Home Health & Hospice Week

Warning: Drastic reimbursement cut could be waiting in the wings for HHAs.

Medicare is proposing a rate increase for 2022 that would be slightly lower than this year’s, but home health agencies should write that figure in pencil rather than pen.

In its 2022 proposed payment rule for home health published in the July 7 Federal Register, the Centers for Medicare & Medicaid Services proposes a 1.7 percent increase to HH rates, which would total about $310 million. “This increase reflects the effects of the proposed 1.8 percent home health payment update percentage ($330 million increase) and a 0.1 percent decrease in payments due to reductions made in the rural add-on percentages mandated by the Bipartisan Budget Act of 2018 for CY 2022 ($20 million decrease),” CMS explains in a fact sheet about the rule.

Reminder: “CMS continues its rural add-on phaseout,” points out Simione Healthcare Consultants in a blog post about the rule. The four-year phaseout is in its last year in 2022, with “Low Population Density” areas receiving a 1 percent bump and other rural areas that used to receive increases — “High Utilization” and “All other” — getting nothing. In 2023, the rural add-on will go away altogether.

CMS proposes a 30-day episode base rate of $2,013.43, up from $1,901.12 this year. (See per-visit rates in chart, p. 189.)

The 1.7 increase for 2022 is in line with the 1.9 percent HHAs received last year, and thus is not a huge surprise, says attorney Robert Markette Jr. with Hall Render in Indianapolis. But that number may end up skewing higher in the final rule, Markette predicts. “As the country continues to come out of the pandemic, I expect to see economic growth, which ought to move that number up,” he tells AAPC.

That’s the opposite of what happened with last year’s pay increase, Markette points out, when CMS decreased the figure from a 2.6 percent to a 1.9 percent bump (see HCW by AAPC, Vol. XXX, No. 40).

What the proposed rule does not contain is any change to CMS’ 4.36 percent cut it implemented last year along with the Patient-Driven Groupings Model. CMS made the decrease based on behaviors it assumed HHAs would make under PDGM, including upcoding and padding visit numbers to evade Low Utilization Payment Adjustments (LUPAs). In the proposed rule, it declines to revise that figure, even in the face of industry opposition (see story, p. 192).

Whether your agency will actually see a pay increase in 2021 depends on a number of factors, including case mix changes (see story, p. 191), how the new wage index designations fall, and whether you operate in one of the few remaining rural add-on areas.

CMS Foreshadows Major Rate Cut

Next year will be the third in a row that CMS grants HHAs a pay increase, if the proposed rule is finalized with the bump-up. The 1.7 percent increase for 2022 compares to 1.9 percent this year and 1.3 percent in 2020. In contrast, CMS made cuts in the previous eight years: 0.4 percent in 2018; 0.7 percent in 2017; 1.4 percent in 2016; 0.3 percent in 2015; 1.05 percent in 2014; 0.01 percent in 2013; 2.3 percent in 2012; and a whopping 5 percent in 2011. Before 2020, the last Medicare payment rate increase was 1.75 percent in 2010.

But don’t expect those positive payment adjustments to keep rolling, Markette warns. The proposed rule’s “discussion of MedPAC continuing to believe the industry is overpaid is important,” he stresses.

In its report to Congress this year, the Medicare Payment Advisory Commission “noted that for more than a decade, payments under the HH PPS have significantly exceeded HHAs’ costs primarily due to two factors — agencies reducing visits to reduce episode costs and cost growth in recent years has been lower than the annual payment updates,” CMS notes in the rule.

In the rule section on behavioral changes, CMS drops this bombshell: “We determined the CY 2020 30-day base payment rate was approximately 6 percent higher than it should have been, and would require temporary retrospective adjustments for CY 2020 and subsequent years until a permanent prospective adjustment could be implemented in future rulemaking.”

CMS is making this announcement “in year 2 of PDGM,” Markette emphasizes. “The industry needs to be preparing and planning now for a rate reduction next year,” he urges.

More rule language underscores this possibility. “Currently our preliminary analysis shows an additional payment decrease would more appropriately account for behaviors reflected in CY 2020, after the implementation of the PDGM and 30-day unit of payment,” CMS says.

However: CMS isn’t ready to slash rates quite yet. “We anticipate potentially seeing further variability in this percentage as we continue to analyze full claims data from CY 2020 and subsequent years, and considering that the COVID-19 PHE is still ongoing,” the agency allows in the rule. But “we intend to propose a methodology and, if appropriate, a temporary and permanent payment adjustment based on our analysis in future rulemaking,” CMS pledges.

And that adjustment could be a whopper. “By not proposing any adjustment for CY 2022, this could potentially result in larger, compounding payment adjustments in future years to fully account for the difference between assumed versus actual behavior change on estimated aggregate expenditures beginning in CY 2020,” CMS warns.

CMS may throw providers a lifeline, however. “We recognize that stakeholders may have other ways to analyze the data to determine the difference between assumed versus actual behavior change on estimated aggregate expenditures, such as analysis of nominal case-mix growth or calculating the percent difference and percent change of payments between simulated 30-day periods of care and actual 30-day periods of care,” the agency allows in the rule. “We solicit comments on the described repricing method for evaluating budget neutrality for CY 2020 and any alternate approaches to annually determine the difference between assumed and actual behavioral changes on estimated aggregate expenditures under the HH PPS.”

Now it’s up to agencies to show CMS persuasive alt-ernate methodologies.

Note: Links to the 143-page rule and associated materials are in the “Spotlights” section at www.cms.gov/Center/Provider-Type/Home-Health-Agency-HHA-Center.