CMS proposes $180 million pay cut for home health

posted by: Amed Realty in Uncategorized


By Virgil Dickson and Lisa Schencker  | June 27, 2016

Home healthcare agencies may see a 1% drop in Medicare reimbursement in 2017, the final year of cuts meant to recoup previous overpayments.

The proposed rates—which would mean Medicare would pay home health agencies $180 million less next year than in 2016—were published the same day that the U.S. Supreme Court decided not to hear a case challenging a federal labor rule that homecare providers say is harming their businesses.

The Affordable Care Act mandated the reduction to address Medicare overpayments for home health services dating back to 2000.

The CMS cut payments by $260 million for 2016, $60 million for 2015 and $200 million for 2014.

Margins for home health agencies—the difference between providers’ costs for providing care and Medicare’s payments to providers— averaged 17.2% for freestanding home health agencies.

Since 2002, about 500 home health agencies a year have signed up for Medicare, according to a December 2014 Medicare Payment Advisory Commission report.

But the cuts appear to have weeded out some providers. In 2014, the CMS estimated there were 11,781 home health agencies caring for Medicare beneficiaries. That figure dropped to 11,400 in the estimate issued Monday. The difference may also reflect moratoria Medicare placed on new providers in several areas identified as hot spots for fraud.

The proposed payment reduction is not the only financial challenge facing the industry. On Monday, the U.S. Supreme Court decided it would not hear a casechallenging a new Department of Labor rule that requires higher wages for many home care workers — those who provide non-medical help to clients such as cleaning, cooking, dressing and bathing.

Employers must pay minimum wages and overtime to so-called companionship workers providing “fellowship, care and protection.” Such workers had long been exempt from minimum wage and overtime pay protection.

The Supreme Court’s refusal to consider the case means the rule will remain in place.

Workers groups have advocated for the rule, saying home care workers deserve fair pay. They say boosting wages will ultimately help the industry by stemming worker turnover and making such jobs more desirable.

Industry groups, however, say many agencies have had to cut workers’ hours, reschedule cases and/or raise fees since the new requirements went into effect. Part of the problem is that most states have not boosted Medicaid funding to help agencies cope with the changes.

Monday’s proposed rule also provides new details on a mandatory value-based purchasing pilot designed to encourage greater quality in home health services. The initiative was unveiled in the 2016 home health payment rule.

The CMS said Monday that all Medicare-certified home health agencies in Arizona, Florida, Iowa, Maryland, Massachusetts, Nebraska, North Carolina, Tennessee, and Washington will participate in the model.

Home health agencies in these states will see their rates adjusted annually up or down depending on whether they meet certain performance metrics.

The CMS would apply a 3% annual payment reduction or increase to home health agencies in the nine states starting in 2018. The payment adjustment would increase to 8% in 2022.