Bundled Payment Changes Negatively Impact Home Health

Recently, the Centers for Medicare & Medicaid Services (CMS) proposed reducing some bundled payment models and canceling mandatory programs yet to be implemented. The move, while largely unsurprising given the current Health and Human Services administration’s views on mandatory initiatives, is likely to have negative impacts on home health care agencies, according to a recent report from Fitch Ratings.

Namely, by reducing the scope of bundled payments and canceling other programs, home health agencies are likely to see a decrease in volume gains. The proposal, which CMS announced in August, moves to scrap the Episode Payment Models and Cardiac Rehabilitation incentive payment model, which were originally scheduled to begin January 1, 2018. It would also reduce the number of mandatory geographic areas participating in the Innovations Center’s Comprehensive Care for Joint Replacement (CJR) initiative, from 67 areas to 33.

Home heath care operators will be negatively affected by these changes, as the programs acted as a catalyst for more patients to be directed toward home heath care, according to the report.


“We expected bundles would be another catalyst for lower risk patients to be cared for at home rather than be discharged to a skilled nursing facility given the potential financial incentives for the referring hospital,” Britton Costa, senior director at Fitch Ratings, told Home Health Care News. “However, the cardiac bundle would likely have had less of an effect on volumes than joints. We continue to expect volume growth for home health, though the bundle changes soften our expectations.”

At the same time, the industry is bracing for another huge regulatory shift in the proposed Home Health Groupings Model (HHGM).

However, the long-term outlook for volume gains in home health are still positive.


“Regulatory changes could have a multi-year impact on the sector,” Costa said. “However, we believe the long-term drivers behind lower cost settings (financial constraints and demographics) will be the catalysts for lower acuity volume growth at home health.”

While home health care providers could see a hit from the changes, skilled nursing facilities (SNFs), which have been seeing lower volumes as bundles push patients into lower-cost settings, could benefit.

“General acute care and SNFs received a reprieve from one of their operating headwinds when CMS took more definitive steps to pause bundled payment initiatives,” the report reads. “Bundles were structured to lower aggregate payments by incentivizing coordination and risk sharing amongst providers by paying for episodes of care rather than individual components and had led to some care occurring at lower cost settings such as home health.”

Written by Amy Baxter

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