Is CMS’ Proposed Home Health Rate Cut Legal? Other Court Decisions Suggest No

The entire home health industry is anxiously awaiting the release of the final payment rule for 2023, which should be released by the Centers for Medicare & Medicaid Services (CMS) at some point over the next two weeks.

The anxiousness is due to the home health proposed payment rule, which included a 4.2% aggregate decrease in payments – or $810 million – and an avenue for future CMS clawbacks of perceived overpayments to providers.

Industry leaders and stakeholders have advocated against those cuts relentlessly over the past few months. They’ve also tried to gain traction on legislation, namely through the Preserving Access to Home Health Act, which was introduced in both the Senate and House in the summer. The final route to avoid payment cuts would be through legal action, though multiple sources have told Home Health Care News in the past that they’d like to avoid that at all costs.


However, if they did decide to go that route, there is recent and mounting legal precedent to suggest that the courts would side with the home health industry and against CMS and its ability to make as drastic cuts as the ones put forth in this year’s proposed rule.

Multiple sources have also told HHCN that the following could be the under-the-radar tool that could save the home health industry from cuts, either now or later.

Prior to 2020, CMS proposed a series of policy changes for hospitals, one of which would have reduced payment for hospitals, specifically through the 340B drug pricing program. Broadly, 340B hospitals are generally those that serve lower-income or rural populations.


Those cuts represented an about $1.6 billion impact on 340B hospitals annually. 

That impact won’t be felt moving forward, though, because the U.S. Supreme Court ruled unanimously against CMS and the U.S. Department of Health and Human Services – and thus, against the rate cuts – in American Hospital Association (AHA) v. Becerra on June 15.

In the hospitals’ case, they were going to see a significant and disruptive cut to reimbursement that they believed would hurt patient care. The same goes for home health providers and their looming potential cuts. Both believe CMS is not statutorily able to cut payments in the ways in which they did, or could be. In AHA’s case, they were ruled correct by the court.

While the specifics of what the hospitals were facing and what the home health providers face are not entirely the same, the legal cases are strikingly similar.

“The Supreme Court basically said the law requires certain actions to be taken by CMS in setting the hospital rates as it relates to the 340B, and they had two ways to go. And CMS chose not to go those two ways,” National Association for Home Care & Hospice (NAHC) President William A. Dombi told HHCN. “What we’ve got going on in the home health payment rule is a comparable legal argument that starts with the position that the law does not allow CMS to do what it did do on the budget neutrality methodology. And second, that the law requires a specific set of actions, none of which the CMS methodology complies with.”

The AHA v. Becerra case is applicable to the home health industry’s struggle and non-existing – for now – legal case against CMS in a very straightforward way. What is less straightforward, but also relevant to the conversation, is a ruling that the Supreme Court made at around the same time in West Virginia v. Environmental Protection Agency (EPA).

The Supreme Court ruled there that the EPA could not put a cap on carbon emissions for certain states. And if that were to be a law, it would have to go through Congress. Therefore, the Supreme Court ruled that the EPA did not have the jurisdiction to apply and enforce that cap on its own.

What both the above-mentioned cases signal is a change in legal direction.

Previously, in the 1984 Chevron U.S.A. v. Natural Resources Defense Council case, the Supreme Court had essentially ruled on behalf of the government agencies to follow through on their own interpretations of the statutes that they administer.

Both AHA v. Becerra and West Virginia v. EPA suggest that is no longer the opinion of the Supreme Court.

“The AHA case involving the 340B program, the EPA case and others as well, are now coming down and leaving a distinct impression in the law that the Chevron case standard is either on life support, or it will be given death by 1,000 knives,” Dombi said. “And it all stems, I think, from concern that federal agencies are given way too much power.”

AHA was also granted an additional victory in September in the U.S. District Court for the District of Columbia. It was ruled there that CMS had to immediately stop underpaying hospitals due to the Supreme Court’s ruling. The AHA requested hospitals be paid back for the underpayments, with interest.

What all this means

At the very least, AHA’s victory should provide some comfort for home health providers.

In some ways, it takes the worst-case scenario – years and years of clawbacks and rate cuts from CMS – off the table.

If advocacy and legislation do not do the trick, the home health industry’s own legal case against HHS and CMS would be a good one. It’s noteworthy that the AHA case was only brought to the courts after the payment reductions were both finalized and implemented.

It could also be more ammo for the industry, in addition to all their effort trying to show that a rate reduction could worsen patient access and the clinician-to-patient ratio, among other things.

“The similarities relate to the issue of if there is a plain language requirement,” Dombi said. “And alternatively, is what was done by the federal agency permissible within any kind of ambiguity that’s there? And that’s rather than deferring automatically to the interpretive authority of the federal agency.”

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