In 1996, HCFA, the Health Care Financing Administration, announced that it was facing greater spending than their existing budget for Part A Medicare. It was projected that the current funds would only last for a few years beyond year 2000. Thus, Congress created the Balanced Budget Act of 1997. As the result of the Balanced Budget Act, along with a 15% reduction of HCFA expenditures, there will be new rules and regulations to control health system costs, including one of their main targets, Home Care.

Since the implementation of the Balanced Budget Act, Home Health Care providers have gone through tremendous pressures and changes, resulting in forced and/or voluntary closures of about 2,500 Home Care Agencies throughout the United States and including 315 in California.

The latest change, to be implemented October 1, 2000, is called PPS, "Prospective Payment System," a new version of the DRG Program for hospitals. In contrast to the current IPS Program, "Interim Payment System," where reimbursement is based upon a per visit rate and number, the new PPS Program will pay a fixed-dollar amount based upon a patient's initial admission diagnosis and OASIS assessment for a 60 day episode. Reimbursement for the service provided is based upon a 60%/40% ratio of final estimated amount due, paid at the time of initial claim and final claim submission, respectively.

Neither the initial or final claim can be submitted unless all care plans and orders have already been signed by the physician, and have been filed in the patient's chart. PPS will have a dramatic impact on the financial status of providers, if not handled in an appropriate and thorough manner.

The physician's understanding and cooperation in the PPS Program is of great importance to the survival of the Home Care providers. Teamwork between the Home Care provider and the physician are absolutely necessary to ensure the timely submission of the initial and final claims. The physician can ensure the smooth operation of this new payment system by signing the care plan and related orders and mailing them back as soon as possible in the postage-paid envelopes supplied by the provider.

All of the current eligibility requirements to receive home care services still apply under PPS requirements, including: patients must be homebound and must have a medically necessary need for home care services ordered by a physician.