Home Health Agencies Face $350 Million Medicare Cut, New Payment Model

Home health agencies in nine randomly selected states would have their Medicare payments tied to quality performance under a new value-based purchasing model proposed by the Centers for Medicare & Medicaid Services (CMS).

The agency described the new model in the same proposed rule that put forward payment policies for calendar year 2016, which would result in a $350 million overall reduction in HHA payments.

The value-based purchasing model follows similar frameworks that have been applied to hospitals and nursing homes, as the Department of Health and Human Services—of which CMS is a part—has tried to shift away from fee-for-service models. It’s a goal driven and supported by the Affordable Care Act, under which accountable care organizations (ACOs) and other alternative payment systems were created.


Specifically, the home health value-based purchasing (HHVBP) model would adjust payments upward or downward on an annual basis starting at 5% in 2016 and escalating to 8% in later years, CMS explained in a proposed rule issued Monday.The model would run from Jan. 1, 2016 through Dec. 31, 2022.

“The distribution of payment adjustments would be based on quality performance, as measured by both achievement and improvement, across a proposed set of quality measures rigorously constructed to minimize burden as much as possible and improve care,” the proposed rule states. “Competing Medicare-certified HHAs that do not perform as well as other competing Medicare-certified HHAs of the same size in the same state might have their payments reduced and those competing Medicare-certified HHAs that perform similarly to others of similar size in the same state might have no payment adjustment made.”

All HHAs within a selected state would be required to participate in the model, in part to avoid self-selection bias, in which only certain providers opt to take part. 


CMS is accepting comments on the proposal through September 4, 2015.

As mandated by the ACA and finalized in the CY 2014 rule, the agency also is moving forward with the third year of rebasing the standardized 60-day episode rate under the home health prospective payment system. The CY 2016 downward adjustment is $80.95.

CMS also proposes decreasing the national, standardized 60-day episode payment amount by 1.72% in both CY 2016 and 2017. This is meant to reflect increases in coding intensity that does not correlate with actual changes patient acuity.

Payment rates also would be increased 2.3%, which is a market basket update of 2.9% minus a mandated 0.6 percentage point productivity adjustment, the rule proposes.

The rate update should result in an overall reduction of $350 million, or 1.8%, in HHA payments, CMS estimates. 

The HHVBP model is anticipated to save the Medicare program $380 million in total, through a reduction in hospitalizations and skilled nursing usage as home health quality improves, according to CMS.

The proposed rule is scheduled for publication in the Federal Register on July 10. 

Written by Tim Mullaney

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