CMS to relaunch home health demonstration

The CMS wants to revive a demonstration project that tried to prevent home health agencies from receiving improper payments.

The agency on Tuesday said it will rework a home health services demonstration that launched in 2016 and was suspended last year following complaints of reduced access to care.

"Home health has been a consistent high area of risk in Medicare," CMS Administrator Seema Verma said in a statement. "The (demonstration) offers new flexibility and choice for providers and implements risk-based changes that reward providers for being compliant with Medicare requirements."

Providers participating in the so-called review choice demonstration for home health services can have their claims reviewed before or after they are paid.

The agency's announcement comes days after the U.S. Government Accountability Office urged the CMS to launch or continue prior authorization experiments because they were starting to save money.

The CMS will relaunch the demonstration in Illinois, Ohio, North Carolina, Florida and Texas.

Home health providers in those states can opt out of the experiment entirely. However, they will receive a 25% payment cut in reimbursement for each claim they submit.

The demonstration will impact 1.3 million claims each year.

The earlier home health demonstration launched in Illinois in 2016, but was suspended before a planned expansion to Florida, Massachusetts, Michigan and Texas.

The home health industry has said the Illinois pilot showed the demonstration stifled access to needed home health services.

Federal lawmakers last year called for the CMS to scrap the demonstration and revamp it.

Home health agencies are dismayed they are the target of another federal experiment that would cut their CMS reimbursements, according to Kyle Simon, director of government affairs and communications at the Home Care Association of Florida.

"Resurrecting the (claim review) demonstration would undoubtedly be a significant administrative and cost burden for providers already operating on razor-thin and ever-reducing reimbursement rates," Simon said.

Increased pressure on their bottom lines, isn't expected to make home health companies less attractive M&A targets for other providers and insurers, according to Ana Gupte, senior analyst and managing director of healthcare services with Leerink Partners.

Late last year, Humana announced plans to buy Kindred Healthcare, a home health and hospitce company, in a $4.1 billion deal involving venture capital firms.

"The business model and rationale for a payer to acquire a home health agency is to improve chronic disease management and reduce hospital admissions and thereby get paid through improved medical underwriting margins and or share gains on their insured business," Gupte said.

The CMS asked for public input on how it can ensure the new experiment doesn't harm access to care. Comments are due July 31.

The Medicare Payment Advisory Commission and the CMS also are concerned that payments to home health agencies are too high, based on Medicare operating margins at free-standing agencies averaging 15.6% in 2015, up from 10.8% the year before.

In 2015, Medicare spent about $18.1 billion on skilled home health services for nearly 3.5 million beneficiaries, who were served by more than 12,300 agencies, according to MedPAC.

Correction: A previous version of this story referenced a home health pay model that was not finalized. This error has been corrected.