FYI – the FINAL Rule for the 2012 Home Health Prospective Payment System is published today in the Federal Register.


Centers for Medicare & Medicaid Services


Medicare Programs:

Home Health Prospective Payment System Rate Update for Calendar Year 2012 ,

68526–68607 [2011–28416]

PDF Link: http://www.gpo.gov/fdsys/pkg/FR-2011-11-04/pdf/2011-28416.pdf

TEXT Link: http://www.gpo.gov/fdsys/pkg/FR-2011-11-04/html/2011-28416.htm


The following (just a portion of this 82-page PDF version of the  rule) was excerpted from the Federal Register:

Centers for Medicare & Medicaid Services
42 CFR Parts 409, 424, and 484
[CMS–1353–F]  RIN 0938–AQ30

Medicare Program; Home Health Prospective Payment System Rate Update for Calendar Year 2012

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.
ACTION: Final rule.

SUMMARY:This final rule sets forth updates to the home health prospective payment system (HH PPS) rates, including: the national standardized 60-day episode rates; the national per-visit rates; and the low utilization payment amount (LUPA) under the Medicare PPS for home health agencies effective January 1, 2012. This rule applies a 1.4 percent update factor to the episode rates, which reflects a 1 percent reduction applied to the 2.4 percent market basket update factor, as mandated by the Affordable Care Act.  This rule also updates the wage index used under the HH PPS, and further reduces home health payments to account for continued nominal growth in case-mix which is unrelated to changes in patient health status. This rule removes two hypertension codes from the HH PPS case-mix system, thereby requiring recalibration of the case-mix weights. In addition, the rule implements two structural changes designed to decrease incentives to upcode and provide unneeded therapy services. Finally, this rule incorporates additional flexibility regarding face-toface encounters with providers related to home health care.

DATES: Effective Date: These regulations are effective on January 1, 2012.

Elizabeth Goldstein, (410) 786–6665, for CAHPS issues.
Mary Pratt, (410) 786–6867, for quality issues.
Randy Throndset, (410) 786–0131 (overall HH PPS).


General Issues of Note:

Current Year Updates: The National Standardized Rate is receiving a (Net) Inflationary Increase of 1.4% but is also incurring a reduction due to the ‘alleged’ nominal change in the Avg Case-Mix Weights of 3.79%  Note:  CMS is also going to reduce the 2013 rates by 1.32% for this ‘alleged’ nominal change in the Avg Case-Mix Weights – see excerpt from the Federal Register below:

Excerpted from page 68543 (from Column 3):

In CY 2011 rulemaking, we proposed to apply a 3.79 percent reduction to payments in CY 2011 and an additional 3.79 percent reduction in CY 2012 to account for nominal case-mix growth we identified through CY 2008.  However, we deferred finalizing the CY 2012 reduction pending an independent review of our method for identifying real case-mix growth. (That independent review has been completed, as we reported in the CY 2012 HH PPS proposed rule.) Because we believe that providers likely expected and planned for us to impose a 3.79 percent payment reduction in CY 2012, we are finalizing a 3.79 percent reduction in CY 2012 and a 1.32 percent reduction for CY 2013. These reductions enable us to account for the nominal case-mix which we have identified through CY 2009, to follow through with the planned 3.79 percent reduction for CY2012, and to allow for HHAs’ adopting process efficiencies during CY 2012.

Outlier Policy: CMS is reducing the Nat’l 60-day Standard Rate by 5% to fund the Outlier provision.  However, CMS will pay NO MORE than 50% of that fund for the year to the industry (meaning that 2.5% of the monies allocated to Home Health are NEVER going to be paid to the Home Health industry!  See page 68573 to see CMS’s Outlier Pmt Table (Table 12) and you will note that for FY 2010 Outlier Pmts only amounted to 1.9% of Total Pmts. Where does the rest of those funds that get allocated to but never paid to the Home Health industry go?).  This 5% reduction and 2.5% cap on reimbursement was also applicable for FY 2011.


Following is a brief overview of what I have noted thus far regarding changes to the Wage-Indices and the Case-Mix Weights:

Changes in Wage-Indices:

Of the wage indices for the 445 services areas (Urban (CBSAs) and Rural), I noted the following for 2012:

  • 221 had an increase from 2011
  • 229 had a decrease from 2011  AND
  • 5 remained the same as 2011

Note – Regarding the Change to the Wage Indices:  An increase to you service area(s) will have the effect of lessening the overall impact of the reduction to the 2012 rates; whereas a decrease to your service area(s) will increase the overall impact of the reduction to the 2012 rates.


Changes in Case-Mix Weights:

Note:  This is the first change to the Case-Mix Weights since 2008 (when the HHRGs went from 80 to 153)

Caveat:  My comparison of Prior and Current Year Case-Mix Weights is based on a Simple Weighted Average of all 153 episodes and my calculated changes from Prior to Current Year are significantly different than those reported by CMS for the following three groups in the Federal Register.  However, this might be explained by the fact that CMS has the data for ALL episodes and can weight accordingly.

Following is a comparison between what CMS reported and what I calculated (based on a simple average) regarding the average change in the Case-Mix for these three groups of episodes identified in the Federal Register (see page 68566):

Avg Change in the Case-Mix Weights
Therapy Group per Fed’l Reg per My Cal’c
0 to 5 Therapy Visits +3.75% +12.9%
14 to 15 Therapy Visits -2.50% -6.7%
20+ Therapy Visits -5.00% -12.7%

I also calculated the (Simple) Weighted Average Change of all 153 Case-Mix Weights for FY 2012 to be -2.2%

Good Luck to all.



P.S., an Ethical question to consider (and this has an impact on the Congressional findings in regards to the Big-4 Publicly traded HH Companies, and the industry overall):

If you have a client that is homebound and legally under a POC but could be discharged after x Therapy Visits; must you discharge when at first possible, or is it reasonable to provide an additional few Therapy Visits that you expect WILL improve the client’s condition (and correspondingly, your Outcomes); with the understanding that those incremental Therapy Visits will increase your reimbursement (and may be material to the overall reimbursement for that episode)?  Again, this client qualifies as Homebound throughout the duration of services.

Is the act of providing these additional Therapy Visits:

  • Illegal?


  • Unethical/Immoral?