07.21.2022

Industry pushes back against proposed rule

6 steps for agencies hoping to mitigate impact of pay cut

Stakeholders and advocates are pushing back against the 2023 proposed rule for home health, hoping the outcry will bring some measure of relief from a 4.2 percent pay cut looming for next year.

Historically, large protests have prompted the Centers for Medicare and Medicaid Services (CMS) to postpone or revise significant changes set out in proposed rules, but SimiTree consultants caution that isn’t a likely outcome in this case.

Advocacy efforts may reduce the amount of the pay cut, but home health providers should expect to see lower reimbursement next year despite challenges such as inflation and an ongoing labor shortage.

“While we can anticipate some tweaks in the final rule, at this point it is realistic to expect to see a rate cut in 2023, the first since 2011,” SimiTree Financial Consulting Director Brian Harris told an audience during a complimentary webinar recently hosted by SimiTree.

“And that means it’s going to be important for agencies to look for some ways to soften the blow,” Harris said.

Strong words from advocacy groups

SimiTree consultants say the proposed decrease would drop Medicare’s base rate of pay for episodes of care in 2023 to within $3 of the base payment for 2021, despite financial pressures such as the return of Medicare’s punitive sequestration, higher supply costs and staffing shortages.

The stark prospect of lower pay and higher costs has prompted harsh words from home health advocacy groups.

National Association for Home Care & Hospice (NAHC) President William Dombi has likened the plan to “a declaration of war on home health” and said the proposed pay cut places the stability of home health care at risk.

The behavioral adjustment

At the heart of the proposed decrease is a behavioral adjustment statutorily required by the Bipartisan Budget Act of 2018. The Act imposed a six-year monitoring period for the Patient-Driven Groupings Model (PDGM), implemented in 2020, and calls for both temporary and permanent adjustments in payment to account for expected changes in behavior as agencies adjust to the new payment model.

CMS expected agencies to adapt to PDGM with 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 as flawed, and based in some measure on data, too limited to reveal the full picture.

Coding changes anticipated by CMS haven’t materialized, according to SimiTree Principal J'non Griffin, Coding & OASIS.

“We’ve seen agencies struggling under a public health emergency, with rising fuel prices and transportation costs, higher labor and supply costs, and a nightmare staffing situation, but we have not actually seen the coding changes the behavioral adjustment was supposed to address,” Griffin said.

She and Harris say the best recourse agencies have against the behavioral adjustment is to provide CMS with data highlighting flaws in its methodology.

“The industry needs to provide data that counteracts what CMS is saying and addresses the flaws in what they’re looking at,” Harris said. Getting involved in the industry protest and submitting comments during the CMS public comment period is one of six “next steps” Griffin and Harris recommend for agencies.

What agencies should do

  1. Advocate for home health. “If there has ever been a time to comment on a proposed rule, this is it,” Griffin said. The public comment period is open until Tuesday, Aug.16, 2022, at 11:59 PM Eastern time. Instructions on how to submit comments are available on the Federal Register.
    • In making a case against the pay decrease, Harris recommends agencies:
      • Use agency data. Contradicting the erroneous assumptions driving the behavioral adjustment is the foundation for change, Harris said. “There needs to be an organized, data driven response from the industry,” he said.
      • Highlight anticipated savings from VBP. Nationwide expansion of Home Health Value-Based Purchasing is expected to generate a savings of $3.376 billion to Medicare by 2027. Agencies need to direct attention to the expected savings, Harris said, and make certain it becomes part of the conversation about the pay cut.
  2. Explore beneficial payor relationships outside Medicare. Although Medicare has traditionally been the backbone of home health reimbursement, Harris advises agencies to consider how and where they can expand payors.
  3. Perform an operational assessment. Finding all opportunities for efficiencies and cost savings is going to be more important to an agency’s profitability than ever before.
  4. Understand the impact of recalibration. Knowing how the recalibrated case mix will impact the agency is also key to profitability under PDGM. CMS recalibrates yearly under PDGM, and it is crucial for agencies to understand changes and adapt accordingly.
  5. Prepare for VBP. Beginning in 2025, home health providers will see a payment adjustment under Value-Based Purchasing that could help offset the decrease in reimbursement. Payment adjustments will be based on agency performance scores. It’s a good idea to work with VBP consultants now to ensure higher performance scores, Harris said
  6. Use top-notch coding and OASIS. Coding continues to drive profitability under PDGM, Griffin said, and the importance of OASIS accuracy continues to impact an agency’s bottom line. She recommends seeking quality coding and OASIS review from professionals who fully understand what is at stake.

SimiTree can help

An analysis by SimiTree financial consultants will identify exactly where and how your organization can strengthen performance to shore up thin margins in a challenging market.

Our friendly and knowledgeable consultants can build your organization’s budgeting expertise, explain how data analytics boost forecasting and improve planning skills, and analyze your revenue cycle to determine where training can make noticeable differences to your cash flow and overall profitability.

We also have a team of VBP consultants ready to work with your organization to understand operational changes that will make a difference in your total performance score. Use the form provided below to reach out to us today.

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