Case-Mix Weights Under PPS

We have been operating with Case-Mix Weights since the inception of the Prospective Payment System (PPS) for Home Health on 10/01/00.  The Case-Mix Weight is a major determinant for calculating the PPS Payment Rate for every patient encounter covered via the Medicare Program.  Simplistically put, the greater the Case-Mix Weight, the larger the Medicare PPS Payment Rate.  The way I describe/define the Case-Mix Weight is as follows:

The Case-Mix Weight (CMW) is a numeric representation of the patient’s acuity level:

• The Lower the CMW, the less acute and fewer resources needed to care for the patient
• The Higher the CMW, the greater the acuity level and more resources needed to care for the patient

As such, throughout PPS, there has been a great search for ways to increase the acuity level of the beneficiaries served.  This has always frustrated me.  This takes me back to the ‘cost-based‘ days of home health reimbursement and how so many were too focused on manipulating their cost limits (do more visits) instead of striving to become more efficient (efficiency reduces costs).  The point with Case-Mix Weights shouldn’t be trying to maximize them, it should be to ensure that you are ‘right-sizing them’; that is, you are accurately and properly identifying the acuity level for every patient and therefore are establishing the correct Case-Mix Weight for every patient treated.  Instead of trying to maximize revenues via increasing Case-Mix Weights, focus on the bottom line by ensuring you are properly resourcing your patients based on their acuity level as per the Case-Mix Weight (this is an ‘efficiency-focused’ approach).  These are not the same thing!  HHAs that chase the ever-higher Case-Mix Weight tend to overutilize resources as well, as efficiency is not in the equation (look at productivity: tends to be too high or too low, not in the sweet spot).  However, HHAs that strive to accurately establish the patient’s acuity level (and thereby their Case-Mix Weight), tend to also strive to be efficient in the allocation of resources to treat that patient (i.e., productivity in the sweet spot); and this helps improve an agency’s bottom line (this is what my Resource Planner was designed to do!).

Case-Mix Weight Trends Under PPS

As a CPA, I am financially-oriented and therefore limited in my ability to opine on patient acuity and Case-Mix Weights from a patient-needs perspective.  However, the analytical side of me is still able to look at the Case-Mix Weights and get a good idea of what CMS is attempting to do with the use of Case-Mix Weights.  I’ll get back to CMS’ intentions momentarily, but first I want to point out how the Case-Mix Weights have changed over the years – see the following:

(Keep in mind, that all things being equal, a larger Case-Mix Weight will generate a larger Medicare payment and a lower Case-Mix Weight will generate a smaller Medicare payment)

CMW Trends (2000 thru 2025-P)

As you can see above, there has been quite a bit of variability in the Case-Mix Weights used by CMS over the years.  Going from 80 Case-Mix Weights for the first eight years of PPS, to 153 Case-Mix Weights for the next twelve years, to the 432 Case-Mix Weights we’ve been using since 2020.  Along with the # of Case-Mix Weights changing over the years, the Case-Mix Weights themselves have changed over the years.

• We had a steady 80 Case-Mix Weights for the years 2000 thru 2007 (payment period: 60-days)
  • The MIN CMW @ 0.5265
  • The AVG CMW @ 1.5346 (the AVG is a simple mathematical average of all CMWs)
  • The MAX CMW @ 2.8113
• Quite a bit of variability (7 changes) during the years 2008 thru 2019 (payment period: 60-days)
  • The MIN CMW ranging from 0.4557 to 0.6692 during this period
  • The AVG CMW ranging from 1.17 to 1.76 during this period
  • The MAX CMW ranging from 2.0228 to 3.4872 during this period
• Continued variability (5 changes) during the years 2020 thru 2025 (per the Proposed Rule) (payment period: 30-days)
  • The MIN CMW ranging from 0.4709 to 0.5239 during this period
  • The AVG CMW ranging from 1.16 to 1.18 during this period
  • The MAX CMW ranging from 1.6629 to 1.7171 during this period

Case-Mix Weights and Reimbursement

The Home Health segment of Medicare has a limited amount of resources ($) allocable to it any given year and CMS uses the Case-Mix Weights to help disperse those funds to the industry in an equitable manner.  I give CMS some high-marks for this reimbursement approach; although I feel we as an industry have been vilified in many ways for unintended consequences that arose because of the design of the approach; not necessarily because of what we have been accused of.  Keep in mind that since 2005, CMS has created negative adjustments to Home Health (HH) Spending due to questionably-supported allegations of the industry gaming the program for self-enrichment that had nothing to do with patient care.  From 2005 through 2019, they called it the ‘Nominal Change in the Case-Mix Weight’ Adjustment, and since 2020, CMS has called it the Permanent Behavioral Adjustment or the Temporary Behavioral Adjustment.

Gaming Case-Mix Weights?

What % of the industry had to be ‘gaming’ Case-Mix Weights, etc. to justify the size of these cuts to reimbursement by CMS over the years?  CMS NEVER clearly identifies this!  They just state that based on their findings these are what these (the aforementioned) adjustments need to be to offset the industry’s gaming of HH reimbursement.  Well, to justify the large $ amounts that CMS has cut from HH reimbursement over the years (and for any given year), it had to be a majority of HHAs throughout the industry gaming reimbursement for self-enrichment (not due to patient needs).  This means over 50% of the industry had to have been gaming reimbursement.  I’d venture it would have had to have been greater than 2/3rds of the HHAs; meaning more than 2 out of every 3 HHAs was manipulating what they could (including Case-Mix Weights) under PPS.  If you believe CMS to be correct, that abuse is that wide-spread in HH, then CMS must be justified in their application of these cuts to HH Spending (i.e., reimbursement rates).  However, if like me, you think that CMS is grossly inflating the instances of intentional manipulation of the Case-Mix Weight by HHAs for self enrichment, having nothing to do with patient needs, then these cuts to HH Spending over the years are not justifiable, and this should fire-up the industry to contest these cuts issued by CMS.

We can fight by indicating CMS’ overreach with these non-congressionally driven cuts in-light of the US Supreme Courts reversal of the long-standing Chevron Doctrine.  We can also fight these cuts based on the spurious support CMS used to justify these cuts, as they have never shown any direct correlation to actual HHAs’ actions (i.e., to my knowledge, no HHA has ever been closed because of these types of fraudulent activities), and CMS has never identified how wide-spread these spurious allegations are (in their opinion) to justify these allegations.  HHAs that do “play within the rules” should be willing to contest these CMS actions at every corner and only the HHAs that do do what CMS attributes to our industry would have a reason to stay quiet-because inspection would lead to detection, and I, for one, am all for shutting down those fraudulent/abusive providers out there that are gaming the industry a giving a bad name to and harming every scrupulous agency in the industry!