In this post, we use CMS data to calculate the cost of the original behavioral adjustment to create a Reverse Temporary Adjustment meant to record this summarized transaction between CMS and HHAs.

In the last two posts, I have described the origin of the Behavioral Adjustment (BA) for HHAs when PDGM was introduced and the pivot to the new BA described by CMS as the difference between what was actually paid to HHAs through PDGM and what would have been paid under the previous payment model with the same claim data.

Now I will use CMS and MedPAC data to describe the actual impact of the BA on the industry and what it would look like if it was fully implemented or if it did not exist. We will also explore the CMS perspective of “budget neutrality” for home health spending and if this data supports this concept.

The United States has a national debt currently at __just over 34 trillion dollars__. When you are dealing with large numbers like this, it makes it easier to understand the significance of this issue if you can relate this to a unit of measure we can visualize.

If we look at the total per person, it works out to $92,528. This metric allows us to compare the significance of this number to our other personal debt and imagine the difficulty we would experience if it had to be paid. This visualization can help us wrap our heads around the issue and its implications on ourselves and our children.

Like the national debt, we can accurately measure CMS spending on HHAs through Medicare Part A using claim data. To explore the issue of budget neutrality, we need data before and after the introduction of PDGM in 2020.

Using the claim data provided by MedPAC and the CMS 2024 proposed rule, we will build a data model that can be used to visualize the impact of the BA on HHAs and what the industry might look like if other alternate realities existed. We can translate this into a metric that allows you to relate these industry issues to your particular situation as an HHA stakeholder.

MedPAC published the __July 2023 Data Book__ that includes this chart with totals by year for all post-acute providers. We will use these numbers for total revenue by year for HHAs in our data model.

There are many factors influencing this annual spending data. The largest one from a statistical standpoint is the transition of Medicare beneficiaries from Medicare Part A to Medicare Advantage. When this happens, their data disappears from the data sources used to construct this chart from MedPAC and most of the charts you see in the proposed and final rules.

In our data model, we need a unit of measure that takes this transition into account so we are making an apples to apples comparison each year. We can get this from the __2024 proposed rule__ table B1.

In my posts using cost report data, we used census as a unit of measure for cost, visits and revenue data. In the 2024 rule, CMS uses the 30-day period of care as a metric. It is the period used for all PDGM claims and the associated clinical documentation. Each of you that deals with the numbers related to your HHAs has an understanding of what you receive as payment for these periods under Medicare Part A and how many of these claims you had over these years. We will use this unit in our data model as well to create visualizations that you can relate to in your particular situation.

CMS simulated these units for 2018 and 2019 claim data as they prepared for PDGM. The other totals are from actual claims. I have spent a lot of time looking at this data regarding these units and the revenue. Although I have issues with how the cost report data is represented by CMS, these units and revenue totals are accurate as well as the revenue data from MedPAC.

Now we have a source for revenue (MedPAC) and units of service from the 2024 proposed rule. A remaining issue is the scope of our data model. CMS has given us units of service for two years prior to PDGM and three years after. The MedPAC data is missing 2022 revenue.

CMS provides this data in the 2024 proposed rule when calculating the temporary adjustment portion of the BA for each year under PDGM. We will use the data from 2021 ( Chart B13) and 2022 (Chart B14) to get revenue for the missing 2022. When we compare this CMS total for 2021 with the MedPAC total, we can see that they are the same.

To make this easier to visualize, I put this data together in a spreadsheet:

This is the core of our data model for measuring the impact of the BA. If we can rely on this data as being accurate, we can build on it in our data model and visualize what it means. If we can do this without errors in math, logic or assumptions, we can learn more about what this data tells us.

Now that we have units and revenue, the next step is to calculate Revenue Per Period (RPP).

The years 2018 and 2019 represent pre-PDGM activity. Like CMS, we will use this to establish the baseline used to calculate budget neutrality under PDGM.

Fluctuations in the periods of service per year are created by the transition to Medicare Advantage as well as factors like the pandemic and economic influences. When we look at annual Medicare HHA spending by year, we see declining revenue for the industry. This is deceiving because the total 30-day periods of service are also declining from the beginning to the end of our model.

By relating the revenue to the 30-day period, we can visualize it in a way that is not influenced by some of the factors influencing the totals. This is a basic accounting technique not only used by CMS when calculating things like the base payment in the proposed rule, but any business analytics process needing to measure relative performance in relatable units using any data model. Like batting average in baseball.

In the proposed and final rules, CMS describes in detail the changes to the base payment that influences each PDGM 30-day period payment. These changes are described as changes to the base payment relative to the prior year. It is in this base payment, that CMS takes into account market basket changes intended to offset economic factors. It is also where CMS incorporates the permanent adjustment portion of the BA to reduce future payments. Examining these adjustments against our data model, we can measure their actual financial impact and what these numbers would look like if things happened differently.

Before we can explore the “what if” scenarios, we need an understanding of the numbers that are there to begin with.

__Pre-PDGM (2018 + 2019)__

These years are in our data model for comparison to PDGM. We do not need to figure out how the base rate was calculated for these years. Like under PDGM, changes were made from year to year through the proposed and final rules to adjust for economic factors intended to maintain a fixed level of spending by CMS, including these upward or downward adjustments. They used the same methods then they use now to apply these changes to individual claim payments.

CMS calculated a base payment rate that was applied to weighted claims with 60-day service periods. Any adjustments CMS felt were justified to maintain neutral spending from year to year were applied to the calculation of these base payments in each proposed rule before PDGM.

__PDGM Year 1 (2020)__

This is the most important transition year, the first one. Unlike other CMS home health rules, the__ 2020 final rule__ introduced a new payment model (PDGM) with new 30-day service periods and an entirely new payment formula. CMS had tested this formula for at least three years (2017 - 2019) and published the results as data files annually in the Limited Data Set with payments under both formulas included for each claim. After the PDGM weights were prepared for these years by CMS using their new cost report and OASIS process, all that was left was to plug in a base payment rate that when applied to all the PDGM test claims, would produce the same total spending as the existing payment model. This was how the first PDGM base payment was created.

Since this new payment model was a dramatic departure from the previous one, CMS was given the legislative power to try to predict how behavior changes by HHAs might increase this spending after PDGM was implemented. If they felt this would happen, they could quantify this behavior and its financial impact and include it as an adjustment to the base payment that would maintain budget neutrality with this behavior included.

In the 2020 final rule, CMS described the new __PDGM base payment amount__ that would achieve “budget neutrality” compared to the previous payment model. They use these words exactly in these regulations:

I am not a lawyer and I will not attempt to translate this into a legal argument. Instead, I am simply going to take CMS at its word. Without the BA, the base payment per claim that would have made PDGM budget neutral in 2020 was $1908.18.

Ultimately, in what has turned into an annual tradition, CMS agreed to __cut the BA in half__ for the first year of PDGM in this final rule. This takes __the original base payment rate and reduces it__ from $1908.18 to $1824.99 instead of $1745.11. The increases related to market basket updates takes this up another $39.04 to $1864.03. These translate into a 4.36% reduction implemented from the original BA and a 1.5% increase due to market conditions.

If we apply these percentages to the actual payments per period from our data model, we can calculate the actual impact of the original BA in 2020. For 2020, the actual payment per period from our spreadsheet is $2042. If this was reduced by 4.36%, then the payment without the BA would have been $2135. This puts the cost of the BA for 2020 at $93 per 30-day period or PDGM claim.

__PDGM Year 2 (2021)__

As the proposed rule for 2021 was being developed by CMS in the spring of 2020, we were in the midst of a pandemic. The data turbulence created in all healthcare environments made it nearly impossible to measure behavior patterns or any impact directly attributable to them. However, as discussed __in my previous post__, the three behaviors identified by CMS could be measured in claims. As they developed the 2021 proposed rule, they had three quarters of 2020 claim data to look at with no indication that their assumed behaviors were happening.

CMS assumed that current conditions had simply delayed these behaviors. With the disruption of Covid, they decided to simply repeat the existing components of the PDGM formula with no changes to case mix weights or the BA.

If we apply the same 4.36% BA adjustment to the revenue per period for 2021 ($1,841) we get a payment without the BA of $1924 and the BA cost per claim at $83.

__The Reverse Temporary Adjustment__

These first two years of PDGM included the same BA applied at the same rate to the base payment and in turn, to all paid claims. Using total Medicare revenue and periods of service provided by CMS and MedPAC, we can calculate the amount in each claim deducted due to this assumption for these years.

In the 2024 proposed rule, CMS calculates the temporary adjustment or unpaid BA as the difference between what was paid under PDGM and what would have been paid under the previous home health prospective payment system. This makes the original BA irrelevant since the deductions to payments from this BA are included in the PDGM payments being compared to previous payments in the new BA. In essence, the original BA reduced the total HHA liability that is included in the annual temporary adjustments calculated by CMS for the current BA.

In our data model, we are going to look at these BAs separately to measure their impact individually without netting them together as described by CMS in the 2024 proposed rule. This will allow us to model their separate impact.

This spreadsheet uses our data model to calculate the total cost of the original BA for 2020 and 2021 as the Reverse Temporary Adjustment (RTA).

As a stakeholder in an HHA, you can adjust the per period BA amount to your own rate by adjusting it based on your wage index. You can calculate your Reverse Temporary Adjustment by multiplying this by the number of claims you processed through Medicare these years. This will tell you what part of the RTA belongs to you, if it existed.

If it could be proven or if CMS agreed that these behaviors did not occur or if it was determined that there was no legal basis for this deduction, this would be the amount owed by CMS to the industry and your HHAs individually.

Like CMS’s temporary adjustment owed by HHAs, this debt would remain until a method was addressed for CMS to disperse this fairly back to the HHAs.

The current BA, applied retroactively back to 2020, can be calculated using this data model separately from the original BA. In my next post, we will look at the current BA and its impact using this data model.

## Commentaires