CMS Finalizes Nearly 4% Rate Reduction for Home Health

WASHINGTON, D.C. (November 1, 2022)—The Centers for Medicare & Medicaid Services (CMS) released its final rule for Medicare home health payments on October 31, settling on a rate reduction of 3.925% for 2023 with additional cuts to come in 2024. That’s less than the 7.69% cut initially proposed by the agency for 2023, but still a blow to providers, according to industry advocates.

CMS explained the lower adjustment will be applied next year because “we recognize the potential hardship of implementing the full -7.85% permanent adjustment in a single year” but laid out a path to get there with additional cuts in 2024. 

“While this short-term phase-in blunts the immediate impact, the long-term consequences of this rule, unless mitigated, will devastate access to care in the home,” said Joanne Cunningham, CEO of the Partnership for Quality Home Healthcare.

The final rule presents serious concerns for the home health community, agreed the National Association for Home Care & Hospice (NAHC). 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, and NAHC has argued that the agency’s method for getting there is incorrect. 

“In no way are these adjustments consistent with logic or the Medicare law on budget neutrality in the transition from the 2019 payment model to PDGM in 2020,” said NAHC President William Dombi. “The fatally flawed methodology will have a direct effect on access to care at a time when home health services have proven their value and are needed more than ever to meet patient needs and control Medicare overall spending.” 

Katie Smith Sloan, president and CEO of LeadingAge, agreed that the methodology is questionable. 

“The agency has made clear that future cuts and clawbacks are on the horizon,” Sloan said. “The behavioral adjustment methodology CMS used is problematic … and we are concerned about its impact on our mission-driven, nonprofit providers,”

WellSky CEO Bill Miller echoed this sentiment, saying that the timing of the future clawbacks will “loom large as agencies plan for the future.”

“Looking forward, innovation will be critical to the success of this vital industry. Home health providers will be challenged to use every tool available to meet the needs of their communities, maximize efficiencies, improve outcomes, and reduce unnecessary hospitalizations,” Miller added.

Using more recent data on cost increases, CMS revised the net inflation update to 4.0% (calculated from the 4.1% Market Basket Index minus a .1% productivity adjustment), up from the 2.9% initially proposed. The combination of the reduced permanent adjustment and the revised inflation update resulted in a base PDGM 30-day payment rate of $1,972.04, compared to the proposed rate of $1,904.76.

While this could be seen as an improvement, NAHC said, the greatest impact comes from CMS finalizing the permanent adjustment and making additional temporary adjustments that will lead to significantly depressed payment rates for years to come.

“We now turn to Congress to correct what CMS has done and prevent the impending harm to the 3.2 million highly vulnerable home health patients that depend on this essential Medicare benefit annually,” Dombi said. He pointed out that home health agencies are already struggling with rising costs for staff, transportation and more and can’t handle additional cuts. 

“We have demonstrated that CMS has applied a methodology that is inconsistent with what it used in assessing rate neutrality for nursing homes, Dombi said. “Finally, we have shown CMS that its action is inconsistent with its own data that establish that it underpaid home health agencies since 2020. Our efforts to correct these wrongs will not end with the rule issued today.”

Find a fact sheet from CMS here. Download the full rule on the Federal Register.