Frequently Asked Questions

1.  What is PPS?

A Prospective Payment System (PPS) is a method of reimbursement in which Medicare payment is made based on a predetermined, fixed amount. The payment amount for a particular service is derived based on the classification system of that service (for example, diagnosis-related groups for inpatient hospital services).  CMS uses separate PPSs for reimbursement to acute inpatient hospitals, home health agencies, hospice, hospital outpatient, inpatient psychiatric facilities, inpatient rehabilitation facilities, long-term care hospitals, and skilled nursing facilities.

2.  What is Home Health PPS?

The Balanced Budget Act of 1997, as amended by the Omnibus Consolidated and Emergency Supplemental Appropriations Act (OCESAA) of 1999, called for the development and implementation of a prospective payment system (PPS) for Medicare home health services. The BBA put in place the interim payment system (IPS) until the PPS could be implemented. Effective October 1, 2000, the home health PPS (HH PPS) replaced the IPS for all home health agencies (HHAs). The PPS proposed rule was published on October 28, 1999, with a 60-day public comment period, and the final rule was published on July 3, 2000.

3.  How does Home Health PPS work?

Under prospective payment, Medicare pays home health agencies (HHAs) a predetermined base payment. The payment is adjusted for the health condition and care needs of the beneficiary. The payment is also adjusted for the geographic differences in wages for HHAs across the country. The adjustment for the health condition, or clinical characteristics, and service needs of the beneficiary is referred to as the case-mix adjustment. The home health PPS will provide HHAs with payments for each 60-day episode of care for each beneficiary. If a beneficiary is still eligible for care after the end of the first episode, a second episode can begin; there are no limits to the number of episodes a beneficiary who remains eligible for the home health benefit can receive. While payment for each episode is adjusted to reflect the beneficiary's health condition and needs, a special outlier provision exists to ensure appropriate payment for those beneficiaries that have the most expensive care needs. Adjusting payment to reflect the HHA's cost in caring for each beneficiary including the sickest, should ensure that all beneficiaries have access to home health services for which they are eligible.

4.  What is Home Health PPS (HH PPS) Consolidated Billing?

Under the PPS a HHA must bill for all home health services which includes nursing and therapy services, routine and non-routine medical supplies, home health aide and medical social services, except durable medical equipment (DME). DME was excluded from the BBA established consolidated billing requirement by the BBRA. The law requires that all home health services paid on a cost basis be included in the PPS rate. Therefore, the PPS rate will include all nursing and therapy services, routine and non-routine medical supplies, and home health aide and medical social services.

5.  What services are included in HH PPS Consolidated Billing?

The following types of services are subject to home health consolidated billing provision, and are included in the primary HHA’s payment:


• Skilled nursing care;

• Home health aide services;

• Physical therapy;

• Speech-language pathology;

• Occupational therapy;

• Medical social services;

• Routine and non-routine medical supplies;

• Medical services provided by an intern or resident-in-training of a hospital, under an approved teaching program of the hospital, in the case of a HHA that is affiliated or under common control with that hospital; and

• Care for homebound patients involving equipment too cumbersome to take to the home.

6.  What services are not included in HH PPS Consolidated Billing?

Two types of services are not subject to the home health consolidated billing methodology. These services are:


• Physician-performed therapy services (which means that although the procedure code would be subject to HH consolidated billing, the specialty code which indicates that it was provided by a physician removes it); and

• Durable Medical Equipment (DME).

7.  What is the process involved in HH PPS claims submission?  

The claim submission process differs under PPS from the old fee-for-service process. PPS provides for split percentage payments. At the beginning of an episode of care, the HHA submits to the RHHI a request for anticipated payment (RAP) for the initial percentage payment. The initial payment is 60% of the total PPS amount for new patients and 50% for on-going patients. At the end of the episode the HHA submits a request for the residual final payment, and is paid the remaining amount.

The initial request for payment does not constitute a Medicare claim. Medicare will only pay for home health services if there is a signed doctor's certificate. Under the final PPS rules, the RAP may be submitted without a care plan signed by a doctor. The request for payment may be based on a signed doctor's referral prescribing detailed orders or on verbal doctor's orders that are: recorded in the plan of care; that include a description of the patient's condition and services to be provided; that are attested to by the nurse or therapist responsible for the care; and that are included in a plan of care that is submitted immediately to the doctor. The care plan must be signed and dated by the doctor before the claim for each episode is submitted for the final percentage PPS payment.