Home health agencies would see an aggregate Medicare pay cut of $350 million in 2016 under a proposed rule released July 6.

The proposed rule from the Centers for Medicare & Medicaid Services (CMS-1625-P; RIN 0938-AS46) also contains a value-based purchasing program model, in which certain Medicare-certified home health agencies would be required to compete for payment adjustments to their current reimbursements based on quality performance. The agency anticipates that this value-based model will save about $380 million over five years, due to decreased hospitalizations and nursing home admissions.

The proposed rule was published in the July 10 Federal Register (80 Fed. Reg. 39,839). Comments are due Sept. 4.

The $350 million pay cut for 2016 represents a 1.8 percent decrease to home health facilities compared with 2015 levels, the proposed rule said.

According to the proposal, the 1.8 percent decrease is made up of a 2.3 percent home health payment increase, a 2.5 percent reduction for rebasing and a 1.6 percent decrease for adjustments to the national, standardized 60-day episode payment amount.

Value-Based Purchasing Model

As proposed, the home health value-based purchasing model would test whether incentives for better care can improve outcomes in the delivery of home health services, a July 6 statement from the agency said.

The model would apply a payment reduction or increase to current Medicare-certified home health agency payments, depending on quality performance, for all agencies delivering services within nine randomly selected states, the statement said. “Payment adjustments would be applied on an annual basis, beginning at five percent and increasing to eight percent in later years of the initiative.”

The agency’s statement also said the proposed model is designed so there is no selection bias; participants are representative of home health agencies nationally; and there is sufficient participation to generate meaningful results among all Medicare-certified home health agencies nationally.

Authorized under the Affordable Care Act, the model incorporates elements of other value-based purchasing programs and demonstrations—including the hospital value-based purchasing program and the home health pay-for-performance and nursing home value-based purchasing demonstrations, the statement said.

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