Permanent Payment Adjustment for Home Health

Permanent Medicare Payment Adjustment for Home Health

The federal agency released the Home Health Prospective Payment System Rate Update proposed rule for CY23, which aims to permanently adjust Medicare payment based on PDGM.

CMS proposes updated Medicare payment for home health agencies

CMS is looking to apply a permanent prospective payment adjustment to the home health 30-day period payment rate to account for changes resulting from the implementation of the Patient-Driven Groupings Model (PDGM). This change and other policies in the new Home Health Prospective Payment System Rate Update proposed rule would decrease Medicare payment to home health agencies by $810 million next year.

PDGM went into effect on Jan. 1, 2020, alongside a new 30-day unit of payment for home health agencies participating in Medicare. The new Medicare payment model is meant to better align home health reimbursement with patient care needs, especially for clinically complex beneficiaries who require more intensive skilled nursing care.

Per federal law, CMS must make assumptions about behaviour changes that might occur following PDGM implementation and the 30-day unit of payment. CMS has already finalized three behavioural assumptions, which include changes to clinical group coding, comorbidity coding, and the Low Utilization Payment Adjustment (LUPA).

CMS is now proposing a new Medicare payment adjustment under the Home Health Prospective Payment System based on assumed behaviour changes and actual behaviour changes on estimated aggregate spending, according to the proposed rule.

The new method of reimbursing home health agencies would result in a 7.69 percent decrease in the 30-day payment rate in the calendar year (CY) 2023, which would total $1.33 billion. CMS says that the decrease ensures that total spending under PDGM would be equal to what Medicare would have paid agencies under the old payment system.

CMS also says it is looking to implement a temporary payment adjustment in later years but is looking for stakeholder feedback on how to do that. The temporary payment adjustment is estimated to be $2.0 billion based on payments made in CYs 2020 and 2021.

The proposed rule would also implement a 2.9 percent home health payment update percentage, totalling $560 million, as well as an approximate 0.2 percent decrease in the fixed-dollar loss ratio used for calculating outlier payments. The latter would cost home health agencies $40 million in Medicare payments next year.

Other policies proposed in the Home Health Prospective Payment System Rate Update rule for CY 2023 include a permanent cap on wage index decreases as seen in other Medicare payment system rules, such as the Inpatient Prospective Payment System proposed rule for the fiscal year 2023, a recalibration of the 432 payment groups under PDGM, and an update to the home infusion therapy benefit.

Quality programs for Medicare home health agencies would also see some changes under the proposed rule. CMS proposes to end the suspension of data collection on non-Medicare and non-Medicaid patients under the Home Health Quality Reporting Program. Instead, home health agencies would be required to submit all-payer OASIS data by CY 2025.

Additionally, the rule would update the Home Health Value-Based Purchasing Model to add definitions for the baseline year, which would be from CY 2019 to CY 2022 for agencies certified by Medicare prior to Jan. 1, 2019, and from 2021 to 2022 for agencies with a certification date prior to Jan. 1, 2022. The Model’s baseline would also shift from CY 2019 to CY 2022 next year.


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