CMS Proposes $375M Cut to Medicare Home Health Payments

CMS has released the calendar year (CY) 2024 Home Health Prospective Payment System (HH PPS) Rate Update proposed rule, which includes a 2.2 percent, or $375 million, cut to Medicare home health payments.

The federal agency said in the HH PPS Rate Update proposed rule that the payment cut reflects a 2.7 percent increase — approximately $460 million —  less a 5.1 percent statutory decrease. The decrease reflects the impacts of a proposed prospective, permanent behavior assumption adjustment ($870 million decrease) and an estimated 0.2 percent increase that reflects the impacts of a proposed update to the fixed-dollar loss ratio (FDL) for outlier payments determinations ($35 million increase).

“This rule proposes a permanent, prospective adjustment to the CY 2024 home health payment rate to account for the impact of the implementation of the Patient-Driven Groupings Model (PDGM),” CMS wrote. “This adjustment accounts for differences between assumed behavior changes and actual behavior changes on estimated aggregate expenditures due to the implementation of the PDGM and 30-day unit of payment as required by the Bipartisan Budget Act of 2018, which amended section 1895(b) of the Social Security Act (the Act).”

The federal agency had previously finalized a permanent adjustment following PDGM implementation, but the adjustment was half of the estimated required permanent adjustment, according to the latest proposed rule.

The HH PPS has undergone reform since the Bipartisan Budget Act of 2018 required CMS to “better align payment with patient care needs and to better ensure that clinically complex and ill beneficiaries have adequate access to home health care.” The PDGM became effective in 2020 and uses 30-day periods as a basis for payment that are adjusted based on case-mix groups.

By law, CMS has had to make assumptions about behavior changes that could occur because of the implementation of the 30-day unit of payment. CMS finalized three behavior assumptions around clinical group coding, comorbidity coding, and low utilization payment adjustment (LUPA) threshold.

The CY 2024 HH PPS Rate Update proposed rule continues to implement a permanent adjustment to Medicare home health payments as a result of the assumed behavior changes and how home health agencies actually performed in CYs 2020 and 2021. But the rule said Medicare paid more under PDGM and the 30-day periods than it would have under the old system based on a CY 2022 claims analysis, resulting in a larger permanent adjustment.

The proposed permanent adjustment includes the remaining -3.925 percent to account for CYs 2020 and 2021, which were not applied to the CY 2023 payment rate, and accounts for actual behavior changes in CY 2022.

CMS also said in the rule that it plans to adopt a 2021-based home health market basket and will recalibrate the 432 payment groups under PDGM using CY 2022 data.

The proposed rule also contained updates to the Home Health (HH) Quality Reporting Program (QRP), including the adoption of two new measures related to COVID-19 vaccinations and functional discharge scores. Three measures are also slated to be publicly reported, including the percentage of patients who are up to date with COVID-19 vaccines.

Home health agencies have decried the proposed rule, arguing that the payment cut could be harmful to the industry and patients.

“We continue to strenuously disagree with the budget neutrality methodology that CMS employed to arrive at the rate adjustments,” William A. Dombi, the president of the National Association for Home Care & Hospice (NAHC), said in a statement shared with Home Health Care News. “Overall spending on Medicare home health is down, fewer patients are receiving care, patient referrals are being rejected because providers cannot afford to provide the care needed within the payment rates, and providers have closed their doors or restricted service territory to reduce care costs. If the rate was truly budget neutral, we would not see these actions occurring.”

Joanne Cunningham, CEO of The Partnership for Quality Home Healthcare, also said in a public statement, “The home health provider community is gravely concerned that CMS’s proposed actions for 2024 will only continue to degrade beneficiary access to home healthcare services.”

The public can comment on the CY 2024 HH PPS Rate Update proposed rule through 5:00 PM EDT on August 29, 2023.