Medicare Fee-for-Service

Under FFS, beneficiaries can see any Medicare-enrolled provider without networks or referrals, and Medicare pays according to nationally set payment systems. Claims are processed by Medicare Administrative Contractors (MACs), private companies that administer defined jurisdictions. Coverage rules come from statute, CMS regulation, and MAC local coverage determinations, and they apply uniformly: every agency in the country is paid under the same PDGM methodology, adjusted for local wages. That uniformity is FFS's defining operational trait. There is no rate negotiation, no contract renewal cycle, and no network to join beyond Medicare certification and enrollment.

Medicare Advantage (MA) plans receive a capitated payment from Medicare and manage the benefit themselves, which means networks, prior authorization, negotiated rates, and plan-specific billing rules. FFS has none of those. There is no prior authorization for home health, though agencies in Review Choice Demonstration states face pre-claim or postpayment review of documentation. Payment is episodic and predictable, and the rulebook is public and well documented. For most agencies, FFS pays more per episode than MA contracts and costs less to administer, which is why payer mix, the share of census in FFS versus MA and other payers, is one of the strongest predictors of agency margin.

FFS billing follows a fixed sequence. The agency verifies eligibility, submits a Notice of Admission within 5 calendar days of the start of care, delivers care under a signed plan of care, and submits a final claim for each 30-day period. Claims must be billed sequentially, meaning each period's claim follows the prior one, and consolidated billing rules make the agency responsible for services bundled into the episode payment. The MAC's systems apply PDGM case-mix logic automatically, along with LUPA, partial episode payment, and outlier adjustments.

More than half of Medicare beneficiaries are now enrolled in Medicare Advantage, and the FFS share of home health census has fallen accordingly in most markets. That squeezes agencies from two directions: MA episodes usually pay less and cost more to manage, while FFS rate updates have been constrained by behavioral adjustments in recent payment rules. Operators respond by tracking margin by payer, negotiating MA contracts against their real cost per visit, and protecting the referral relationships that generate FFS volume. FFS remains the benchmark: if a contract cannot be serviced profitably relative to FFS economics, growing that contract makes the agency weaker, not stronger.