Medicare home health payments to dip 1.7% in CY 2025

Home health agencies are slated to see a major dip in Medicare reimbursements next year as CMS proposes a decrease in rates to account for changes from the Patient-Driven Groupings Model (PDGM).

A new proposed rule from CMS estimates a 1.7% decrease in Medicare reimbursement to participating home health agencies in calendar year (CY) 2025, equating to about a $280 million decrease. The agency said the estimated decrease in payments stems from a proposed CY 2025 home health payment update of 2.5%, offset by the implementation of the permanent prospective adjustment to account for the impact of PDGM and other proposed policies in the rule.

CMS implemented the PDGM in 2020 to align Medicare home health reimbursements with patient care needs versus volume of services. Therefore, PDGM relies more heavily on patient characteristics and other clinical information to place periods of home health care into payment categories. CMS categorizes the 30-day periods into over 400 case-mix groups for the purpose of adjusting reimbursements to home health agencies.

However, the Bipartisan Budget Act of 2018 required CMS to make assumptions about behavior changes under the new reimbursement model and account for those changes in future rulemaking for home health rates. CMS has already finalized a 3.925% reduction in CY 2023 and a 2.890% reduction in CY 2024 to account for differences between assumed and actual behaviors under the model. These reductions represented just half of the permanent adjustment based on CMS assumptions.

CMS has determined that Medicare continues to pay home health agencies more than it would have under the traditional prospective payment system. The latest proposed reduction in payments to account for the differences would reduce the need for large permanent payment adjustments in the future, the agency explained. It could also lessen a temporary adjustment slated for CY 2025.

The National Association of Home Care and Hospice has already sued HHS over previous payment reductions.

The proposed rule would also recalibrate the case-mix weights and low utilization payment adjustment (LUPA) thresholds for the over 400 payment groups under PDGM. CMS would use CY 2023 data to more accurately pay for the types of patients home health agencies serve, the rule stated.

Additionally, the proposed rule would establish a definitive occupational therapy-specific LUPA add-on factor while discontinuing the temporary use of the physical therapy LUPA add-on factor as a proxy. All LUPA add-on factors would also recent claims data through CY 2023 for updates.

Other proposed payment policies include a crosswalk for mapping  Outcome and Assessment Information Set (OASIS)-D data elements to the latest OASIS-E data elements and a wage index update and new labor market delineations based on updated data.

The proposed rule also included updates to Home Health Quality Reporting Program. CMS proposed to collect four new items as standardized patient assessment data elements. These items would be in the social determinants of health category, while another item in the category would be modified. The updated items include one living situation item, two food items, one utilities item, and the current transportation item.

CMS also proposed an update on the removal of the suspension to change all-payer data collection to begin at the start of care versus discharge as it relates to OASIS data collection.

Finally, the proposed rule would change Home Health Conditions of Participation to minimize avoidable care delays. CMS said a new standard would require agencies to develop, implement and maintain a patient acceptance to service policy. The policy must address the anticipated needs of the referred prospective patient, the agency’s caseload and case mix, staffing levels and the skills and competencies of staff.

Home health agencies would also have to make public accurate information on the services they offer, as well as any service limitations related to specialty services, service duration or service frequency.