The Home Health PPS Proposed and 2022 Final Rule Changes Explained

Proposed and Final Rule

Changes aplenty. Will you be ready?

This (CY2022) being year 2 under PDGM, there are numerous changes in the CY2022 HH PPS Proposed Rule; most having to do with HH PPS (see § II of the Proposed Rule) and the HHVBP Model (see §III), which I will discuss in this post. There are other changes outside of this area (see sections IV, V, VI & VII) that I will not be commenting on.

In this article:

A Commonly Misinterpreted Aspect of the Proposed Rule

What You Need to Know about the Final Rule for 2022

Proposed Rule Changes for 2022

The Final Rule Details for 2021

Let’s dive in.

Note: Click here to watch a free training on the 2023 Final Rule Information.

A Commonly Misinterpreted Aspect of the Proposed Rule

CMS often notes in the proposed rule that the projected impact will be a 1.7% increase (or some other percentage of increase) each year.

But a 1.7% increase in what?

For years I have been approached after my presentations about this increase as many have told me that they were told in other presentations that the change indicated by CMS, which is projected to be 1.7% for CY2022 per this Proposed Rule, was what an agency could expect the change in its Medicare revenues to be for the upcoming year. Well, THAT IS, AND ALWAYS HAS BEEN WRONG! CMS is projecting a 1.7% change in home health spending.

That is, the dollar amount projected to be spent in CY2022 for home health is expected to be 1.7% more than what was spent in CY2021.

This is NOT what individual agencies should expect as a change in Medicare revenues.

And this has been what CMS projections have always been. If you were informed otherwise, I am sorry, but that was not correct.

That being said, 20% – 30% of home health agencies will see a change in their Medicare revenues commensurate with the CMS projected change in home health spending, but most will see a change rate different than what CMS notes in the Proposed Rule.

Note: Just because an agency sees a change equivalent to the change projected by CMS in one year does not mean its change in revenue the following year will also be commensurate with the change in home health spending.

In fact, as in most years, hundreds if not over a thousand home health agencies will see a reduction in their Medicare revenues for CY2022 despite the projected 1.7% increase in home health spending. This is not a guess; this is a fact. In-fact, the range of the change in individual payment rates per this Proposed Rule could be as much as a 35.7% increase all the way down to a 34.6% decrease!

Final Rule for 2022

Here are the important home health 2022 final rule discoveries every agency needs to know.

One of the major changes in CMS’ final rule for the Home Health Prospective Payment System announced is this — 2022 will be a “pre-implementation year” for the HHVBP, which was originally scheduled to begin in January.

Additionally, these final rule changes were made:

  • Individual payment rate changes ranging from:
    • An increase of 35.7%, to
    • A decrease of 34.6%
  • 2022 will be the last year of the Rural Add-on
  • Significant changes with all 432 Case-Mix Weights

And, do you know how much your Medicare revenues are projected to change?

There will be a 3.2% increase ($570 million) in home health spending for CY2022.

Learn exactly what you need to do in 2022 for HHVBP and how you can maximize revenue for your agency in the below free presentation.


You can download all of the slides for this presentation by clicking here.

What was in the CY2022 Proposed Rule?

The ONLY way to know how your Medicare revenues will change is to have it calculated. Otherwise, you are dealing with a lot of uncertainty about the future, and the more dependent your agency is on Medicare, the greater the risk. Additionally, if you are in the minority of home health agencies that prepare a budget for the upcoming year, you should really try to project your revenue change as accurately as possible.

This is an operational and financial fundamental that few agencies employ each year, but that all home health agencies should. As a side note, the more operational and financial fundamentals that your agency utilizes, the better your agency is positioned for short and long term success.

Below you will learn the important elements of the HH PPS for CY2022 Proposed Rule.

Additionally, to learn about the changes by listening instead of reading, you can check out this video that discusses the rules in greater depth.

Thank you John Reisinger and Innovative Financial Solutions for Home Health

Note: You can download all of the slides from the presentation by clicking here.

Behavior Assumption Adjustment

The Behavior Assumption Adjustment was applied to HH PPS for CY2020, the first year of PDGM, before CMS even had any empirical evidence to support such an adjustment.  In the CY2021 HH PPS Proposed Rule, CMS proposed implementing an 8.01% cut to home health spending that they termed the “Behavior Assumption Adjustment”. CMS made this proposal to reduce expected home health spending based on changes they felt home health agencies would implement to increase their reimbursement that were not associated with the actual acuity of the patient. They successfully did this before.  From CY2008 thru CY2019, they used what they called the “Nominal Change in the Case-Mix Weight Adjustment” to cut home health spending by over 20%. CMS did not use it every year during that span, but they did most years.

CMS finalized the Behavior Assumption Adjustment for CY2020 at 4.36%. This reduction from the original proposed 8.01% only occurred because of comments submitted from interested parties and stakeholders. Note: There were only a handful of comments. Commenting does make a difference. If we had thousands of comments on this issue, it might have been eliminated!. So, home health reimbursement rates were reduced 4.36% in CY2020 based on this one CMS assumption and our current rates are still impacted by it. I point this out because CMS has put the industry on notice that it’s considering doing the same thing again in the near future.

Suffice it to say, CMS is planning on implementing an adjustment in the near future, whether they call it the “Behavior Assumption Adjustment” or the “Nominal Change in the Case-Mix Weight Adjustment”. Something to consider with future proposed rules is that we all have the opportunity to submit comments as part of the rule-making process.

Notice of Admission (NOA)

Starting January 1, 2022, No-Pay RAP’s will change to the Notice of Admission (NOA).  For the most part, this should be a fairly nominal change.

This also brings up the question of how the late-filing penalty will be applied under the change to the NOA as there is only one NOA submitted for each length of stay (LOS) as opposed to each 30-day payment period. Will a late filing penalty only be applicable for/through the 30-day period the NOA is filed in, or will it be applicable to each 30-day payment period associated with the NOA? I did not see absolute clarity on this issue in the Proposed Rule and as such, I included a question about this in the comments that I submitted to CMS. Time will tell.

Market-Basket Update

The net Market-Basket Update (MBU) per the CY2022 Proposed Rule is 1.8%. The MBU is our inflation adjusted update for each year. It was initially identified to be +2.4%, but is adjusted for what is termed the MFP (the annual economy-wide private nonfarm business multifactor productivity which is an aspect of the 2010 PPACA), which is a reduction of 0.6%. So the +2.4% combined with the -0.6% equals the net MBU of +1.8% for CY2022.

Home Health Wage-Index

Home Health Wage-Index

There are 465 CBSA/Service Areas (SAs), each with its own Wage-Index (WI) covered under the Medicare program. The Home Health WI is CMS’ attempt to make the payment rates equivalent in all 465 CBSA/SAs, when considering the labor-rate differences in these CBSA/SAs. For CY2022, 226 CBSA/SAs are proposed to see an increase in their WI and 234 are proposed to see a decrease.

Case-Mix Weights

There are 432 Case-Mix Weights (CMWs) under the PDGM regime of HH PPS. The CMW is part of the calculation to determine the 30-day payment rate. Per the CY2022 HH PPS Proposed Rule, 223 of the CMWs are proposed to increase with a MAX increase of +15.94%) and 209 are proposed to decrease with a MAX decrease of -26.73% .

LUPA Thresholds

The LUPA Thresholds are proposed to remain the same per the CY2022 HH PPS Proposed Rule.

The LUPA Thresholds are more complex under PDGM as each of the 432 HIPPS Codes has its own LUPA Threshold associated with it as opposed to the 4 visits that it was pre-PPS. It’s important that you know what the LUPA Threshold is for every 30-day payment period of service, but you should also know how your agency is presented on the PEPPER report LUPA Target Area.

National, Standardized 30-day Payment Rate

The National, Standardized 30-day Payment Rate is the starting point for calculating the payment rate for each 30-day payment period. Home health agencies that submit the required quality data receive the full update whereas agencies that do not submit the required quality data have their update rate reduced by 2 percentage points. Following is the National, Standardized 30-day Payment Rate.

Submitted the required quality data:            $ 2.013.43(currently for CY2021 $1,901.12)

Did not submit the required quality data:   $ 1,973.88

National Per Visit Rates (LUPA Rates)

The LUPA Rates are used to calculate an agency’s revenue for a LUPA situation. They are also used to calculate what is called the “Imputed Costs” for an Outlier situation.  Home health agencies that submit the required quality data get the full update whereas agencies that do not submit the required quality data have their update rate reduced by 2 percentage points. Following are the National LUPA Rates.

Do Submit    DISC       Do Not Submit

$ 155.59        SN            $ 152.54

$170.70         PT                166.73

$171.24         OT                167.88

$184.46         ST                181.23

$249.39       MSS             244.49

$70.45          HHA              69.07

LUPA Add-on

The LUPA Add-on is an additional dollar amount, over and above the LUPA Per Visit Rate, in an attempt to offset the administrative costs that an agency will incur since it will not have the full 30-day payment to cover those costs. The CY2022 HH PPS Proposed Rule is proposing to retain the LUPA Add-On rates for SN (1.8451), PT (1.6700), and ST (1.6266).

However, as CMS has proposed allowing OT to perform the initial assessment visits in certain situations, CMS has established a LUPA Add-on for OT since it did not exist previously. CMS feels that currently there is a lack of data to establish a true OT LUPA Add-on rate, so they propose to use the PT rate (1.6700) until they have more data to calculate a more accurate OT LUPA Add-on factor.

Rural Add-on

rural rules

The Rural Add-on was modified for CY2019 with rural counties separated into one of three categories: High utilization, Low population density, and All other. As established in CY2019, the Rural Add-on rates were being phased down and out from CY2019 thru CY2022. As such, CY2022 is the last year of the Rural Add-on with it scheduled to sunset on December 31, 2022. The only rural county category receiving a rural add-on for CY2022 is the Low population group and they are only receiving an add-on of 1%.


A benefit at what cost?

About 10 years ago, I created a presentation that I provided around the country about outliers that I called: Outliers: The Good, The Bad, and The Ugly. In it, I broke the Outlier Provision into three sections. The Good was about the Outlook Provision premise which conceptually (before looking at any of the mechanics therein) seemed to be a positive protection against potentially very costly episodes for which there was a limited revenue potential. But, the premise was all that I considered good.

The Bad was the use of ‘Imputed Costs’ for calculating the cost of an Outlier episode.  Imputed costs were and are based on the CBSA/SA’s Per Visit LUPA Rates and excludes from consideration any chargeable medical supplies provided for the episode.  Therefore, I considered the aspect of the Outlier Provision using the LUPA Per Visit Rates and exclusion of the costs of any chargeable medical supplies as ‘The Bad’.  Additionally, I believe that +95% of all home health agencies would probably find that their Medicare payments are reduced greater than the Outlier payments that they receive each year. It’s just that most agencies do not realize the impact of the withhold to fund aspect of the Outlier Provision. They see that Outlier payments are received and  therefore, have a positive perception of the Outlier Provision. But, it is actually detrimental to their Medicare revenues and cash flow.

The Ugly was based on a section of the PPACA that was established to reduce annual home health spending by 5%. Theoretically it was established to fund the Outlier Provision, but then it set a cap on Outlier payments of 2.5% of total home health spending. Meaning that half of the 5% removed from home health spending is permanently removed from home health spending each year.

The amount cut each year amounts to approximately $400-$450 Million. With CY2022 being the twelfth year of this discrepancy, it will mean that the total amount taken from home health spending since implementing this aspect of the PPACA will exceed well over $4 Billion.

Regarding the Outlier changes for CY2022, the Fixed-Dollar Loss (FDL) is proposed to change to 41% and the Loss-Sharing Ratio is proposed to be 80%.

Allowed Practitioners

CMS has identified in the CY2022 HH PPS Proposed Rule that they are proposing to make changes long sought by the industry. They are defining Nurse Practitioners (NPs), Clinical Nurse Specialists (CNSs), and Physician’s Assistants (PAs) as “Allowed Practitioners”.

Next, I’ll briefly talk about the HH VBPM.

Home Health Value-Based Performance Model

Per the CY2022 HH PPS Proposed Rule, CMS is proposing ending the Home Health Value-Based Performance Model (HH VBPM) demonstration and then extending the HH VBPM across the entire program. As per this proposal:

  • CY’s 2022 & 2023 would be the first two Performance Years,
  • CY2024 would be the first year of the Payment Adjustments and would be based on the HHA’s Performance Scores of CY2022, and
  • The revenue impact could be up to +/- 5% of Medicare payments, including LUPA & Outlier payments for any HHA

Final Rule info for 2021

CMS released the CY2021 Home Health Final Rule, which will impact all Medicare-certified home health agencies.

Here’s the important info you need to know about the final rule for CY2021:

  • There were significant issues and changes in the final rule
  • No-Pay RAP
  • Home health payment rate updates
  • Telehealth provisions for home health
  • Requirements for home health infusion therapy suppliers
  • Preparation tips for upcoming changes

In this webinar, John Reisinger, CPA, discusses the various updates in the rule and the impact on home health, all the way down to the agency level.


As previously noted, interested parties and stakeholders are generally able to submit comments to each rule proposed by CMS. This is considered part of the Rule-Making Process. As noted per the below extract from the regulations page of the Federal Register, there appear to have been 207 comments submitted from interested parties and stakeholders, 89 of which are available for review as of Sept 2, 2021.

Since this Proposed Rule was originally published on July 7, 2021, home health agencies have almost six months to prepare for the proposed changes. The most successful agencies will be the ones that use the maximum amount of time to analyze the projected impact to their organization and prepare for the upcoming year.

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