Home healthcare and hospice agencies have utilized Medicare’s Request for Anticipated Payment (RAP) mechanism to maintain adequate cash flow. However, the Centers for Medicare and Medicaid Services (CMS) plans to phase out the RAP mechanism under the new Patient-Driven Groupings Model (PDGM) that commences on January 1, 2020. As reported in a recent article in Home Health Care News, this may create a significant cash flow squeeze (and especially for small and newer agencies with a large proportion of Medicare-enrolled clients).
The following describes how RAPs aid your agency’s cash flow, and how RAPs will be handled under the PDGM (as well as some ways to mitigate the impact of the PDGM on your revenue stream). Meanwhile, the professionals of Liberty Consulting and Management Services (a billing and financial services company for home healthcare and hospice agencies) can help in preparing you for the PDGM.
What are the Current Guidelines for Submission of RAPs by Home Healthcare and Hospice Agencies?
Chapter 10 of the CMS’ Medicare Claims Processing Manual (as of May 23, 2019) specifies that a RAP can be submitted after the first patient visit under the care plan has occurred if the following three criteria are also met:
- RAP is submitted after OASIS data is complete (and finalized for submission);
- RAP is submitted after the referring physician’s verbal orders have been received and documented;
- RAP is submitted after plan of care has been been established and submitted to the referring provider
Employee staffing is the largest expenditure segment for a home healthcare (or hospice) agency, and an adequate monthly cash-flow is imperative to maintain staffing levels. If an agency is unable to achieve a reasonable monthly cash-flow, clinician and home health aide staffing levels are likely to be decreased – and this can negatively impact the ability to accept new clients. Therefore, maintaining (and boosting) cash-flow is essential to preserving an adequate revenue stream for agency survival.
Two-Tiered Effect of RAP Changes under the PDGM
Home health and hospice agencies that were certified for participation in Medicare prior to January 1, 2019 will continue to receive RAPs in 2020 (but with some rules changes applicable to submission). However, any HHA or hospice agency certified after January 1, 2019 will no longer receive split-percentage payments. (Currently, the split is 60 percent in response to the RAP, and 40 percent in response to the claim.) Disallowance of all RAPs is planned as of 2021.
Since split percentages have enabled HHAs to receive a percentage of the Medicare payment at the beginning of the client’s episode of care, this change under the PDGM will reduce the amount of up-front revenues that HHAs have to allot to paying the upcoming month’s budgeted categories (e.g., employee salaries, supplies, and utility costs).
Predicted Revenue Reductions for Home Health Agencies due to Behavioral Assumptions
Home health and hospice agency behavioral assumptions embedded into the PDGM by the CMS are that agencies will normally do the following: 1) always use reimbursement codes under the PDGM that enable the highest reimbursement possible, and 2) always carry out enough visits to avoid submitting LUPA claims.
On October 31, 2019, a Home Healthcare News article reported that the CMS final rule for the behavioral adjustment for 2020 was shifted downward from the formerly-proposed 8.01 percent to 4.36 percent – but still higher than recommended by such home healthcare industry organizations as the National Association for Home Care & Hospice (NAHC).
Meanwhile, healthcare economic analysts have estimated a 6.42 percent annual reduction in CMS payments to HHAs and hospices under the PDGM. Indeed, one of the major rationales behind the CMS decision to eliminate RAPs was that RAPs enabled unscrupulous HHAs to obtain payments and close before any client services were actually provided.
Why Accountable Care Organizations (ACOs) are Better-Positioned to Survive under the PDGM
The revenue stream of Accountable Care Organizations (ACOs) is far more diverse than for most independent HHAs and hospice agencies. One reason is that ACOs that provide home healthcare services to their patients are more likely to serve a broader age-based demographic than independent HHAs. Consequently, HHAs (and hospices) that are part of ACOs are more likely to receive a larger percentage of annual revenues from commercial insurers.
While large-sized ACOs are more likely to provide home healthcare services to their patients, 80 percent of all existent ACOs provide such services to their patients as a result of adoption of value-based payment models by both public and private payers (per a Health Affairs article in June, 2019). Moreover, study findings published in this article suggested that outpatient physician practices that were part of ACOs were more likely than practices not in ACOs to utilize home healthcare visits during their patients’ care transitions (such as following an inpatient stay).
According to the Commonwealth Fund in 2019, a comparison of the use of post-discharge home healthcare visits by payers revealed the following: 86.7 percent of Medicaid ACOs, 82 percent of Medicare ACOs, and 79.6 percent of commercial ACOs utilized post-discharge home visits. Three other research findings described on the Commonwealth Fund’s website were:
- ACOs using home visits tended to be larger in size.
- More than 50 percent of ACOs participating in risk-bearing payment arrangements utilized home visits, as compared to 30.2 percent of ACOs not participating in risk-bearing payment arrangements.
- Besides utilizing home visits for post-discharge patients, ACOs often utilized home visits for noncompliant patients.
Overall, home healthcare and hospice entities within ACOs tend to have greater financial resources than independent HHAs and hospices.
Assessing Five-Year Financial Risk under the PDGM
One element of assessing your HHA’s five-year financial risk under the PDGM is to understand your agency’s overall dependence on RAPs for cash-flow. If your HHA or hospice had sufficient cash-flow in the previous three years without a dependence on RAPs, your agency’s financial resources will probably not be severely impacted by the elimination of RAPs.
However, the myriad regulatory changes by the CMS affecting hospitals, outpatient physicians, Skilled Nursing Facilities (SNFs) and HHAs are likely to impact the entire healthcare administration landscape involved in providing care to Medicare-enrolled (and Medicaid-enrolled) patients/clients.
Therefore, diversifying the age demographic served by your HHA (or hospice) in tandem with progressing toward a 50:50 publicly and privately-insured client population base are good ways to increase the likelihood that your independent HHA (or hospice) will survive the shift to value-based payments over the next five years.
Will Rural HHAs and Hospices Be More Likely to Close under the PDGM?
The phase-out of “add-on” payments to rural HHAs and hospices – in conjunction with reduction in RAPs – may place a particular burden on HHAs and hospices located in rural regions. This is because rural HHAs and hospices tend to operate on slimmer financial margins than their urban and suburban counterparts (per the website of LeadingAge.org). Therefore, rural HHAs and hospices need to be even more proactive in assessing their financial risk under the PDGM.
At Liberty Consulting and Management Services, we want your HHA and/or hospice agency to adapt as smoothly as possible to functioning under the PDGM.