If finalized as is, the home health proposed payment rule for next year could lead to larger cuts than originally estimated.
That’s according to an analysis from Homecare Homebase (HCHB), which pulled data from its vast customer base, representing nearly 50% of all Medicare-certified home health visits.
Released on June 30, the FY 2024 home health proposed payment rule from the U.S. Centers for Medicare & Medicaid Services (CMS) includes a 3% market-basket update that’s partly offset by a roughly 0.3% downward productivity adjustment. The agency’s plan also includes a 0.2% increase that reflects the effects of a proposed update to the fixed-dollar loss ratio used in determining outlier payments.
Added up, those figures produce a 2.9% increase in home health payments for 2024. That positive number, however, is offset by a whopping 5.1% cut from CMS, which believes it has to permanently adjust payments under the Patient-Driven Groupings Model (PDGM) to maintain budget neutrality, as mandated by the Bipartisan Budget Act of 2018.
The way the math currently works out, CMS estimates that its proposed payment rule would represent an aggregate cut of 2.2% next year, or about $375 million less compared to 2023 levels.
Broadly, CMS says it needs to make permanent adjustments to home health payment mechanics because providers adapted to PDGM in a way that’s different from how the agency assumed providers would behave under the model. Those behaviors are largely related to how agencies document and code for their patients’ functional-impairment levels, their number of clinical comorbidities and more.
“In the CY 2023 HH PPS final rule, using CY 2020 and 2021 claims, CMS finalized a methodology for analyzing the differences between assumed versus actual behavior changes on estimated aggregate expenditures and calculated levels of actual and estimated aggregate expenditures,” the agency wrote in a June 30 fact sheet. “Based on analyses of CYs 2020 and 2021 claims data, CMS determined a permanent adjustment was needed.”
But after doing its own numbers crunching, HCHB estimates that the 2024 cut could be even greater than 2.2%.
“In terms of HCHB’s methodology, as soon as the proposed rule is released, our regulatory and analytics teams immediately begin reviewing every detail of the rule and updating our ongoing models,” HCHB Chief Strategy Officer Scott Pattillo told Home Health Care News in an email. “Once the new model is complete and has been thoroughly tested, we take all the claims for 2023 (year-to-date) and run them through the proposed 2024 model. Then we compare the actual reimbursement in 2023 to the modeled reimbursement for 2024.”
After analyzing reimbursement by standard periods, Low Utilization Payment Adjustments (LUPAs), outlier payments, wage-index changes and other factors, HCHB estimates aggregate total home health payments next year could be trimmed by as much as 2.66%.
“This year’s results show that, if agencies saw the exact same patients and performed the exact same services, they would be paid 2.66% less for those patients in 2024 than in 2023,” Pattillo explained.
While a difference between the CMS and HCHB estimate may seem small, it ultimately could translate into several million dollars of home health payments.
Senior Director of Product Management Andy Guarnera and Product Manager Benjamin Hayes, both in the data analytics department of Homecare Homebase, helped spearhead the analysis.
Not equal for everyone
Pattillo was careful to point out that the proposed payment adjustment for next year wouldn’t be equal for everyone.
“Each of our customers has their own unique results,” he said. “While we cannot share the details by agency, we can share some ranges.”
Unique to this proposed rule, Pattillo noted, is that every state will see a cut, which hasn’t always been the case. Yet some states will be barely impacted at all, while others could receive an almost 6% cut.
“Agency results show a wide range from -6% for a few, to up to a 3.6% increase,” Pattillo said. “The biggest drivers of this variance are case mix and wage index.”
Generally, the greatest drivers of this year’s potential cut in terms of real impact are the reduction in standard payment and case mix, which is slightly offset by the increase in outlier revenue.
“Based on HCHB’s very large sample, we would expect this -2.66% to be representative of the aggregate impact to the whole industry,” Pattillo said.
Don’t forget the clawbacks
It’s important to note that temporary payment adjustments in the form of clawbacks could be on the table in the future, too. CMS believes PDGM has produced upwards of $3.4 billion in overpayments in 2020, 2021 and 2022, and it may eventually seek to recoup those perceived overpayments.
The agency is not seeking to do so in 2024, though.
“The law provides CMS the discretion to make any future permanent or temporary adjustments in a time and manner determined appropriate through analysis of estimated aggregate expenditures through CY 2026,” CMS noted in its fact sheet. “As such, we are not proposing to implement a temporary adjustment in CY 2024.
On its end, HCHB plans to continue sharing its findings with policymakers and other key individuals in Washington, D.C. One of its main messages, Pattillo emphasized, is expressing how there’s already an access to care problem, with home health providers struggling with costs, capacity challenges and record-high referral-rejection rates.
“HCHB is very active in advocacy efforts in the industry and will be spending time on Capitol Hill later this month,” he said. “We are also working with our providers on a variety of advocacy efforts.”
HCHB plans to share a detailed look at its modeling and the 2024 proposed rule mechanics during an upcoming HHCN webinar. It will share additional insights at the HHCN FUTURE conference in August as well.
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