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CMS Released 2011 Final Home Health Prospective Payment System

On November 3, 2010, the Centers for Medicare and Medicaid Service (“CMS”) posted its final 2011 Home Health Prospective Payment System (“2011 HHPPS” or the “Final Rule”). According to CMS, “this final rule reflects CMS’ ongoing efforts to improve quality of care provided by home health agencies to Medicare beneficiaries. The rule is intended to promote efficiency in payments, implements various Affordable Care Act (ACA) provisions and enhances Medicare’s program integrity.”

In practice, however, the “enhancement” of the Final Rule, in fact, yields a material adverse effect for home health agencies (“HHAs”). Under the 2011 HHPPS, beginning January 1, 2011, HHAs will experience a 4.89% decrease in payments, translating into almost a billion dollars. This decrease is one of a series of decreases that HHAs are slated to experience in the future. CMS originally planned to decrease 2011 HHA rates by 3.79% and, again, in 2012. While CMS has instituted a 4.89% decrease for the upcoming calendar year, it has not yet formally commented on its plans for 2012.

The Final Rule also requires that physicians certifying a Medicare beneficiary’s home health benefits to document that the certifying physician or a non-physician practitioner had a face-to-face encounter with the patient prior to certification that the beneficiary may receive Medicare home health benefits.

Of note in the 2011 HHPPS is the final policy regarding HHA change in ownership (“CHOW”) and the 36 Month Rule. The Final Rule provides a comparatively less stringent application of the 36 Month Rule than was adopted in January 1, 2010. The Final Rule provides that the 36 Month Rule applies in a change of majority ownership. A change in majority ownership

Occurs when an individual or organization acquires more than a 50 percent direct ownership interest in an HHA during the 36 months following the HHA’s initial enrollment into the Medicare program or the 36 months following the HHA’s most recent change in majority ownership (including asset sale, stock transfer, merger, and consolidation). This includes an individual or organization that acquires majority ownership in an HHA through the cumulative effect of asset sales, stock transfers, consolidations, or mergers during the 36-month period after Medicare billing privileges are conveyed or the 36-month period following the HHA’s most recent change in majority ownership.

It is important to recognize that the 36 Month Rule only applies to CHOWs affecting a direct ownership interest, not an indirect ownership interest.

Moreover, the Final Rule excepts the following from the requirements of the 36 Month Rule:

1. An HHA that has submitted two consecutive years of full cost reports;

2. An HHA undergoing an internal corporate restructuring;

3. An HHA in which the owners are changing the existing business structure (e.g., converting a corporation into a limited liability company, converting a partnership into a corporation, etc.); or
4. An HHA in which an individual owner dies.

The Final Rule will be published in the Federal Register on November 17, 2010. Unless otherwise stated, the provisions therein will go into effect on January 1, 2011. While CMS has not announced its definitive 2012 plans, THE HEALTH LAW PARTNERS will continue to monitor developments and provide updates in our Health Law Blog.

For more information, please contact The Health Law Partners at (248) 996-8510, (212) 734-0128, or (770) 804-6475 or visit the HLP website.

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