Navigating the Impact of CMS's Home Health Payment Rule
New rule finalizes aggregate increase to 2024 home health payments of 0.8%
THE VBP Blog
November 9, 2023 – The Centers for Medicare & Medicaid Services (CMS) recently finalized a significant development in the realm of home health care and released its CY 2024 home health final payment rule. This update comes with an estimated aggregate increase to 2024 home health payments of 0.8% and has sparked a myriad of responses from industry stakeholders.
While there is an aggregate increase, and it is higher than the original CMS proposed this summer, what does it mean for home health agencies, and more importantly, consumers? At first look, the implications are not good. With the rejection of patient referrals already on the rise due to home health agencies shuttering or reducing services in conjunction with the workforce shortage, consumers are going to suffer. We are likely to see consumers unable to access the necessary services they need to remain living comfortably and independently at home, or they will receive poor-quality services. Neither are good outcomes.
In this blog, we will explore the intricacies of CMS’s finalized home health payment increase and analyze how it is poised to shape the home health care industry in 2024 and beyond.
The Details of the Finalized Home Health Payment Rule
The CY 2024 Home Health Prospective Payment System (HH PPS) Rate Update final rule was released on November 1, 2023. This rule updates Medicare payment policies and rates for Home Health Agencies (HHAs) across the country.
The much anticipated and highly debated CMS ruling on home health payments has culminated in a modest increase for 2024 of 0.8%. Unfortunately, that does not tell the whole story. The Home Health payment rule also includes sharp rate cuts.
The updated rule encapsulates several key elements. First, it adopts the Home Health Prospective Payment System (HH PPS), which determines the aggregate costs of skilled nursing, therapy services, and other home health services. This increase reflects the effects of the 3.0% home health payment update percentage, an estimated 2.6% decrease that reflects the net effects of the finalized prospective permanent behavior assumption adjustment across all payments, and an estimated 0.4 percent increase that reflects the effects of an update to the fixed-dollar loss ratio (FDL) used in determining outlier payments.
Additionally, CMS is also finalizing a permanent prospective adjustment of -2.890% to the CY 2024 home health payment rate. This is short of the highly contested -5.1% adjustment proposed in June but considering that a -3.925% permanent rate adjustment was already implemented in 2023, stakeholders are not happy.
While a 0.8% increase in aggregate payments is better than the originally proposed 2.2% decrease, this shows that CMS is not backing off of its desire for permanent reduced payments. CMS is holding firm to its belief that home health agencies have been overpaid by billions of dollars over the last few years.
Some advocates worry that CMS is not accounting for Medicare Advantage reimbursement for home health services in the analysis. MA plans typically offer lower rates for home health services, and these beneficiaries now make up over 50% of the Medicare population.
The National Association for Home Care & Hospice (NAHC) vehemently disagrees with CMS. “We continue to strenuously disagree with CMS’ rate setting actions, including the budget neutrality methodology that CMS employed to arrive at the rate adjustments,” NAHC President William A. Dombi told Home Health Care News. “We recognize that CMS has reduced the proposed 2024 rate cut. However, overall spending on Medicare home health is down, 500,000 fewer patients are receiving care annually since 2018, patient referrals are being rejected more than 50% of the time 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.”
The Partnership for Quality Home Healthcare also expressed their disappointment with the home health payment rule, stating, “On top of last year’s nearly -4% cut, CMS’s decision to only partially mitigate their proposed cut to home health will cause further harm to patient access and create financial instability that will make it harder to provide care in the home.”
The Partnership CEO Joanne Cunningham also added that, “I do not understand what the disconnect is. With labor and inflation costs continuing to rise dramatically and home health providers dealing with a national healthcare workforce crisis, any cut to home health will cause further harm. To put these numbers into context, the rule finalizes a base rate year-over-year increase of less than $1 per day to care for Medicare’s sickest patients.”
Despite displeasure with the final home health payment rule, agencies and organizations must now adapt to these changes. The issue is that we are going to see a negative impact where agencies either shutter or draw back on services. This will create a chain reaction that ultimately ends with consumers either being denied the services they need or the quality of care suffering.
The Impact of the Final Rule on Home Health Agencies and Care Access
While the home health payment aggregate increase of 0.8% for 2024 may initially seem like a step in the right direction, agencies and experts within the industry are expressing significant concerns regarding the potential negative repercussions of this update. Put simply, many believe it can negatively impact the quality and accessibility of vital home health care services.
Agencies are already grappling with escalating costs due to inflation, the COVID-19 pandemic’s long-tail effects, and the persistent challenges of a workforce shortage. With operational costs rising well above 0.8%, the payment update does not align with the current economic climate and increased cost of providing care.
The final rule could force home health agencies to reevaluate their service models, particularly in rural or underserved areas where the balance between cost and care is already tenuous. There are also already issues with access to quality healthcare in rural areas, which will only be exacerbated by the updated payment rule.
Industry leaders have been vocal about their concerns throughout the entire rule making process. They argue that the decreased rate will exacerbate the decline in access to home health services, impacting the most vulnerable populations who rely on these services the most. By potentially leading to reduced staffing or service cuts, the final rule could inversely affect quality of care and increase hospital readmissions. This is all counterproductive to the overall goals of home health care and a disservice to consumers.
Overall, these concerns highlight a larger systemic issue – the underappreciation of the cost-saving and patient-centered nature of home health care. As hospitals and facilities continue to experience high patient loads, home health services offer a critical solution to alleviating these pressures. Home health denial rates are already increasing and without proper financial support, the capacity for home health agencies to take on more individuals and effectively care for those discharged from acute care settings could be undermined.
Ultimately, the final rule’s rate increase is insufficient in the eyes of many and may start a negative chain reaction. It risks shuttering agencies, reducing access to care, and undermining the industry’s ability to contribute to a more cost-effective, patient-preferred healthcare landscape.
The Critical Role of Home Health for Maintaining Independence
We have examined how the home health payment rule can impact quality of and access to care, but why does this matter? It’s simple. Home health care has become an essential spoke of the healthcare hub. It not only caters to the desire for patients to receive care in the comfort and familiarity of their own homes, but studies and pilot programs have shown that home health care produce better health outcomes. It is also essential for maintaining independence, especially among the aging population and those with chronic conditions.
What is home health and how does it achieve this? Home health care encompasses a wide range of medical and non-medical services, such as:
- Medically necessary part-time or intermittent skilled nursing care
- Physical therapy
- Occupational therapy
- Speech-language pathology services
- Medical social services
- Activities of daily living (ADLs) – non-medical
- Part-time or intermittent home health aide care – non-medical
- Durable medical equipment
The goal of home health is to facilitate a faster recovery, manage chronic health issues outside of a hospital or skilled nursing facility, and maintain or improve the current level of health. The added benefit is that home health does this all while fostering independence and dignity.
One noted benefit of home health care is that is has been shown to reduce hospital readmissions. People can receive one-on-one attention and customized care plans and the personalized approach often translates into better health outcomes. In addition, care in the home removes the risk of infectious diseases that can often spread through hospitals and other care facilities. Studies have also shown that those who receive physical therapy and continued medical care at home after a surgery are less likely to experience readmission or slips and falls.
It is important to note that these benefits also extend beyond consumers to the healthcare system. Home care helps reduce the burden on hospitals and long-term care facilities by transitioning people to their home. Many of these facilities are already at capacity and facing worker shortages, so it is beneficial to reduce patient loads. Home health care is also cost-effective, as delivering care in the home is cheaper than at the hospital or a long-term care setting.
When looking at all the benefits, it becomes clear that home health care is a necessity. And the compounding issue is that the population requiring these services is growing every year. Home health care plays an essential role in the healthcare continuum, promoting optimal health outcomes and allowing individuals to live with dignity in their own homes, and we need to be sure that these agencies and organizations have the necessary funding to not only continue providing quality services, but also expand access to them.
Advocates Perspective
While the finalized home health payment rule released by CMS brings a modest increase in payments, there are serious underlying concerns about its impact on the home health industry and the accessibility of quality home health care. Access to quality and reliable home health care is essential. It is a service that not only ensures the continuation of care in the comfort and privacy of one’s home but also improves health outcomes. The importance of home health care cannot be overstated. The issue with the final rule is that it will likely result in reduced access to care as home health agencies draw back. We’ve already seen an increase in the rejection of patient referrals 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. This proposed rate cut is only going to exasperate this issue and consumers will suffer. As we navigate the unknown impacts of the new payment rule, it is crucial for stakeholders to continue advocating for policies that support the growth and sustainability of home health services. Our aging population and those needing home-based care deserve no less than a system that can robustly support their health and independence for the long term.
Onward!
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About the Author
Fady Sahhar brings over 30 years of senior management experience working with major multinational companies including Sara Lee, Mobil Oil, Tenneco Packaging, Pactiv, Progressive Insurance, Transitions Optical, PPG Industries and Essilor (France).
His corporate responsibilities included new product development, strategic planning, marketing management, and global sales. He has developed a number of global communications networks, launched products in over 45 countries, and managed a number of branded patented products.
About the Co-Author
Mandy Sahhar provides experience in digital marketing, event management, and business development. Her background has allowed her to get in on the ground floor of marketing efforts including website design, content marketing, and trade show planning. Through her modern approach, she focuses on bringing businesses into the new digital age of marketing through unique approaches and focused content creation. With a passion for communications, she can bring a fresh perspective to an ever-changing industry. Mandy has an MBA with a marketing concentration from Canisius College.