CMS Backs Off Severe Cuts, Finalizes 0.7% Increase To 2023 Provider Payments

The U.S. Centers for Medicare & Medicaid Services (CMS) released its FY 2023 home health final payment rule late Monday.

It comes with an estimated increase to 2023 home health payments of 0.7%, or $125 million, compared to 2022 aggregate payments. Although it sets up certain financial challenges moving forward, the final rule is better news for providers than what was previously expected.

The agency had initially floated a 4.2% aggregate decrease in 2023, which would have marked one of the steepest home health Medicare cuts in years. Nonetheless, CMS is still phasing in other cuts and permanent adjustments related to the rebalancing of the Patient-Driven Groupings Model (PDGM).


At least for now, immediate PDGM clawbacks appear to be delayed.

“CMS is phasing-in the permanent adjustment by finalizing a -3.925% permanent adjustment for CY 2023,” the agency wrote in its fact sheet. “The -3.925% permanent adjustment is half of the full permanent adjustment of -7.85% (-7.69% in the proposed rule). This rule also discusses the comments received on the best approach to implement the statutorily required temporary payment adjustment for CYs 2020 and 2021, and those comments will be considered for future rulemaking.”

Strong pushback from providers across the country, as well as numerous home health advocacy organizations, seems to have paid off.


For context, 51% of agencies were in danger of going in the red had CMS’ proposed payment adjustments been finalized, according to a summer analysis from the National Association for Home Care & Hospice (NAHC).

Still, NAHC is not satisfied with the final rule, or CMS’ methodology.

“We wholeheartedly disagree with the budget neutrality methodology that CMS employed to arrive at the rate adjustments. In no way are these adjustments consistent with logic or the Medicare law on budget neutrality in the transition from the 2019 payment model to PDGM in 2020,” NAHC President William A. Dombi said in a statement shared with HHCN. “The fatally flawed methodology will have a direct effect on access to care at a time when home health services have proven their value and are needed more than ever to meet patient needs and control Medicare overall spending.”

While Monday’s final rule may not be considered a great outcome, it’s far better than what providers considered the worst possible scenario.

“To mitigate such a large decrease in home health payments in a single year, we are finalizing to phase in the permanent adjustment by reducing it by half for CY 2023,” the CMS fact sheet continued. “That is, we are finalizing a -3.925% permanent adjustment to the 30-day payment rate in CY 2023 to ensure that aggregate expenditures under the new payment system (PDGM) would be equal to what they would have been under the old payment system.”

In addition to the payment rates, CMS is finalizing a methodology to “determine the impact of differences of assumed and actual behavior changes on aggregate expenditures, as well as a permanent prospective payment adjustment to the home health 30-day period payment rate to account for any increases or decreases in aggregate expenditures.”

With downward PDGM adjustments still included, it’s likely that legislation efforts will continue throughout the end of 2022 and 2023. The Preserving Access to Home Health Act, which would prevent further home health cuts until 2026, was introduced in the House and Senate earlier this year.

“The home health final rule is completely disconnected from the Biden Administration’s goals of expanding beneficiary access to home-based care. Mitigating the draconian cuts with a phase-in and offsetting the impact in 2023 with the annual market basket increase is unacceptable,” AccentCare CEO Steve Rodgers said in a statement shared with HHCN. “The final rule should be viewed for what it is, which is nothing more than CMS adjusting payments for home health services by applying post-2020 provider behaviors to pre-2020 reimbursement methods. Rather than ensuring the payment amounts are budget neutral, CMS’ actions constitute an unauthorized rebasing of the home health payment amount, which will lead to patient access issues for the Medicare benefits they are entitled to under law.”

Other takeaways

In another payment area, CMS finalized a cap on negative wage index changes, regardless of the reason for the decrease.

“To achieve the policy goal of increased predictability in home health payments, while aligning with the FY 2023 Inpatient Prospective Payment System final rule and other rules, this rule finalizes a permanent, budget neutral 5% cap on negative wage index changes for home health agencies to smooth year-to-year changes in the pre-floor/pre-reclassified hospital wage index,” CMS said.

Also regarding payment, CMS is recalibrating the case-mix weights and Low-Utilization Payment Adjustments (LUPA) thresholds for 2023, which it does annually.

“We initially determined a -8.389 percent behavior change adjustment to the base payment rate would be needed in order to ensure that the payment rate in CY 2020 would be budget neutral, as required by law. However, based on the comments received and reconsideration as to the frequency of the assumed behaviors during the first year of the transition to a new unit of payment and case-mix adjustment methodology, we believed it was reasonable to apply the three behavior change assumptions to only half of the 30-day periods in our analytic file (randomly selected),” CMS wrote in the rule itself. “Therefore, we finalized in the CY 2020 HH PPS final rule with comment period (84 FR 60519), a -4.36 percent behavior change assumption adjustment (“assumed behaviors”) in order to calculate the 30-day payment rate in a budget-neutral manner for CY 2020.”

In addition, the rule finalized baseline years for the Home Health Value-Based Purchasing (HHVBP) Model, which will be implemented on Jan. 1, 2022.

When HHVBP goes nationwide, the baseline year for home health agencies will be 2022 if they became Medicare certified prior to Jan. 1, 2019. The baseline year had previously been 2019 for those providers. For providers with a Medicare certification date prior to Jan. 1, 2022, the baseline year has been changed from 2021 to 2022.

“Over the past year, CMS has been presented with detailed analyses as to its budget neutrality obligations under Medicare law in setting payment rates along with comprehensive assessment of the disastrous impact of its proposals on patients and providers,” Dombi said. “We have demonstrated that CMS has applied a methodology that is inconsistent with what it used in assessing rate neutrality for nursing homes. Finally, we have shown CMS that its action is inconsistent with its own data that establish that it underpaid home health agencies since 2020. Our efforts to correct these wrongs will not end with the rule issued today.”

The full fact sheet from CMS can be read here.

Home Health Care News will be covering the final rule throughout the week. Check for further updates on this developing story.

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