Navigating the Rise in RCD Denials and TPE Audits: Implications for Home Health Agencies

Written By Michele McCutchen, Clinical Consulting Manager, McBee

In recent months, home health agencies across the United States have experienced a significant increase in claim denials under the Review Choice Demonstration (RCD) and Targeted Probe and Educate (TPE) programs. This trend is particularly evident among providers serving patients in Assisted Living Facilities (ALFs), where documentation deficiencies are contributing to non-affirmations and audit flags. 

As clinical consultants, we are closely observing the operational, compliance and financial challenges these denials are presenting to home health agencies. 

The Documentation Challenge in ALFs 

During the Pre-Claim Review phase of RCD, agencies must submit comprehensive documentation, including a signed plan of care and face-to-face encounter details, to obtain service affirmation. Recently, Palmetto GBA reviewers have increased scrutiny, denying claims when documentation does not clearly distinguish services provided by the home health agency from those potentially offered by the ALF. 

In Chapter 7 of the Medicare Benefit Policy Manual, patients residing in ALFs may qualify for home health services if they meet the homebound criteria and the facility is not primarily engaged in delivering skilled care. However, when services appear duplicative or are required under state ALF licensing regulations, claims may be denied under provisions of the Social Security Act.

Although CMS and Palmetto GBA have not published specific denial rates related to ALF documentation issues, recent data indicates a decline in affirmation rates under RCD. This suggests more rigorous documentation standards. Anecdotal evidence also points to ALF-related documentation gaps as a growing contributor to non-affirmations and audit flags. 

Financial Consequences 

The increase in RCD denials and TPE audits presents a substantial threat to the financial health of home health agencies. These denials disrupt revenue cycles, increase operational costs and reduce profitability. 

Key Financial Impacts Include: 

1. Rework Costs and Revenue Loss 
   • Approximately 20% of claims are initially denied or delayed 
   • Up to 65% of claims denied are never resubmitted, resulting in permanent revenue loss 
2. Key Performance Indicator (KPI) Disruption 
   • Days Sales Outstanding (DSO) rises due to payment delays 
   • Net margin contracts as administrative burdens increase 
   • Cost Per Visit (CPV) escalates due to additional labor for documentation and appeals 
   • Revenue Per Visit declines when claims are denied or underpaid 
3. Compliance and Risk Exposure 
   • Increased audit triggers 
   • Potential overpayment refunds 
   • Referrals to oversight entities 
   • Risk of losing Medicare certification 
   • Operational disruptions 
   • Reputational harm 

Strategic Response 

The escalation in RCD denials and TPE reviews highlights the need for home health agencies to strengthen their compliance infrastructure. With CMS extending the RCD program through 2029 and broadening audit oversight, agencies should focus on: 

• Improving documentation accuracy and clarity 
• Implementing proactive compliance measures 
• Streamlining internal processes for audit readiness 

McBee is committed to supporting agencies in navigating these challenges. Our goal is to help providers not only withstand regulatory scrutiny but also improve performance and sustainability.