Medicare Home Health Services: Case Mix Weight …

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Medicare Home Health Services: Case Mix Weight Adjustments Haunt Care Providers

Summary

The Medicare program provides payment for home health services under a model known as the Home Health Prospective Payment System (HH PPS). A prospective payment model replaced a per visit, cost reimbursement model in October 2000, consistent with the mandate under the Balanced Budget Act of 1997.

From 2000-2007, the Centers for Medicare and Medicaid Services (CMS) devised HH PPS to provide a 60-day episodic payment based on one of 80 patient case-mix categories. The patient specific category was determined based upon scoring system that lead to the assignment of a case-mix weight that was applied to the base episodic rate to calculate the payment.

Beginning in 2008, CMS instituted a new 153 category model, revising the scoring system to assign the case mix weights. In 2008, CMS initiated a series of adjustments to the base episodic payment rate known as the Case Mix Weight Change Adjustment. This adjustment was intended to reduce payment rates to take into account increases in case mix weights (and resulting payment levels) that was not due to changes in the condition of patients. Case mix weight changes related to improved coding accuracy, coding behavioral changes, and increased utilization of therapy services in contrast to patient condition changes are the basis of the adjustment.

CMS has implemented three case mix weight change adjustments to date—2.75% rate reductions in each of 2008, 2009, and 2010. It planned on an additional reduction of 2.71% in 2011. In its recent Proposed Rule, CMS proposes to increase the 2011 adjustment to 3.79% and to add a further 3.79% adjustment in 2012.

With these adjustments it is estimated that nearly 45% of home health agencies would receive Medicare payments that are below the cost of care. These rate cuts are in addition to the projected $39.7 billion in cuts coming from the 2010 health care reform legislation, the Affordable Care Act.

BACKGROUND

Medicare has instituted rate adjustments related to changes in claims coding in numerous provider sectors including inpatient hospitals, rehabilitation hospitals and home health care. These adjustments are often labeled as “case-mix creep” adjustments. However, the adjustments address more than abusive claims coding practices. The adjustments also reflect coding changes that may increase a claim payment that occur because of improved accuracy in coding. Further, with respect to home health services, the adjustments also occur because patients are receiving more therapy services than in the past.

With Medicare home health services, the coding weight is significantly affected by the volume of therapy services. From 2000-2007, increased coding weight occurred when the patient received 10 or more therapy visits in a 60 day episode. Beginning in 2008, coding weight adjustments occur with 6, 14, and 20 visits in the episode.

When CMS applies rate reductions related to coding weight increases due to therapy, it reduces payment while the provider incurs greater care costs. With abusive “upcoding” a provider would get higher payments without higher costs.

Therapy services for home health patients have increased in volume since the start of HH PPS in 2000. At the same time, patient outcomes have improved and Medicare spending per patient and in the aggregate overall has stayed well below projections by OMB and CBO. In fact, per patient spending in 2007 was lower than in 1997. Overall spending in 2007 also fell below 1997 spending levels.

Coding weight increases also have occurred because of improvements in coding accuracy. At the start of HH PPS home health agencies had only limited experience with the patient assessment model known as OASIS. That assessment model is the basis for the payment system coding and scoring.

There is strong evidence that the nature and severity of the patients receiving home health services has changed since 2000. Those changes are due to a number of factors including reimbursement system changes in other provider sectors that lead to reduced inpatient stays and more restrictive admission requirements in other settings. In addition, there has been a nationwide rebalancing of care in favor of community care settings leading to a higher condition severity in home care admissions. However, the CMS assessment method relies significantly on the DRG patient classification system which does not adequately account for the discharge condition of the patient as it relates to home care needs. Finally, nearly one half of home health care patients are admitted from a setting other than an inpatient hospital.

These regulatory cuts are on top of a series of rate cuts stemming from the Affordable Care Act. Under the health care reform legislation, an estimated $39.7 billion in Medicare spending on home health services will be lost between 2011 and 2019. These cuts include: a 1 point reduction in the annual inflation update (Market basket index); a $7 billion reduction in outlier payments; the institution of an annual productivity adjustment to the inflation update beginning in 2015; and a 4 year phase-in of rate rebasing starting in 2014.

RELEVANT FACTS

T A B L E

3B–1

Changes in home health utilization

|Percent change |

|1997 |2000 |2008 |1997–2000 |2000–2008 |

|Agencies |10,917 |7,528 |10,026 |–31 |% |33 |% |

|Total spending (in |$17.7 |$8.5 |$16.9 |–52 |99 |

|billions) | | | | | |

|Users (in millions) |3.6 |2.5 |3.2 |–31 |28 |

|Number of visits (in |258.2 |90.6 |117.8 |–65 |30 |

|millions) | | | | | |

|Visit type (percent of total) |

|Skilled nursing |41 |% |49 |% |55 |% |20 |12 |

|Home health aide |48 |31 |18 |–37 |–41 |

|Therapy |10 |19 |26 |101 |11 |

|Medical social services |1 |1 |1 |1 |–30 |

|Visits per user |73 |37 |37 |–49 |1 |

|Percent of FFS |10.5 |% |7.4 |% |9.1 |% |–30 |24 |

|beneficiaries | | | | | | | | |

|who used home | | | | | | | | |

|health | | | | | | | | |

|Note: FFS (fee-for-service). |

|Source: Home health standard analytical file; Health Care Financing Review, Medicare and Medicaid Statistical Supplement, 2002; and Office of the Actuary, |

|CMS. |

Average Case Mix Weight

2000--- 1.0959

2008--- 1.3085

Increase 2000 to 2008—--- 19.40%

CMS estimate of “creep”--- 17.45%

Therapy Utilization

6 to 9 visits 10 to 13 visits 14 or more visits

2002 9% of episodes 11% of episodes 12% of episodes

2007 9% of episodes 15% of episodes 12% of episodes

2008 12% of episodes 11% of episodes 15% of episodes

Chronology of Events

Case-mix Weight Change Rate Reduction Adjustments

2008. 2.75%

2009. 2.75%

2010. 2.75%

2011. 2.71% Proposed 3.79%

2012. Proposed 3.79%

Prior to the onset of HH PPS, Congress amended the Medicare provisions that mandated the creation and implementation of the prospective payment system for home health services. That amendment, Section 501(c) of the “Medicare, Medicaid, and SCHIP Benefit Improvement and Protection Act of 2000, authorized adjustments to HH PPS payment rates where it is determined that aggregate payments change as a result of coding changes “that do not reflect real changes in case mix.” (codified at 42 USC 1395fff(b)(3)(B)(iv).(Appendix 1)

CMS first applied this adjustment authority in its 2007 rulemaking related to the 2008 rates. In its Notice of Proposed Rulemaking issued on May 4, 2007, CMS proposed that payment rates be reduced by 2.75% in each of 2008, 2009, and 2010. The proposal was based upon a review of claims data from 2000 to 2004. (Appendix 2) That review also evaluated other clinical information available to CMS that led CMS to determine that most of the coding weight increases from 2000-2004 was not related to “real” changes in case mix.

NAHC and much of the home health community objected to the proposed adjustments in formal comments submitted in the rulemaking process. (Appendix 3). Generally, the objections were based on arguments that the nature and severity of patients had significantly changed since 2000. NAHC backed up its position with a study prepared by the Lewin Group.(Appendix 4) That study was critical of the CMS methodology for evaluating case mix weight changes and concluded that significant evidence existed to demonstrate material changes in patient characteristics combined with payment system changes in other sectors that impact on the nature of home health care patients.

Lewin noted that many of the changes in patient characteristics were indicative of a greater need for therapy visits—a key factor in the calculation of case mix weights. The HH PPS increased payment amounts between 2000 and 2004 when more than 10 therapy visits were provided in an episode of care. During that period, an increasing number of patients received therapy services leading to increases in the average case mix weight.

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CMS issued it Final Rule on the 2008 HH PPS rates on August 29, 2007. (Appendix 5) That Final Rule rejected all of the public comments, including NAHC’s comments that challenged the validity and accuracy of the case-mix weight change adjustment. In addition, the Final Rule added an 2.71% adjustment in 2011 based upon further analysis by CMS on case mix weight changes in 2005. It is notable that the Final Rule used a different method for evaluating case-mix weight changes that was used in the Proposed Rule. The new method was not available for public review until May 2008, five months after it took effect and nearly 8 months after the rule was finalized.

NAHC and others submitted additional comment to CMS regarding the expanded rate reduction of 2.71% in 2011.(Appendix 6). NAHC also complained about the “bait and switch” tactic used by CMS wherein it explained its proposed adjustment with a rationale it abandoned and replace with another in the Final Rule.

In 2007, legislation was introduced in the House and Senate that was designed to bring a rational structure as well as transparency to the process of determining case-mix weight change adjustments. H.R. 3865, introduced on October 17, 2007, was sponsored by Rep. James G. McGovern (D.MA) and garnered 87 cosponsors. S. 2181, also introduced on October 17, 2007, was sponsored by Senator Susan M. Collins (R.ME) along with 20 cosponsors. (Appendix 8)

NAHC addressed concerns regarding the rulemaking process that CMS used to the Small Business Committee at the U.S. House of Representatives. (Appendix 7).

Following the public revelation of the basis for the four-year rate reduction in May, 2008, NAHC filed a lawsuit in federal district court in Washington, D.C. contesting the rulemaking process and the case –mix weight change evaluation method employed by CMS. (Appendix 9).Ultimately, the lawsuit was dismissed on the grounds that there are administrative remedies that must be exhausted before a court can gain jurisdiction over a complaint against Medicare. NAHC dropped its litigation effort as the administrative remedies are not available to an association and pursuit of 10,000 administrative appeals was not practical.

In 2009, CMS published a Proposed Rule setting out the 2010 payment rates. (Appendix 10). In that proposal, CMS indicated that it might increase the case-mix weight change adjustment in 2011 from 2.71% to 4.26%. The increase was explained as based on consideration of 2006-2007 on top of the previous 2000-2005 data reviews. CMS indicated that it had three options under consideration: imposing a 4.26% adjustment in 2011; increasing the 2010 adjustment to 6.89%; or Increasing the 2010 and 2011 adjustment to 3.51%. CMS calculated the adjustment using the same contested methodology used in the 2007 Final Rule determination. NAHC submitted comprehensive comments challenging the accuracy of the proposed adjustment.(Appendix 11).

The Final Rule on 2010 payments rates acknowledges the concerns raised in comments to the proposal to increase the adjustment and concludes that the 2011 rates would remain tentatively subject to the original 2.71% adjustment. However, CMS noted that it would continue to review the case mix weight data and that a modified adjustment was not ruled out in the future.(Appendix 12).

On May 5, 2010, Senator Susan Collins introduced a updated version of her bill, S. 3315, cosponsored by Senators Russ Feingold and Patty Murray. (Appendix 13). On July 22, 2010, Congressman James G. McGovern introduced H.R. 5803, the House counterpart to Senator Collins’ bill. These legislative proposals would require that CMS use an open and transparent process for establishing standards on reviews of changes in case mix weights. The process would require the involvement of stakeholders and a technical expert panel. No adjustments would be allowed outside of this process. While the outcome of this process cannot be determined as a comparison to the current adjustment process and the multi-year rate reductions, the architecture of the process should lead to more confidence in the validity and accuracy of the case mix weight change calculation.

On July 23, 2010, CMS published the Proposed Rule regarding payment rates in 2011. This proposal increases the case-mix weight change adjustment in 2011 from 2.71% to 3.79% and adds a further adjustment of 3.79% in 2012. CMS indicates that it considered a single year adjustment that would raise the 2011 reduction to 7.43%. CMS’s explanation for the proposed adjustment is that it has calculated that the average case mix weight increased significantly in 2008.

What Is Wrong About the Case-Mix Weight Rate Reduction Adjustments?

1. The payment rate reductions are on top of significant rate reductions mandated by the Affordable Care Act. The health care reform legislation requires reductions in the annual inflation update, imposition of a new “productivity adjustment, a 2.5% rate cut through elimination of a portion of outlier payments, and rate rebasing beginning in 2014. These cuts total $39.7 billion through 2019.

2. A significant portion of the rate reductions is due to the increased use of therapy services. These services have help control the growth in home health spending, reduced per patient costs, and improved clinical and functional outcomes for patients.

3. Unlike abusive up-coding, increased coding weights related to therapy come with an increase in care costs for home health agencies. The higher reimbursement for increased therapy is intended to offset these increased costs. Rate reductions for increased therapy use will discourage providers from caring for therapy patients

4. Growth in total spending on home health services continues to be lower than OMB and CBO projections. CMS is authorized to institute coding weight change adjustments when aggregate spending is improperly increased. Unless Medicare home health services spending increases beyond that projected, there is no warrant for a rate reduction based on coding weight changes

5. The CMS model for evaluating changes in case-mix weights is severely flawed.

• It ignores the reality that the increased use of therapy means that patients have changed rather than providers have up-coded claims

• It relies too heavily on hospital discharge data when half of all patients are admitted to home health from settings other than a hospital

• It fails to integrate changes in care delivery and payment methodologies in other provider sectors such as hospitals, nursing facilities, long term care hospitals and rehabilitation hospitals that affect the nature of patients in home health services

• It fails to account for home health coding policy changes that negate the risk of coding weight increases such as the proposed elimination of hypertension from the coding while CMS proposes a permanent rate reduction related to the impact of hypertension coding

• It does not consider that certain coding adjustments, e.g. therapy utilization, increase provider costs rather than reimbursement alone

• It penalizes providers for improved accuracy in patient assessment and coding

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RECOMMENDATIONS

1. Congress should pass HR 5803/S3315 to establish a sensible process for assessment and evaluation of improper coding weight changes.

2. In the interim, Congress should block CMS from instituting and rate reductions related to coding weight changes.

3. CMS should focus it efforts relative to home health services on the requirements under the Affordable Care Act which include a study to determine what changes may be needed in the reimbursement model to assure access to care and the rebasing of payment raters beginning in 2014.

Regulatory History and References

1. Home Health Prospective Payment System--Notice of Proposed Rulemaking, 69 FR 58133 (October 28, 1999) .

2. Home Health Prospective Payment System—Final Rule, 69 FR 58133 (July 3, 2000) .

3. Home Health Prospective Payment System; 2008 Payment Rates---Notice of Proposed Rule, 72 FR 25366 (May 4, 2007) .

4. Home Health Prospective Payment System; 2008 Payment Rates---Final Rule, 72 FR 49762 (August 29, 2007) .

5. Home Health Prospective Payment System; 2010 Payment Rates---Notice of Proposed Rule, 74 FR 40948 (August 13, 2009) .

6. Home Health Prospective Payment System; 2010 Payment Rates---Final Rule, 74 FR 58078 (November 10, 2009) .

7. Home Health Prospective Payment System; 2011 Payment Rates---Notice of Proposed Rule, 75 FR 43236 (July 23, 2010) .

APPENDIX

1. Coding adjustment statutory authority 42 USC 1395fff(b)(3)(B)(iv)

2. Home Health Prospective Payment System; 2008 Payment Rates---Notice of Proposed Rule, 72 FR 25366 (May 4, 2007)—Excerpt on coding weigh adjustment

3. NAHC Comments on 2008 Proposed Rule (June 26, 2007)

4. Lewin Group Report on HH PPS Coding Weight Adjustment (June 26, 2007)

5. Home Health Prospective Payment System; 2008 Payment Rates---Final Rule, 72 FR 49762 (August 29, 2007)---Excerpt on coding weight adjustment

6. NAHC Comments on 2008 Final Rule (October 26, 2007)

7. Testimony before the Committee on Small Business, United States House of Representatives (November 15, 2007)

8. HR 3861/S. 2181

9. Complaint, NAHC v. Leavitt, U.S. District Court, District of Columbia

10. Home Health Prospective Payment System; 2010 Payment Rates---Notice of Proposed Rule, 74 FR 40948 (August 13, 2009)---Excerpt on coding weight adjustment

11. NAHC Comments on 2010 Proposed Rule (September 28, 2009)

12.. Home Health Prospective Payment System; 2010 Payment Rates---Final Rule, 74 FR 58078 (November 10, 2009)---Excerpt on coding weight adjustment

13. HR 5803/S.3315

14. Home Health Prospective Payment System; 2011 Payment Rates---Notice of Proposed Rule, 75 FR 43236 (July 23, 2010)--- Excerpt on coding weight adjustment

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