The Centers for Medicare & Medicaid Services (CMS) issued the CY 2020 Home Health Prospective Payment System Rate Update, which finalized changes for the Patient-Driven Groupings Model (PDGM) that will go into effect on January 1, 2020. As this rule continued to take shape, industry leaders continually expressed their concern over the detrimental impact PDGM would have on the future of home health. Of the many challenges PDGM brings, one of the most widely opposed and scrutinized was the Behavioral Adjustment, which was most recently proposed at 8.01%. In the final rule, CMS announced that it has been lowered to 4.36%.

“The biggest change released in the final rule was the reduction of the behavioral adjustment from 8.01% to 4.36%, which is a big win for home health. I want to express my deep gratitude to all industry advocates and organizations who made mitigating the challenges under PDGM their number one goal every day,” said Mike Dordick, President, McBee. “When we band together and work towards a common goal, we are successful in making the home health industry a place where providers can achieve financial success and provide quality outcomes for their patients.”

CMS released the following:

Based on the comments received and reconsideration as to frequency of the assumed behaviors during the first year of the transition to a new unit of payment and case- mix adjustment methodology, we are finalizing a -4.36 percent behavior change assumptions adjustment in order to calculate the 30-day payment rate in a budget-neutral manner for CY 2020. This adjustment will be made using the three behavior assumptions finalized in the CY 2019 HH PPS final rule with comment period (83 FR 56461). 

The finalized 30-day budget-neutral payment amount with the -4.36 percent behavioral assumption adjustment will be $1,824.99 and the CY 2020 30-day payment rate, with the wage- index budget neutrality factor and the home health payment update of 1.5 percent, will be $1,864.03 with a fixed-dollar loss ratio of 0.56. Section III.E. of this final rule with comment period describes the CY 2020 home health payment rate update and section III.F. describes the payments for high-cost outliers and the fixed-dollar loss ratio for the CY 2020 HH PPS.

This adjustment is based from assumptions on how providers will adapt to PDGM. Despite opposition, these three theoretically-based assumptions are finalized and include comorbidities, LUPA avoidance, and diagnosis coding.

Comorbidity Coding
Under PPS, providers can only code five secondary diagnoses. Under PDGM, comorbidity adjustments are made based on all of the patient’s secondary diagnoses (up to 24). As a result, CMS assumes that more claims will receive additional reimbursement for comorbidities.

Clinical Group Coding – Diagnosis coding
CMS assumes that providers will adjust their coding and clinical documentation processes to code highest-margin diagnosis codes as the principal diagnosis in order to have a 30-day period of care be placed into a higher-paying clinical group.
For guidance on PDGM comorbidities and diagnosis coding, visit here.

LUPA Threshold – LUPA avoidance
LUPAs will no longer be based on four or fewer visits. The new payment model considers anywhere between two to six visits per 30-day period a LUPA, depending on clinical groups, functional levels, admission timing/source (early vs. late, community vs. institutional), and comorbidities. CMS assumes providers will add more visits per billing period to prevent LUPAs.
For creating and optimizing visit plans under PDGM, visit here.

CMS cited the following in response to comments on behavior assumptions:

We continue to believe that the behavior assumptions are reasonable given past experience with changes in provider behavior in response to payment system modifications. We refer readers to the CY 2019 HH PPS final rule with comment period (83 FR 56456), in which we provided examples of observed behavior changes resulting from payment system changes.

RAP Phase Out

Also finalized in the CY 2020 Final Rule was the RAP Payment reduction to 20% of the estimated final payment amount. Citing an increase in RAP-related fraud, the goal of the decrease in upfront payment is to phase out pre-payments for home health services over the next year and eliminate those payments completely in 2021. In 2022, the RAP will be replaced with a one-time submission of a Notice of Admission (NOA) that will be required to submit within 5 days of the start of care.

Section III.G. of this final rule with comment period, finalized technical regulations correction at § 484.205 regarding split-percentage payments for newly-enrolled HHAs in CY 2020; and finalizes the following additional changes to the split-percentage payment approach: (1) a reduction in the up-front amount paid in response to a Request for Anticipated Payment (RAP) to 20 percent of the estimated final payment amount for both initial and subsequent 30-day periods of care for CY 2020; (2) a reduction to the up-front amount paid in response to a RAP to zero percent of the estimated final payment amount for both initial and subsequent 30-day periods of care with a late submission penalty for failure to submit the RAP within 5 calendar days of the start of care for the first 30-day period within a 60-day certification period and within 5 calendar days of day 31 for the second, subsequent 30-day period in a 60-day certification period for CY 2021; (3) the elimination of the split-percentage payment approach entirely in CY 2022, replacing the RAP with a one-time submission of a Notice of Admission (NOA) with a late submission penalty for failure to submit the NOA within 5 calendar days of the start of care.

“McBee has been working with the industry and our clients to ensure success under the changes PDGM brings. While the behavioral adjustment reduction is a major win, there is still work to be done to position providers for guaranteed success in 2020 and beyond. We will continue to listen to our clients about their concerns surrounding the Medicare Final Rule and work with home health leaders to ease additional pain points,” said Dordick.

McBee is continuing to thoroughly review the final rule and conferring with our industry partners.  McBee will continue to advocate for fair home health industry regulations and provide support and resources to help our clients and the industry succeed.

Click here to access the Final Rule.

Click here to view the fact sheet on the Final Rule.

PDGM Resources & Insights

BLOG: Three Cash Collection Strategies to Prioritize for PDGM

WEBINAR: Check Your Gauges! Leverage Revenue Cycle KPIs for Operational Success Today and Under PDGM

WEBINAR: Episode Management in a PDGM World

WEBINAR: Diagnosis Coding in a PDGM World — The Clinical Perspective

BLOG: Patient Driven Groupings Model (PDGM) Readiness Series: Clinical Coding Challenges


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