Changes aplenty.  Will you be ready?

This (CY2022) being year 2 under PDGM, there are numerous changes proposed in the CY2022 HH PPS Proposed Rule; most having to do with HH PPS (see § II of the Proposed Rule) and the HH VBP Model (see §III), which I will discuss in this post; but other outside of this area (See sections IV, V, VI & VII) that I will not be commenting on. 

First, Clarification of a Commonly Misinterpreted Aspect of the Proposed/FINAL Rule

CMS noted in this Proposed Rule that the projected impact was to be a 1.7% increase for CY2022.

But a 1.7% increase in what?

For years I have been approached after my presentations (on-site or virtually) about this increase as many have told me that they were told in other presentations that the change indicated by CMS (or previously HCFA); which is projected to be 1.7% for CY2022 per this Proposed Rule, was what an agency could expect the change in its Medicare revenues to be for the upcoming year.  Well, THAT IS, AND ALWAYS HAS BEEN WRONG!  What CMS is projecting a 1.7% change for, for CY2022 is the change in HH Spending.  That is, the $ amount projected to be spent in CY2022 for HH is expected to be 1.7% more than what was to be spent in CY2021; NOT what individual agencies should expect the change in the Medicare revenues to be.  And this has been what CMS (or previously HCFA) projections have always been (at least since I entered the industry in ’92)!  If you were informed otherwise, I am sorry, but that was just not correct!

That being said, some agencies will see a change in their Medicare revenues commensurate with the CMS projected change in HH spending (approx. 20-30% of all HHAs); but most will see a change rate different than what CMS notes in the Proposed or FINAL Rule (Note: just because an HHA sees a change equivalent to the change projected by CMS in one year does not mean its change in revenue the following year will also be commensurate with the change in HH spending in the following year).  In fact, this year (as in most year’s), 100s (if not over 1000) of HHAs will see a reduction to their Medicare revenues for CY2022, in-spite of the projected 1.7% increase in HH spending.  This is not a guess; this is a fact.  In-fact, the range of the change in individual payment rates per this Proposed Rule could be as much as a 35.7% increase all the way down to a 34.6% decrease! 

Therefore, the question is: Do you know what the change in your revenues are to be for CY2022 based on the Proposed Rule (or FINAL Rule when it’s published)

The ONLY way to know is to have it calculated for your agency.  Otherwise, you are dealing with a lot of uncertainty about the future, and the more dependent your agency is on Medicare, the greater the risk.  Additionally, if you are one of the minority of HHAs that prepares a budget for the upcoming year, you should really try to project the revenue-change impact as accurately as possible.  This is an operational-financial fundamental that few agencies employ each year; but all HHAs should.  As a side note, the more operational-financial fundamentals that your agency regularly utilizes, the better you position your agency for success (both short- and long-term success).

Now, on to the proposed changes to HH PPS for CY2022.

Behavior Assumption Adjustment

The Behavior Assumption Adjustment was applied to HH PPS for CY2020, the first year of PDGM, before CMS even had any empirical evidence to support such an adjustment!  In the CY2020 HH PPS Proposed Rule, CMS proposed implementing an 8.01% cut to HH spending that they termed the “Behavior Assumption Adjustment”.  This was CMS proposing to reduce expected HH Spending based on what they felt would be changes that HHAs would make to increase their reimbursement that was not associated with the actual acuity of the patient.  They successfully did this before.  From CY2008 thru CY2019, the used what they called the “Nominal Change in the Case-Mix Weight Adjustment” to cut HH Spending by over 20%.  CMS did not use it every year during that span; but they did most years. 

CMS finalized the Behavior Assumption Adjustment for CY2020 @ 4.36%; and this reduction from the original proposed 8.01% only occurred because of comments submitted via (what really amounted to only a handful of) interested parties/stakeholders (so, don’t ever let anyone say that commenting doesn’t make a difference – if we’d of had 1,000s commenting on this issue, it might have been eliminated!). So, HH’s reimbursement rates were reduced 4.36% in CY2020 for this one CMS assumption; and our current rates are still impacted by that!  I point this out because CMS has put the industry on notice that it’s considering doing the same again in the near future.  See the following as extracted from the Proposed Rule:

(extracted from the Proposed Rule)

Suffice it to say, CMS is planning on implementing an adjustment in the near future, whether they call it the “Behavior Assumption Adjustment” or the “Nominal Change in the Case-Mix Weight Adjustment”!  Something to consider with future proposed rules and the opportunity we all have to submit comments as part of the Rule-Making Process.

Notice of Admission

Starting Jan 1, 2022, ‘No-Pay RAP’s will change to the Notice of Admission (NOA).  For the most part, this should be fairly nominal change.  But there is a significant aspect to consider with this change and that is:

But, this also brings in the question of how the late-filing penalty would be applied under the change to the NOA.  As there is only one NOA submitted for each length of stay (LOS) as opposed to each 30-day payment period, will a late filing penalty only be applicable for/thru the 30-day period the NOA is filed in, or will it be applicable to each 30-day payment period associated with the NOA?  I did not see absolute clarity on this issue in the Proposed Rule, and as such, did submit a question about this in the comments I submitted to CMS.  Time will tell. 

Market-Basket Update

The net Market-Basket Update (MBU) per the CY2022 Proposed Rule is 1.8%.  The MBU is our inflation adjusted update for each year.  It was initially identified to be +2.4% but is adjusted for what is termed the MFP (the annual economy-wide private nonfarm business multifactor productivity – an aspect of the 2010 PPACA), which is a reduction of 0.6%.  So the +2.4% combined with the -0.6% equals the net MBU of +1.8% for CY2022. 

Home Health Wage-Index

There are 465 CBSA/Service Areas (SAs), each with it’s own Wage-Index (WI) covered under the Medicare program. The Home Health WI is CMS’ approach to try to make the payment rates equivalent in all 465 CBSA/SAs, when considering the labor-rate differences in these CBSA/SAs.  226 CBSA/SAs are proposed to see an increase in their WI and 234 are proposed to see a decrease for CY2022.

Case-Mix Weights

There are 432 Case-Mix Weights (CMWs) under the PDGM regime of HH PPS.  The CMW is part of the calculation to determine the 30-day payment rate.  223 of the CMWs are proposed to increase (w/a MAX increase of +15.94%) and 209 are proposed to decrease (w/a MAX decrease of -26.73%)  per the CY2022 HH PPS Proposed Rule. 

LUPA Thresholds

The LUPA Thresholds are proposed to remain the same per the CY2022 HH PPS Proposed Rule.

The LUPA Thresholds are more complex under PDGM as each of the 432 HIPPS Codes has its own LUPA Threshold associated with it, as opposed to the 4 visits that it was pre-PDGM.  It is important that you know what the LUPA Threshold is for every 30-day payment period of service, but you should also know how your agency is presented on the PEPPER report LUPA Target Areas. 

National, Standardized 30-day Payment Rate

The National, Standardized 30-day Payment Rate is the starting point for calculating the payment rate for each 30-day payment period.  HHAs that submit the required quality data get the full update; whereas HHAs that do not submit the required quality data have their update rate reduced by 2 percentage points.  Following is the National, Standardized 30-day Payment Rate for HHAs that:

  • Submitted the required quality data:             $ 2.013.43       (currently, for CY2021 $1,901.12)
  • Did not submit the required quality data:     $ 1,973.88

National Per Visit Rates (LUPA Rates)

The LUPA Rates are used to calculate an agency’s revenue for a LUPA situation, and they are also used to calculate what is called the “Imputed Costs” for an Outlier situation (more on that later).  HHAs that submit the required quality data get the full update; whereas HHAs that do not submit the required quality data have their update rate reduced by 2 percentage points.  Following are the National LUPA Rates for HHAs that:

Do Submit       DISC       Do Not Submit

 $ 155.59           SN            $ 152.54

    170.70           PT               166.73

    171.24          OT               167.88 

    184.46            ST              181.23

    249.39         MSS              244.49

      70.45          HHA               69.07

LUPA Add-on

The LUPA Add-on is an additional $ amount, over and above the LUPA Per Visit Rate to try to offset the administrative costs an agency will incur but not have the full 30-day payment to cover those costs.  The CY2022 HH PPS Proposed rule is proposing to retain the LUPA Add-on rates for SN (1.8451), PT (1.6700) and ST (1.6266).

However, as CMS has proposed allowing OT to perform the initial assessment visits (in certain situations), CMS has established a LUPA Add-on for OT, as that did not previously exist.  CMS feels there currently is a lack of data to establish a true OT LUPA Add-on rate, so they propose to use the PT rate (1.6700) until they have more data to calculate a more accurate OT LUPA Add-on factor.

Rural Add-on

The Rural Add-on was modified for CY2019, with rural counties separated into one of three categories (High utilization, Low population density, and All other).  As established in CY2019, the Rural Add-on rates were being phased down/out from CY2019 thru CY2022; as such, CY2022 is the last year of the Rural Add-on as it is scheduled to sunset on Dec 31, 2022.  The only rural county category receiving a rural add-on for CY2022 is the Low population group and they are only receiving an add-on of 1%.


A benefit at what cost?

About 10 years ago I created a presentation that I provided around the country about Outliers that I called: Outliers: The Good, The Bad, and The Ugly.  In it I broke the Outlier Provision into three sections.  The first section: The Good, was about the premise of the Outlook Provision and that conceptually (but before looking at any of the mechanics therein) it seemed as a positive protection against potentially very costly episodes for which there was a limited revenue potential for.  But, that was all I considered good: the premise.

The Bad was the use of ‘Imputed Costs’ for calculating the cost of an Outlier episode.  Imputed costs were (are) based on the CBSA/SA’s Per Visit LUPA Rates AND excludes from consideration any chargeable medical supplies provided for the episode.  Therefore, I considered the aspect of the Outlier Provision using the HHA’s LUPA Per Visit Rates and exclusion of the costs of any chargeable medical supplies as ‘The Bad’.  Additionally, I believe that 95+% of all HHAs would probably find that the $ amount that their Medicare payments are reduced is greater than the Outlier payments that they receive each year.  It’s just most HHAs do not realize (do not see) the impact of the withhold to fund the Outlier Provision, but they do see the Outlier payments received, and therefore have a positive perception of the Outlier Provision that is actually detrimental to their Medicare revenues and cash-flows. 

The Ugly was based on a section of the PPACA (i.e., the Affordable Care Act) that was established to reduce annual HH spending by 5%; theoretically to fund the Outlier Provision, but then set a cap on Outlier payments of 2.5% of total HH spending.  Meaning, that ½ of the 5% removed from HH spending is permanently removed from HH spending each year and that this amount cut each year amounts to approx. $400-450- million (yes, each year!).  With CY2022 being the twelfth year of this discrepancy, it will mean that the total amount taken from HH spending since the implementation of this aspect of the PPACA will exceed well over $4 Billion!

Regarding the Outlier changes for CY2022, the Fixed-Dollar Loss (FDL) is proposed to change to 41% and the Loss-Sharing Ration is proposed to be at 80%. 

Allowed Practitioners

CMS has identified in the CY2022 HH PPS Proposed Rule that they are proposing to make changes long sought by the industry, and that they are defining Nurse Practitioners (NPs), Clinical Nurse Specialists (CNSs) and a Physician’s Assistant (PA) as “Allowed Practitioners”.

Next, I’ll briefly talk about the HH VBPM.

Home Health Value-Based Performance Model

Per the CY2022 HH PPS Proposed Rule, CMS is proposing ending the Home Health Value-Based Performance Model (HH VBPM) demonstration and then extending the HH VBPM across the entire program.  As per this proposal:

  • CY’s 2022 & 2023 would be the first two Performance Years,
  • CY2024 would be the first year of the Payment Adjustments and would be based on the HHA’s Performance Scores of CY2022, and
  • The revenue impact could be up to +/- 5% of Medicare payments (including LUPA & Outlier pmts) for any HHA

Other Areas Updated in the CY2022 HH PPS Proposed Rule

  • HH QRP – § IV of the Proposed Rule
  • Home Infusion Therapy Services – § V of the Proposed Rule
  • Medicare Provider and Supplier Enrollment Changes – § VI of the Proposed Rule, and
  • Survey and Enforcement Requirements for Hospice Programs – § VII of the Proposed Rule


As previously noted, interested parties/stakeholders are generally able to submit comments to each rule proposed by CMS.  This is considered part of the Rule-Making Process.  As noted per the below extract from the regulations page of the Federal Register, there appear to have been 207 comments submitted from interested parties/stakeholders; 89 of which are available for review as of Sept 2, 2021.

Since this Proposed Rule was originally published on July 7, 2021, HHAs across the program have almost six-months to prepare for the changes as proposed.  The most successful agencies will be the ones that use the maximum amount of time possible to analyze the projected impact to their organization and use that time to plan and prepare for the upcoming year.