might find it necessary to adjust the offsets as new data became available. Given that we have adjusted the rates for two consecutive years by -2.75 percent in each year (2008 and 2009), based on 2007 data, if we were to account for the

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case-mix over the next two years, we estimate that the percentage reduction in the rates for nominal case-mix change for each of the remaining two calendar years (2010 and 2011) of the case-mix change adjustment would be 3.51 percent per year.

If we were to account for the remaining residual increase in nominal case-mix in CY 2010, we estimate that the percentage reduction to the national standardized 60-day episode rates and the NRS conversion factor would be 6.89 percent. In the proposed rule, we proposed to move forward with our existing policy, as implemented in the August 22, 2007 CY 2008 final rule, of imposing a 2.75 percent reduction to the national standardized 60-day episode rates and the NRS conversion factor for CY 2010. We stated that we would continue to monitor any future changes in case-mix as more current data became available and update as appropriate.

Comment: A number of commenters were opposed to further payment reductions based on estimates of nominal CM change. One commenter wrote that CMS assumes upcoding, yet 2008 HHA payments are $1 billion less than 1997 payments. Several commenters noted that HHAs have faced years of market basket update reductions during this decade, and that combined with annual

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case-mix adjustment on top of these other reductions, the survival of HHAs is threatened. The commenter stated that reductions may force the quality providers out of business, jeopardizing access, and leaving only those who “game” the system to provide care. A commenter wrote that this is contrary to the interests of Medicare’s long term solvency or growing future care needs, and another wrote that reductions hurt innovation and quality. Additionally, a commenter suggested that the effect of the reductions will be to decrease dollars available for treating patients, and will indirectly limit access for patients with heavy care needs.

Response: We understand that some aspects of the payment environment have been uncertain at times. However, the total of 1997 payments is not comparable to the expenditures following the Balanced Budget Act (BBA) of 1997, which took effect in August of that year. The BBA led to a markedly lower use rate of home health services by 1999. Although the use rate has been rising since the historically low level brought by the BBA, the change in use rate is one reason for lower payments compared to the past. Analyses by the Medicare Payment Advisory Commission (MedPac) indicate that home health agency margins have been

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other payment changes under law have been made in the knowledge that agencies are generally not at risk of becoming insolvent.

The continuing certification of new agencies and capital access for the industry, both of which are documented in MedPac’s March 2009 annual report, are additional indications that Medicare payment is generally adequate or more than adequate.

Furthermore, MedPac reported that freestanding agencies’ cost per case grew at a relatively low annual average rate of 1.5 percent per year between 2002 and 2007. This low rate of cost growth compares favorably with annual payment updates of those years, notwithstanding Congressionally mandated reductions to some updates. Net updates for 2008 and 2009, incorporating the case-mix change adjustment, have been modestly positive. In terms of impacts on innovation, as we have noted elsewhere in our responses, some agencies have been able to make investments in new technology during these years. Home health quality measures have been generally stable or improving. In short, at this time, we do not believe that the survival of home health providers is threatened, and we have no indication that quality, access, and innovation are being compromised.

Comment: One commenter agreed with MedPAC’s suggestion to

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HHAs. Several commenters urged CMS to suspend further case-mix changes until a solution is found that ensures continuing access to home health care, and offered to work with CMS on the issues surrounding the case-mix change reductions. Several suggested that CMS meet with the industry to discuss the data and methodology, and find consensus. Another suggested that CMS refrain from additional case-mix adjustments until an impartial third party, the industry, and Congress review the process for analyzing case-mix.

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