CMS Proposes Far-Ranging Changes for Medicare Home Health PPS for CY 2020

By Published On: July 22, 2019

On July 18, 2019, the Centers for Medicare & Medicaid (CMS) published a proposed rule concerning changes to the Medicare home health prospective payment system for calendar year (CY) 2020 (the “CY 2020 HH PPS Proposed Rule”).[1] The proposed rule includes potential updates to the CMS Home Health Prospective Payment System as well as the home infusion therapy benefit, quality measures, and other home health-related rules.

The Medicare home health benefit covers home visits by skilled health care professionals to Medicare beneficiaries who are homebound and require intermittent skilled nursing care or rehabilitation services. Medicare pays home health agencies (HHAs) using a prospective payment system (PPS). The PPS is a fixed payment representing the average costs of providing a bundle of services during a fixed time period in a base year. The payment is trended forward for inflation, and in addition, the PPS methodology uses adjusters that are intended to reflect factors such as area wage costs, the intensity of a patient’s care needs, or the urban or rural location of the provider. Currently, in CY 2019, the base payment to an HHA per 60-day care episode is $3,154.27.

CMS announces updates to the home health PPS in annual rulemakings. In its CY 2018 proposed rule, CMS proposed several significant changes to the HH PPS, such as overhauling the case-mix adjuster system and changing the unit of payment under the PPS from a 60-day episode of home health care to a 30-day “period of care.” However, CMS delayed implementation of those proposed changes after commenters expressed concern that the new system would unduly lower payments to HHAs and change their behavior in a way that would compromise the quality of care. In response, Congress, in the Bipartisan Budget Act of 2018 (“BBA 2018”), required CMS to move forward with most of the proposed changes in CY 2020, but also required that some of the changes be implemented in a budget-neutral manner.[2]

In the CY 2020 HH PPS Proposed Rule, CMS announces its plan to implement the BBA 2018 requirements regarding Medicare home health services, as well as other changes.

Major Changes

Patient-Driven Groupings Model

From the inception of the HH PPS, the Medicare home health PPS methodology has used a case-mix adjustment system called home health resource groupings (HHRG) to reflect the acuity of patient care needs. There are 153 HHRG categories, and a chief factor used in assigning patients to an HHRG has been the need for skilled therapies (the “therapy thresholds”).  The Medicare Payment Access Commission has argued that the structure of the HHRGs has served to inflate Medicare costs by “encourag[ing] [HHAs] to consider financial incentives when providing therapy services.”[3]

The Balanced Budget Act of 2018 (“BBA 2018”) requires CMS, effective in CY 2020, to eliminate the 60-day “episode of care” (the unit of payment that has been used since the inception of the home health PPS) as the unit of payment for the HH PPS, and replace it with the 30-day “period of care.” BBA 2018 also required CMS to eliminate the therapy thresholds that were central to the HHRG case-mix system.[4]

CMS had already proposed both changes to the HH PPS in prior years’ rulemakings but had delayed implementation of the proposals after commenters objected, saying that the changes would result in significant reductions in payment. In BBA 2018, Congress required HHS to implement the changes in a “budget-neutral” manner such that estimated aggregate expenditures under the HH PPS are equal to the estimated aggregate expenditures that would otherwise have been made even if the unit of payment had not changed. The law also required the budget-neutral payment amount to be computed before the application of the annual payment update.

Accordingly, effective January 1, 2020, CMS proposes to implement the Patient-Driven Groupings Model (PDGM) in place of the HHRGs as its case-mix adjustment system for home health. Under the PDGM, each beneficiary using home health services will be placed into one of 432 payment groups based on clinical factors including episode timing (initial versus subsequent home health period), referral source (prior hospitalization or nursing facility stay versus community referral), diagnosis category, functional/cognitive level, and presence of comorbidities. CMS explains in the Proposed Rule that the new methodology is intended,  “to shift the focus from volume of services to a more patient-driven model that relies on patient characteristics.”[5] The need for skilled therapies is not a factor in the PDGM, and therefore the PDGM satisfies the statutory requirement in BBA 2018 to eliminate the HHRG therapy thresholds.

Along with this change, CMS proposes to implement the 30-day “period of care” as the unit of payment. CMS proposes a 30-day payment amount of $1,791.73 for CY 2020. CMS explains that this amount is 14% more than the estimated CY 2020 30-day period cost of furnishing home health services and complies with the budget neutrality requirements in BBA 2018.[6]

Behavioral Adjustment

CMS proposes an 8.1% reduction in base payment rate for a 30-day period of care to ensure overall budget neutrality in Medicare home health spending in CY 2020. This percentage amount was calculated based on an assumption that HHAs may alter their manner of providing services or their documentation practices when transitioning to the PDGM in a way that will increase Medicare spending. The law authorizes CMS to make temporary adjustments (on a year-by-year basis) to the HH PPS rate to account for anticipated behavior changes.[7] This proposed change is perhaps the most controversial with HHAs, which have voiced concerns about possible harm to beneficiaries from rate reductions based on behavioral changes that have not yet, and might never, occur.

Split-Percentage Payment Phase-Out

CMS is proposing to phase out the Request for Anticipated Payment (RAP) split-percentage payment system to protect taxpayer dollars against alleged fraud and abuse. The RAP is a feature of the existing HH PPS under which HHAs may, at the outset of initial 6-day episodes of home health services, seek an advance payment equal to 60% of the anticipated final claim payment amount. The final bill is submitted at the end of the 60-day episode for the remaining 40% of the claim payment amount. For subsequent episodes, the HHA may request 50% at the start of the episode, and the remaining 50% at the end.

CMS proposes to phase out the RAP system, beginning in CY 2020, on the grounds that with a shorter (30-day) unit of payment, the split payment is no longer necessary in order for HHAs to maintain adequate cash flow. CMS’ phase-out plan includes an initial reduction of split-percentage payments from 20% in CY 2020 for existing home health agencies (instead of the 60% currently in place for initial episodes and 50% for subsequent episodes). Beginning in CY 2020, there would be no RAP, for new home health agencies and RAPs would be completely eliminated for all HHAs in 2021. HHAs have expressed concern that the elimination of the upfront payments could increase their financial constraints.

Notice of Admission Requirement

Following the phase-out of split percentage payments, CMS proposes to require home health agencies to submit a notice-of-admission (“NOA”) to report home health admissions within five days of initiation. CMS would impose penalties for late NOA submissions.

Home Infusion Therapy Benefit

CMS proposes to implement a new home infusion benefit in 2021 that will be separate from the HH PPS payment. This benefit would include three payment categories for infusion therapies, each with an associated single unit of payment. CMS will adjust each unit of payment by a Geographic Adjustment Factor. CMS will also set higher payment amounts for initial home infusion visits followed by lower payment amounts for all subsequent visits. Finally, CMS will only pay for home infusion where a skilled professional is present at the home during the infusion therapy.

Quality Measure Changes

Established in 2007, the Medicare Home Health Quality Reporting Program requires HHAs to submit data to the Secretary to assist in measuring health care quality. This program will undergo the following changes:

  • Removal of the Improvement in Pain Interfering with Activity Measure in CY 2021.
  • Adoption of “Transfer of Health Information to Provider-Post-Acute Care” and “Transfer of Health Information to Patient- Post-Acute Care” process measures under the “Transfer of Health Information” domain in CY 2020.
  • Exclusion of baseline nursing facility residents from the Discharge to Community- Post Acute Care measure beginning in CY 2020.
  • Implementation of new standardized patient assessment data elements beginning in CY 2022.
  • Removal of question 10 from all the HH Consumer Assessment of Healthcare Providers and Systems (CAHPS) surveys beginning in CY 2020.

Rural Add-On

The rural add-on is an increase to the HH PPS base rate for services provided to beneficiaries in rural areas and has been a feature of the HHS PPS since 2005. While the percentage has varied over time (between 3% and 5% based on Congressional enactment), it has always taken the form of a uniform add-on to the episode rate.

BBA 2018 changed this, requiring HHS to implement three different add-on percentages for home health services in rural areas in CYs 2019 through 2022, depending on whether the relevant county falls into the category of “high utilization,” “low population density,” or “all other.” For CY 2020, the add-on percentages will be 0.5% (for high utilization counties), 3% (for low population density counties), and 2% (for all other counties).

Other Proposed Changes:

  • Physical therapist assistants will be permitted to perform maintenance therapy services.
  • CMS has reduced the complexity of the home health plan of care requirements. Violations relating to items missing from the plan of care will be addressed through the HHA survey process, rather than through denial of claims for otherwise valid periods of care.

Notice and Comment:

Comments on the proposed changes are due by 5:00 PM on September 9, 2019. The rule will become effective on January 1, 2020.


[1] CMS, Proposed Rule, Medicare and Medicaid Programs; CY 2020 Home Health Prospective Payment System Rate Update; Home Health Value-Based Purchasing Model; Home Health Quality Reporting Requirements; and Home Infusion Therapy Requirements, 84 Fed. Reg. 34,598 (July 18, 2019). Available here.

[2] Bipartisan Budget Act of 2018, P.L. 115-123, §51001(a).

[3] MedPAC, Report to Congress: Medicare Payment Policy, p. 232 (Mar. 2019).

[4] BBA 2018 §  51001(a) (amending Social Security Act (SSA) § 1895).

[5] 84 Fed. Reg. at 34,602.

[6] 84 Fed. Reg. at 34,616.

[7] SSA §1895(b)(3)(D) (as amended by BBA 2018 §51001(a)).


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