Home health providers will receive a 0.8% Medicare reimbursement increase in calendar 2024 under a final rule the Centers for Medicare and Medicaid Services issued Wednesday.
CMS had proposed a 2.2% Medicare payment cut in a draft regulation published in June, which triggered a tsunami of criticism from home health providers and a lawsuit from the National Association of Home Care and Hospice.
Home health industry groups blasted the proposed rule, contending its flawed methodology would cause financial struggles and curtail access to care.
CMS introduced the Patient-Driven Groupings Model, which pegs reimbursements to patient characteristics, in 2020 and contended it would reduce unnecessary care and discourage providers from upcoding Medicare claims. That policy generated a significant portion of the cut CMS proposed in June, but CMS softened the blow in the regulation issued Wednesday.
The home health prospective payment final rule applies a negative 2.9% update related to the Patient-Driven Groupings Model as a factor in the net payment change, down from negative 5.1% under the proposed rule. "This halving of the permanent adjustment is in response to commenter concerns about the magnitude of a single-year significant payment reduction," CMS said in a news release.
The final regulation maintains the 3% market basket increase from the draft regulation. Combined with the effects of the Patient-Driven Groupings Model adjustment and other factors, CMS said home health provider pay would rise 0.8% next year.
“For agencies all across the country that are experiencing an 8% to 12% increase annually in what they are paying for labor, an 0.8% increase isn’t going to help them," Partnership for Quality Home Healthcare CEO Joanne Cunningham said in a statement.
“We recognize that CMS has reduced the proposed 2024 rate cut," National Association for Home Care and Hospice President Bill Dombi said in a statement Wednesday. "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. If the payment rate was truly excessive, we would not see these actions occurring."
In March, the Medicare Payment Advisory Commission advised CMS to reduce the home health base payment rate 7% for 2024. The panel concluded that home health reimbursements are too high and estimated that average Medicare margins for home health providers are about 17% this year.
Although CMS backed off from cutting home health pay next year, the industry may still face a reckoning. "CMS will have to account for the remaining permanent adjustment not applied in [calendar year] 2024, and other potential adjustments needed to the base payment rate, to account for behavior change based on analysis at the time of future rulemaking," the agency said in the news release.
Last year, CMS also initially proposed cutting home health reimbursements but eventually gave these providers a small increase.
"We think the final 2024 rates will likely force more home health industry consolidation given the pressures on margins that it will place on industry participants, particularly smaller [home health agencies] with limited operating scale," Scott Fidel, a managing director at the investment bank Stephens, wrote in an email.