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Helping Get the Kinks out of Home Health Prospective Payments


Highlights

  • Changes in home health agencies’ prospective payment system may have led to behavior that thwarted the goals of the payment reforms
  • We conducted several empirical analyses of the issue
  • We developed potentially large-scale payment methodology changes to align payment with patient needs and address the system’s perverse payment incentives and vulnerabilities
The Challenge

Changes in the complex prospective payment system (PPS) for home health agencies (HHAs) may have led to HHA behavior changes that thwarted the modifications’ goals. As a result, the Centers for Disease Control and Prevention (CDC) wanted an assessment of the PPS and options for addressing potentially perverse incentives. The current system has the potential for variability in profitability across the 153 home health resource groups (HHRGs), the basis for payment. It may rely too much on therapy utilization variables. Payments for episodes with no therapy services may be too low.

The Approach

Abt conducted several empirical analyses:

  1. descriptive analysis of utilization, beneficiaries, and agencies over time;
  2. analysis of changes in case mix due to changes in providers’ coding behavior (case-mix creep) as opposed to real changes in the patient population; and
  3. analysis of HHA costs and Medicare margins under PPS and technical support for rebasing home health payment rates. Abt also provided technical assistance to CMS to support rulemaking related to refinements to the PPS, including recalibration of payment weights, calculation of predicted impacts of proposed system changes and updates on various groups of providers.

Abt supported the CMS transition of the payment system to ICD-10, refinements to the case-mix classification algorithm under ICD-9, and recalibration of payment weights.

The Results

Abt reassessed the home health prospective payment system and developed potentially large-scale payment methodology changes to align payment with patient needs and address the system’s perverse payment incentives and vulnerabilities. Abt simulated the impact of new payment models that seek to eliminate vulnerabilities in the current payment system. Abt wrote white papers on the project’s major tasks. We provided technical assistance to CMS for rulemaking, including language and tables for inclusion in proposed and final rules. We delivered technical reports.