The U.S. Centers for Medicare & Medicaid Services (CMS) released a fairly negative proposed payment rule for the home health industry on Friday. Specifically, the proposal includes a 4.2% decrease to payment rates that, if finalized, dumps cold water on an industry that’s just starting to heat up again.
Though CMS’ unveiling of the proposed payment rule is less than a week old, it has already been met with a flurry of strong criticism from home health industry stakeholders.
“The entire home health community is in a bit of a tailspin, given the release of the rule,” Joanne Cunningham, the CEO of the Partnership for Quality Home Healthcare, told Home Health Care News. “We are continuing to peel back the analysis and get a full understanding of all of the components of it, but it certainly has been a real stemwinder of a reaction from urban, rural, big and small home health agencies across the country.”
Indeed, many industry stakeholders have noted that the proposed payment rule will place pressure on providers and hinder their ability to deliver quality care in light of COVID-19 related disruption in recent years.
“The proposed rule is clearly going to make the exit out of the pandemic-related pressure that the industry has been experiencing after the last couple of years that much more challenging,” Scott Fidel, an analyst at the private investment banking company Stephens, told HHCN.
Across the industry, there’s been increased concerns that CMS would push for a recalibration of the Patient-Driven Groupings Model (PDGM), but the extent of the federal agency’s proposal was far worse than even some of the more pessimistic expectations, according to Fidel.
Additionally, many providers believe that it doesn’t reflect the operational and inflation pressures that the home health industry has been experiencing.
“It’s clear that CMS was conducting the analysis on their statutory guidance framework for budget neutrality, and were conducting the types of analysis they use to determine overall costs on the PDGM model,” Fidel said. “It just didn’t seem like there was a recognition of how much cost inflation has accelerated in 2022.”
In the U.S., the annual inflation rate checked in at 8.6% in May 2022. This is the largest annual increase since December 1981.
In general, CMS updates the home health rates by an inflation index every year, but Cunningham previously pointed out that the updates have not kept up with the increased costs of staffing, medical supplies and fuel.
Similar to Fidel, Cunningham also believes the conclusion that home health organizations have been overpaid is at the heart of the disagreement between CMS and providers.
“We have produced additional data analysis on how the system performed, in particular examining whether the system met the requirements to be budget neutral from one year to the next, which is a requirement in the home health statute,” she said. “Our data is demonstrating a whole different story, which is that home health was actually underpaid in 2020 by 2.5%.”
Cunningham also noted an “inherent conflict” of the proposed rule and its various components.
“On the one hand, CMS is proposing some sizable reductions, not just in 2023, but in years beyond,” she said. “On the other hand, [HHVBP] is set to expand to all 50 states starting in 2023. CMS is projecting that home health will deliver [millions] in savings [due to] avoided hospitalizations, readmissions and so forth. To me it’s a startling dichotomy that I find in tremendous conflict.”
In other words, CMS cannot impose this level of reduction and constriction on a system and then expect that providers will have the same capacity to deliver care services, according to Cunningham.
Along these lines, Fidel says investors are questioning the message CMS is getting across with its proposal.
“I’ve had really countless conversations with large investors in the industry since the rule came out,” he said. “The investment community has felt that health care policymakers, government payers and managed care payers have all been in alignment with the view that increasing access to home-based care and home health is a positive attribute for the health care system. … There’s a real struggle right now with the message that CMS is sending here.”
Looking ahead, home health stakeholders will be busy attempting to educate congressional policymakers and the Biden administration about the impact the proposal could have on access to care services.
“We will also make formal comments to CMS outlining our issues and concerns and also provide data to back it up,” Cunningham said. “We hope our comments are listened to and that CMS takes a good look at the fallout that could occur with respect to patient care and access to care.”
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