Home Health Agencies Face Financial Burden of Proposed CMS Payment Cut

The U.S. Centers for Medicare and Medicaid Services (CMS) proposes a decrease in Medicare reimbursement for home health agencies by 4.2% next year. CMS estimates that this move would decrease reimbursements by about $810 million compared to 2022 projected reimbursements.

As a home health agency provider, this proposed rule would add more financial burden at a time when you’re already struggling with turnover, staffing costs, high gas prices for your mobile clinicians, and other workforce challenges.

“Every day thousands of boomers are hitting the Medicare rolls, and a large number are choosing to age in place and receive home health services,” said Relias Director of Post-Acute Care Solutions, Trish Richardson, MSN, BSBA, RN, NE-BC, CMSRN. “This proposal will add to the myriad challenges facing home health agencies with many shuttering their doors, thus significantly impacting the most vulnerable members of our society by removing the option to receive care in their homes.”

In June, CMS proposed the update to the Home Health Prospective Payment System just days after the U.S. Bureau of Labor Statistics reported the fastest growth rate in the consumer price index since December 1981.

“There’s widespread industry concern about the proposed pay decrease, particularly in light of rising costs on all fronts,” said SimiTree Principal, Rob Simione. The staffing shortage is showing no signs of abating, agencies are still dealing with COVID-19, and both transportation and supply costs are accelerating, Simione added.

Painful Behavioral Adjustment Looms

Most of the industry outcry related to the cut centers on applying a behavioral-based reduction in payment known as the behavioral adjustment, which is mainly responsible for the 4.2% decrease.

The behavioral adjustment is required by the Bipartisan Budget Act of 2018. The act mandates a six-year monitoring period for the Patient-Driven Groupings Model (PDGM), the home health payment model implemented for Medicare in 2020. The act calls for both temporary and permanent adjustments in payment to account for expected changes as agencies adapt to Medicare’s new payment model.

CMS expected PDGM to drive changes in clinical group coding, comorbidity coding, and low utilization payment adjustment (LUPA) threshold. But home health leaders have questioned the CMS behavioral adjustment methodology, and National Association for Home Care & Hospice (NAHC) President William Dombi called the change “fatally flawed” in a Home Health Care News article.

The behavioral adjustment proposed for 2023 would permanently reduce the 30-day payment rate by 7.69%. The proposed 4.2% decrease in pay for 2023 is the net effect. The decrease reflects the effects of the proposed 2.9% home health payment update percentage (a $560 million overall increase), an estimated 6.9% decrease that reflects the effects of the proposed permanent behavioral assumption adjustment of -7.69% (a $1.33 billion decrease overall), and an estimated 0.2% decrease that reflects the effects of a proposed update to the fixed dollar loss ratio (FDL) used in determining outlier payments (an overall $40 million decrease).

Changing the Baseline Year for HHVBP

While the pay decrease garners much of the attention in the proposed rule, CMS put forward several other modifications. One of them is a proposed change in the baseline year for the nationwide expansion of the Home Health Value-Based Purchasing (HHVBP) program.

The first performance year for HHVBP will not be affected by the change in the baseline year and will still be 2023.

The baseline year for home health agencies with a Medicare certification date prior to January 1, 2019, would change from 2019 to 2022.

Starting in 2023, the baseline year for HHVBP will be 2022 for all agencies with a certification date prior to January 1, 2022.

Adjusting PDGM Calculations Based on Data

The proposed rule follows CMS policy to review and recalibrate PDGM case-mix weights and LUPA thresholds annually, using the complete utilization data available at the time of rulemaking. CMS uses 2021 data to recalibrate case-mix weights, including functional levels, comorbidity adjustment subgroups, and LUPA thresholds.

Cap on Negative Wage Index

To smooth year-to-year changes in the hospital wage index, CMS proposes a 5% cap on negative wage index changes for home health agencies, regardless of the underlying reason for the decrease. A similar cap was proposed earlier for hospice.

All-Payer Policy for Home Health Quality Reporting

CMS is proposing a requirement for agencies to submit OASIS data for all patients, regardless of payer, and not just for Medicare or Medicaid patients, beginning in 2025. The change would be required for the Home Health Quality Reporting Program.

Mandatory Telehealth Reporting

As a home health provider, you have had opportunities to incorporate telehealth visits without reimbursement during the COVID-19 pandemic. CMS is still not allowing billing for telehealth, and no reimbursement is outlined in the proposed rule. But CMS is taking a step in that direction with a proposed requirement for agencies to report all telehealth visits on claims beginning in 2023. Your reporting would be voluntary for six months, from January to July, becoming mandatory in July.

Note: This content was adapted from a blog originally posted by our partner SimiTree.