As we get ready to enter Year 3 of Rebasing, the 2016 HH PPS payment rates are projected to decline again.  CMS notes in the Proposed Rule for 2016, that HH reimbursement is projected to be reduced another $350 million (a 1.8% reduction) as compared to total HH payments expected for CY 2015.

Now what everyone needs to understand is that the -1.8% reduction projected for HH Reimbursement is the projected impact for the entire industry; NOT for any given service area, and NOT for your agency!  The reduction to any given service area is going to be a by-product of a couple of things:

  1. The CMS identified industry average of -1.8% and
  2. The change in the Wage-Index for that Service Area

A HH agency is going to be impacted by the above; PLUS, the impact that will be felt based on their patient census.  Another way of looking at this is that two HHAs on the same street corner with the same # of patients, in the exact same service areas could have significantly different impacts to their reimbursement because of the differences in their patient census.  Now the different impacts based on the differences in the patient census is going to be next to impossible to identify because competing HHAs are generally not going to share this kind of proprietary information (unless they have common ownership).  But the individual HHAs can do an internal analysis shortly after the start of the year once a fair amount of episodes have ended in the new year.  What I recommend that you do then is compare what the reimbursement rates (w/the applicable HIPPS/HHRG info) for like-kind episodes were for both the prior and current year.  This is not something generally done in the industry, but it is something that should have been done every year to try to estimate the ‘reasonableness’ of the changes implemented and projected by CMS as well as what the expected impact to your agency would be.  What a # of agencies identified for CY 2015 was that many like-kind patients (those that had OASIS responses similar or exact for CY 2014 & CY 2015) were being scored at a lower Clinical and/or Functional Dimension in CY 2015, and as such had much lower reimbursement rates for those patients.  There is the potential for CMS to ‘game’ reimbursement by the way that they adjust (play with) the:

  • Point Scoring Variables of the OASIS (which they propose in this Rule to adjust every year now) and
  • Case-Mix Points  (which they propose in this Rule to adjust every year)


As this is going to be something that you are going to be able to identify after you have completed a batch of OASISs and episodes applicable to the new year, it’s not something that you can easily plan for (you can, but it would be a fair amount of work); however, you can currently identify what the change is for any/all PPS Payment Rates for any/all of your service areas: and you should!

Each service area (CBSA) has 918 unique payment rates associated with it, without exception.  These 918 payment rates are determined by the reimbursement rates as calculated for the 153 Case-Mix Weights plus the 6 different NRS Add-on amounts for each Case-Mix Weight (NRS = Non-Routine Supplies).  That is how we come to 918 possible payment rates:

  • 153 Case-Mix Weights  x  the 6 NRS Add-on Amounts  =  153 x 6 = 918


Since the early days of PPS I have been performing a comparative analysis of these changes to the payment rates; in the early years I was doing it for the HHC chain organization that I worked at, and since 2008 I have been doing it for my consulting clients.  Last year, 2015 was the first time I stared doing this for non-clients.  I had initially been reticent to do this in a more public manner in that I did not want to educate my fellow consultants on a service that most did not ever consider because most had never worked a day in the industry they consult in and as such do not know/have no experience with the day to day issues that a HHA has to deal with.  But, as I noted that a few did (to varying degrees of accuracy/depth/detail) I decided to move forward publically.

This is something that everyone should be doing.  Identifying the changes in your PPS Payment Rates helps you prepare for the upcoming year.  This gives you a good indication of what the likely impact in reimbursement is to be for your agency and when coupled with the analysis reviewing the impact the change on the Points Scoring Variables has on your census, you can quite accurately project out what the impact to your HHA’s reimbursement should be for the upcoming year.  And if you do industry-appropriate budgeting for your agency, you can couple the projected changes to your reimbursement with your budget to have a strong management tool for operating your agency (unfortunately, too many HHAs do not prepare an annual budget; and most that do, do so in a not so industry-specific manner, lessening the value of the budgeting process: a financial fundamental long lacking in the HH industry!).

Based on analyses that we have thus far completed, we have seen average reimbursement rates for a given service area increase by as much as 7.7% and decrease by as much as -27.0% (and that’s a simple average for the change in all 918 payment rates).  Furthermore, we have seen individual payments rates increase by as much as 13.1% and decrease by as much as -29.9%!

What do you think is going to happen to the HHAs that service the areas that have the significant reductions to reimbursement (>= 5.0%), if they are expecting a reduction of reimbursement of -1.8%; let alone any service areas that are realizing double-digit reductions to individual payment amounts or an average double-digit reduction to all 918 payment rates.  They are going to be in for some hard times to say the least.

Will knowing ahead of time what these changes are projected to be guarantee success for HHAs in these service areas? No.  But it will significantly increase the chance of survivability/success for the HHAs that do know this ahead of time as it will give them the time to prepare for this change as opposed to the other HHAs that will find this out slowly and painfully as the CY 2016 reimbursements start to arrive (and even then they may not immediately identify what the issue is!).

We have two analyses that we provide for this specific issue:

  1. An analysis of the change in all 918 PPS Payment Rates for each Service Area (CBSA) and
  2. An analysis of your actual episodes for the last 12-months where we identify what the PPS Payment Rate is by episode based on the applicable HIPPS Code for that episode as per the Current Year (i.e., the 2015 Rule) compared to what it is projected to be per the Upcoming Year (i.e., CY 2016 per the Proposed &/or FINAL Rule).

This is something that everyone should do/have done each and every year.  This would be another of the financial fundamentals that has disappeared since the inception of PPS.  It’s time to re-acquire those financial fundamentals to help make your agency a more cost-effective provider of high-quality care.

If you want/need some help with this analysis, please contact us at your earliest convenience to discuss analysis and pricing options.