Home Health & Hospice Week

Slim 0.7% pay increase isn’t enough, industry reps insist.

Apparently, hundreds of home health agencies and their representatives are wrong. At least Medicare officials think so, according to the newly released home health final rule for 2023.

Proposed: Back in June, the Centers for Medicare & Medicaid Services blindsided many agencies by proposing a massive productivity adjustment cut of 7.69 percent, which translated to a 4.2 percent reduction as compared to this year’s rates (see HHHW, Vol. XXXI, No. 22-23). The rule also covered a lot of other regulatory and payment ground, but the steep pay cut was the most crucial provision for most HHAs. That led them, their advocates, and others to submit 900 comment letters that mostly excoriated the proposal for a wide variety of reasons.

Finalized: In its final rule issued on Halloween, CMS sticks by its guns on the productivity adjustment, actually upping the amount a bit. But the agency does offer a slightly softened timeline for its implementation. “CMS is phasing-in the permanent adjustment by finalizing a -3.925 percent permanent adjustment for CY 2023,” the agency explains in its rule fact sheet. “The -3.925 percent permanent adjustment is half of the full permanent adjustment of -7.85 percent (-7.69 percent in the proposed rule),” CMS explains. The other half of the cut will hit in 2024, under the rule.

Dialing the productivity adjustment back for one year contributes to HHAs actually seeing a rate increase, although a slim one, starting Jan. 1. “CMS estimates that Medicare payments to HHAs in CY 2023 will increase in the aggregate by 0.7 percent, or $125 million, compared to CY 2022,” the agency says in the sheet. “This increase reflects the effects of the 4.0 percent home health payment update percentage ($725 million increase), an estimated 3.5 percent decrease that reflects the effects of the prospective permanent behavioral assumption adjustment of -3.925 percent ($635 million decrease) that is being phased-in, and an estimated 0.2 percent increase that reflects the effects of an update to the fixed-dollar loss ratio (FDL) used in determining outlier payments ($35 million increase),” CMS explains. The reason the overall impact of the -3.925 percent permanent behavioral assumption adjustment is -3.5 percent is that “the permanent adjustment is only made to the 30-day payment rate and not the Low Utilization Payment Adjustment (LUPAs) per visit payment rates,” the fact sheet adds.

Final Rule Punts Half Of Productivity Adjustment To Next Year

“We are … finalizing … half of the proposed -7.85 percent adjustment, as we recognize the potential hardship of implementing the proposed full permanent adjustment in a single year,” CMS says in the 232-page final rule scheduled for publication in the Nov. 4 Federal Register.

But HHAs and their reps have come out swinging against the provision.

“This rule offers the tactic of relief for CY 2023, but this short-term acknowledgement that home health cannot withstand devastating cuts does nothing to address the long-term impacts that the final rule’s 7.85 percent permanent reduction to home health payments will have on the stability of the Medicare home health program and services to senior citizens,” blasts Joanne Cunningham with lobbying group The Partnership for Quality Home Healthcare. “This 7.85 percent cut is worse than initially proposed and when fully implemented in 2024, will result in an immediate decline in access to home health,” Cunningham warns in a release. “This will have negative effects on the availability of care for the most chronically ill of the Medicare population and result in access to care problems,” she says.

“While the final rule institutes a short-term phase-in by instituting a 3.925 percent payment reduction for CY 2023, it does nothing to mitigate the effect of the underlying permanent cut of 7.85 percent overall,” Cunningham charges. “Consequently, it will result in detrimental, long-term repercussions for home health patients and their providers,” she predicts.

“While this may be viewed as an improvement of the proposed rate … the greatest impact comes by way of CMS finalizing the permanent adjustment along with additional temporary adjustments that will lead to significant depressed payment rates for years in the future,” warns National Association for Home Care & Hospice President William Dombi in a statement. “We wholeheartedly disagree with the budget neutrality methodology that CMS employed to arrive at the rate adjustments. In no way are these adjustments consistent with logic or the Medicare law on budget neutrality in the transition from the 2019 payment model to PDGM in 2020,” he rails.

The outcome: “The fatally flawed methodology will have a direct effect on access to care at a time when home health services have proven their value and are needed more than ever to meet patient needs and control Medicare overall spending,” Dombi warns.

“While this short-term phase-in blunts the immediate impact, the long-term consequences of this rule, unless mitigated, will devastate access to care in the home,” Cunningham emphasizes.

“The reality is that the 0.7 percent increase is still squaring off against an inflationary rate running about 8 percent, with escalating labor and supply costs,” says SimiTree’s Nick Seabrook in a release. “Agencies are still facing an uphill battle when comparing the overall payment increase to cost increases in addition to trying to manage staffing shortages.”

Speaking of inflation: CMS ups its proposed 2.9 percent inflation update to a much healthier 4.0 percent in the final rule. Numerous comment letters gave CMS major grief over the inadequate inflation amount (see HHHW, Vol. XXXI, No. 30). “We now have an updated forecast … that incorporates more recent historical data and reflects a revised outlook … and expected price inflation for CY 2023 for HHAs (including upward revision to the price growth as compared to the proposed rule for compensation and transportation),” the final rule details.

“The final CY 2023 home health market basket update is 4.1 percent (reflecting forecasted compensation price growth of 4.4 percent) and the final CY 2023 productivity adjustment is 0.1 percentage point. Therefore, for CY 2023, the final home health productivity-adjusted market basket update of 4.0 percent (4.1 percent less 0.1 percentage point) will be applicable, compared to the 2.9 percent productivity-adjusted market basket update that was proposed,” CMS explains.

“We note that the final CY 2023 home health market basket growth rate of 4.1 percent would be the highest market basket increase we have implemented in a final rule since the beginning of the HH PPS,” CMS adds. In other words, be grateful, the rule implies.

Submitting Comments Does Help, At Least A Little

Some providers and reps give CMS at least a little bit of credit for pushing back half of the steep cut.

“While not the ideal outcome, [the] release of the CY 2023 Home Health Final Rule is a welcomed improvement over what was proposed by CMS this summer in regard to the overall payment update for next year,” says Amedisys Inc. in a release about the rule. “CMS’s decision to reduce the behavioral adjustment cuts calculated by half for CY 2023 is … helpful, and … was undoubtedly impacted by the significant volume of comments and advocacy conducted over the last six months by home health providers, our dedicated clinicians, patient advocacy groups, trade associations and Members of Congress,” the national publicly traded chain says.

“CMS is moving forward with the behavioral adjustment, despite widespread industry criticism, but it will bring some relief by using a phased-in approach,” observes SimiTree CEO William J. Simione in a release. The finalized 0.7 increase “brings a welcome measure of relief to an industry which was anticipating a 4.2 percent rate cut based on the proposed rule,” SimiTree says.

“The base rate is a win compared to what was proposed in July,” Seabrook acknowledges.

CMS proposed a 30-day period base rate of $1,904.76, down from $2,031.64 this year, but the final rule increases the base rate to $2,010.69. The productivity adjustment doesn’t affect per-visit rates (see chart).

Industry Pivots To Congressional Help

While CMS seems to consider the matter of the produc­tivity adjustment settled, HHAs and their reps are far from done battling on this front.

CMS doesn’t give an inch on the adjustment amount, and even increases it in the final rule. In the face of vociferous protest, CMS notes in the rule that the Medicare Payment Advisory Commission “states that Medicare margins increased under the PDGM, from 15.4 percent in 2019 to 20.2 percent in 2020. Additionally, they projected margins for home health agencies in 2022 will be roughly 17.0 percent.”

And MedPAC has said it “found positive access, quality, and financial indicators for the sector, with average margins of 20.2 percent for freestanding HHAs in 2020, even though the cost per 30-day period increased by 3.1 percent in this year. We believe that these margins, despite economic challenges, demonstrate that the payment rate, along with the market basket update, are more than adequate to support business operations,” CMS responds.

“Over the past year, CMS has been presented with detailed analyses as to its budget neutrality obligations under Medicare law in setting payment rates along with comprehensive assessment of the disastrous impact of its proposals on patients and providers,” Dombi maintains. “We have demonstrated that CMS has applied a methodology that is inconsistent with what it used in assessing rate neutrality for nursing homes. Finally, we have shown CMS that its action is inconsistent with its own data that establish that it underpaid home health agencies since 2020. Our efforts to correct these wrongs will not end with the rule issued today,” Dombi vows.

“We now turn to Congress to correct what CMS has done and prevent the impending harm to the 3.2 million highly vulnerable home health patients that depend on this essential Medicare benefit annually. Even with the limited phase-in of the rate cut, with significantly rising costs for staff, transportation, and more, home health agencies across the country cannot withstand the impact of rate cuts,” Dombi adds.

“We still have serious concerns regarding the agency’s continued reliance on a flawed budget neutrality methodology that produced the Proposed Rule and today’s result,” Amedisys says in its statement.

“Medicare spending in 2020 and 2021 was less than spending in 2016 through 2019. How that outcome squares with CMS’s calculation that HHAs were overpaid strains credulity,” Dombi notes. “While we hoped that PDGM was an improved payment model, it sure looks like we would have had a fairer payment system without it,” he argues. “Fortunately, we have a head start with Congress on corrective action given the pending bipartisan legislation that would prevent these cuts from taking effect in 2023,” he says.

At Least $3 Billion In Clawbacks Loom

The second half of the productivity adjustment isn’t the only other reimbursement shoe waiting to drop.

Don’t forget: In the June rule, CMS proposed reducing payment rates by $2.1 billion to recoup overpayments under the Patient-Driven Groupings Model in 2020 and 2021.

Those “additional ‘clawback cuts’ of more than $2 billion [are] for services provided to patients during the COVID-19 pandemic,” the Partnership points out.

Applying the “temporary adjustment of approximately $2.1 billion to reconcile retrospective overpayments in CYs  2020 and 2021 … immediately would result in a significant negative adjustment in a single year,” CMS admits in the final rule, so it shelves the clawback plan — for now.

“However, if the PDGM base 30-day payment rate remains higher than it should be, then there would likely be a compounding effect, potentially creating the need for an even larger reduction to adjust for behavioral changes in future years,” CMS warns.

“Any temporary adjustment for CY2022 has yet to be calculated, but can be expected to be in excess of $1 billion under the CMS methodology,” NAHC cautions in its rule summary.

Note: The final rule is at https://public-inspection.federal­register.gov/2022-23722.pdf.