PPS Margins in an HHGM Payment Model

Published: 1/1/0001

Home Health providers worried about reimbursement and margins under CMS's proposed Home Health Grouping Model can take a breath.

In other Medicare certified healthcare sectors, providers have been forced to develop efficiencies to live within the strictures of tightening payment rules. Home Health providers have yet to scratch the surface of efficiencies, so rest easy, there is plenty margin in the episode when efficiencies are implemented.

One major component of home health efficiency is nursing workflow patterns. Improving this area more than makes up for annual reimbursement rate reductions. In general, however, innovation in this area has remained at best unchanged over the past two decades. Until now.

Systematized efficiency gains in clinical practice that parallel the usual and customary best practices of the rest of the Medicare-Certified continuum result in margins equal to the early days of PPS, we see this every day now. Adding a scribing component to an already high clinical standard of practice, provides you a nurse recruitment and retention tool as well.

Historically, clinical practice patterns are shaped by payment systems, which drive the need to attain process efficiencies in order to survive. When Diagnosis Related Groupings were implemented in hospitals, for example, that sector's care delivery model changed from Procedure-Recovery-Discharge to Procedure-Discharge-Recovery. At the same time, lengths of stay went from 10-12 days to 2-3 days on average, seemingly overnight.  

Hospitals changing their care delivery model from P-R-D to P-D-R is a success in the eyes of CMS. Duplicating this success is exactly what Value Based Purchasing and HHGM are designed to do in Home Health.  In CMS’s opinion these reforms have worked and continue to work in hospitals. Mandates to fill the beds was immediately followed by a mandate to clear them out. This is exactly why CMS continues to press forward with HHVBP and HHGM, it saves them money.

Hospitals became efficient in ways initially thought unimaginable; they "leaned out" in order to survive. The hospital industry as we know it today is a testament to resilience and creativity. CMS is convinced that Home Health providers will follow. 

Reduction in the number of home health episodes, visits, and costs will be achieved in one way or another. Abt Associates, one of the HHGM consultants to CMS, documents that 68.8 % of PPS episodes performed now are third, fourth, or greater consecutive episodes. This is the first obvious target as medical review teams show almost 80% denial rate for medical necessity in these cases. We see MedPac embracing this reduction in episodes, visits, and costs as well. 

As we move to the 30 day HHGM care episode, and it will come in one fashion or another, our current practice of Assessment, Creation, and Implementation of a care plan in 3-5 days will eat up 20-25% of the provision of care without coordination of care with treatment.  HHA's recertification practices will rapidly change in a similar manner, just as BID diabetic care changed under payment pressure a few years ago. 

Combine all of this with the fact that patients come to us much sicker than ever before, and with the mandate that we keep them out of the hospital for at least 30 days, and it is easy to see that we cannot continue the practices of the past twenty years.

History also shows us that CMS watches our data, reads our documentation, and benchmarks our efficiencies against Hospitals, SNF’s, LTACH’s and IRF’s, each of which has gone before us on the reform road. As such, CMS is demanding a different path, just as they did with the aforementioned providers. 

It may sound bold to say this, but if we the home health community are not actively engaged in change to meet VBP, HHGM, reductions in reimbursement etc., we may need to check our pulse. If it is not at zero yet, it may be soon.

Of course, the argument I hear is "It's not in my state yet." And, of course, the logical reply to that is: "When CMS sees how quickly they can cut costs, gain control over the contractor community, and flush out 30-50% of the agencies as they did in the IPS to PPS transition, how long will it take them to roll it out nationwide?"

Speaking from experience, I know these necessary process improvement changes are possible.

My team and I have designed a process and paired it with a third party software product; and today the system is well past the concept stage. Efficiencies resulting from the clinical practices we teach are keeping our clients ahead of the shrinking reimbursement rate curve. Are the changes we require easy? Of course not. But that is not the question. The only question that matters is, "Is change in clinical practice patterns required to survive?"