Planning for new payment system should begin now, experts say

By MATTHEW HAY

HHBR Washington Correspondent

WASHINGTON – Home health agencies may have received a much-needed reprieve when Congress delayed the 15% across-the-board cut in reimbursement scheduled for Oct. 1, 2000. But the operational challenges they confront under the home health prospective payment system (PPS) proposed by the Health Care Financing Administration (HCFA; Baltimore) last month require immediate planning, according to several PPS experts that have been studying the agency’s proposed regulation.

The consensus opinion is that success under the new system will depend significantly on the accurate use of Outcome and Assessment Information Set (OASIS) data, adequate cash flow, revised strategic planning and budgeting, and, above all, immediate planning.

Experts say home health agencies should begin modifying their budget and planning systems as soon as possible. Because their budgets and strategic plans will no longer be based on the number of visits they are going to perform, agencies will have to start basing those plans on the number of episodes.

Within that number, agencies will have to determine how many episodes will be short episodes, where they will be paid by the visit, and how many will be full episodes. Those two methodologies require entirely different ways of planning and budgeting, experts say.

Under PPS, agencies will also have to care for patients for 60 or 90 days, sometimes spread out over a longer period. That means home health agencies will have to come up with a method to spread the revenue out over that period. When home health agencies exceed a fiscal year, they will have to develop a deferred revenue calculation.

Some experts also predict a high degree of medical review under PPS. Not only will home health agencies have to make sure that all their clinical staff are familiar with the proper completion of OASIS forms, but that all the clinical documentation that supports the OASIS assessment is provided.

Home health agencies must also learn how to select OASIS items they believe they will need and price them out to determine which one of the resource groups they fall into. Experts recommend that agencies begin to apply this system on a random basis within their own organizations immediately.

In addition, agencies should begin working on a grouper schedule now as opposed to waiting for HCFA to provide the software grouper, they say. Aside from the fact that it is not available, the software HCFA uses might require refinements.

Home health agencies that are operating on a high per-beneficiary cost basis should anticipate making significant changes. HCFA’s PPS proposal assumes that on average, home health agencies will perform roughly 36 visits per patient at about $58 a visit. Any home health agency that exceeds that number of visits or has higher costs will have to find a way to bring that down, experts advise.

The biggest immediate challenge agencies will face under the new system is cash flow, experts say. Some predict that accounts receivable will soar much as they did in HCFA’s PPS demonstration. Part of that problem will stem from the likelihood that agencies will be forced to bill 50% at the beginning of an episode and 50% at the end. But increased medical review and additional documentation requests are likely to exacerbate payment delays as well.

As a result, experts are advising home health agencies to obtain additional capital or establish additional lines of credit. Home health agencies that are undercapitalized or have too much money already tied up in accounts receivable may not survive, they warn.

Under the PPS demonstration, it was clear from the very beginning that cash flow was a major problem, and HCFA was forced to offer home health agencies the opportunity to go back on periodic interim payment. The other cash flow problem will be related to sequential billing, which was suspended under the interim payment system, but will be in place under PPS

HCFA is likely to make at least marginal changes in the proposed regulation. The original rates established by HCFA are being revised since Congress postponed the 15% reduction scheduled to coincide with implementation of PPS. Several other factors might also have an impact on the numbers used by HCFA. For example, HCFA could change the number of episodes they are projecting, which would increase or decrease the rate.

Likewise, HCFA or the Congressional Budget Office could also change the target number because that number is tied to an amount no greater than the number that would have been spent by Medicare under the interim payment system in 2000. In addition, changes could be made if the OASIS data HCFA accumulates before the final rule indicates that their original assumptions require modification.