CMS has released their annual proposed payment update rule. There’s no way to sugar-coat it: if finalized as written this payment update rule will be the death knell of many agencies, further accelerating closures and market consolidation into the hands of a few powerful players. Let’s jump right into the details.
Annual Payment Update
Every year CMS makes legally required updates to home health payment rates for the coming fiscal year. Unlike other years, CMS has decided to slap agencies in the face with a dramatic proposed cut in reimbursement. If the 2023 rule is finalized as written, agencies would receive 4.2% lower payments, or approximately $810 million nationwide compared to this year!
If you think you can weather this storm, since payment updates can vary significantly from year to year, you need to think again. CMS is proposing to apply a permanent prospective payment adjustment to the home health 30-day period payment rate. This comes from a proposed “behavioral assumption adjustment” of -7.69%, which is possible thanks to the Patient-Driven Groupings Model (PDGM). This decrease is slightly offset by 2.9% general payment increase and a handful of other small factors that impact payment rates each year, which is how CMS arrived at the -4.2% figure discussed above.
CMS arrived at this massive pay cut by using the “repricing method,” which calculates what Medicare would have spent had PDGM not been implemented. This calculation assumes that agencies would have provided home health services in the same way they do under PDGM. CMS then compares that amount to what actual home health expenditures were under PDGM. This figure represents what CMS feels they “should” spend on home health services.
Will Your Agency Be Forced to Repay So-Called “Excess” Payments from 2020 and 2021?
CMS has made it very clear that the point of PDGM was to slash your agency’s reimbursement. Unfortunately for them, most agencies were able to adapt and make the model work. Since there are still too many agencies standing for Medicare’s taste, they are soliciting comments on how best to implement a temporary payment adjustment, estimated to be $2.0 billion for excess estimates in calendar years 2020 and 2021.
Since CMS is actively seeking comments and feedback, we don’t know what the temporary payment adjustment will look like, or how it will be implemented. However, we can make an educated guess based on recent history. At the beginning of the COVID-19 pandemic, Medicare gave providers advance and/or accelerated payments to help agencies and others continue to provide quality care. CMS knew they were making overpayments when they did this. When providers learned how to operate in a post-COVID world, CMS clawed back the excess payments from providers’ payments until the amount they owed was paid back. It’s likely (but again, not known) that CMS will use a similar approach to take back these so-called “excess estimates.”
Wage Index Changes
Agencies do have one small win in the 2023 proposed rule. CMS will impose a permanent 5% cap on negative wage index changes (regardless of the reason for the decrease) for home health agencies. This change aligns with new rulemaking for other provider types such as acute providers and hospices. While this change will protect your agency from dramatic wage index changes, keep in mind that there is nothing to prevent CMS from decreasing the wage index 5% year after year.
Annual PDGM Case-Mix Adjustments
As required under the law for PDGM, CMS will perform its annual “recalibration” the case-mix weights and LUPA thresholds using the newest data available. 2021 data will be used to adjust PDGM’s case-mix weights for 2023. How this will impact your agency will depend on your market and the types of patients that you serve. Please contact us if you are interested in discussing the unique challenges that your agency will face next year.
More Scrutiny Over Telehealth Use?
If your agency has been relying on telehealth to help your overworked staff provide quality care, you may have another thing to worry about. CMS is looking for comments on the collection of telehealth data on home health claims, which will allow them to “analyze the characteristics of the beneficiaries’ utilizing services furnished remotely.” In simple language this mean more poking, more prodding, and in all likelihood more punishment for taking advantage of pandemic-era waivers that were designed to help patients and providers alike. Telehealth can not replace in-person care, but it can be useful for certain simple services. While this issue is not as pressing as other changes in the proposed rule, it would be worthwhile to review your agency’s use of telehealth and consider what uses could be a red flag that could trigger an audit.
Public Reporting and Medicare Care Compare
There are many other small changes in the proposed rule. Among the smaller but still notable changes are a proposal to end the suspension of non-Medicare / non-Medicaid data for home health agency patients. This means that agencies would be required to submit all-payer OASIS data to the HH Quality Reporting Program (HHQRP), beginning with calendar year 2025. Medicare is also looking for comments on public reporting of a “composite structural health equity quality measure,” which would be displayed on Medicare Care Compare.
What’s Next, and How Can Your Agency Stay Ahead of the Curve?
Can your agency really survive a 4.2% drop in reimbursement, a potential repayment of “excess” payments from the prior two years, and the possibility of future performance-based cuts in reimbursement? Don’t forget, the Home Health Value-Based Purchasing Model (HHVBP) is being expanded nationwide starting on January 1, 2023. Your agency will compete for payment increases based on nation-wide metrics derived from OASIS items, claims data, and CAHPS surveys to determine what adjustments will be made. The HHVBP Model is going to affect your clinical operations and your financial operations. After the first performance year of the HHVBP Model in 2023, your agency’s quality performance data from that year will be used to calculate payment adjustments in 2025. The maximum payment adjustment (either an increase or a decrease in reimbursement) will be capped at 5%.
4% here, 5% there, potential repayments taken from your current Medicare reimbursement…what can your agency do? Is there any realistic way to trim that much fat from your agency? You’ve been pinching your pennies and dealing with skyrocketing costs since the pandemic began, and inflation shows no sign of slowing down. A typical 2 or 3% annual increase wouldn’t even begin to keep up with your costs. You may need to think about changing your agency’s payer mix or making other big changes to your business. The time to make a plan is now, before you watch your revenue evaporate. Every agency is different, and the best way forward is going to be different depending on your market, your staff, your current patient mix and the competitive landscape.
The first step to making the right move is having the information and guidance you need to make the best decision. Call Optima Billing Services to discuss the impact of the proposed rule on your agency and what you can do to keep your business strong!