06.23.2022

Despite inflation, CMS proposes pay decrease for home health

As fuel prices and spiraling inflation drive prices upward at the highest rate in decades, the Centers for Medicare and Medicaid Services (CMS) is proposing to decrease Medicare reimbursement for home health by 4.2 percent in 2023.

Overall, the move would generate a loss of about $810 million for home health providers, SimiTree consultants say.

The proposed rule to update the Home Health Prospective Payment System for 2023 was issued June 17, just days after the U.S. Bureau of Labor Statistics reported the fastest rate of growth in the consumer price index since December 1981.

“There’s widespread industry concern about the proposed pay decrease, particularly in light of rising costs on all fronts,” said SimiTree Principal Rob Simione. The staffing shortage is showing no signs of abating, agencies are still dealing with COVID-19, and both transportation and supply costs are accelerating, Simione added.

Behavioral adjustment

Most of the industry outcry is centered on the application of a behavioral based reduction in payment known as the behavioral adjustment. Application of the behavioral payment reduction is largely responsible for the 4.2 percent decrease.

The behavioral adjustment is statutorily required by the Bipartisan Budget Act of 2018. The Act requires a six-year monitoring period for the Patient Driven Grouping Model (PDGM), the new payment model implemented for Medicare in 2020, and calls for both temporary and permanent adjustments in payment to account for expected changes as agencies adapt to Medicare’s new payment model.

CMS expected PDGM to drive changes in clinical group coding, comorbidity coding and low utilization payment adjustment (LUPA) threshold. But the behavioral adjustment methodology used by CMS has been widely scorned in the industry, with National Association for Home Care & Hospice (NAHC) President William Dombi calling it “fatally flawed.”

The behavioral adjustment proposed for 2023 would be a permanent reduction of 7.69 percent to the 30-day payment rate.

  • The proposed 4.2 percent decrease in pay for 2023 is the net effect
  • The proposed 2.9 percent home health payment updated percentage (a $560 million overall increase)
  • An estimated 6.9 percent decrease that reflects the effects of the proposed permanent behavioral assumption adjustment of -7.69 percent (a $1.33 billion decrease overall)
  • An estimated 0.2 percent decrease reflecting the effects of a proposed update to the fixed dollar loss ratio (FDL), used to determine outlier payments (an overall $40 million decrease).

New baseline year for VBP

While the pay decrease is garnering much of the attention in the proposed rule, CMS set out several other changes in the rule. One of them is a proposed change in the baseline year for the nationwide expansion of the Home Health Value Based Purchasing Program.

The first performance year for the model will not be affected by the change in baseline year, and will still be 2023.

The baseline year for home health agencies with a Medicare certification date prior to Jan. 1, 2019 would change from 2019 to 2022.

Starting in 2023, the baseline year for VB will be 2022 for all agencies with a certification date prior to Jan. 1, 2022.

Recalibration of PDGM

The proposed rule follows CMS policy to review and recalibrate PDGM case mix weights and LUPA threshold annually, using the most complete utilization data available at the time of rulemaking. CMS uses 2021 data to recalibrate case mix weights, including functional levels and comorbidity adjustment subgroups as well as LUPA thresholds.

Wage index cap

To smooth year-to-year fluctuation in the wage index, CMS is proposing a 5 percent cap on negative wage index changes for home health agencies, regardless of the underlying reason for the decrease. A similar cap was earlier proposed for hospice.

All payer OASIS policy CMS is proposing to require agencies to submit OASIS data for all patients, regardless of payer, and not just for Medicare or Medicaid patients, beginning in 2025. The change would be required for the purposes of the Home Health Quality Reporting Program.

Telehealth reporting on claims

Although no billing is allowed for telehealth, and no reimbursement was outlined in the proposed rule, CMS is taking a step in that direction with a proposed requirement for agencies to report all telehealth visits on claims beginning in 2023. Reporting would be voluntary for six months, from January to July and would become mandatory in July.

Watch for SimiTree updates

SimiTree consultants will provide additional information about the proposed rule over the next few weeks. Watch for upcoming webinars and be sure to check out posts on this topic which will be added to our blog soon.

Contact Us

Let's work together to improve the health of your organization. At SimiTree, we balance financial expertise and clinical excellence to help our clients grow. How can we help you? Call us at 800.949.0388 or complete the form below.

I am interested in: