CMS Proposes 3.35% Medicare Payment Cuts to Home Health Agencies

In an ongoing effort to stem the Medicare funding crisis, the Centers for Medicare & Medicaid Services (CMS) recently listed some proposed changes to the 2012 Medicare home health payment system that are meant to result in greater efficiency and payment accuracy.

One such proposal, which was displayed at the Federal Register, is to decrease Medicare payments to home heath agencies (HHA) by 3.35% for calendar year 2012; this would be an estimated net decrease of $640 million compared to HHA payments in CY 2011, says CMS.

This percentage, says CMS, would also “include the combined effects of market basket and wage index (which determine payment updates and cost limits), and reductions to the home health prospective payment system (HH PPS) rates to account for increases in aggregate case-mix that are largely related to billing practices and not related to changes in the health status of patients.”


The way Medicare operates is by paying HHAs through a prospective payment system (PPS) that pays out a higher rate for caring for beneficiaries with greater needs; the way these rates are set are through assessing relevant patient data from clinicians. All HHAs participating in the Medicare program must submit quality data, per the Deficit Reduction Act of 2005, and if they fail to do so, the market basket percentage increase is reduced by 2%.

Regarding the market basket, the Affordable Care Act (ACA) mandates that CMS apply a 1% reduction to the CY 2012 market basket amount, which CMS says would equate to a proposed 1.5% update for HHAs net year. As for the HHPS rate update, CMS is proposing another change that would reduce those rates by 5.06% in CY 2012 “to account for the increase in the case-mix that is unrelated to changes in patient acuity.”

The new rule would also make some changes to the case-mix system that would lower payments for high therapy episodes and accordingly adjust the amount of aggregate payments.


“CMS’s proposal reflects our commitment to ensure that we pay accurately for Medicare home health services as we improve the structure of our payment system and decrease incentives for upcoding,” said Jonathan Blum, Deputy Administrator and Director of the Center for Medicare.

Additionally, a Medicare policy requiring a certifying physician or an allowed non-physician practitioner to see a patient prior to certifying that patient as eligible for the home health benefit has been tweaked under a proposed rule that would allow physicians who attended to a home health patient in an acute or post-acute setting to inform the certifying physician of their encounters with the patient in order to satisfy the requirement, says CMS.

Another new rule released by CMS requires comparable face-to-face encounters for people receiving Medicaid home health services to adhere to the unifying nature of these provisions made under the ACA. CMS says that unlike qualifications for beneficiaries to receive Medicare home health benefit Medicaid home health beneficiaries do not need to be homebound or require skilled car.e However, home health agencies participating in the Medicaid program must also follow Medicare conditions of participation.

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This new rule would fulfill provisions under the ACA, says Cindy Mann, director of CMS’ Center for Medicaid, CHIP and Survey & Certification.

“We established the Medicaid implementation of this requirement to align with Medicare’s guidance to better facilitate home health services provided to individuals that are eligible for Medicare and Medicaid and to lessen the administrative burden on providers participating in both programs,” she says.

More information on the rules can be found here.

Written by Alyssa Gerace