Simione™ Healthcare Consultants

The CMS Home Health Final Rule: Key Points and Financial Implications

On Thursday, October 29, 2015 the Centers for Medicare and Medicaid (CMS) issued the final rule, (CMS-1625-F): CY 2016 Home Health Prospective Payment System Rate Update; Home Health Value-Based Purchasing Model; and Home Health Quality Reporting. Simione Healthcare Consultants offers this summary of the major components of the rule, which impact home health agency operations.  The following sections include:

  • CY 2016 Home Health Rate Update
  • Case Mix Creep Adjustment
  • Home Health Value Based Purchasing (VBP) Pilot Program
  • Provisions of the Home Health Care Quality Reporting Program (HHQRP) and the IMPACT Act
  • OASIS Submission Requirements
  • CAHPS Home Health Survey and Star Ratings

We will provide further detail regarding the implications of this rule, and specifically about VBP, proposed quality measures, discharge planning and the IMPACT Act, in an upcoming newsletter.

CY 2016 Home Health Rate Update

The final rule updates the Home Health Prospective Payment (HH PPS) rates for home health agencies (HHAs) effective January 1, 2016.  As required by the Affordable Care Act (ACA), the final rule represents the third year of the four-year phase-in for rate rebasing.  It will adjust the national, standardized 60-day episode payment rates, the national per visit payments and the non-routine medical supply (NRS) conversion factor effective for all episodes ending on or after January 1, 2016. The following rate changes will occur:

  • The national, standardized 60-day episode payment amount will increase by $3.74 to $2,965.12.
  • National per-visit payments will increase by 5% from 2015 to 2016:



Skilled Nursing


Physical Therapy


Occupational Therapy


Speech Therapy


Medical Social Worker


Home Health Aide


  • The NRS conversion factor will be reduced by 1%. 

In addition, HHAs are reminded that the 2% sequestration adjustment remains in effect for 2016 and must be considered in their budget impact analysis.  HHAs that fail to comply with quality data submission requirements also face an additional 2% rate reduction.

Case Mix Creep Adjustment

In the 2015 HH PPS final rule, CMS initiated a recalibration of the case-mix weights with more current data. The 2016 HH PPS final rule will recalibrate case-mix weights again with the most up-to-date cost and utilization data in a budget neutral manner.  To accomplish this, CMS will reduce the national, standardized 60-day episode payment rate in 2016, 2017 and 2018 by 0.97% each year to account for case mix creep adjustment. This stems from the CMS belief that HHAs have “up-coded” claims to levels that do not reflect actual changes in patients’ clinical condition.  The final case mix creep adjustment will be 2.88% over three years. The updated payment rates under the HH PPS will increase 1.9% based on the 2010-based HHA market basket update of 2.3% minus 0.4% for a productivity adjustment.

It is estimated that the net impact of the HH PPS rebasing and adjustments will decrease Medicare payments to HHAs by $260 million in 2016.  This is due to the combination of the following:

  • 1.9% increase in the HH payment percentage
  • 0.97% decrease in the standardized 60-day episode payment rate
  • 2.5% decrease in payments from rebasing adjustments

HHAs are advised to conduct a budget impact analysis to determine the effect of these rate changes on their operations.

Home Health Value Based Purchasing (VBP) Pilot Program

In the final rule, CMS provides a detailed explanation of the HH VBP pilot program that starts on January 1, 2016 in nine selected states (Massachusetts, Maryland, North Carolina, Florida, Washington, Arizona, Iowa, Nebraska and Tennessee) with mandatory participation from all Medicare-certified HHAs in those states.  The final rule outlines the methodology for participation, performance assessment and scoring, quality measures, and payment adjustment methodology. The HH VBP measure will be based on both achievement and improvement in quality outcomes.

Provisions of the Home Health Care Quality Reporting Program (HHQRP) and the IMPACT Act

The 2016 final rule also includes changes to the HHQRP to ensure compliance with the Improving Medicare Post-Acute Care Transformation Act of 2014 (IMPACT Act), which imposes new data reporting requirements for certain post-acute care providers, including HHAs. In an effort to move toward the goal of implementation of cross-setting measures, the IMPACT Act requires the specification of a quality measure to address skin integrity and changes in skin integrity in the home health setting by January 1, 2017.

To meet this requirement, CMS has finalized the adoption of NQF #0678 Percent of Residents or Patients with Pressure Ulcers that are New or Worsened (Short Stay) for use in the HHQRP for CY 2018 home health payment determination and subsequent years. HHAs will be subject to a 2 % rate reduction for failure to submit data in accordance with this requirement. The specifications and data items for NQF #0678, the Percent of Residents or Patients with Pressure Ulcers that are New or Worsened (Short Stay), are available in the downloads section of the Home Health Quality Measures webpage.

CMS also identified four future cross-setting measure constructs to potentially meet the requirements of the IMPACT Act domains of:

  • All-condition risk-adjusted potentially preventable hospital readmission rates;
  • Resource use, including total estimated Medicare spending per beneficiary;
  • Discharge to community; and
  • Medication reconciliation.

These measures are currently under consideration for future implementation.

OASIS Submission Requirements

HHAs currently face a 2% rate reduction for failure to meet the 70% threshold for timely submission of OASIS quality data between July 1, 2015 and June 30, 2016 as established in the FY 2015 CMS Home Health Wage Index Final Rule. In the FY 2016 final rule, CMS will increase this threshold and require an 80% Pay-for-Reporting Performance Requirement for Submission of OASIS Quality Data for Year 2 reporting period of July 1, 2016 to June 30, 2017, and a 90% Pay-for-Reporting Performance Requirement for Submission of OASIS Quality Data for the reporting period of July 1, 2017 to June 30, 2018, and thereafter.

HHAs are reminded to monitor OASIS validation reports and promptly address issues identified on OASIS error reports to ensure timely submission of these assessments.

CAHPS Home Health Survey and Star Ratings

CMS did not make any changes in the Home Health CAHPS assessment requirements or the planned public launch of Patient Survey Star Ratings on the Home Health Compare website, effective January 1, 2016. HHAs should be continually monitoring their Home Health CAHPS and preliminary Patient Survey Star Reports along with current Home Health Compare/Star Reports to ensure they are implementing strategies to demonstrate improvement in these publicly reported process and outcome measures.

Moving Forward

The changes noted in this 2016 Final Rule represent the beginning of a fundamental shift in service provision for the home health industry and increased alignment with other health care industry providers.  To ensure readiness for these changes, HHAs will need to evaluate operations as a whole to determine the most efficient structure and processes necessary to prepare to meet these needs and continue to ensure (and demonstrate) high-quality care, compliance and successful operations in an integrated, streamlined and cost-effective manner.

Simione will continue to provide insight into these complex changes impacting the home health industry, and provide realistic and measurable strategies to ensure provider readiness for these changes. 

For more information, visit or call 844.215.8823.

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