‘Extensive’ Proposed Rule Sets Stage for Value-Based Purchasing, PDGM Adjustments

The U.S. Centers for Medicare & Medicaid Services (CMS) released its FY 2022 home health proposed payment rule on Monday, while simultaneously announcing plans for the nationwide expansion of the industry’s value-based purchasing demo.

While just a few days have gone by, home health stakeholders have already started to zero-in on several key areas — both major and minor — within the 387-page proposal.

“It was a very extensive rule — almost 400 pages compared to last year’s, which was 130 pages,” Joanne E. Cunningham, executive director of the Partnership for Quality Home Healthcare (PQHH), told Home Health Care News. “I think that the size of it certainly signifies there are some pretty big proposed changes.”


As far as minor developments, the proposed payment rule for next year included a 1.7% increase in Medicare payments to home health providers. CMS projects the increase to come in at about $310 million.

While 1.7% is down from the 1.9% bump that home health providers received in 2021, it’s still a fairly positive sign, according to Stephens analyst Scott Fidel. If finalized, the proposed rate for FY 2022 would represent the third-highest Medicare home health rate update over the past 15 years.

“Given that this is also the first Medicare rate proposal for [home health] under the Biden administration, we are generally encouraged to see a positive proposed rate update,” Fidel wrote in a note. “Recall that under President Obama, annual [home health] Medicare rate updates were negative throughout almost the entirety of the two terms of his presidency.”


In its other less-than-groundbreaking proposals, CMS also called for changes to the formal home health Conditions of Participation (CoPs). Specifically, the agency is seeking to make certain COVID-19 waiver flexibilities related to home health aide supervision and the use of telecommunication permanent.

On top of that, CMS is proposing to allow occupational therapists to conduct the initial home health assessment visit and complete the comprehensive assessment under the Medicare program, but only when OT is on the plan of care, with either physical therapy or speech therapy and skilled nursing not initially on the plan of care.

The proposal additionally includes updates to home infusion therapy services payment rates.

“I think every provider should carefully read the rule and offer their comments on it,” Cunningham said. “There’s a lot of a lot to be commented on here.”

Accelerating value-based care

Probably the biggest proposed change in this week’s proposed rule was CMS saying it wanted to expand the Home Health Value-Based Purchasing (HHVBP) Model nationwide — by 2022.

“That is something we were somewhat expecting,” Cunningham said. “But it certainly, I would say, is a major, major component of the proposed rule.”

Originally implemented in 2016, HHVBP is a Medicare demonstration that aims to tie reimbursement to quality of care, with home health providers paid based on how well they keep their patients healthy and out of the hospital. Currently, Medicare-certified home health agencies in Massachusetts, Maryland, North Carolina, Florida, Washington, Arizona, Iowa, Nebraska and Tennessee participate in the demo.

Since its implementation, the model has resulted in an average 4.6% improvement in home health agencies’ quality scores and an average annual savings of $141 million to Medicare, according to CMS.

For the most part, HHVBP has gained popularity within the home health industry, with Amedisys Inc. (Nasdaq: AMED) Chairman and CEO Paul Kusserow and others lobbying for its expansion. In light of that, CMS’s move to blow out the demo didn’t come as a surprise, SimiTree Managing Principal Nick Seabrook told HHCN.

“It was a game-changer for the nine states that took part in the demonstration project,” Seabrook said. “It really supports CMS’s views and drives home the quality aspect. For the 41 states that haven’t been part of HHVBP — it’s definitely going to be a big operational change.”

The first performance year of the expanded HHVBP Model would be CY 2022, with quality performance data from that year used to calculate payment adjustments in CY 2024.

In 2021, home health agencies in HHVBP states could receive a maximum payment adjustment of 7%, upward or downward. That was originally scheduled to be 8% in 2022.

The Trump administration’s CMS previously touted plans to broaden value-based purchasing in home health. Those ambitions became unclear when the Biden administration took over, with new health care officials freezing many of the old administration’s projects.

With no news on HHVBP for months, some believed an expansion wouldn’t come until 2023. Now, home health providers in non-HHVBP states have just six months to prepare.

There’s a chance that CMS may refine the model’s framework, however.

“We have suggested some reforms to HHVBP, such as a shared-savings approach,” Bill Dombi, president of the National Association for Home Care & Hospice (NAHC), told HHCN during an episode of Disrupt. “The way it operates is, there are winners and losers from within the home health community on a state basis. We think that an added incentive of sharing some of the savings the Medicare program gets will further result in the kind of outcomes CMS and CMMI want to see.”

The future of PDGM

Despite the nationwide expansion of HHVBP taking center stage, industry insiders likewise have fixed their attention on other aspects of the proposed rule. In particular, CMS’s plan to recalibrate the Patient-Driven Groupings Model (PDGM) case-mix weights.

Under PDGM, there are 432 payment groups with an associated case-mix weight and LUPA threshold. It is CMS policy to recalibrate the case-mix weights annually based on available data.

“I think the fact that they recalibrated a lot of the case-mix weights just based on Year 1 of data, and it was a pandemic year, was the biggest shock,” Seabrook said. “You have to wonder how reliable [the data] is, in order to make such a big change.”

Seabrook also noted the changes proposed for comorbidity adjustment subgroups.

“They’re increasing the list of comorbidity-low combinations from 13 up to 20,” he said. “The one that stuck out, even more, was the comorbidity-high. … Before there were only 31 combinations that would have qualified you for a ‘high’ comorbidity adjustment. That list is increasing to 85. I thought that was another eye-opener.”

CMS’s decision to keep PDGM’s 4.36% behavioral adjustment also stood out. The behavioral adjustment has been the target of many critics, including U.S. lawmakers who asked CMS to reconsider the rate reduction last year.

Organizations such as the PQHH have also launched criticisms against the payment rate adjustment.

“Our analysis, which we’ve shared with CMS, indicated that the case payment rate is 3.2% less than below budget neutrality, which is a requirement of the new payment system,” Cunningham said. “We maintain that the 4.36% behavioral assumption cut should be eliminated. If it isn’t, we will go into a third year with a rate that includes a cut that the body of data indicates is not warranted.”

For now, CMS included an analysis of PDGM’s first year in the proposal. It also included details on how the agency examined differences between assumed and actual behavior changes.

CMS is requesting comments on the behavioral adjustment and how it should be viewed. The agency is also requesting comments on the implementation of the PDGM case-mix adjustment methodology.

PQHH advises providers to read the rule proposal carefully.

“I would especially be interested in what providers experience has been with PDGM,” Cunningham said.

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