Home Health Prospective Payment System

In October 2000, CMS implemented the home health prospective payment system (PPS). Under PPS, a standardized payment is made for each 60-day episode of care that a beneficiary receives from an HHA. The PPS payment covers skilled nursing and home health aide visits, as well as covered therapy, medical social services, and routine medical supplies.

HHAs use certain elements from the Outcome and Assessment Information Set (OASIS) to determine the payment amount for each 60-day episode of care for each beneficiary. OASIS evaluates beneficiaries and measures outcomes using demographic, clinical, and functional data items. Elements of OASIS contribute to a score that the HHAs use to assign the individual to a Home Health Resource Group (HHRG). The HHRGs reflect beneficiaries’ health conditions and their needs for care in three distinct areas: clinical severity, functional severity, and service utilization. The assignment to a given HHRG represents the amount of care that the HHA expects a beneficiary to need. A change in the group assignment can change the payment that the HHA receives for care of that individual. The HHA assigns the beneficiary to a Health Insurance Prospective Payment System (HIPPS) code that is based on the HHRG level. 

2008 Changes to Home Health PPS  

For home health care episodes paid prior to 2008, CMS adjusted the home health base payment by assigning beneficiaries to 1 of 80 HHRGs.17 As of January 1, 2008, CMS significantly refined the home health payment method with the goal of reducing overpayments. Although HHAs continue to assign individuals to an HHRG using OASIS, the score now depends on the timing of the episode. CMS created a case-mix model that differentiates payment based on whether the beneficiary is in an early episode (i.e., a first or second episode) or a late episode (i.e., third episode and beyond), as well as whether the beneficiary has received more than 20 therapy visits. CMS also expanded the number of HHRGs from 80 to 153 to better capture the actual cost of care.

Home Health Fraud  

In 2011, CMS assigned newly enrolling HHAs to the high-risk screening level because of program vulnerabilities that these entities pose to Medicare.18 As early as 1997, the Office of Inspector General (OIG) reported on fraud in HHAs. OIG found that 40 percent of total services in HHA claims reviewed did not meet Medicare reimbursement requirements.19 As part of its review, OIG interviewed beneficiaries or beneficiaries’ family members, as well as the physicians who certified the plans of care. OIG also requested medical records to determine whether beneficiaries were homebound and whether the home health services were medically necessary.

Since that time, the Department of Health and Human Services (HHS) has changed Medicare payment requirements, suspended payments to some HHAs, and investigated and pursued criminal actions in its efforts to combat increasing Medicare fraud, waste, and abuse by HHAs.