Home Health & Hospice Week

CMS calls for an overall 1.7 percent payment reduction in 2025 proposed rule released June 26.

Medicare officials persist in implementing “deep and destabilizing” cuts for home health agencies in the Centers for Medicare & Medicaid Services latest proposed payment regulation.

While the 250-page proposed rule covers a variety of home health topics, the “focus is on the rate cut, of course,” notes consultant Joe Osentoski with Gateway Home Health Coding & Consulting in Sterling Heights, Mich.

This year, “CMS proposes a permanent prospective adjustment to the [calendar year] 2025 home health payment rate of -4.067 percent, to account for the impact of implementing the Patient-Driven Groupings Model (PDGM),” the agency says in its fact sheet on the rule. “This adjustment accounts for differences between assumed behavior changes and actual behavior changes on estimated aggregate expenditures due to the CY 2020 implementation of the PDGM and the change to a 30-day unit of payment,” explains the rule scheduled for publication in the July 3 Federal Register.

Background: “For CY 2023 and CY 2024, CMS previously applied a 3.925 percent reduction and a 2.890 percent reduction, respectively, which were half of the estimated required permanent adjustment,” CMS reviews.

The behavioral adjustment is just one factor in the payment methodology. It combines with an inflation update percentage of 2.5 percent and an estimated 0.6 percent decrease that reflects an updated fixed dollar loss figure for outliers. And the 4.067 percent cut actually translates to an estimated 3.6 percent decrease because it affects all payments including low utilization payment adjustments, CMS explains in the rule.

All told, the proposal would result in a 1.7 percent decrease to home health payments in 2025, the rule estimates. That would strip about $280 million from home health reimbursement, CMS expects. The proposed base rate is $2,008.12, down from $2,038.13 this year. (See chart, p. 171, for per-visit rates.)

Home health agencies and their representatives have been fighting the budget neutrality adjustment for years, and CMS seems to anticipate some of the industry’s arguments. The Bipartisan Budget Act of 2018 “required CMS to make assumptions about behavior changes that could occur because of the 30-day unit of payment and the PDGM,” the agency says in its rule fact sheet. Subsequently, “in the CY 2019 HH PPS final rule ... CMS stated that we interpret actual behavior change to encompass both behavior changes that were previously outlined, as assumed by CMS when determining the budget-neutral 30-day payment amount for CY 2020, and other behavior changes not identified at the time the 30-day payment amount for CY 2020 was determined,” the agency points out.

How it works: “CMS finalized three behavior assumptions in the CY 2019 HH PPS final rule: clinical group coding, comorbidity coding, and [low utilization payment adjustment] threshold,” it explains.

‘Fatally Flawed’ Methodology

Regardless of the adjustment’s specifics, its impact is devastating for HHAs and the patients they serve, advocates insist.

After years of PDGM cuts, the adjustment “will further undermine the delivery of high-quality home healthcare services to millions of older Americans,” says the Partnership for Quality Home Healthcare in a release about the rule.

“The status quo of continuous cuts is unsustainable,” blasts PQHH’s Joanne Cunningham in the release. “Medicare’s continued application of permanent cuts to home health further undermines a community that is facing historic labor costs and workforce shortages. We fear that CMS’s proposed actions for 2025 will have unintended consequences on older Americans who want to receive care at home,” Cunningham warns.

“These deep and destabilizing cuts have already resulted in agency closures, service area reductions, and a reduction in home health services,” PQHH maintains. And “CMS has again used the market basket increase (+2.5 percent) to mask the impact of the permanent reimbursement rate cut (-4.067 percent), an approach that is unsustainable and inconsistent with the purpose of an update to account for increases in the costs of care,” the lobbying group protests.

The American Hospital Association “has raised serious concerns about such [PDGM] adjustments, which come on top of multiple years of similar downward adjustments,” the heavy-hitting trade group says in its rule analysis.

“Payment decreases, including this proposed 1.7 percent cut to home health providers, jeopardize older adults’ and families’ ability to access needed care and services,” warns LeadingAge CEO Katie Smith Sloan in a release. “A payment decrease presents real challenges for our members. Without staff, there is no care; ultimately, older adults and families will suffer.”

The rule “presents further, serious concerns for the home health community as CMS proposes additional, significant rate reductions,” the National Association for Home Care & Hospice says in its member newsletter. “The ongoing and predictable rate reductions impacting home health agencies since the beginning of the new payment model in 2020 … [are] solely due to a fatally flawed budget neutrality methodology that CMS employed,” NAHC President William Dombi criticizes in a statement.

“While this means that Medicare spending on home health services will continue to decline as costs continue rise, the more important element is that care access and utilization continues to decline at significant levels,” Dombi stresses. “When Congress set Medicare payment reform in motion starting in 2020, it was not planned or even expected that the outcome would be that nearly 500,000 Medicare beneficiaries would be able to access care or that those who could find care would get fewer services,” he adds.

CMS’ “continuing reliance upon the ‘behavioral adjustment’ to continue to reduce home health reimbursement at a time when labor costs and other cases continue to climb is not just bad analysis on their part … but it is bad policy,” blasts attorney Robert Markette Jr. with Hall Render in Indianapolis. “You have to be willfully ignoring reality,” Markette tells AAPC.

“This is why some in the industry view these cuts as nothing more than an effort to reduce the number of agencies,” Markette continues. “Small providers cannot survive on constantly lowering rates. The question is at what reimbursement level can the larger providers survive?”

Plus: “CMS continues to refuse to recognize its unprecedented forecasting error in CY2022 and 2023 rates where the inflation update fell far short of reality by a cumulative 5.2 percent,” NAHC charges. “That error will impact base rates permanently if not corrected. All Medicare sectors have suffered from the CMS forecasting error with CMS rejecting all calls for correcting the error with an adjustment,” the trade group says.

HHAs Need Congress To Intervene

Now that CMS has for years rebuffed the industry’s pleas to reconsider the punishing budget neutrality adjustment under PDGM, HHAs and their advocates are turning to lawmakers for help.

“Congressional action is critical this year,” PQHH stresses. “The role of Congress in alleviating the burden of these cuts is now increasingly important, and we will be calling on our champions in Congress to finish the job on legislation to block these harmful cuts this year,” the lobbying group says.

“Congress must step in immediately to put an end to this dismantling of the Medicare home health benefit,” Dombi exhorts. “We call on Congress to correct what CMS has done and prevent the growing harm to the millions of highly vulnerable home health patients that depend and will depend in the future on this essential Medicare benefit,” he says.

Another problem: Aside from the proposed permanent adjustment for budget neutrality, CMS also notes $4.55 billion in so-called “temporary” overpayments so far under PDGM, PQHH notes. CMS doesn't suggest collecting those alleged overpayments in 2025, but the other shoe may drop on that issue at any time, observers note.

“It is so frustrating to see they just keep moving forward with this narrative,” Markette concludes. “Has any other Medicare provider type faced this level of ongoing cuts? Eventually, even the largest providers will have to find this unsustainable,” he warns.

Do this: Providers and other interested parties can comment on the rule until Aug. 26. A final rule is expected in late October or early November.

Note: The proposed rule is at https://public-inspection.federalregister.gov/2024-14254.pdf.