Lean times: A look at Medicare’s 0.7% rate hike

Consultants offer 7 strategies to help counter uncertainty

A sliver of an increase may be preferable to a decrease, but the consensus among home health stakeholders is that Medicare’s 0.7 rate hike increase for 2023 is too thin to hold ground against inflation.

The financial outlook for 2023 is further complicated by escalating wages, quality expectations under Medicare’s new value based care model, and the launch of a time-consuming new version of the OASIS, expected to greatly impact productivity.

“Agencies are being asked to tighten their belts while striving to maintain outcomes under Home Health Value Based Purchasing – and this will come at a time when we are facing staffing shortages, continued public health emergencies, and recession,” said SimiTree Principal J'non Griffin.

“It feels like, yet again, home health agencies are being asked to do more with less,” she said.

A phased-in approach

In the final rule issued Oct. 31, the Centers for Medicare and Medicaid Services (CMS) backed off its proposal to saddle agencies with a 4.2 percent rate cut next year. Instead, CMS increased aggregate home health payments for 2023 by 0.7 percent, or an estimated $125 million, over this year’s reimbursement amounts.

The medicare rate hike increase is largely the result of cutting in half a widely criticized behavioral adjustment in pay, relying on a phased-in approach to bring about a 7.85 percent pay decrease.

Half of the total behavioral adjustment, or a 3.925 percent decrease, will be phased in for 2023. When factoring in LUPAs, the actual decrease will be about 3.5 percent.

“Agencies need to understand that this is a phased-in approach, and in 2023 they will only see half of what will be imposed,” Griffin said.

“The remaining permanent adjustment, along with any other adjustments to the base payment rate to account for behavioral changes based on data analysis, which are all required by law, will be proposed in future rulemaking,” she said.

Advice for agencies

Lean is the word for home health providers in 2023: leaner margins, leaner business models, and leaning into the expertise of outsourcing partners to optimize revenue and keep cash flowing.

“Agencies will have to think of creative ways to stretch their dollars, possibly outsourcing some services that have traditionally been housed internally, and utilizing those staff members in other areas of the business,” Griffin said.

A priority area in the leaner financial landscape for 2023 should be performance scores under Value Based Purchasing, SimiTree consultants say.

Performance scores from 2023 will determine whether agencies receive an increase or decrease in future payment, and could help soften the blow of tighter Medicare rate hike reimbursement rates.

“Poor performance scores, on the other hand, could have the opposite impact,” said SimiTree Financial Consulting Director Brian Harris.

“HHVBP is definitely going to affect reimbursement, so it’s important for agencies to roll up their shirtsleeves and do the work to make certain the impact is positive.”

Strategies for moving forward

SimiTree consultants offer these strategies for home health providers to weather the uncertainty of leaner times.

  1. Start with an impact analysis. Knowledge is power, and understanding how the new reimbursement rate will impact your agency is an essential first step. What will new case mix recalibrations under PDGM mean to your operation? SimiTree consultants say agencies should financially model the impact of the rule on their operation, and recommend using a consulting company to do this. SimiTree offers a complete PDGM Impact Analysis. 
  2. Identify cost saving opportunities. “You may feel certain that your organization is already running a tight operation, but an objective organizational assessment will almost always identify opportunities for additional efficiency and cost savings,” Harris said. Schedule a deep analysis by professionals to target areas for improvement and see where you may be leaving money on the table. 
  3. See how quality outsourcing makes a difference. Quality coding and OASIS drives reimbursement, and certain OASIS items will become even more important under VBP. “Take a hard look at your coding and OASIS to make sure there are no gaps in this area,” Griffin said. “Coding and OASIS has to be topnotch in 2023, and you need to know where yours is lacking. Consider asking a consulting company to do this for you as an impartial party.” A full revenue cycle refresh can shore up billing compliance and ensure full, predictable cash flow in 2023. The right revenue cycle management partners will fit seamlessly into an operation, and the right billing department can help your agency grow
  4. Look beyond Medicare. A changing market is leading more agencies to shift away from fee-for-service payers to pursue more who pay a premium market rate through value-based care arrangements. “It’s definitely the right time to explore beneficial payor relationships outside of traditional Medicare,” Harris said. 
  5. Explore new revenue streams. In the same vein, SimiTree consultants encourage home health providers to look beyond traditional care models to other potential sources of revenue, such as service line expansions. Read more about four popular new service lines here
  6. Beef up sales and marketing. SimiTree’s Growth Solutions team works with providers of any size and budget to boost income through better sales and marketing efforts. Revenue begins with referrals, and referrals begin with fully understanding your market. SimiTree’s MAP (the Market Analysis Platform) delivers the information providers need to pinpoint stronger new referrals, refine messaging, see what competitors are doing and more. Join us for a complimentary webinar Thursday, Dec. 1, to learn more about using market data to boost sales and marketing. View details and register here. 
  7. Consider interim management. This is no time to go leaderless. The nationwide staffing shortage may make it challenging to fill open positions, but there are alternatives. Consider filling your open leadership roles with SimiTree’s experienced interim managers, who know the business and have a history of making a real difference. Learn more about interim management.

SimiTree can help

SimiTree has the resources and expertise to ensure profitability and growth despite leaner margins in 2023. Use the form below to reach out to us today, and let’s get started making your agency stronger and healthier.

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