Re: CMS-1473-NC - Medicare Program; Home Health Prospective Payment System Rate Update for FY 2004 (68 Federal Register 39764), July 2, 2003.

Liberty Place, Suite 700
325 Seventh Street, NW
Washington, DC 20004-2802
(202) 638-1100 Phone

Friday, August 29th 2003

Thomas A. Scully
Centers for Medicare & Medicaid Services
Room 443-G, Hubert H. Humphrey Building
200 Independence Avenue
Washington, DC 20201

Dear Mr. Scully:

On behalf of our nearly 5,000 hospital and health system members who operate nearly 1,800 home health agencies, the American Hospital Association (AHA) is pleased to submit comments to the Centers for Medicare & Medicaid Services (CMS) on the fiscal year (FY) 2004 update notice to the home health prospective payment system (HH PPS). 

The notice provides an update to HH PPS rates of 3.3 percent, the rate of change in the market basket.  Unfortunately, CMS did not update the outlier threshold, which continues to be a key concern. 

Outlier payments for home health agencies are intended to compensate for extraordinarily high-cost patients.  For hospital-based home health agencies (HHAs) in particular, appropriate compensation for high cost patients is essential due to their precarious financial situation.  Hospital-based agencies have been struggling with negative Medicare margins for years, which has resulted in a steady pattern of closures.   Hospital-based HHAs, which account for 30 percent of the field, have experienced a negative Medicare margin for years, including a negative 10 percent in 2000.  Additional funding to cover the care of high-cost patients is essential.

Each year, five percent of the standard payment rate is carved out of the base to create the outlier pool, which amounts to approximately $500 million annually.  CMS data indicate that only half of the outlier pool is being used, which places an unreasonable and avoidable burden on providers caring for high cost patients.  By setting the threshold too high, CMS is causing excessive harm to already endangered hospital-based HHAs.  With the current threshold, CMS is withholding resources to support the care of high cost cases while still reducing payments to account for the full outlier pool.  This back door cut must be addressed – an update to the outlier threshold is past due.  CMS should act immediately to lower the outlier threshold to allow the earmarked outlier funds to be used as intended – to support the treatment of homebound Medicare beneficiaries with medical needs requiring high cost resources. 

Thank you for consideration of this issue.  If you have any questions about these comments, please contact me or Rochelle Archuleta, senior associate director for policy, at (202) 626-2320.


Rick Pollack
Executive Vice President


About AHA


Member Constituency Sections

Key Relationships

News Center

Performance Improvement

Advocacy Issues

Products & Services


Research & Trends


155 N. Wacker Dr.
Chicago, Illinois 60606

800 10th Street, N.W.
Two CityCenter, Suite 400
Washington, DC 20001-4956