How does Medicare Calculate Home Health Agency Payments

The Home Health Episode Payment Formula


Home health agencies are paid under the Home Health Prospective Payment System which uses a complex model to calculate episodic payment for up to 60 days of skilled home care services. The rates for each certification period are calculated using the OASIS document, a set of questions used to perform a comprehensive assessment. OASIS answers are used to determine the HHRG (Home Health Resource Groups) score for the corresponding episode. There are 45 HHRG codes total, each representing a different level of the patient’s status, as well as the expected treatment. From there, the RAP claim calculation ensues. Here are important elements of claim calculation, and how they affect your payment.

Rates and Amounts Set by CMS

At the end of every year the Department of Health and Human Services and the Centers for Medicare and Medicaid Services release the Final Rule outlining changes to the Medicare and Medicaid Programs for the following year. Information includes any policy related changes, new program requirements and rate changes. You can check out the Final Rule for 2016:

Federal Register / Vol. 80, No. 214 / Thursday, November 5, 2015 / Rules and Regulations

National, Standardized 60-Day Episode Payment

Every year CMS sets the National, Standardized home health episode rate. This rate is the basis for all claim calculations. It represents the average payment to a home health agency, which then gets adjusted by various factors to accommodate for location, patient severity and clinical need. The National, Standardized 60 Day Episode Payment rate for all claims ending in 2016 is $2,965.12.

Case Mix Adjustment

The Case Mix Adjustment is determined by the HHRG score, along with 2 other OASIS elements:

  • M0110: whether the patient is in an early or late episode;

  • M2200: the number of projected therapy visits.

The HHRG, episode timing and therapy count come together to determine the Case Mix Adjustment rate. This rate is used to adjust the National, Standardized Episode Payment Amount.

National, Standardized Per-Visit Payment Amounts

CMS also sets the per visit payment amounts for the purpose of final claim and LUPA calculations. Because SN, PT and ST disciplines are qualifying services, CMS understands that the evaluation visits for these disciplines are often significantly higher due to the completion of OASIS documents. Because of this, CMS has allowed a payment boost for the first visit for the first episode of an admission in the case of a LUPA claim. Here are the set per-visit payment amounts for regular and LUPA claims with episodes ending in 2016:

CY 2016 Per-Visit Payment Rates

Skilled Nursing: $248.02

  • Physical Therapy: $245.40

  • Speech Therapy: $259.78

  • Occupational Therapy: $147.95

  • Medical Social Services: $215.47

  • Certified Home Health Aide: $60.87

CY 2016 Per-Visit LUPA Payment Rates

  • Skilled Nursing: $134.42

  • Physical Therapy: $146.95

  • Speech Therapy: $159.71

  • Occupational Therapy: $147.95

  • Medical Social Services: $215.47

  • Certified Home Health Aide: $60.87

Per Visit Rates

NRS Payment Amounts by Severity

The last character of the HIPPS score is the severity level calculation which indicates the Non Routine Supply add on amount. There are 6 severity levels, each with its own amount calculation. This is what CMS expects you will be paying for supplies for the episode based on the patient's condition as described in the OASIS. Here is how much each severity level adds to your claim:

  • S: $14.22

  • T: $51.35

  • U: $140.80

  • V: $209.18

  • W: $322.57

  • X: $554.79

Wage Index Adjustment

The Wage Index Adjustment simply refers to the adjustment made based on the patient's area to accommodate for the geographical difference in paid wages in that particular area. All areas covered under Medicare are split first into Urban vs Rural. Urban areas are identified individually by CBSA code and adjusted accordingly. The urban area with the highest payments is Santa Cruz-Watsonville, CA with a Wage Index Adjustment rate of 1.8563. The lowest paid urban area is Aguadilla-Isabela, PR with a Wage Index Adjustment rate of 0.3433. Generally, if the patient does not reside in one of the specified Urban areas, then the calculation takes the Rural rate for the patient's state. There is also a 3% add on for Rural areas. The highest rural rate is in California, and the lowest is in Puerto Rico. Delaware, New Jersey and Rhode Island don't have rural areas.

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