Proposed Medicare Changes Threaten Home Health in Rural Markets

Throughout the past several years, home health providers operating in rural areas have received on-and-off payment bumps to help them overcome the inherent obstacles of operating in remote and sparsely populated areas. While relatively small, those payment bumps, officially known as rural add-on payments, have played an important, cost-effective role in allowing America’s non-city-dwelling-seniors age in place, experts say.

Despite industry support, rural add-on payments may change drastically in 2019, then go away entirely after 2022.

“Aging in place is beneficial to the patients that we serve, as well as appropriate utilization of Medicare resources,” Tonya Hopper, vice president of home health operations at Interim HealthCare of Texas & New Mexico, told Home Health Care News. “Without the rural add-on, there would not be any ability to care for rural Americans in their homes, which would force patients into an institutional setting.”


Interim HealthCare of Texas & New Mexico is part of the Interim HealthCare network, comprised of nearly 600 worldwide locations. Interim HealthCare franchises provide nursing, home care and hospice services.

“The rural add-on allows for rural [home health] locations to exist, extending our service area for patients with the lowest access to care,” Hopper said. “We have a patient on service currently that lives 45 miles from any hospital or provider. Her only caregiver is her spouse, who is dealing with health concerns of his own.”

In general, rural home health agencies across the board in 2018 received a 3% rural add-on payment increase. Moving forward, the Centers for Medicare & Medicaid Services (CMS) plans to implement a new methodology, varying add-on amounts depending on a rural county’s home health utilization, population density and other factors.


CMS proposed the more targeted methodology for years 2019 through 2022 in its proposed payment rule for calendar year 2019. The shift was mandated by the Bipartisan Budget Act of 2018.

Changes to rural add-on

Unlike the uniformity of previous rural add-ons, CMS’ latest proposed payment rule breaks counties down into the categories of “high utilization,” “low population density” and “all other.”

CMS defines high-utilization counties as “rural counties and equivalent areas in the highest quartile of all counties and equivalent areas based on the number of Medicare home health episodes furnished per 100 individuals who are entitled to, or enrolled for, benefits under part A of Medicare or enrolled for benefits under part B of Medicare only, but not enrolled in a Medicare Advantage plan under part C of Medicare.”

Low population-density counties are defined as counties and equivalent areas with a population density of six individuals or fewer per square mile of land.

The all-other category includes counties and areas that don’t fit into either definition.

“This is the first time that we’ve gone back to Congress and they’ve given us the rural add-on [with it] being more targeted,” Mary Carr, vice president of regulatory affairs for the National Association for Home Care & Hospice (NAHC), told HHCN. “They’ve looked at certain counties deserving it more than others.”

The Medicare Payment Advisory Commission (MedPAC) has repeatedly reported to Congress that rural add-on payments need correcting to better reflect access challenges. Overall, rural add-on payments “are poorly targeted” and don’t benefit areas with low home health utilization, MedPAC officials wrote in a 2017 report.

“MedPAC keeps coming back and saying, ‘We don’t see any evidence, at least in the aggregate, that the rural areas have such lower margins than urban ones,'” said Carr, who spoke with HHCN at NAHC’s annual leadership conference in Dallas. “In other words, MedPAC doesn’t see evidence that rural agencies need this bump every year.”

There are 3,246 total counties or equivalent areas when taking into account all states, Washington, D.C., and the U.S. territories of Guam, Puerto Rico, the U.S. Virgin Islands, according to an HHCN review of CMS data. More than 2,000 of those are considered rural in respect to add-on payments.

Combined, rural and equivalent areas had more than 1.2 home health episodes in calendar year 2015, the most recent year for which data was available.

There are at least 510 high-utilization counties and 334 low population-density counties, according to the HHCN review. The vast majority of counties fall into the all-other category.

‘We will continue to fight this’

Under CMS’ proposed home health payment rule for 2019, high-utilization counties would receive a 1.5% rural add-on in 2019, followed by a 0.5% add-on before the payment bump being phased out entirely.

Meanwhile, low population-density counties would receive a 4% rural add-on in 2019, a 3% bump in 2020, a 2% increase in 2021 and a 1% add-on in 2022. Payments would potentially stop in 2023.

All-other counties would receive a 3% rural add-on payment in 2019, a 2% bump in 2020 and a 1% increase in 2021 before payments go away.

“All of the rural providers in Illinois are assigned to the all-other category — which means their rural add-on percentage will incrementally be reduced from 3% to zero over the next three years,” Sara Ratcliffe, executive director of the Illinois HomeCare & Hospice Council, told HHCN via email. “We do not support the reduction in payment to rural agencies regardless of category.”

Although changes to the rural add-on have been circulating since early July, the topic has garnered little attention. Instead, home health stakeholders have largely been focused on a possible return of CMS’ pre-claim review demonstration and the Patient-Driven Groupings Model (PDGM).

“The collective impact of all of these have providers worried about the future,” Ratcliffe said.

The final home health payment rule is expected to be announced sometime this week.

NAHC plans to continue fighting on behalf of the rural add-on rural, Carr said, noting the association does have concerns about the targeted approach.

Even if the rural add-on is not as galvanizing as other looming payment changes, NAHC is far from alone in focusing on this issue. Lafayette, Louisiana-based LHC Group (Nasdaq: LHCG) has consistently spent money lobbying on the rural add-on, public records show. Kindred Healthcare, the National Association of Medical Technicians and the Iowa Hospital Association are among other organizations active on this issue.

It’s easy to see why health care businesses are concerned.

“You can have high utilization and still lose money, especially with some of these rural patients as sick as they are and as far apart as they are,” Carr said. “In some cases, the more patients you take, the more money you actually might be losing.”

Written by Robert Holly

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