Metrics Matter: Projected Medicare Non-Routine Supply Payments Versus Actual Payments
In 2008, a new Prospective Payment System (PPS) methodology was developed for the Medicare Home Health reimbursement of non-routine supply payments. In this month’s Metrics Matters, we analyze Medicare’s projections of non-routine supply payments to determine how close they came to the actual payments.
The Home Health Medicare benefit covers the payment of patient-specific disposable medical supplies, such as wound care, ostomy, and urological supplies. These supplies are an integral part of the hands-on care provided by clinicians during their home visits. When patients are not receiving home health services, these supplies are generally covered under Medicare Part B’s durable medical equipment portion of the benefit; however, a 20% co-pay is required.
A New “Budget Neutral” Method for Non-Routine Supply Payments
Under the original Prospective Payment System (PPS) for Home Health, payments for these non-routine supplies were included uniformly in the full episode reimbursement in the amount of $52.14. When devising the new PPS methodology, policymakers felt that the uniform supply payment disincentivized agencies from taking “high-cost supply” patients and preferred a system that better matched costs with reimbursement.
As a result, they developed a six-level approach, which assigned points based on answers to certain questions in the initial OASIS assessment. Their intent was to make the new method “budget neutral.” To accomplish this, Medicare assigned a reimbursement amount for each level (demonstrated in the chart below), and projected a utilization percentage for each.
Healthcare Market Resources’ analysis of the 2008 Medicare Home Health claims covers only those full episodes that had the new PPS billing code in its records. Based on our analysis, we can conclude the following:
- Episodes that started in 2007 and ended in 2008 had the old billing code in their records but were paid under the new method. These crossover episodes represented roughly 8% of all episodes paid in 2008.
- Medicare projections assumed much higher levels of supply-intensive patients than actually occurred.
- Medicare estimates fell short of expectations, and reimbursement to agencies was underfunded by more than $14 million.
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