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Financial impact of OASIS-E and value-based purchasing

There’s no question that the new OASIS-E assessment effective on January 1 will have a financial impact on home health organizations. That impact will be compounded by the new home health value-based purchasing model, which also becomes effective in 2023. Here’s what you need to know about the new proposed payment rules and how they could impact your bottom line. 

Expect a downward shift in home health payments

Under the new proposed payment rules, home health payments will decrease by 4.2% in calendar year 2023. The fixed loss, which has been 0.08% for several years, will now decrease by 2%. Baseline payment is set at $1904.76 for each 30-day period. The new rules also propose a permanent 5% cap on negative wage index changes, no matter the underlying reason. The changes are designed to improve the predictability in home health payments.

Here are other important highlights of the proposed payment rules:

  • If your home health organization was Medicare certified prior to 2021, your calendar year 2021 data will be used as your baseline for payment scoring.
  • If your organization was Medicare certified after 2021, your baseline year will be 2022.
  • Baseline year data will be used to update your low utilization payment adjustment (LUPA) thresholds, along with the functional points and functional impairment levels by clinical groups.
  • Since functional points that are assigned by response tend to trend lower, it’s likely you’ll see a decrease in thresholds by clinical group.
  • Proposed comorbidity adjustment changes — also based on 2021 data — show an increase from 10 subcategories to 23. High comorbidity adjustment changes increase from 85 interactions to 94.

Payment score timing

Extremely important is the new payment score timing (PST), which begins on January 1, 2023, along with OASIS-E. Calendar year 2023 will also be your gathering-of-performance year for payment year 2025. So, it is critical that you get three areas right in 2023, because your payments will decrease if patients aren’t happy:

  • Hospitalization and SNF activity
  • Five key measures of HCAHPS

Here’s how it works. Using your 2021 or 2022 data as a baseline (depending on when your organization was Medicare certified), your 2023 performance in the three areas above will determine how your payments will be affected. You’ll know results in 2024, when your first annual report is received and the adjusted payment percentage (also known as the AAP) is applied. Your results will then determine your payment scores for calendar year 2025.

Home health value-based purchasing model (HHVBP)

The theory behind value-based purchasing is that agencies will be rewarded for better quality care and outcomes. The model is designed to:

  • Provide incentives for better quality care and greater efficiency
  • Study and test potential quality and efficiency measures for the care setting
  • Enhance the current public reporting process

Study and testing

We started hearing a lot about home health value-based purchasing back in 2014. We also understood that the Centers for Medicare and Medicaid Services (CMS) would be doing a subset of testing around quality control measures. In 2016, the study and testing began in nine states: Arizona, Florida, Iowa, Maryland, Massachusetts, Nebraska, North Carolina, Tennessee, and Washington. The study ran for five years. It showed the original home health value-based purchasing model resulted in an average 4.6% improvement in a home health agency’s total performance score (TPS). That resulted in an annual savings of $141 million to Medicare without evidence of adverse risk. And with reductions in unplanned acute care hospitalizations and SNF stays, inpatient and SNF spending were also reduced.

Based on these findings, the U.S. Secretary of Health and Human Services determined that expansion of the original HHVBP model would provide ongoing reductions in Medicare spending while improving the quality of patient care. And in October of 2020, CMS certified the expansion of the model, confirming that it would produce additional savings when it reached all states.

Agency experiences with HHVBP

Two large agencies (one in North Carolina and one in Washington) that participated in the study reported the same outcomes for the first year, 2017. While the year was difficult, the agencies didn’t expect a reduction in payments.

In the way of preparation for HHVBP, one of the agencies spent more than $1 million preparing staff to drive better outcomes. The other agency spent less money but conducted extensive staff education and training around the value-based care model. For both agencies, the total patient experience was the bottom line — including HHCAHPS.

Both agencies also worked to adapt processes to improve reimbursement and outcomes, and each year the value-based model worked a little better. In the end, both agencies performed better than half the organizations that participated in the study, demonstrating that preparation and education go a long way in driving better results. It all comes down to performance, and better performers are going to see payment increases while lower performers are not.

Guidelines for full implementation

For home health organizations that were Medicare certified prior to January 1, 2022, calendar year 2023 performance has been assessed. These agencies are eligible for the 2025 payment adjustment.

For the expanded model, CMS has established cohorts based on the number of unique HHCAHPS survey-eligible beneficiaries for a calendar year that precedes the performance year. These home health agencies will compete in either a nationwide larger volume cohort, or a nationwide smaller volume cohort. This allows grouping agencies of similar size, that are also more likely to receive scores based on the same set of measures. This will help establish benchmarks, achievement thresholds, and payment adjustment determinations.

HHCAHPS survey-based measures will account for 30% of your total TPS score. Most larger volume cohort agencies (approximately 7,000) will be scored on the full set of applicable measures. Smaller cohort agencies (485) will be measured against their peers.

Within each cohort, competing agencies that deliver a higher quality of care in a given performance year will have an adjusted final payment that’s higher than the amount they would have been paid otherwise. In contrast, those agencies that perform below others in their cohort will see a reduced final payment amount. Those that perform similarly to others in their cohort may receive a small payment adjustment, or no adjustment at all.

Bottom line: reduced home health payments

Based on the new proposed payment rules, net home health payments will be reduced by $810 million in 2023, relative to the 2022 baseline. The new rules also seek to achieve budget neutrality for the patient-driven groupings model (PDGM) on a prospective basis by imposing a 6.9% cut to all payments and a 0.2% high-cost outlier cut. This means home health agencies will see a payment decrease of 2% for higher cost patients.

The unprecedented scale of the proposed PDGM behavioral offset and the required collection of all patient assessment data for the home health quality reporting program are particularly concerning given their financial impact on home health agencies nationwide. To secure proposed payment rules with a less devastating financial impact, feedback from home health agencies across the U.S. is critical. You have until August 16, 2022 to review the proposed rules and provide feedback.

Additional Articles:

Preparing for OASIS-E: Focus on your people and your operations

OASIS-E regulatory changes for 2023

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Nancy Cary

Nancy possesses a wide range of experience in the Home Health and Hospice field, including direct involvement in managing various aspects of the revenue cycle such as intake, authorizations, medical records, accounts receivable, and other related positions within Home Care and Hospice agencies. As a Senior Implementation Consultant, Nancy has successfully overseen complex software implementations for McKesson and Netsmart Home Health and Hospice. Her expertise extends to working with payors, particularly Medicare, and she is highly knowledgeable in the specific billing rules and regulations pertaining to Home Health and Hospice.

Before assuming her current managerial role, Nancy served as an A/R Consultant in the Revenue Cycle Division of HEALTHCAREfirst. In this capacity, she utilized her skills and knowledge to implement RCM services for unique and large clients, as well as assisting customers in resolving intricate A/R and billing issues. Nancy's notable strengths lie in her exceptional ability to train, develop, and efficiently manage effective teams.

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