The Prospective Payment System (PPS)

Medicare Part A and Medicare Part B reimburse home health agencies a lump sum, which is divided into two payments for a 60-day episode of care. The bundled services provided during the 60-day episode include all skilled nursing, therapy, and home health aide visits along with nonroutine supplies. Some outpatient therapy services may be covered under the PPS benefit as well. The total payment is based on the Outcome and Assessment Information Set (OASIS) assessment scoring with geographical location using core-based statistical area (CBSA) codes. Chapter 10 of the Medicare Claims Processing Manual provides details on how to process Medicare claims. 

Home health resources groups (HHRG)

The federal prospective payment system for home health began on October 1, 2000, established by the Balanced Budget Act of 1997. This system created a case mix severity index that is adjusted for the health condition, clinical characteristics, and care needs of the patient. There are 153 different HHRGs.

PPS payment types

 There are many different types of payment under the PPS. These include the following 

Request for anticipated payment (RAP)

A RAP is the first payment received. The home health agency may submit a request for the initial anticipated payment based on receiving verbal orders from the physician and delivering at least one service to the patient. The RAP pays 60% of the episode’s worth for the initial episode and 50% of the episode’s worth for all subsequent episodes. Use “0322—Type of Bill (TOB)” (form locator 4) for RAP submission only. RAPs may be paid zero percent if Medicare is the secondary payer or if the patient is enrolled in a Medicare Advantage program. 

Final claim payment

The remaining split percentage payment due for the episode will be made based on a claim submitted at the end of the 60-day period, or after the patient is discharged, whichever is earlier. The claim may not be submitted until after all services are provided for the episode and the HHA has a signed the plan of care on file at the agency. Use “0329—Type of Bill (TOB)” (from locator 4) for final claims.

Medicare will recoup the RAP and submit final claim payment in full to the agency. The related remittance advice will show the RAP payment was recouped in full and a 100% payment for the episode was made on the final claim. The final claim payment is based upon the HHRG conversion to Health Insurance Prospective Payment System (HIPPS) code calculation, which is defined in this chapter, and the claim detail. The claim detail includes all visits provided and nonroutine supplies. The reimbursement often changes from the RAP estimate due to the number of therapy visits provided being different than what was projected at the beginning of the episode.