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Why value-based purchasing matters now to home health agencies

Why value-based purchasing matters now to home health agencies

In January 2016, the Centers for Medicare & Medicaid Services (CMS) rolled out the Home Health Value-Based Purchasing (HHVBP) model in nine randomly selected states (Arizona, Florida, Iowa, Maryland, Massachusetts, Nebraska, North Carolina, Tennessee and Washington).

The shift, per CMS, was designed to move away from volume-based reimbursement to a quality-of-care model. Value-based purchasing is the linking of “provider payments to improved performance by healthcare providers.” In essence, the model holds health agencies accountable for the cost and quality of care provided.

What started as a pilot program was deemed successful, meaning home health agencies across the U.S. will soon receive financial incentives to improve quality of care, rewarding HHAs with higher payouts when they improve their quality scores. The HHVBP Model, thus, reduces payments to home health agencies with lower performance scores.

According to CMS, data released in January 2021 showed the HHVBP Model produced an average improvement of 4.6% to a home health agency’s quality score. The average annual savings to Medicare was $141 million. CMS also reported reductions in unplanned acute care hospitalizations and skilled nursing facility stays, meaning Medicare spending dropped – cumulatively by more than $604 million from 2016 through 2019.

The ending of the successful HHVBP pilot in November 2021 paved the way for the model to expand to all 50 states, U.S. territories, and Washington, D.C. CMS is also increasing the maximum payment adjustment through the program from 7% to 8%.

Home Health Value-Based Purchasing model’s impact on home health agencies

The newly expanded value-based purchasing model impacts HHAs because it uses benchmarks, achievement and improvement thresholds to assess each participating agency’s performance.

Under the model, HHAs can better compete with other HHAs in their region by demonstrating to CMS that they deliver a higher quality of care in a given performance year when measured against a baseline year relative to peers nationwide. As a result, the HHAs that provide better care get higher Medicare reimbursements.

For qualifying HHAs, the amount of the Medicare payment adjustment is determined by comparing its Total Performance Score (TPS) with the scores from other agencies in the same state. Medicare payments are redistributed among agencies within a state to reward those agencies with relatively higher quality or improved quality and reduce payments with lower performance levels.

CMS uses Outcome and Assessment Information Set (OASIS) data, completed Home Health Consumer Assessment of Healthcare Providers and Systems (HHCAHPS) surveys and claims-based measures to calculate HHAs’ performance.

An applicable percent ranging from -5% to 5% is applied in a payment year toward Medicare fee-for-service payments.

Implementation timeline

Throughout 2022, CMS plans to train all Medicare-certified HHAs, walking them through expectations and requirements without risk to payments. The first complete performance year for the expanded HHVBP Model is 2023, beginning January 1. Because of this, 2025 is the first payment year determined by 2023 performance.

Finally, it’s worth noting that the HHVBP Model does not apply to Medicaid or commercial patients.

To learn how Inovalon supports agencies like yours during this transition and beyond, check out our overview of home health software solutions.

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About the author

Michelle Karl, Solution Architect