How The Rural Add-On Payments Changed Where Home Health Services Were Delivered

Utilization of home health services fell in both urban and rural counties from January 2016 to March 2022 in the “high-utilization” categories, in part, due to the rural add-on payments.

In 2018, the Centers for Medicare & Medicaid Services (CMS) implemented a rural add-on payment, or a percentage increase, at the request of Congress. That is added to the standardized home health payment.

Lawmakers created the rural add-on to give higher percentages to rural counties with low population density.


According to a new report from the Office of Inspector General (OIG), the rural add-on did shift payments to those low population density areas. However, there were some issues in reporting those utilization figures, due to possible record-keeping errors.

“We determined that the methodology shifted the distribution of add-on payments from the ‘high-utilization’ category to the ‘low-population density’ and ‘all other’ categories,” the OIG summary read. “We originally planned to use Federal Information Processing Standards (FIPS) data to analyze utilization, but were unable to do so because the FIPS data was incomplete.”

High-utilization counties are those in the highest quartile of counties based on the number of Medicare home health episodes served per 100 people. About 25% of rural counties fall into this category, according to the OIG.


Low population density areas are the counties with a population density of six people or fewer per square mile. About 17% of rural counties fall into this category, with the remaining 58% being “all other.”

Source: OIG

The OIG report found that from 2016 to 2021, the number of home health beneficiaries served fell by more than 13% in urban counties, more than 20% in the “high utilization” rural category and more than 10% in the “all other” rural category.

Source: OIG

In that same time period, the number of beneficiaries served in the “low population density” rural category increased by less than 1%.

Source: OIG

Rural add-on payments will stop at the end of 2022.

In the 2023 home health final rule, CMS requested comments on future approaches to health equity in the expanded Home Health Value-Based Purchasing Model (HHVBP) to remedy inequities in outcomes caused by several factors, including living in a rural area.

OIG findings, recommendations

While conducting the audit, the OIG found that home health providers were either not always applying FIPS codes to claims or the codes that were used were invalid.

The OIG also found Medicare administrative contractors (MACs) did not always return claims with missing or invalid FIPS codes to providers. Because of that, the errors were never corrected.

However, that trend seems to be improving.

Source: OIG

Despite the improvements, the federal watchdog group believes CMS should take steps to improve the reporting of FIPS codes for home health claims and update its pricing logic to check for missing and invalid FIPS codes on all home health claims.

In response, CMS agreed that the FIPS requirements apply to all claims, but it did not concur with OIG’s recommendation that the home health pricer check for a FIPS code on all claims.

“Enforcing such an edit on all claims, and not just those claims where the rural add-on payment is impacted, may delay prompt payment for eligible home health services and would not affect the payment amount,” CMS wrote in response.

The second recommendation from OIG, which was agreed upon by CMS, was to work with MACs to ensure that these claims are returned to providers for correction.

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