CMS proposes 1.7% Medicare cut for home health providers

The Centers for Medicare and Medicaid Services is proposing a net 1.7% Medicare pay cut to home health agencies for 2025.

The proposed reduction is the sum of several factors: The agency proposes a 2.5% payment update, which is offset by a proposed 0.6% fixed-dollar loss cut and a 3.6% spending cut tied to the Patient-Driven Groupings Model. 

Related: Federal court tosses Medicare home health pay lawsuit

Home health agencies received a 0.8% pay bump for 2024 after CMS walked back its initial proposal to cut the sector by 2.2%.

This is the third year of implementation of a permanent adjustment to the 2020 model, which ties home health payments to patient characteristics rather than on therapy hours and reconfigures payments from 60-day episodes to 30-day episodes. CMS introduced the PDGM to help improve the efficiency of payments, but the agency misjudged how providers would operate within the system and has applied PDGM adjustments since 2021 to compensate.

This year’s proposed rule also includes a 4.067% additional permanent prospective rate cut for 2025 as CMS finishes implementing PDGM, which the agency says is meant to account for “differences between assumed behavior changes and actual behavior changes on estimated aggregate expenditures.” CMS applied a 3.925% reduction in 2023 and a 2.890% reduction in 2024. 

"The 2025 proposed version of Medicare home health payment rates shows the ongoing and predictable rate reductions impacting home health agencies since the beginning of the new payment model in 2020," said Bill Dombi, CEO of the National Association of Home Care, in a news release. "That decline is solely due to a fatally flawed budget neutrality methodology that CMS employed to arrive at the rate adjustments."

Joanne Cunningham, CEO of the Partnership for Quality Home Health, said in advance of the rule that the organization has encouraged CMS to spread out the PDGM implementation, but reiterated the group’s years-long concerns that the model's cuts are extremely disruptive to providers. 

“We are of course continuing to attack the methodology and make clear that we think the methodology they're using is flawed, and actually outside the parameters of the statute,” Cunningham said. “But from CMS’ standpoint, they've made clear they're finalizing it or have finalized it.”

The industry’s 2024 PDGM-related payment cuts prompted home health providers to file a lawsuit against HHS in 2023, which was dismissed after the judge said the group didn’t exhaust all possible administrative fixes before filing suit.

In Wednesday's proposed rule, CMS also proposes four new data collection items to the Quality Reporting Program focused on social determinants of health, and is proposing to add a health equity update to the home health value-based purchasing program.