Home Healthcare industry pushes back against CMS budget neutral methodology for PDGM

Since the US Centers for Medicare & Medicaid Services (CMS) proposed payment rule was released, home healthcare players have sat in their respective “war rooms” trying to navigate the proposal. .

As vendors geared up for the unveiling of the proposal, many knew that CMS’s analysis of whether the Patient-Centered Groupings Model (PDGM) led to higher, lower or equal spend compared to the old payment model would be a major factor, according to William A. Dombi, president of the National Association for Home and Hospice Care (NAHC).

Many oppose CMS’s methodology for assessing budget neutrality, with organizations such as the NAHC voicing their concerns even before the proposed rule was published.

“When we discovered on Friday that CMS had chosen to use the same methodology that had been strongly condemned by all who had evaluated it, we had to conclude that CMS had effectively declared war on home health,” said Dombi. “I don’t mean that in an emotional sense, but in a practical sense, where the outcome of this proposal could be extraordinarily – not just disruptive – but devastating to the home healthcare community.”

He made the comments during the last NAHC webinar on Thursday.

Overall, the proposed rule comes with a decrease in payment rates of 4.2%, or $810 million less than 2022 rates.

“CMS can only do that [$810 million] adding the inflation update, so the inflation update for 2023 is only 2.9%,” Dombi said.

The proposed rule also includes a 7.69% adjustment for PDGM budget neutrality.

“It’s surprising to see, in this time of high inflation, this huge change in the level of base payment rates,” Dombi said.

Along with the changes in payout rate, CMS mostly maintained the same PDGM case mix model but, like last year, the agency recalibrated the 432 case mix weights. CMS also recalibrated the LUPA thresholds for the first time since 2020.

Dombi noted that CMS has learned the importance of maintaining “some level of stability” for service providers due to changes to the salary index last year.

“As they did in their proposal for skilled nursing facilities, hospitals, hospices and all other provider sectors where a salary index is applicable, CMS proposes to institute a permanent cap of 5% on any negative changes in the wage index that would reflect changes in labor costs,” he said.

Additionally, CMS changed the outlier fixed dollar loss to 0.44, which would then change the number of outlier episodes.

“CMS is making these changes in an effort to stay within the 2.5% of Medicare spending as the budget for outlier spending,” Dombi said.

The home health industry is currently gearing up for the nationwide expansion of the home health value-based purchasing model (HHVBP).

In the CMS proposal, the start date of January 1, 2023 remains the same, but there are some changes on the quality reports. This includes the requirement that OASIS must be performed for all patients, regardless of payer source.

Going forward, NAHC is focusing on its advocacy efforts for the home health industry to activate changes before the final rule.

“It’s not a proposal that we can just feel comfortable and relaxed going forward with,” Dombi said. “This is a rule that is going to require a significant amount of advocacy effort from all of us, in order to achieve an alternative outcome to what we see proposed here by CMS.”

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