Key Insights
CMS is proposing a permanent prospective adjustment of negative 4.067% in 2025 to account for the transition to a patient-driven grouping model. CMS estimates an increase of 2.5%, but when combined with the behavioral offset and other payment changes in the rule, the updates are estimated to result in a 1.7% decrease (approximately $280 million) compared to calendar year 2024. CMS is proposing to replace current COVID-19 reporting standards with new standards that cover a broader range of acute respiratory illnesses. CMS is proposing updates to the enrollment process for providers who resume Medicare billing privileges to reduce fraud, waste, and abuse.
The Centers for Medicare & Medicaid Services (CMS) released a proposed rule to update home health agencies’ (HHA) payment rates and policies for the Home Health Prepaid System (PPS) for calendar year (CY) 2025. While CMS projects a 2.5% increase, the rule’s action offsets and other payment changes combined would result in a 1.7% decrease, or approximately $280 million, from the update compared to calendar year 2024.
The post-Chevron environment
Any health insurance and payment policy enthusiast will be paying close attention to the U.S. Supreme Court’s decision in the Roper case, which overturned the so-called “Chevron” doctrine, a doctrine used for decades to give deference to federal agencies when statutes are ambiguous.
Just days after the Supreme Court ruling, the National Home Care & Hospice Association refiled its lawsuit challenging the home health benefit cuts in 2024. With new benefits proposed for 2025, it will be interesting to see how federal agencies and Congress handle the post-Chevron landscape.
The final rule also includes changes to the Home Health Quality Reporting Program (HHQRP) and the Home Health Value-Based Purchasing Program (HHVBP) for 2025 and beyond.
For more information, please read below or download the final rule from the Federal Register.
Market Basket and Payment Updates
CMS proposed a 2.5% increase in home health payment rates for FY 2025, which is the proposed 3% market basket update minus a required productivity adjustment of 0.5%.
Additionally, the payment updates include a 4.067% reduction in nationally standardized 30-day payment rates to reflect a full and permanent behavior adjustment. This adjustment accounts for the difference between actual and assumed behavior changes as a result of CMS’ implementation of the Patient-Driven Grouping Model (PDGM). All payment updates combined represent a 1.7% reduction compared to 2024.
Regarding the behavioral offset, CMS indicates that it is proposing to “meet statutory requirements…to reduce the need for future large permanent adjustments and help delay the occurrence of temporary payment adjustment amounts.” We are pleased to announce that CMS has already finalized two previous reductions (3.925% in calendar year 2023 and 2.890% in calendar year 2024) that account for half of the required permanent adjustments. The final 2025 percentage amount will be based on final calendar year 2023 claims, so this proposed percentage will be updated accordingly. It is important to remember that CMS has suggested that it will also need to make temporary adjustments based on the transition to PDGM. However, CMS is not proposing to make temporary adjustments in calendar year 2025, but will do so in the future.
CMS updates the PDGM case-mix weights annually, and the proposed budget-neutral factor for case-mix in FY 2025 is 1.0035.
CMS is proposing a fixed dollar loss ratio of 0.38 for FY 2025 when determining outlier payments.
CMS is proposing an occupational therapy (OT) low utilization payment adjustment (LUPA) add-on. CMS now proposes to establish a definitive OT-specific LUPA add-on factor and discontinue the past temporary practice of using the physical therapy (PT) LUPA add-on factor as a surrogate. CMS proposes to use the same methodology used for PT, skilled nursing, and speech-language-hearing disability factors. The OT LUPA add-on factor is proposed at 1.7266.
CMS is proposing to set the stand-alone payment for disposable negative pressure wound therapy at an amount equal to the FY 2024 payment of $270.09, updated by the Consumer Price Index for all urban consumers in June 2024, minus a productivity adjustment.
CMS is proposing a payment rate of $430.99 for intravenous immunoglobulin products and services, based on a FY 2024 payment rate of $420.48 adjusted by the proposed home health payment update of 2.5%.
Wage Index Update
CMS is proposing to adopt the Office of Management and Budget’s (OMB) July Core-Based Statistical Area (CBSA) classifications, similar to other Medicare payment mechanisms, for 2025, which will affect the local wage index.
OMB’s new classification includes several significant changes, such as urban CBSAs becoming rural and rural CBSAs becoming urban. A series of tables in the proposed rule outlines:
Table 26 outlines the changes specific to the request to replace Connecticut’s eight counties with nine planning areas. Table 27 lists the 53 urban counties that will become rural. Table 28 lists the 54 rural counties that will become urban. Table 29 lists the urban CBSAs that have been renamed or renumbered. Table 30 lists the urban areas that have merged into another CBSA. Table 31 lists the 73 counties that will switch to new or revised urban CBSAs. Table 32 lists the counties that CMS is proposing should use transition codes (50XXX).
CMS is not proposing to phase in these changes, but rather believes that the current 5% annual cap on wage index changes is sufficient.
Finally, Table 33 contains information on the wage index for North Dakota, and CMS notes that Delaware will now have one rural county, meaning the rural wage index value will be 1.0429.
Home Healthcare Quality Reporting Program
CMS is proposing four new metrics, amending one existing metric, and updating the OASIS all-payer data collection. These metrics relate to the Administration’s current focus on social determinants of health. New metrics will include living conditions, food, and utility costs beginning with the FY27 reporting year.
Beginning in FY2027, CMS is proposing to modify the transportation items to align with the Inpatient Psychiatric Facility Quality Reporting and Inpatient Quality Reporting programs.
CMS is proposing to change data collection for non-Medicare/Medicaid patients to use the point of start of care (SOC), which is the first assessment that can be submitted after January 1, 2025 for the phase-in period or July 1, 2025 for the mandatory period.
Home Health Value-Based Purchasing Model
CMS is requesting information regarding future performance measurement concepts for the HHVBP model. New measurement concepts include:
Family caregivers Fall-related injuries (claims basis) Medicare expenditures per beneficiary Functional measures to complement existing cross-setting discharge functions
CMS remains committed to integrating health equity concepts into the expanded HHVBP model. CMS is considering incorporating health equity adjustments, such as SNF value-based purchasing, in FY 2027 and adding measures that more directly target specific disparities. Examples of these would include measures for underserved communities, measures based on within-provider performance differences for underserved communities, and measures based on the lowest performing groups.
Home Health Conditions of Participation (CoP)
CMS is proposing to require home health agencies to establish service acceptance policies, which will help address a variety of concerns regarding initiation of home health services, referrals, and the impact on prospective and current patients.
The policy should address the institution’s caseload and case mix (the number and complexity of patients currently being treated), the anticipated needs of prospective patients, staffing levels, and staff skills and capabilities.
CMS believes that this rule will complement, not replace, each agency’s current implementation of an admissions policy. CMS proposes that this policy be applied consistently regardless of payer and that home health agencies will only admit patients who they can reasonably expect to meet the patient’s needs.
CMS also proposes that home health agencies publish accurate information about services provided, limitations related to specialized services, and the duration or frequency of services. The proposal would require home health agencies to provide limitations due to differences in staffing levels to provide further information to referral sources.
Respiratory illness reporting in LTC facilities
CMS is proposing to replace respiratory illness reporting expiring on December 31, 2024, with new reporting requirements beginning January 1, 2025. CMS is proposing to continue weekly NHSN and electronic reporting for COVID-19, influenza, and respiratory syncytial virus in a standard format. Data required for this reporting are a facility census, resident vaccination status for a range of respiratory illnesses, confirmed resident cases for a range of respiratory illnesses, and residents hospitalized with a range of respiratory illnesses.
How we can help
For more information about this final rule and how it impacts your home health agency, please contact CLA. Our health care team has been on the front lines of regulatory, policy, and payment changes for health care providers and can provide guidance to meet your specific needs.
