Special Considerations for Home Health Providers:
HCFA's Phase-in and Contingency Plans for Home Health PPS

The Home Health PPS Executive Checklist and Billing Tips outline some general considerations for implementing the new home health prospective payment system. Providers, however, need to be aware that HCFA has outlined a phase-in plan for home health PPS that provides for operational implementation of the new payment system for the first wave of episodes commencing October 1, 2000.

HCFA provided details of the phase-in plan in a Program Memorandum issued August 31 (Transmittal A-00-59). The memorandum also outlines a contingency plan for those home health agencies that are not prepared to submit bills electronically on October 1. HCFA's phase-in of home health PPS implementation attempts to ensure that agency cash flow during the beginning weeks of the new payment system will be adequate for the transition.


Home health provide should be aware that special considerations will apply to implementation efforts for the first episode, including:

  • HCFA will pay each provider an initial payment during the phase-in period of 60 percent of the standard payment ($2,115 for a nationwide average cost of a 60-day home-health episode), or about $1,270, for each request for anticipated services (RAP). This amount is irrespective of wage index or home health resource group (HHRG) of the beneficiary. The final payment (at discharge or at the end of the 60-day episode) will be adjusted to cover variations from the standard payment based on the applicable wage index and HHRG, as well as other adjustments outlined in the Final Rule (such as outliers, significant change in condition, low utilization payment adjustments, etc.).
  • At this point, HCFA expects that these transition procedures will only apply to episodes commencing during the month of October (which, by definition, includes all cases being carried over from the Interim Payment System). It is reasonable to assume, for planning purposes, that the standard payment approach for RAPs may extend into November and possibly beyond.
  • To be eligible for these special payments for RAPs, providers must submit to their Regional Home Health Intermediary (RHHI) an original, signed statement acknowledging three things:

That they are receiving special payments and understand that recovery will be made by withholding 100 percent from Medicare home health payments;

That recovery of all payments will be completed within 90 days from the date that the new home health PPS is fully operational; and

That the provider will make a good-faith effort to assure that recovery is made within the 90-day time frame.

  • Recovery of any overpayments will be made against subsequent RAPs and claims submitted by the provider and will begin on the day that the system is fully operational. Depending on several factors, some agencies may be refunding overpayments through this mechanism and should be careful not to spend the funds in the interim period.
  • A home health agency with extenuating circumstances may be permitted to request an extended repayment plan that allows for repayment beyond 90 days but less than 12 months. The RHHI has the authority to approve or deny such requests. Approvals are expected to be very limited, however.


HCFA's phase-in approach has the virtue of being relatively simple to administer. One of the potential problems, however, is that about one-in-five agencies are expected to receive less cash than under the payment procedures envisioned in the Final Rule. A subset of those agencies, in turn, may experience significant cash-flow problems, especially if this phase-in approach extends for a significant period of time. Agencies which meet the following three criteria, or substantially exceed two of the three, may incur cash flow problems as a result of HCFA's phase-in plan:

  1. Substantial dependence on Medicare for overall agency revenues (defined as Medicare percent of total revenues greater than 50%); and
  2. Operation in an area with a wage index greater than 1.00; and
  3. More than half of the beneficiaries in the episodes commencing in October are expected to be classified into HHRGs with a case mix index greater than 1.00. (Example: the agency cares for a high proportion of wound care cases or expects many cases to meet the ten visit therapy threshold).

Agencies which meet all three of these criteria, or significantly exceed two of the three, should perform a detailed cash-flow analysis for the final quarter of 2000 and begin to make reparations. Cash flow problems could be manifested in mid-November and extending through the time period in which the claims payment system is up and running and claims are paid under the full PPS.

One option for agencies meeting the above criteria to consider is accelerated payments vailable under existing regulatory authority. These procedures, outlined in section 2412 of the Provider Reimbursement Manual, Part 1 (PRM), provide for a case-by-case review of exceptional situations for a provider experiencing financial difficulties due to delays in payments or for exceptional situations as a result of provider delays in submitting bills. The procedures allow for 70 percent of payments "otherwise due" a provider. One definition of "otherwise due" would be an estimate of the final wage and case-mix adjusted episode payments under PPS. Since the standard for determination of "financial difficulties" is high, providers should only consider this option if the expected need is dire. The AHA has communicated the above criteria to HCFA and expressed a desire to insure swift review of any hardship cases by Regional Home Health Intermediaries (RHHIs).

Providers will want to evaluate carefully the procedures and requirements contained in HCFA's August 31 Program Memorandum. The Program Memorandum is available at transmit/A0059.pdf. There also is a link to the memorandum from the Home Health Agency PPS section of the AHA's web site under Other HCFA Links.



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