CMS Proposes 2.7% Cuts to Home Health Agencies in 2024 PPS

Last Friday, the Centers for Medicare and Medicaid Services (CMS) released a proposed rule for the 2024 Home Health Prospective Payment System. The proposal shocked the home health industry by enforcing an aggregate decrease of 2.2% for Medicare payments to home health agencies (HHAs).

The cut arises from a proposed pay bump of 2.7% and 0.2% increase for an update to the fixed-dollar loss ratio, in addition to a 5.1% decrease from a permanent behavior assumption adjustment. From the CMS Press Release:

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. … CMS previously finalized, for CY 2023, a permanent adjustment that was half of the estimated required permanent adjustment.

Fierce Healthcare explains that CMS was required to create the new assumptions about behavioral changes and change the pay rate from a 60-day period to 30 days. The agency also proposes revisions to the home health market basket, the labor-related share, the Patient-Driven Groupings Model (PDGM), the low utilization payment adjustment thresholds and comorbidity adjustment subgroups for CY 2024.

The home health care industry expressed outrage at the cuts via a statement from William A. Dombi, president of the National Association for Home Care and Hospice:

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.

Senators Debbie Stabenow (D-Mich.) and Susan Collins (R-Maine) have proposed a bill that would remove CMS’s ability to set payment rates for home healthcare, Home Health Care News reports. The bill was meant to intervene on behalf of HHAs prior to the release of the proposed rule.

The home health care industry is still reeling from a CMS proposal that would require at least 80% of Medicaid payments to go to direct care workers rather than company overhead. According to Axios, HHAs have called the policy “untenable,” as Medicaid is the primary payer for long-term care services.

CMS is under fire more broadly for its market basket calculations in CY 2024 prospective payment system proposals in other sectors as well. Modern Healthcare notes that the comments of all the proposed rules for nursing homes, inpatient rehabs, providers and trade groups are urging CMS to take inflation more seriously in their proposals. For example, from the American Hospital Association’s comment letter regarding the skilled nursing facility PPS proposed rule:

We remain concerned that CMS’ market basket approach continues to show lags in recognizing inflationary trends and may not fully capture the rising costs of care.