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A Brief Look into CMS’ Latest Proposed Rule on Payment Systems

Updated: Oct 7, 2020

On Friday, June 26th, 2020, The Centers for Medicare and Medicaid Services (CMS) published major proposals for the next calendar year. The changes are detailed in the Calendar Year (CY) 2021 Home Health Prospective Payment System Rate Update and Quality Reporting Requirements Proposed Rule. The rule includes proposals related to the Medicare home health benefit for 2021 on payment requirements.


The 2021 proposed rule represents a simple inflation rate update, a change in wage index area designations (CBSA changes), no Patient Driven Groupings Model (PDGM) payment model changes, and a phasing-out over time of the rural add-on.

This proposal would bring little change in the Medicare payments for most home health agencies. Many home health agencies within the CBSA geographical areas will see impact. These areas should be evaluated in detail for impact of rate changes.

Details on the Payment Proposal

Base payment rates are increased by a net Market Basket Index (MBI) of 2.7%. An annual inflation update of 3.1% is reduced by a 0.4% Productivity Adjustment to net at 2.7%. This means the following calculations are applied:

  • The base 30-day payment rate is increased from $1864.03 to $1911.87 after applying the wage index budget neutrality factor of 0.9987. Home health agencies are required to submit their quality data. For those that did not submit, they can expect to see an additional rate reduction by 2%.

  • The Low Utilization Payment Reduction (LUPA) per visit rates are set at:

  • Home Health Aide $69.53

  • Skilled Nursing $153.54

  • Physical Therapy $167.83

  • Speech Language Pathology $182.42

  • Occupational Therapy $168.98

  • Medical Social Worker $246.10

  • The CBSA Wage Index adjustments for the patient’s residence has changed based on the census bureau reporting information. CMS issues a statement saying the max adjustment would be 5% in these effected areas.

  • The Outlier Fixed Dollar Loss ratio would remain unaffected in the rule.

Quality Program

In the CY 2020 HH PPS final rule, 20 measures for the CY2022 quality reporting program (QRP) were finalized. These need to be reviewed by the agency to see the impact they will cause in 2021. No new changes to the HH QRP were proposed in the CY2021 proposed rule.

There were also some changes to the Oasis testing requirements that need to be reviewed and implemented. These changes will require IT support to accommodate. See section related to VPN in the Federal Register / Vol. 85, No. 126 / Tuesday, June 30, 2020 / Proposed Rules page 39430.

Using Technology with Medicare Home Health Benefit

CMS proposed to finalize the use of telecommunications technology as part of the home health plan of care. This is allowed as long as the use of the technology is not substituted for in-person visits. The proposal will also look to allow agencies to report the use of telecommunications technology as an allowable administrative cost. Once approved, these proposals will look to be permanent policy regardless of the existence of a public health emergency. Although this is a step in the right direction, the changes made will not have a material impact to the agency from a revenue perspective. The agency will have the burden of the costs associated with implementing the telehealth program as well as the equipment.

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