The Medicare home health payment system contains incentives that encourage use of therapy over other services. This report outlines a possible approach to eliminating the use of therapy as a payment factor. Home health agencies would be paid the expected cost of treating a patient but would not receive higher payments for providing additional therapy visits given the type of patient. Compared with the current payment system, the alternative approach would shift payments away from episodes that use six or more therapy visits. It would also balance payment-to-cost ratios across groups of patients defined by need for therapy services better than the current system and reduce variation in payment-to-cost ratios by type of agency.
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