2010 Home Health PPS Final Rule Addresses Program Integrity Issues

On November 10, 2009, the Centers for Medicare & Medicaid Services (CMS) issued a final rule to update the Medicare Home Health Prospective Payment rates for the 2010 calendar year (the “Final Rule”). The Final Rule continues with the previously promulgated 2.75 percent reduction to the home health prospective payment rates in calendar year 2010 (to account for the increase in case-mix not due to the underlying condition of the home health patient), and updates the home health prospective payment rates by a 2.0 percent home health market basket update.

Further, as part of its efforts to address potential fraud and abuse regarding outlier payments to home health agencies, CMS revises its outlier policy by capping outlier payments at 10 percent of total home health prospective payment rate payments, updating the fixed dollar loss ratio to 0.67, and targeting outlier payments to be no more than 2.5 percent of total home health prospective payment rates payments. Further, CMS will also require the submission of OASIS as a condition for payment, and is implementing a new version of OASIS (OASIS-C) beginning January 1, 2010.

Lastly, CMS is also adding payment safeguards to improve the enrollment process, improve quality of care, and reduce fraud. For example, as of January 1, 2010, a home health agency that has been in existence for less than three (3) years cannot have its provider agreement transferred as part of a CHOW. Instead, the new owners will need to reapply as Medicare providers and undergo an accreditation survey or a state survey. Accordingly, investors are not permitted to start up a Medicare home health agency with the idea of later selling it as a “turn-key” agency, unless the agency is operating for at least thirty six (36) months from the “effective date of enrollment in Medicare.” The Final Rule specifically provides that this prohibition on transfers applies to stock or asset sales. The comments to the Final Rule state CMS’ belief that the rule applies not only to CHOW’s submitted after January 1, 2010, but also to CHOW’s pending on January 1, 2010. Another change in the Final Rule was that CMS will require home health agencies whose billing privileges have been deactivated due to inactivity to undergo a state survey or an accreditation survey before the privileges are reactivated. This means that if the home health agency has not billed Medicare in the previous twelve (12) months, it will need to undergo a survey before it can bill.

For more information, please contact Adrienne Dresevic, Esq., Robert S. Iwrey, Esq. or Carey Kalmowitz, Esq.