AHA Voices Concerns About Home Health Medicare Reimbursement Update

August 24, 2022 - The American Hospital Association (AHA) has urged CMS to reconsider the Medicare reimbursement update for home health agencies proposed in the Calendar Year 2023 Home Health Prospective Payment System (PPS) Rate Update.

In a letter to CMS Administrator Chiquita Brooks-LaSure, AHA expressed concerns about the proposed Patient-Driven Groupings Model (PDGM) behavioral offset, market basket update, and productivity adjustment.

The updates included in the proposed rule would decrease Medicare payments to home health agencies by $810 million in 2023.

In addition to the original behavioral offset of 4.36 percent in CY 2020, CMS proposed a 7.69 percent behavioral offset to the 30-day payment rate for CY 2023. The agency stated that the additional offset reflects its statutory requirement to ensure PDGM budget neutrality.

AHA asserted that the proposed behavioral offset is based on flawed assumptions and would inaccurately penalize home health providers. The offset fails to account for the decrease in average per-episode therapy services under PDGM, which would have reduced payments under the prior case-mix system.

“As such, we urge CMS not to finalize any budget neutrality adjustment for CY 2023,” the letter stated. “Instead, we ask the agency to reevaluate its PDGM budget neutrality methodology to account for the drop in therapy in CY 2020 and subsequent years. Doing so could substantially reduce or negate the need for any behavioral offset, or actually create the need for a future restoration of funds.”

AHA also opposed the proposed market basket update of 3.3 percent for CY 2023. The update does not reflect the financial struggles that home health agencies are experiencing, the group wrote. The COVID-19 pandemic and rising inflation have led to increased costs and economic instability for healthcare providers.

According to AHA, if CMS had used more recent data, the market basket adjustment would more accurately reflect the economic environment in which home health agencies are operating.

AHA asked CMS to clarify in the final rule how the agency will account for the increased costs that are not reflected in the market basket update and how it will ensure patients maintain access to home health services.

The letter voiced concern about the proposed productivity reduction as well. The rule included a productivity adjustment of 0.4 percentage points, which, when coupled with the market basket update, would result in a 2.7 percent payment increase for CY 2023.

AHA has asked CMS to elaborate in the final rule on the productivity gains that the reduction is based on, as the cut does not align with the losses home health agencies have faced during the pandemic.

“The use of the private nonfarm business [total factor productivity] is meant to capture gains from new technologies, economies of scale, business acumen, managerial skills, and changes in production,” AHA wrote. “Thus, this measure effectively assumes that [home health] agencies can mirror productivity gains across the private nonfarm business sector. However, in an economy marked by great uncertainty due to inflation as well as demand and supply shocks, this assumption generates significant departures from economic reality.”

AHA supported the proposed 5 percent cap on wage indexes to mitigate changes in home health payments. However, the group urged CMS to implement this change in a non-budget-neutral manner for the home health PPS and other payment systems.

The rule included a proposal to require home health agencies to report quality data on all patients regardless of their payer in the Home Health Quality Reporting Program (HH QRP). CMS said home health agencies must submit this data beginning January 1, 2024.

AHA asked the agency to extend the implementation requirement until at least January 1, 2025 to account for the increased burden and give providers more time to prepare.