LHC: Hard to Judge Proposed Revamp of Medicare Payment System

The most recent proposal for a new prospective payment system (PPS) for home health agencies was released last week. One major home health provider has a few reservations, but thinks the company could support the proposal depending on specific details still to be released.

“It’s difficult to formulate an opinion on what their doing,” Richard MacMillan, senior vice president and senior counsel for legislative and regulatory affairs at LHC Group (Nasdaq: LHCG), tells Home Health Care News. “In a general sense it may be a little more specific than our current payment model, but also looks to be a lot more complex than what we currently have.”

There has been talk for years about rebooting PPS for home health agencies and some movement toward that already, with the Affordable Care Act mandating some reforms and the Medicare Payment Advisory Commission (MedPAC) among the influential groups consistently pushing for changes.


Abt Associates, a global research company headquartered in Cambridge, Massachusetts, contracted by the Centers for Medicare & Medicaid Services (CMS), shared its research and presented its revised prospective payment system, the Home Health Groupings Model (HHGM), for the home health industry during a CMS Open Door Forum call on Aug. 23.

One of the biggest differences between the current system and the newly proposed HHGM is the possibility of 128 payment groups, which is 25 groups less than the current model.

The period of care in this model would also be different than the system now, using a 30-day period of care instead of a 60-day period of care. This is based the research by Abt that the bulk of therapy services are usually in the first 30 days.


“The 30-day versus 60-day period of care makes logical sense, but until we see the impact on how it will affect payments, it’s hard to make a call one way or another,” MacMillan says. “We did however see a positive impact from the switch to 60-day periods in our hospice area.”

The ultimate goal of the HHGM model is to determine payments based on patient characteristics, not on the number of therapy visits, according to Abt’s report.

The HHGM would also include referral sources as a large component and determining factor in how much payments will be. The referral source will be based on a 14-day look back before the episode begins and the cost is higher for episodes coming for an institutional setting instead of from a community setting, the Abt presentation explains.

“The stronger influence of referral sources is good, but I would like to see the actual influence that referral sources will have,” MacMillan says. “They [Abt] did a broad presentation with no evidence to support their approaches, but I’d want to see how they assign severity to post-acute care communities admissions.”

HHGM is still being developed and CMS along with Abt are working on finalizing details of the model. A technical report describing the model will be released later this year.

“We could be supportive of the change in the payment model, but we would need to have a lot more detail before we could express that support,” MacMillan says.

See the full report from Abt.

Written by Alana Stramowski

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