Home Health Legislation and Billing Overview

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Introduction   

Each year the Centers for Medicare and Medicaid (CMS) propose a rule in June, wait for the public comment, and publish the Final Rule on or around November 1. The final rule that was issued in November 2023 for the Home Health Prospective Payment System went into effect January 1, 2024. The rule updates Medicare payment polices and rates and adopts a permanent prospective adjustment to the 2024 home health payment rate. This is to account for the impact of the implementation of the Patient Driven Groupings Model (PDGM). This adjustment accounts for differences between assumed behavior changes and actual behavior changes on expenditures due to the implementation of the PDGM and 30-day unit of payment. An important determining factor in CMS’s decision making. (1)  

These updates are made in an effort to improve patient care and ensure the sustainability and cost effectiveness of the Medicare program for future generations. PDGM has changed the financial landscape for home health agencies and adapting to these changes has been difficult due to inflationary pressures with wages, supplies, costs, COVID related expenses and interest rates. The ability to balance the cost increases with reimbursement rates has been a challenge.  

On June 26, 2024, CMS issued the 2025 Home Health Prospective Payment System (HHPPS) proposed rule which will further update the Medicare payment policies and rates for Home Health Agencies. (HHAs). These changes include and support timely admission to home health services, which has demonstrated improvements in patient outcomes and reduces the risk of hospital readmissions, very important indicators for agencies and home health patients.  

Home Health Market History 

The growth in the home healthcare market has been largely driven by the aging U.S. population, advancements in technology, and the rising demand for care delivered at home and is expected to grow at an annual growth rate of about 7.96% from 2024 to 2030. The growth can be attributed to the rising demand for cost effective alternatives to curb rising healthcare costs and an increased growth in the virtual and remote care industry. (2)  

Effective January 1, 2020, the Patient Driven Groupings Model (PDGM) took effect and was the largest change to the reimbursement system in nearly 20 years and the biggest financial challenge for agencies. The goal was to have agencies focus on the clinical characteristics of the patient they are serving, more than ever before, and eliminate the use of therapy service thresholds and volumes as a payment determinant.   

This significant change has been challenging for home health agencies to keep up and maintain compliance while evaluating and updating internal processes, during a time when they are expanding their service lines to serve more clinically complex patients.  The PDGM system also moved payments from a single 60-day episode to 30-day periods of care, still retaining the 60-day certification and plan of care requirements.  

In March 2020 the COVID 19 pandemic hit the home health industry with another significant impact to service delivery and capacity ability, resulting in reduced therapy and overall visits but an increase in virtual care delivery. Patients were sicker post COVID pandemic with a rise in acuity.  

Additionally, the HHVBP (Home Health Value Based Purchasing) national expansion increased the market competition to “do more with less.”  There were higher acuity discharges from health systems in addition to Medicare Advantage topping 51% of the payer mix changing the financial pressures for agencies. (3)   

All of these changes, plus additions added each year as CMS reviews and changes policies are increasing the challenges agencies are faced with.  

Patient Driven Groupings Model (PDGM) and Behavior Assumptions 

When CMS implemented the home health PDGM (Patient Driven Groupings Model) on January 1, 2020, as required by the Social Security Act as amended by the Bipartisan Budget Act of 2018, it changed the payment methodology to a 30-day unit of payment from the 60-day episode.  The PDGM better aligns payments with patient care needs, especially for the clinically complex that require more skilled nursing care rather than therapy. 

This law required CMS to make assumptions about behavior changes that would occur because of the implementation of the 30-day unit of payment and the PDGM. CMS finalized three behavior assumptions in the 2019 Home Health Prospective Payment (HHPPS) final rule;  

• Clinical group coding  

• Comorbidity coding  

• Low-utilization payment amount (LUPA) threshold 

The law also required CMS to annually determine the impact of differences between assumed behavior changes and actual behavior changes on estimated aggregate expenditures. The timeframe began with 2020 and will end in 2026.  

In the 2023 HHPPS final rule, CMS finalized a methodology for analyzing the differences between assumed versus actual behavior changes on estimated and actual aggregate expenditures, using 2020 and 2021 claims. Based on this analysis of claims data, CMS determined a permanent adjustment was needed. (4)  

Each of the 432 payment groups under PDGM has an associated case-mix weight and LUPA threshold. The CMS policy is to annually recalibrate the case-mix weights and LUPA thresholds using 2023 data to more accurately pay for the types of patients home health agencies are serving. LUPA periods that occur as the only period of care or the initial 30-day period of care in a sequence of adjacent 30-day period of care with the appropriate add-on factor: 

• 1.8451 for SN 

• 1.6700 for PT 

• 1.6266 for SLP 

• OT same as PT until the data becomes available 

Example: Using the proposed 2024 per-visit payment rates for HHAs that submit the required quality data, for LUPA periods that occur as the only period or an initial period in a sequence of adjacent periods, if the first skilled visit is SN, the payment for that visit would be $310.66 (1.8451 multiplied by $168.37), subject to area wage adjustment. (5)  

The policy of CMS is to recalibrate annually the case mix weights and LUPA thresholds using the most complete utilization data available. It is currently recalibrating, including functional levels and comorbidity adjustment subgroups and LUPA thresholds using 2022 home health claims data with linked OASIS data, to more accurately pay for the types of patients a home health agency serves.  

Wage Index 

CMS uses the wage index as a measure to determine a hospital, facility or home health agency’s wage level in its geographic area in relation to the national average. There are over 450 Core-Based Statistical Area (CBSA) codes that get updated each year. It is one of the factors that has a significant impact on Medicare reimbursement rates for inpatient and outpatient services. As a primary driver for Medicare reimbursement rates it has a significant impact on revenue up to 60% of outpatient rates. Health systems continue to face staffing shortages, increases in labor and related benefit costs and changes regulating staffing ratios.  

For service periods and visits on or after January 1, 2024, there will no longer be the rural add-on county-based percentage increase to the payment rates based on the County-Code Values. Agencies should submit the CBSA code corresponding to the state and county of the patient’s place of residence.  

In the CMS CY2025 Proposed Rule, 53 counties will shift from urban to rural status. Among these, 29 counties are expected to experience a wage index decrease of more than 5 percent. In addition, 54 counties will transition from rural to urban, with 10 of them facing a wage index reduction exceeding the 5 percent cap.  

Other counties will undergo changes in CBSA classification. Some counties will shift from one wage index to another, while others will be renamed or reclassified. Agency billing teams will need to be aware of those counties affected by the changes and assure that the correct CBSA code is on the claims. In addition, the EMR system needs to have the correct CBSA updates for 2025. (6)   

Rebasing and Revising the Home Health Market Basket 

The CMS Market Basket is a fixed weight index because it measures the change in price over time of the same mix of goods and services purchased in the base period. The market basket is used in home health care for payments and cost limits in the various fee-for-service CMS payment systems and reflects input price inflation facing providers in the provision of medical services.  (7)  

The market basket used to update home health PPS payments has been rebased and revised to reflect more recent data on home health costs. CMS last rebased and revised the market basket for home health in the 2019 final rule and adopted a 2016 based home health market basket. For 2024, CMS adopted a 2021 home health market basket using cost reports from freestanding home health agencies from October 1, 2020 to October 1, 2021 which is the most complete year of data.  

The overall economic impact related to the changes in payments under the home health PPS for 2024 is estimated to be a $140 million (0.8%) increase which is actually a $525 million increase, an estimated 2.6 percent decrease that reflects the permanent behavioral assumption adjustment of $455 million minus a 2.6% decrease that reflects the behavioral adjustment. 

The 2023 30-day period payment base rate for home health services will increase by $27.44 from $2,010.69 (2023) to $2,038.13 (2024) after application of the PDGM budget neutrality adjustment, market basket update, a wage index budget neutrality factor, labor related share factor and case mix recalibration factor adjustment. Agencies that do not submit the required quality data will have that rate reduced by 2%.  

Disposable Negative Pressure Wound Therapy 

The Consolidated Appropriation Act, 2023, required that effective January 1, 2024, there be a separate payment for using a disposable negative pressure wound therapy (dNPWT) under a home health plan of care. Payment for services to apply the device is included in the 30-day payment under the home health prospective payment system.  

Previously, CMS didn’t allow home health agencies to bill for providing the negative pressure wound therapy using a disposable device. Effective in 2024 payment for nursing and therapy services related to the applicable devices would no longer be billed separately and paid under the HHPPS.  

For the purposes of paying for dNPWT device for a patient under a Medicare home health plan of care, CMS finalized the payment amount for 2024 of $263.25.  (8)   

Request for Information on Access to Home Health Aide Services 

One of the important aspects when a final rule is proposed each year by CMS, is when comments are solicited from the public, including home health care providers, as well as patients and advocates, regarding information related to the appropriate access to and provision of home health aide services for all beneficiaries receiving care under the home health benefit. This 2024 final rule included a discussion on the comments received regarding access to home health aide services. (9) 

The comments stated that: 

• The decline in the utilization of home health services was not indicative of a reduced need for such services and while substantial home health aide hours are allowed, the actual provision is dwindling, especially affection those with chronic or long-term conditions, who often require a combination of skilled and aide. (10)  

• Both CMS’ and home health agencies’ policies, practices, and current payment model (PDGM) have resulted in barriers that devalue and disincentive the provision of these essential services.  

• Multiple commenters stated that HHAs’ engage in selective practices and strategic preference for serving lower acuity patients to maximize profits and suggested that SMS has not fulfilled its oversight and enforce responsibility regarding the nondiscrimination conditions of participation for Medicare-certified HHAs.  

• Commenters identified multiple barriers affecting recruiting and retaining aides, including low compensation, competition for labor in different job markets, inadequate/limited training opportunities, and demanding work conditions. They also noticed wage disparities between home health aides and similar positions in nursing homes and hospitals.  

• Solutions to these recruitment and retention barriers included improved compensation, including aide services more directly in care plans, providing advanced training, and establishing centralized systems for employee development. 

• A commenter stated that CMS’s episode reimbursement for home health does not support robust staffing, particularly in rural areas where separate visits for home health aides could not be justified when other professionals could complete the work in the scope of their practice. 

• When it comes to Medicare and Medicaid coordination of these services, commenters shared that the effectiveness of coordination varies by state and is generally limited (especially for dually eligible beneficiaries) compounded by systemic issues align from difference I eligibility, coverage, and administrivia factors. 

• Multiple commenters stated that HHA’s limited aide services through convincing physicians not to write orders by stating aide services are either very limited or not available at all, refusing to initiate aide services unless family/caregivers commit to learning how to perform the aide functions themselves or refusing to staff aides adequately or understaffing them deliberately. 

• Commenters identified consequences to beneficiaries’ including outcomes such as unnecessary hospitalizations nursing facility admissions, potential health complication, family/ caregiver burnout, and even forced institutionalizations.  

(11)  

Home Health Quality Reporting Program (HHQRP) 

The CMS 2024 Final Rule finalized changes to the Home Health Quality Reporting Program (QRP) which is a program that creates quality reporting requirements for Home Health Agencies. It is mandated by the Social Security Act and Medicare regulations. Each year CMS publishes the quality measures that an agency must report. The following three categories of quality measures are used in the Home Health Quality Reporting program: 

• Outcome measures: Assess the results of health care that are experienced by patients pulled from the OASIS information submitted by the home health agencies and the data submitted in the Medicare claims. There are four types of Outcome measures: 
  • Improvement measures (a patient’s ability to get around, perform activities of daily living and general health) 

• • Potentially avoidable events which can be indicators of potential problems in care 

• • Utilization of care measures that describe how often patients access other health care resources during the home care episode or after 

• • Cost / Resource measures 

• Process measures: Focus on high-risk, high-volume, problem prone areas for home care. They pertain to all or most home care patients, such as timeliness of care admissions.  These measures are those collected in the OASIS and calculated using a full episode that begins with admission to the agency (or a resumption of care from an inpatient facility stay) and ends with discharge, transfer to inpatient facility or sometimes death. Unlike Outcome measures, Process measures are not risk-adjusted because the processes measures are appropriate for all patients. (those not appropriate are excluded) 

Process Measures include: 

• Timely initiation of Care 
• Percent of Patients with an Admission and Discharge Functional Assessment and a care Plan that Addresses Function 
• Drug Education on All Medications Provided to Patients/Caregiver during All Episodes of Care 
• Influenza Immunization Received for Current Flu Seasons 
• Influenza Offered and Refused for current Flu Season 
• Influenza Immunization contraindicated 
• Drug regiment Review Conducted with Follow-up for identified Issues 
• Transfer of Health Information to the Patient 
• Transfer of Health Information to the Provider 

The following changes of addition of two quality measures and remove of one existing quality measure were made to the HHQRP in the 2024 Final Rule: 

Quality measures added:  

• The Functional Discharge Score (DC Function) measure, which is an assessment-based outcome measure that evaluates a patient’s functional status and is calculated using standardized patient assessment data from the current OASIS assessment tool, will begin with the 2025 HHQRP.  It considers both self-care using the eating, oral hygiene, and toileting hygiene from GG0130 self-care items and mobility activities. Activity not assessed (ANA)has a statistical imputation to estimate the item score for that item based on the values of other data and which are otherwise similar to the assessment with a missing value.  

• The COVID 19 Vaccine:  A measure of the percent of patients who are up to date beginning January 1, 2025. It will be reported on the patient’s discharge from the agency via assessment-based process measure data utilizing a new item added to the oasis Assessment tool.  

Quality measure removed: 

• The percent of long-term care hospital patients with an admission and discharge Functional Assessment and application of Functional assessment and care plan will be removed from the HHQRP beginning in 2025 due to meaningful distinctions in improvement no longer being made. 

The removal of two OASIS based data elements effective January 1, 2025 will be due to no longer being necessary for data collection.   M0110 – Episode Timing, and M2220 – Therapy Needs are not being used for payment, survey, the HHVBP Model or care planning as they were originally intended.  

(12)  

Update on Health Equity in the Home Health Quality Reporting Program (HHQRP) 

Health Equity is defined as the attainment of the highest level of health for all people. Everyone has a fair and just opportunity to access their optimal health regardless of race, ethnicity, disability, sexual orientation, gender identity, socioeconomic status, geography, preferred language, or other factors that affect access to care and health outcomes. 

CMS is working to advance health equity by designing and implementing policies that support health for all people served by CMS programs and eliminating avoidable differences in health outcomes and providing the care and support that people need to thrive. (13)  

The goals of CMS’ Health Equity: 

• Close the gaps in health care access, quality and outcomes for all patients, including but not limited to those who are members of underserved populations.  

• Promote culturally and linguistically appropriate services to ensure health care services and supports are understandable, respectful, and responsive to preferred languages, health literacy, and other diverse communication needs 

• Build on outreach efforts to enroll eligible people across CMS programs.  

• Expand and standardize the collection and analysis of data, including data on race, ethnicity, preferred language, sexual orientation, gender identity, disability, income, geography, health related social needs, and other factors.  

• Evaluate policies to determine how CMS can support safety net providers and partner with providers in underserved communities to ensure every person and family can access the care they need. 

• Engage with and be accountable to the communities CMS services with two-way communication on policy development implementation 

• Incorporate screening and support to address health related social needs through quality measurement coordination with community-based organization, opportunities for payment, and collection of social needs data in standardized formats across CMS programs.  

(14)  

Expanded Home Health Value based Purchasing (HHVBP) Model 

Medicare beneficiaries who qualify for home health care often receive inadequate, uncoordinated care for their chronic health conditions, resulting in more visits to the emergency room, more admissions to the hospital, or maire placements in a skilled nursing facility.  The Expanded Home Health Value Based Purchasing (HHVBP) Model seeks to improve the quality and efficiency of home health care across the nation to improve patients’ experience with their care, strengthen their physical function and address health issues and reduce Medicare spending.  

Originally implemented in nine states in 2016, the specific goals of the original HHVBP Model were to provide incentives for better quality care with greater efficiency, study new potential quality and efficiency measure for appropriateness of home care and enhance the current public reporting process. 

The original HHVBP Model resulted in improvement in home health agencies’ performance scores and an average annual savings of $141 million to Medicare without evidences of adverse risks.  (15)  

It was also found that there were reductions in unplanned hospitalizations and skilled nursing facility stays, ultimately reducing inpatient and SNF spending. The expanded HHVBP Model began in 2022 and included all home health agencies in all 50 states. The first full performance year was 2023 with calendar year 2025 to be the first payment year, determined by 2023 performance.  

Agencies will receive adjustments to the Medicare fee-for-service payments based on their performance measured against a set of quality measures in relation to their peers’ performance also. It currently uses the data already reported by HHA’s through the Home Health Quality Reporting Program requirements, or Medicare claims and HHCAHPS surveys so at this time HHAs do not need to submit any additional data.  

As for payments to HHAs, there are no aggregate increases or decreases expected to be applied to the HHAs competing in the expanded Model. (16) 

Public Reporting  

The public reporting of the HHQRP data will be January 2025 Care Compare refresh or as soon as possible and will include the two new items of Transfer of Health (TOH) process measures. They will be publicly reported on Care Compare starting in January 2025, as outlined in the 2024 Home Health Final Rule.  The initial data for reporting on Care Compare will be derived from quality episodes ending between April 1, 2023 and March 31, 2024.  (These measures were adopted in the 2020 Home Health Final Rule, but in response to the public health emergency of COVID, data collection was delayed until January 1, 2023.) 

• Transfer of Health (TOH) Information to the Patient Post Acute Care:  this measure assesses how timely home health agencies provide a patient’s reconciled medication list to the patient, family or caregivers when the patient is discharged from home health. 

• TOH Information to the Provider Post Acute Care: this measure assesses how timely home health agencies provide a patient reconciled medication list to a subsequent provider when the patient was transferred or discharged from home health to another provider.  

When responding to the OASIS items used to calculate the TOH measures, in OASIS Transfer, a subsequent provider refers to any inpatient facility where the patient was transferred.  (MO100: Assessment Reason = RFA 6 or 7).  In OASIS Discharge, it could be a non-inpatient Medicare-certified home health agency or a home hospice setting providing skilled services for the patient after discharge from the agency. Other care programs or settings, such as primary care physician care or an outpatient clinic, will not be considered as subsequent providers.  

CMS started collecting TOH measure data with OASIS E on January 1, 2023.  From January 2024 onwards, agencies can check their performance in the Process Measure Report. (17)  

Covid 19 Vaccine Data Collection 

This cross-setting process measure reports the percentage of home health quality episodes in which patients were up to date with their COVID-19 vaccinations. (the definition of “up to date” may change based on the CDC’s guidance) 

This measure requires the collection of COVID-19 vaccination data at the end of each episode. This would include OASIS collection when a patient is transferred to an inpatient facility, with or without discharge (MO100 RFA 6or 7), when a patient experiences a death at home (MO100 RFA8), and when a patient is discharged from agency-not to an inpatient facility (MO100 RFS9).  Data would be collected using a standardized item across the post-acute care settings, using the OASIS for home health patients.   

The purpose of this measure is to report the rate of patient vaccination in home health agencies and other facilities. The elderly population has been especially affected by the virus and is more likely to experience serious health outcomes from a COVID-19 infection. The demonstrated positive impact of the COVID 19 vaccination has put the post-acute care providers in a unique position to leverage their care processes to address vaccination coverage in these settings. (18)   

Discharge Function 

Functional measures are not new to home health and came about with the onset of OASIS in 1999 and then the Outcome Based Quality Improvement Reports (OBQI) in 2022. So, home health providers have been working to understand and improve functional outcome measures for over 20 years. Historically, the functional outcome measures were focused on either improvement or stabilization with measure such as Improvement in Ambulation/Locomotion, Stabilization in Grooming, Improvement in Bathing, etc.  

The Improving Medicare Post-Acute Care Transformation (IMPACT) Act of 2014 mandated a standardized cross-setting post-scute care functional outcome measure. CMS initially developed the functional process measure for all PAC (Post Acute Care) settings which was the Application of Percent of Long-Term Care Hospital Patients with an Admission and Discharge Functional Assessment and a Care Plan that Addresses Function.  

This measure was first publicly reported on Care Compare for home health in April 2022 with a national rate of 98.2%. This high national rated prompted CMS to quickly decide that this mandated cross-setting measure was “topped out”, meaning that the rate was such that meaningful distinctions and improvement in performance can no longer be made. In 2022 CMS had a Technical Expert Panels (TEPs) develop a cross-setting outcome measure that could replace this topped out process measure. These TEPs laid the foundation for the new cross-setting functional outcome measure planned to replace the topped-out process measure and be publicly reported on Care Compare in January 2025. (19)  

This new assessment-based outcome measure will evaluate functional status by calculating the percentage of home health patients’ quality episodes that meet or exceed the expected discharge function score. The discharge score will incorporate risk adjustment controls, including admission function score, age and patient clinical characteristics.  

The Discharge Function measure will evaluate a patient’s capacity to perform daily activities related to self-care (GG0130) and mobility (GG0170) and calculate the percentage of home health patients’ quality episodes that meet or exceed the expected discharge function score which incorporates the admission function score, age and patient clinical characteristics. This new measure will replace the cross-setting Application of Functional Assessment /Care Plan process measure in the HHQRP. It will also replace the Change in Self-Care and Change in Mobility measures in HHVBP. (20)  

The eligible quality episodes for this measure are all episodes that do not meet the exclusion criteria during the reporting period. The HH quality episode is excluded if any of the following are true. The quality episode is defined as an incomplete stay and excluded by meeting one of the following criteria:  

• Quality episodes that end in a transfer (M0100 reason for assessment = 6 or 7) during the reporting period   

• Quality episodes that end with Death at Home (M0100 reason for assessment = 8) 

• Quality episodes lasting less than 3 days 

The rationale for this is that when a patient has an incomplete stay, for example, the patient has an urgent medical emergency, it can be challenging to gather accurate discharge functional status data. 

A patient is considered to be non-responsive, in which the primary diagnosis (M1021) or other diagnoses (M1023) indicates that the patient has a diagnosis of coma, persistent vegetative state, complete tetraplegia, locked-in state, severe anoxic brain damage, cerebral edema, or compression of brain and in which the patient’s cognitive functioning (M1700) is totally dependent due to disturbances such as constant disorientation, coma, persistent vegetative state, or delirium.  

The rationale for this is that these patients are excluded because they may have limited or less predictable functional abilities.  

The patient is discharged to hospice (home or institutional facility)  

The rationale for this is the patient priorities may change during the HH quality episode for a patient discharged to hospice. (21) 

Home Intravenous Immune Globulin (IVIG) Items and Services 

The Medicare IVIG Demonstration was authorized under the “Medicare IVIG Access and Strengthening Medicare and Repaying Taxpayers Act of 2012”. This legislation authorized the evaluation of the benefits of providing payment for items and services needed for the in-home administration of IVIG for the treatment of PIDD. (Primary Immunodeficiency Disease).  PIDD is a rare, inherited condition that affects the immune system and prevents it from functioning properly.  It can damage the immune system’s ability to fight infection and control inflammation.  

Under this demonstration project there was a per-visit, bundled payment amount under Part B for items and services needed for the in-home administration of IVIG based on the national per visit low-utilization payment amount (LUPA) under the prospective payment system for home health services and those with Medicare who were not otherwise homebound and receiving home health care benefits. (22) 

The 2024 Final Rule now implements coverage and payment for items and services related to giving IVIG in the home to a patient with a diagnosed primary immune deficiency disease. Previously, Medicare used the average sale price (ASP) methodology to pay for the IVIG products administered in the home under the Medicare Demonstration program. This program ended on December 31, 2023 so beginning January 1. 2024, permanent coverage and payment of the items and services for this in-home administration as a bundled payment.  

The overall economic change for 2024 is an estimated increase of $8.7 million in total costs to Medicare Fee for Service. (23)    

Durable Medical Equipment, Prosthetics, Orthotics and Supplies (DMEPOS) Policy Issues 

The Consolidated Appropriations Act (CAA) of 2023 established a new Medicare DMEPOS benefit category for standard and custom fitted compression garments and additional lymphedema gradient compression garment items for the treatment of lymphedema beginning on January 1, 2024.  

In the past, compression garments for lymphedema treatment had not been covered by Medicare because there was no statutory benefit category for it. The final rule now defines what a standard or custom fitted gradient compression garment is and also identifies other compression items that can be used for the treatment of lymphedema. This now includes both daytime and nighttime gradient compression garments as well as the ready to wear, non-elastic, gradient compression wraps in with adjustable straps.  

This also applies to compression bandaging systems used for a recipient in a clinical setting as part of the first phase of decongestive therapy and also phase two of the maintenance therapy. The amount of payment for the daytime garments has increased over the previous amount so Medicare will now pay for three daytime garments every six months and two nighttime garments every two years for each affected extremity or part of the body.  

The final rule also established the initial Healthcare Common Procedure Coding System (HCPCS) codes and the payment methodology for these items and the futures coding, benefit category, and payment determinates for these items. The payment for the lymphedema compression items is the average Medicaid State Agency payment plus 20%. (24)   

The device and professional service will be billed separately on home health claim type of bill (TOB) 32x rather than bundled on TOB 34x.  The nursing and therapy visits provided for the dNPWT billed separately and included as home health visit.  

Additionally, the DMEPOS Refill policy has been addressed in response to concerns about auto shipments and delivery of DMEPOS supplies that may no longer be needed or the frequency or amount has changed, which inaccurate monitoring and changes can result in increased costs.  CMS instituted policies to require that the suppliers contact the beneficiary prior to dispensing the DMEPOS refills and require documentation that the beneficiary confirmed the need for the refill within the 30-day period prior to the end of the current supply to avoid shipping and delivering when the patient may not need it.  In addition, the requirement that delivery of DMEPOS be no sooner than 10 calendar days before the expected end of the current supply. 

80/20 Rule for Home and Community-Based (HCBS) Providers 

In an effort to help promote the availability of home and community-based services for Medicaid beneficiaries the new rule will require Home and Community Based providers to spend at least 80% of their Medicaid payments for most Medicaid-funded homemaker, home health aide, and personal care services on direct care worker compensation in an effort to help stabilize the HCBS workforce.  

Providers will have six years from the effective date of the rule to demonstrate compliance with the 80/20 rule. States are to begin collecting and tracking data on direct care worker compensation within four years of the effective dates of the final rule. The definition of those direct care workers now also includes those whose role is tied to clinical supervision (e.g. nursing supervisors). 

The definition of compensation for direct care workers means salary, wages, and others as defined by the Fair Labor standards Act such as health and dental benefits, life and disability insurance, paid leave, retirement and tuition reimbursement.  It also includes the employer share of payroll taxes and also includes: 

• Overtime pay 
• All forms of paid leave (e.g. sick leave, holidays, and vacations 
• Different types of retirement plans and employer contributions 
• Benefits:  CMS indicated the benefits list was non-exhaustive and that technical guidance to states is available.  

Excluded costs: 

• Costs of required direct care worker training 
• Direct care worker travel costs (mileage, public transportation subsidy, etc.)  
• Personal protective equipment costs 

(25)  

There are limited exceptions to the 80/20 rule. States administering Medicaid programs can establish a hardship exemption based on objective criteria for providers facing extraordinary circumstances. States can also establish a separate performance level for small providers meeting state-defined criteria, allowing them to meet a lower minimum percentage of funds to compensate direct care workers. The 80.20 rule does not apply to Indian Health Service and tribal health programs.  

Without an increase in rates, the 80/20 rule may have a significant negative effect on the financial feasibility of operating a home and community-based agency. The low Medicaid reimbursement rates for these services already make it challenging for many agencies to make a profit. Requiring agencies to spend 80% of these low rates on compensation may make it more likely that some agencies will choose not to participate in Medicaid, which will likely further reduce access to home-based services in rural and other underserved areas.  

HCBS providers and state Medicaid agencies have six years to sort out their compliance with the 80/20 rule although data tracking and reporting begins after year three.  As a provider, it means carefully evaluating the business and economic impacts of compliance with the 80/20 rule.  (26)  

CY 2025 Home Health Proposed Rule 

On June 26, 2024, the Centers for Medicare and Medicaid Services (CMS) issued the Calendar Year (CY) 2025 Home Health Prospective Payment System rule which would reduce the net home health payments. The proposed changes can have far-reaching implications for the home health industry, influencing reimbursement structures, compliance requirements and care delivery models. In addition to permanent adjustments there are also temporary adjustments that represent the amount that Medicare believes it has overpaid providers since the start of PDGM. CMS estimates that by the end of 2023, they had overpaid the industry by nearly $4.5 billion.  

Lupa Threshold Changes 

Lupa threshold changes for 2025 are decreases within the five visit thresholds for rehab and neuro groupings, which should positively affect LUPA rates for these clinical categories.  For wound care, and additional HIPPS (Health Insurance Prospective Payment System) code within a five-visit threshold has been introduced, impacting the LUPA rate for this grouping. Lupa thresholds by admission source and timing have been adjusted also. For the Community Late category, there are now no four or five visit LUPA thresholds. Instead, only two or three visits are required to receive a full period payment.  

Functional and Clinical Updates 

There are several functional and clinical updates in the proposed rule that provide a look at the changes in the distribution of care periods by the twelve clinical groupings. Key changes include an increase in rehab periods and a decrease in cardiac periods.  

Proposed OASIS Points Table for 2025 

The proposed OASIS Points Table for 2025 modifies the points that categorize patients into low, medium and high functional impairment levels.  

Calculating the 60-to-30 Day Payment Estimates 

CMS is also addressing the challenge of calculating the transition from 60-day to 30—day estimates and is proposing a method to estimate payments based on simulated 60-day episode. (27)  

Other Rule Highlights 

Other highlights of the proposed rule include: 

• A negative 4% (-4.067%) adjustment to base payment rates to achieve budget neutrality following the transition to the Patient Driven Groupings Model. (PDGM) 

• A 30-day standard payment rate of $2,008.12, down 1.5% from the current $2,038.13, for home health agencies that submit the required quality data. 

• Updating core-based statistical areas for wage index purposes, consistent with recent fiscal year 2025 proposed rules.  

• Recalibrating the PDGM case-mix weights, low utilization payment adjustment thresholds, functional levels and comorbidity adjustment subgroups. CMS’ policy is to annually recalibrate the case-mix weights and LUPA thresholds using the most complete utilization data available to the time of rulemaking. The proposal is to recalibrate the case-mix weights-including the functional levels and comorbidity adjustment subgroups-and LUPA thresholds using CY2023 data, to more accurately pay for the types of patients the agencies are serving. 

• Revising the fixed dollar loss ration from 0.27 to 0.38, reducing outlier payments.  

• Requiring home health agencies to report four new patient assessment items in the Home Health agency Outcome and Assessment information Set under the social determinants of health category, beginning DY2027. 

• Adding a new standard within the Medicare Conditions of Participation requiring home health agencies to develop, implement and maintain a patient acceptance to service policy that is applied consistently to each prospective patient referred to home health care.  

• Changes are to be made to the OASIS with 13 items that are on OASIS-E no longer required to be asked at a follow-up visit. For those items, the most recent SOC/ROC (Start of Care / Resumption of Care) to determine a response. (28)  

• CMS also proposes a new condition of participation that would require home health agencies to develop a “patient acceptance service policy” that is consistently applied to each prospective patient referred for home health care. The policy would need to address the agency’s capacity to provide patient care including the anticipated needs of the refereed prospective patient, the agency’s caseload and case mix, staffing levels, and the skills and competencies of the agency staff.  

• There is also a request from CMS for feedback regarding whether physical and occupational therapists and speech-language pathologists should be allowed to open therapy and nursing cases. At this time, therapists are only allowed to open “therapy-only” home health cases.  CMS is proposing to establish a home health occupational therapy LUPA add-on factor.  

• Additionally, CMS proposes to requires home health agencies to report data associated with COVID-19, the flu, and respiratory syncytial virus to the Centers for Disease Control. CMS also proposes to add four new and one updated social determinants of health (SDOH) items associated with living situation, food security by adding two food security items to the OASIS; “Are you worried that your food will run out? and “has your food run out?”, and ability to pay utilities and access to transportation. (29)  

• For new providers and suppliers, CMS is proposing to impose a provisional period of enhanced oversight (PPEO) for 30 days to one year in an effort to reduce and prevent fraud, waste, and abuse. During a PPEO, CMS may conduct prepayment medical review and cap payments. This proposal would add reactivating providers and suppliers as another category of new providers and suppliers subject to a PPEO. (30)  

• Discharge Function Changes: Starting January 1, 2025, new discharge function measures will be implemented, but the OASIS GG items for dressing and bathing are not included. It is possible that CMS will replace the “rolling side to side” and “sitting up” items with dressing and bathing measures.  

Conclusion

As with any of the CMS rule updates and proposals the goal is to improve patient care and protect the Medicare program’s sustainability for future generations. Every provider will experience these rule changes differently but will need to operate within the boundaries that CMS has set while ensuring that correct and accurate data is being submitted to CMS so that the best data is used to make informed decisions about future changes.  

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