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Most HHAs don't have to fear outlier payment cap
Changes may be positive for many agencies
[Editor's Note: This is the second of a two-part series exploring regulatory changes that affect home health reimbursement. Last month, we examined health care reform's effect on home health in several different areas. This month, we take a close look at the outlier cap.]
Experts agree that health care reform will increase the importance of home care services as the health care industry looks for ways to handle increased demand for services in a more efficient manner Although this is a good thing for home care, it is a challenge for home health managers, who face reimbursement cuts in many different areas.
One potential reduction that has caused concern for the industry is the outlier payment cap that went into effect at the beginning of 2010. Outlier payments to an agency cannot exceed 10% of the agency's total home health prospective payment system (HH PPS) payments for the year. Because wound care and insulin-dependent diabetes patients unable to self-inject their insulin usually generate outlier claims, home health managers have expressed concern that their agencies would have to limit the number of these patients admitted for care.
"There were three significant changes to the outlier payment provision," says John M. Reisinger, CPA, principal of Innovative Financial Solutions for Home Health in Tampa, FL. The fixed-dollar loss ratio used in calculation of payments and outliers was reduced for 2010 from 0.89 to 0.67, he points out. "This reduction will mean that more episodes of care may be eligible for outlier payments," he explains. Although additional payments can be a good thing, the additional outlier payments may create issues for agencies when bundling payments, he says.
Another change to the outlier payment provision is the reduction of the amount of home health payments withheld to fund the outlier payment pool, says Reisinger. "Since the implementation of PPS, 5% of home health payments have been withheld to fund this pool, but now, only 2.5% of the payments will be withheld," he says. This translates to a 2.5% increase in payments for each episode, he points out.
The most dramatic change in the outlier payment provision, however, is the 10% cap, explains Reisinger. "The provider-specific payment cap was put into place to address outlier abuses," he says. Even though the payment cap has received a lot of attention, the reality is that 95% of home health agencies will not be adversely affected, he says. "My research has shown that only 5% of home health agencies will see a reduction in income from the cap," he says. "The majority of agencies don't have outlier payments that equal or exceed the 5% of payments that have been withheld to fund the outlier pool, so these agencies will actually see a positive effect; because only 2.5% will be withheld from other payments now," he explains. "Of the agencies that do hit the outlier cap, the vast majority will still be better off, because they are receiving more on other claims," he adds.
An agency manager can get an idea of how close to the cap the agency might be by reviewing payment records from the previous year and calculating the percentage of outlier payments to the total amount of PPS payments received, says Reisinger. Keep in mind that more episodes may be eligible for outlier payments with the fixed-dollar loss ratio decrease, he adds.
Throughout the year, monitor your outlier payments carefully, suggests Reisinger. If an agency's billing system cannot produce reports that evaluate total PPS payments vs. outlier payments, a summary PS&R [Provider Statistical and Reimbursement Report] can be requested from CMS during the year, he says.
At the same time, all home health agencies should take steps to identify potential outlier episodes and reduce the occurrence of outliers. "Wound care is the most typical reason for admission that can result in an outlier episode, says Lisa Stroud, RN, administrator, Advance Care in Richmond, VA. Although around 63 of the 200 patients per day that the agency sees are wound care patients, an analysis of their previous year's Medicare reimbursement shows that the agency is in no danger of hitting the outlier cap.
"We've taken steps to reduce the risk of outlier episodes," explains Stroud. Education for staff members, referral sources, patients, and family caregivers has reduced the need for staff members to make emergency visits for wound care and reduce the number of total visits needed for each wound care patient, she says.
The good news is that outlier payments and the 10% cap are fiscal year-specific, says Reisinger. "Even if you exceed the cap in 2010, nothing carries forward, so you are not penalized in the following year."
For more information about outlier payment caps, contact:
John M. Reisinger, CPA, Principal, Innovative Financial Solutions for Home Health, 17716 Grey Eagle Road, Tampa, FL 33647. Telephone: (813) 994-1147. E-mail: jreisinger@IFSforHomeHealth.com.
Lisa Stroud, RN, Administrator, Advance Care, 575 Southlake Boulevard, Suite B, Richmond, VA 23236. Telephone: (804) 897-9056. E-mail: firstname.lastname@example.org.