CMS proposes $375M cut to home health Medicare payments in 2024

The Biden administration issued a proposal Friday to cut reimbursements to home health providers by 2.2% next year, or an estimated $375 million less than 2023 payment levels.

The Centers for Medicare & Medicaid Services (CMS) released Friday a proposed rule outlining changes to the 2024 Home Health Prospective Payment System and updating rates for home health agencies.The proposed update would bump payments 2.7%, or $460 million, but home health agencies would also absorb a 5.1% decrease that reflects the effects of the permanent behavior assumption adjustment, or a decrease of $870 million. The payment changes also reflect an estimated 0.2% increase that reflects the effects of an updated fixed-dollar loss ratio, or $35 million increase, CMS wrote in the proposed rule.

"This rule proposes a permanent, prospective adjustment to the CY 2024 home health payment rate to account for the impact of the implementation of the Patient-Driven Groupings Model (PDGM). This adjustment accounts for differences between assumed behavior changes and actual behavior changes on estimated aggregate expenditures due to the implementation of the PDGM and 30-day unit of payment as required by the Bipartisan Budget Act of 2018," the agency wrote.

"CMS previously finalized, for CY 2023, a permanent adjustment that was half of the estimated required permanent adjustment," agency officials wrote in the proposed rule.

The draft is expected to be officially published in the Federal Register on July 10. CMS will accept comments on the proposed rule through Aug. 29.

The large dip for agencies reflects reforms installed back in 2020 for home health payments. A 2018 spending law required CMS to “better align payments with patient care needs, especially for clinically complex beneficiaries that require more skilled nursing care rather than therapy,” CMS said in a fact sheet on the new rule. 

CMS was required to create new assumptions about behavioral changes in home health and to change the payment rate from a 60-day unit to a 30-day period. The agency each year must determine the impact of differences between the assumed behavior changes and actual changes from 2020 through 2026.

CMS is also proposing to rebase and revise the home health market basket; revise the labor-related share; recalibrate the PDGM case-mix weights; update the low utilization payment adjustment (LUPA) thresholds, functional impairment levels, and comorbidity adjustment subgroups for CY 2024.

"The actions CMS is taking in this proposed rule would help improve patient care and also protect the Medicare program’s sustainability for future generations. In addition, the proposed rule includes several hospice-related enrollment provisions. We believe these provisions would help protect hospice beneficiaries by more closely scrutinizing hospice owners and ensuring that they do not pose program integrity risks," the agency wrote.

For 2024, using updated 2022 claims and the methodology finalized in the 2023 final rule, CMS determined that Medicare paid more under the new system than it would have under the old system. The agency is proposing an additional permanent adjustment percentage of -5.653% in 2024 to address the differences in the aggregate expenditures.

Industry groups immediately decried the proposed payment changes. CMS continues to rely on a "deeply flawed methodology that inappropriately produces devastating cuts to Medicare home health," one industry group said in a statement.

"Despite several years of significant Medicare home health payment cuts – and evidence demonstrating reduced access to home health services as a result – CMS has proposed further cuts in 2024 and beyond," the Partnership for Quality Home Healthcare said in a statement.

“The Partnership has repeatedly expressed concerns with CMS’ actions aimed at cutting Medicare home health reimbursement, primarily because of the serious impacts on access to the home-based care that patients and families overwhelmingly prefer,” said Joanne Cunningham, CEO of the Partnership. “The home health provider community is gravely concerned that CMS’s proposed actions for 2024 will only continue to degrade beneficiary access to home healthcare services.”

Overall, the Partnership estimates cuts will total more than $18 billion over the next decade at a time when home health providers have faced rising costs and significant challenges hiring the skilled nurses, therapists, and other caregivers necessary for patient care. 

In a statement, the American Hospital Association said it previously expressed concern about the scale of the proposed PDGM behavioral offsets, and is "disappointed" that CMS continues to seek their implementation.

“We continue to strenuously disagree with the budget neutrality methodology that CMS employed to arrive at the rate adjustments,” William A. Dombi, the president of the National Association for Home Care & Hospice (NAHC), said in a statement shared with Home Health Care News. “Overall spending on Medicare home health is down, fewer patients are receiving care, patient referrals are being rejected because providers cannot afford to provide the care needed within the payment rates, and providers have closed their doors or restricted service territory to reduce care costs. If the rate was truly budget neutral, we would not see these actions occurring.”

Last month, senators Debbie Stabenow (D-MI) and Susan Collins (R-ME) introduced the Preserving Access to Home Health Act of 2023 to prevent further cuts to home health providers. The bill, if passed, would take away some of CMS' payment-rate setting power and force the The Medicare Payment Advisory Commission (MedPAC) to consider Medicare Advantage payment rates in its reports.

"We strongly support this essential legislation as current policy positions of CMS put access to home health services for the over three million beneficiaries that utilize this care in jeopardy,”  NAHC's Dombi said in a statement last month. “The Medicare home health benefit has shrunk over the last decade due to various payment cuts, which the most recent of those is the subject of the legislation. We call on both houses of Congress to join Senator Stabenow and Senator Collins in their valiant effort to preserve the home health benefit.”