Home health agencies are expected to see a significant drop in Medicare reimbursements next year as CMS proposes rate cuts to account for changes to the Patient-Directed Grouping Model (PDGM).
CMS’ new proposed rule projects a 1.7% decrease in Medicare reimbursements to participating home health agencies in calendar year (CY) 2025, a decrease of approximately $280 million. According to the agency, the estimated decrease in payments is due to a proposed 2.5% calendar year 2025 home health payment update, offset by the implementation of permanent prospective adjustments to account for the impact of PDGM and other policies proposed in the rule.
CMS introduced PDGM in 2020 to align Medicare home health reimbursement with patient care needs and volume of services. As such, PDGM relies heavily on patient characteristics and other clinical information to classify home health time periods into payment categories. CMS categorizes 30-day time periods into more than 400 case-mix groups for the purposes of adjusting reimbursement to home health agencies.
However, the Bipartisan Budget Act of 2018 required CMS to make assumptions about behavioral changes under the new reimbursement model and to consider those changes in future rulemaking on home health rates. CMS has already finalized reductions of 3.925% in FY 2023 and 2.890% in FY 2024 to account for the difference between assumed behavior in the model and actual behavior. These reductions are only half of the permanent adjustments based on CMS assumptions.
CMS determined that Medicare remains paying home health agencies more than it would under the traditional prepaid payment system, and the latest payment reductions proposed to make up the difference will mitigate the need for large permanent payment adjustments in the future, the agency explained. They may also mitigate temporary adjustments scheduled for fiscal year 2025.
The National Home Care and Hospice Association is already suing HHS over earlier payment cuts.
The proposed rule would also recalibrate case-mix weightings and low utilization payment adjustment (LUPA) thresholds for more than 400 payment groups based on PDGM. The rule states that CMS will use FY 2023 data to more accurately pay home health agencies for the types of patients they serve.
Additionally, the proposed rule would temporarily discontinue the use of the physical therapy LUPA surcharge factor as a proxy while establishing a definitive LUPA surcharge factor specific to occupational therapy, and all LUPA surcharge factors would be updated using the most recent claims data through FY 2023.
Other proposed payment policies include a crosswalk to map Outcomes and Assessment Information Set (OASIS)-D data elements to the latest OASIS-E data elements, as well as updates to wage indexes and new labor market delineations based on updated data.
The proposed rule also included updates to the Home Health Quality Reporting Program. CMS proposed to collect four new items as standardized patient assessment data elements. These items would be included in the Social Determinants of Health category, while other items within the category would be modified. The updated items include one living situation item, two food items, one utility item, and a current transportation item.
CMS also proposed updates to the lift of the moratorium related to OASIS data collection to change all-payer data collection to begin at discharge rather than at the start of care.
Finally, the proposed rule would modify home health conditions of participation to minimize unavoidable treatment delays. CMS stated that the new standards would require agencies to develop, implement, and maintain a patient admissions policy for services. The policy must address the anticipated needs of referred prospective patients, the agency’s caseload and case mix, staffing levels, and staff skills and competencies.
Home health agencies must also publish accurate information about the services they provide, as well as any service limitations related to specialized services, duration of services, and frequency of services.
