Home Health Proposed Rule Results in $810M Decrease in Payments

WASHINGTON, D.C. (June 21, 2022)—The annual proposed rule for Medicare home health services includes an estimated 4.2% or $810 million decrease in aggregate payments, said the Centers for Medicare and Medicaid Services (CMS) in its fact sheet on the rule. The rule would apply to calendar year 2023. 

This decrease reflects the effects of: the proposed 2.9% home health payment update percentage ($560 million increase); an estimated 6.9% decrease that reflects the effects of the proposed prospective permanent behavioral assumption adjustment of -7.69% ($1.33 billion decrease); 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 ($40 million decrease).  

Overall, the rule presents serious concerns for the home health community as it includes significant proposed rate reductions to account for the change in the payment model in 2020, the National Association for Home Care & Hospice (NAHC) said. Medicare law requires CMS to make permanent and temporary adjustments intended to ensure that the transition to the Patient Driven Groupings Model (PDGM) is budget neutral in comparison to expected Medicare spending on the 2019 payment model. 

“We are extremely disappointed in the CMS proposed rule issued today. The stability of home health care is at risk because of CMS proposing the application of a fatally flawed methodology for assessing whether the PDGM payment model led to budget neutral spending in 2020 and later years,” stated William A. Dombi, president of NAHC. “That has been made clear to CMS in the 2021 rulemaking and in multiple discussions since. With significantly rising costs for staff, transportation, and more, home health agencies across the country cannot withstand the impact of the proposed rate cut. Reliable analyses proves that PDGM underpaid home health agencies. We will be taking all steps to protect the home health benefit as this proposed rule advances and have fully prepared for congressional action and more.” 

“Considering that access to home-based care has become increasingly important to the health and safety of American seniors, it is very troubling that CMS would propose such steep rate cuts for next year and potentially even deeper cuts in the future,“ said Joanne Cunningham, CEO of the Partnership for Quality Home Healthcare. “If implemented as proposed, this payment adjustment will jeopardize the stability of this vital sector and risk seniors’ access to Medicare home health services.”

“What we see in the proposed rule is the equivalent of a declaration of war against home health agencies and the 3 million plus patients they serve. To believe this will have no impact on patients is to live in a bubble,” Dombi stated.

The rule also contains:

• A net 2.9% inflation update (3.3% market basket index – 0.4% productivity adjustment)—This is a strikingly low inflation update given that current inflation is at a 20-year high, nearing double digits.
• A 7.69% budget neutrality adjustment allegedly related to provider behavior changes triggered by PDGM
• An alleged $2 billion overpayment in 2020 and 2021. CMS proposed withholding any adjustment at this time to reconcile the alleged overpayment.
• Recalibration of the 432 case mix weights—Recalibration has been done annually to account for changes in case-specific resource and cost changes.
• Modification of the LUPA thresholds Institution of a 5% cap on negative changes in the area-specific wage index.

CMS originally applied a 5% negative change cap in 2021 with the new wage index. The cap was not applied in 2022. CMS now proposes to apply a cap prospectively on a permanent basis to prevent provider financial instability. However, certain areas had significant declines in their wage index in 2022 without the protection of a 5% cap. CMS does not propose to protect these providers for 2022 despite providing that protection to inpatient hospitals.

• A request for information regarding a data collection on the use of telecommunications
• Modified QRP measures
• Modified elements of the upcoming Home Health Value-Based Purchasing (HHVBP) demonstration program
• Deferring the Home Infusion Therapy benefit rate update to the Physician Fee Schedule issuance

Additionally, this rule discusses the future collection of data regarding the use of telecommunications technology during a 30-day home health period of care on home health claims, proposes changes to the Home Health Quality Reporting Program (HH QRP) requirements; requests information on health equity in the HH QRP and provides an update on advancing health information exchange.

“Medicare spending in 2020 and 2021 was less than spending in 2016 through 2019. How that outcome squares with CMS’s calculation that HHAs were overpaid by 7.69% strains credulity,” said Dombi. “While we hoped that PDGM was an improved payment model, it sure looks like we would have had a fairer payment system without it.” 

“CMS’ continued cuts to home health are particularly troubling considering the unique environment in which our community delivers care. Unlike other providers, our clinicians have to transport themselves to patients’ homes and this means that rising gas prices have a direct negative effect on the cost of care. A cut of this magnitude will have an immediate impact on home health care providers’ ability to care for seniors who need healthcare services provided in their home,” added Cunningham.

Request for Comment
In last year’s home health rule, CMS sought and received comments regarding health equity. The comments were supportive of gathering standardized patient assessment data elements and additional Social Determinants of Health (SDOH) data to improve health equity. Many commenters shared that relevant data collection and appropriate stratification are very important in addressing any health equity gaps. These commenters noted that CMS should consider potential stratification of health outcomes. Stakeholders, including providers, also shared their strategies for addressing health disparities, noting that this was an important commitment for many health provider organizations. Commenters also shared recommendations for additional SDOH data elements that could strengthen their assessment of disparities and issues of health equity.

As CMS continues to consider health equity within the HH QRP, it is soliciting public comment on the following questions:

• What efforts does your HHA employ to recruit staff, volunteers, and board members from diverse populations to represent and serve underserved populations? How does your HHA attempt to bridge any cultural gaps between your personnel and beneficiaries/clients? How does your HHA measure whether this has an impact on health equity?
• How does your HHA currently identify barriers to access in your community or service area?
• What are barriers to collecting data related to disparities, social determinants of health, and equity? What steps does your HHA take to address these barriers?
• How does your HHA self-reported data such as race/ethnicity, veteran status, socioeconomic status, housing, food security, access to interpreter services, caregiving status, and marital status used to inform its health equity initiatives?
• How is your HHA using qualitative data collection and analysis methods to measure the impact of its health equity initiatives?

Find the CMS fact sheet on the new rule here. 

NAHC is planning a webinar once analysis of the rule is complete.