How the new HHGM would affect home health agencies

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proposed rule updating the home health prospective payment system would lower payment rates to home health agencies next year and completely overhaul the way Medicare pays home health agencies the following year.

CMS estimates that the cost to agencies for implementing the rule published to the Federal Registry on Aug. 4 would be about $80 million in 2018. 

But the rule has garnered more attention for the changes it would bring about in payment structure for episodes of care provided by home health agencies, shortening the national standardized 60-day episode payment to just 30 days beginning Jan. 1, 2019, and replacing the current therapy-driven payment system with a model largely based on six clinical groupings. 

CMS calls the revised payment model a “more clinically intuitive system” and said it will align with the way clinicians already categorize their patients to deliver care. 

The new model is predicated on the use of principal diagnoses as the core of the system to more clearly identify the types of patients treated in home health, and the focus of their care,” said J’non Griffin, owner and president of Home Health Solutions LLC.

   Each 30-day payment period would be assigned to a clinical group according to the primary reason the patient was receiving home health. CMS would use the principal diagnosis code reported on the home health claims to assign the grouping to one of these 6 classifications:

  • Musculoskeletal rehabilitation
  • Neurological or stroke rehabilitation
  • Wound care
  • Medication Management Teaching and Assessment
  • Behavioral health care (including psychiatric and substance abuse conditions)
  • Complex nursing care (IV therapy, ventilator, ostomies, parenteral or enteral nutrition, etc.)

Questionable encounters
Under the new payment model, 30-day payment episodes which could not be grouped by primary diagnoses due to coding issues would be considered “questionable encounters” and returned to the provider for more accurate or definitive coding. 

CMS has announced that it will post on its web site a list of codes which would be considered “a questionable encounter.”

“We believe this will help to minimize any returned claims for more definitive coding,” CMS states in its proposal. “Each code should be reported to the level of certainty and specificity known for the home health admission. Under our proposal, secondary diagnosis codes would not be used to assign the clinical group, as the intent of the HHGM is to increase clarity by classifying the 30-day period based on the primary reason for home health services.”
Other factors will be considered 
Although the principal diagnosis code would be the basis for the home health episode, secondary diagnosis codes would be used to case-mix adjust the period further through additional elements of the model, such as co-morbidity adjustment.
“The relationship between function and cognitive status and episode cost will also take on increased significance under the new model,” J’non said. “Each of the primary diagnosis groupings will be ranked either high or low in terms of functional/cognitive level. Four of the 6 clinical groupings will have an additional medium category.”

In all, the new 30-day home health category will be classified according to:
– TIMING — Early or late episode
– REFERRAL SOURCE – Community or institutional
– CLINICAL GROUP – One of the 6 primary diagnosis-based groupings listed above
– COMORBIDITY ADJUSTMENT – Determined by secondary diagnoses  

Under the new model, diagnosis codes would support medical necessity for services furnished, and provide information for establishing the home health Plan of Care, according to CMS.


“Ultimately, developing clinically similar groups based on the reported principal diagnosis as part of the larger structure of the model would allow for more meaningful analysis of home health resource use, ensure that patients are receiving care commiserate with their level of need, and more accurately align payment with cost,” CMS said.