Home Health Payments Much Lower Than Expected Under New Model

Medicare reimbursement cuts meant to keep home health payments levels during the transition to a patient-based payment system have actually resulted in significant revenue decreases for the providers, according to an analysis of 2020 Medicare claims.

The analysis prepared by Dobson | DaVanzo & Associates, LLC for Partnership for Quality Home Healthcare found that total aggregate payments to home health providers were about 22 percent lower than projected over the first four months of the Patient-Driven Groupings Model, a new Medicare reimbursement system that pays home health providers based on patient characteristics rather than volume of services rendered.

The roughly $1.3 billion payment shortfall flouts PDGM’s budget neutrality requirement, which CMS had sought to achieve by prospectively reducing 2020 rates by 4.36 percent based on “presumed behavioral assumptions” that would lead to greater home health spending during model implementation.

The behavioral assumptions largely stated that home health providers would alter coding and documentation workflows to maximize reimbursement under PDGM. For example, CMS assumed that home health agencies would provide one to two extra visits for Low-Utilization Payment Adjustment (LUPA) case to receive the full 30-day reimbursement.

The agency also assumed that home health agencies would put the highest paying diagnosis code as the principal diagnosis code on claims.

But based on 2.6 million 30-day PDGM episodes, those behavioral assumptions have not held true, the analysis found.

In fact, the analysis showed that LUPA rates were much higher than anticipated in the first half of 2020 and case-mix groups reflect historical trends of primary diagnoses rather than payment-optimized groups, Dobson | DaVanzo & Associates, LLC stated.

“Their analysis and findings from the first half of 2020 cast significant doubt regarding the accuracy of these behavioral adjustments being applied going forward,” the Partnership for Quality Home Healthcare told CMS in an Aug. 24th letter to CMS, which included the analysis.

The federal agency recently proposed to continue the 4.36 percent behavioral offset per federal regulation in the Home Health Prospective Payment System rule for 2021 calendar year (CY).

In the rule, the agency explained that it plans to stay on course with PDGM implementation as it would be “premature” to release any information related to assumed behavior changes and actual behavior changes based on the amount of data available and the current COVID-19 public health emergency.

But the Partnership is calling for CMS to reverse the rate reduction, especially considering the public health emergency.

“The proposed -4.36 behavioral adjustment to HH payments for CY 2021 is excessive,” the group wrote in the letter. “Home health providers already face enormous challenges in delivering care to patients as the significant financial and clinical impact of the COVID-19 pandemic continues to affect our nation and health system. While we hope that as a nation, we will move past this public health crisis, the challenges for home health and other providers are likely to remain well into 2021.”

CMS should hold off on applying the offset for the remainder of CY 2020 and beyond until all CY 2020 data is available for an analysis of whether the behavioral assumptions hold true, the American Hospital Association (AHA) urged CMS.

That analysis may not be feasible for a while because of the COVID-19 pandemic, the Association acknowledged in its comments on the proposed Home Health Prospective Payment System rule for CY 2021. But that is all the more reason for CMS to immediately end the rate reductions since the disruptions caused by the pandemic “virtually eliminate the possibility that CMS’ CY 2020 behavioral offset was accurate.”

AHA asked CMS to address how it plans to reconcile the gap in projected versus actual Medicare spending in CY 2020 in its rulemaking for CY 2021.

The Association also asked CMS to “provide further clarity on certain enrollment requirements, such as what supplier type to select on enrollment form CMS-855B and licensure requirements for suppliers that operate in multiple jurisdictions or who work with subcontractors.”