Home Health & Hospice Week

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Drastic Proposed Pay Cut Takes HHAs By Surprise

Published on Thu Jun 23, 2022

CMS rule a ‘gut punch,’ one industry veteran judges.

If you think the Centers for Medicare & Medicaid Services has been more reasonable since COVID-19 hit, you may rethink that opinion following the issuance of the 2023 proposed rule for home health payment.

In the rule issued on June 17, CMS proposes a 4.2 percent cut to Medicare home health payment rates, based largely on a -7.69 percent permanent behavioral assumption adjustment. That would reduce Medicare home health spending by $810 million in 2023 compared to 2022.

“What we see in the proposed rule is the equivalent of a declaration of war against home health agencies and the more than three million patients they serve,” says NAHC President William Dombi. “The stability of home health care is at risk.”

“This is a train wreck,” attorney Robert Markette Jr. with law firm Hall Render in Indianapolis tells AAPC.

Specifically, CMS proposes a “2.9 percent home health payment update percentage ($560 million increase), an estimated 6.9 percent decrease that reflects the effects of the proposed prospective, permanent behavioral assumption adjustment of -7.69 percent ($1.33 billion decrease), and an estimated 0.2 percent decrease that reflects the effects of a proposed update to the fixed-dollar loss ratio (FDL) used in determining outlier payments ($40 million decrease),” the agency explains in a fact sheet about the rule published in the June 23 Federal Register.

The proposal would result in a 30-day period base rate of $1,904.76, down from $2031.64 this year. The adjustment doesn’t affect per-visit rates (see chart, p. 171).

“This proposed net reduction … will be a traumatic hit to agencies who are already being impacted with the highest level of inflation for over 40 years and the highest gas prices ever witnessed,” blasts software vendor HealthCare Synergy in online analysis of the rule. “Agencies may also take a financial hit from a possible pending recession,” points out the Cypress, California-based company.

The amount of the cut is “drastic,” judges Joe Osentoski with Gateway Home Health Coding & Consulting in Madison Heights, Michigan. “I am surprised that cuts to home health are being put forth,” Osentoski tells AAPC. That’s due to “the health care landscape, trend towards less costly service than inpatient, impact of COVID that hit agencies, and expected budget neutrality of PDGM.”

It “seems like a rather large behavioral adjustment considering there has been no evidence produced that the coding was any different than pre-PDGM,” protests consultant J’non Griffin with SimiTree.

“I was expecting a very small increase at the best, but this type of a cut was a shock,” stresses Angela Huff with FORVIS. (BKD and DHG recently merged to form FORVIS.) The Medicare Payment Advisory Commission “has been reporting to CMS that providers have been overpaid for over a decade … but with the pandemic, increases in inflation and staffing shortages, I am surprised that CMS would propose to make these types of cuts at this time,” Huff tells AAPC. “Especially when the value of care in the home was so evident with the Public Health Emergency.”

While CMS is looking to trim fat, “this type of cut may be deep enough to cut into muscle, which could really impact patient care,” Huff warns. “One would think that CMS would look to support the industry that is least costly, but this feels more like a gut punch.”

The American Hospital Association is “very concerned about the unprecedented scale of the proposed PDGM behavioral offset,” it says on its website.

“The proposed changes are troubling,” judges LeadingAge NY in its analysis of the rule. And CMS “does not propose a phase-in of the rate reductions proposed” to ease agencies’ burden, LeadingAge NY points out.

Number Of HHAs Will Shrink

CMS needs to take a good, hard look at what will happen if it cuts rates as proposed, agencies and their representatives warn.

“With Value-Based Purchasing, OASIS E and this potential pay cut all, if approved, converging in 2023, impacts to providers are significant and may be the very thing that push some providers to rethink providing this type of care, which is very much needed and saves CMS money overall,” Huff warns. “In a lot of organizations, the belt has been tightened” already, she points out.

“I think we will see a lot of agencies close or a lot of mergers as smaller agencies will struggle with the increased pressure of regulations, new OASIS and financial cuts,” Griffin forecasts.

“That amount of reimbursement decrease must result in putting many agencies over the edge and, at minimum, reducing the amount of service and worst case, just closing,” Osentoski says.

“Agencies will sell,” predicts Julianne Haydel with Haydel Consulting Services and The Coders in Baton Rouge, Louisiana. “There won’t be fewer patients, but the number of agency owners will be smaller. With fewer agencies, CMS will initially have less work to do and it seems efficient,” Haydel allows. “But they will have little or no recourse when an agency should be closed, but doing so will result in an access to care problem,” she cautions.

Bottom line: “This reduction in the home health PPS standardized payment will present a serious challenge to agencies next year,” Markette says.

And it won’t be the end of cuts, if adopted. For one, CMS also is considering implementing “a temporary adjustment of approximately $2.0 billion to reconcile retrospective overpayments in CYs 2020 and 2021,” according to the rule. The only reason it hasn’t already proposed the further decrease is because “we recognize that applying the full permanent and temporary adjustment immediately would result in a significant negative adjustment in a single year,” the rule notes.

And CMS is required by law to continue assessing behavioral changes and their costs, CMS says throughout the rule.

Time To Get Loud: CMS can expect to hear from outraged HHAs and their representatives during the comment period, industry experts say. Comments are due Aug. 16.

“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 by 7.69 percent strains credulity,” Dombi blasts. “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 concludes.

Note: Links to the 175-page rule and other supporting materials are at www.cms.gov/medicaremedicare-fee-service-paymenthomehealthppshome-health-prospective-payment-system-regulations/cms-1766-p.