Home Health Agencies Get $125M Payment Boost from Medicare

Home health agencies will receive a 0.7 percent Medicare payment boost under the calendar year (CY) 2023 Home Health Prospective Payment System (HH PPS) Rate Update final rule, translating to an extra $125 million next year.

The final rule released yesterday says that the Medicare payment increase reflects a 4.0 percent home health payment update percentage, which will add $725 million, and a 0.2 percent increase because of an update to the fixed-dollar loss ratio (FDL) used in determining outlier payments, which will add $35 million.

However, Medicare payments to home health agencies in 2023 will decrease by 3.5 percent after CMS determined that it has paid significantly more under the new Patient-Driven Groupings Model (PDGM) for home health agencies. The decrease will subtract $635 million from home health agency payments next year, with more cuts planned for subsequent years.

CMS implemented the home health PDGM and a 30-day unit of payment in 2020. The PDGM is meant to “better aligns payments with patient care needs, especially for clinically complex beneficiaries that require more skilled nursing care rather than therapy,” according to CMS.

To implement the model though, CMS had to make assumptions about behavioral changes because of the new unit of Medicare payment. The agency finalized three behavioral assumptions around clinical group coding, comorbidity coding, and the Low Utilization Payment Adjustment (LUPA) threshold.

However, CMS ran actual claims under the prior system and compared them to claims submitted under PDGM to find that behavior changes led to significantly higher spending under PDGM. By law, CMS must make changes to the 30-day payment rate, whether temporary or permanent, to account for significant changes in Medicare spending under PDGM.

The final rule sets a -7.85 percent permanent adjustment to the 30-day payment rate next year, which is up from a -7.69 percent adjustment in the proposed rule. CMS will phase in the payment cut though since it is so large for a single year.

The cut next year will reflect what CMS would have paid under the old payment system and the remaining permanent adjustment will be proposed in future lawmaking.

CMS also notes in the final rule that the permanent adjustment to the 30-day payment rate does not impact the LUPAs per visit payment rates.

Policies in the final rule impacting home health agency payment next year also include:

• A permanent, budget-neutral 5.0 percent cap on negative wage index changes
• Recalibration of case-mix weights and LUPA thresholds under PDGM
• An 8.7 percent final home infusion therapy payment rate update for CY 2023
• End of the temporary suspension of OASIS data collection on non-Medicare and non-Medicaid patients
• Changes to the Home Health Value-Based Purchasing Program, including new definitions for the baseline years

To view the final rule in its entirety, click here. The rule will be effective Jan. 1, 2023.