What the Potential Cut to Medicare Home Health Payments Means for Home Health Billing

Home health companies will want to pay attention to recent news coming from the White House. This is because it can impact your reimbursement as well as your approach to home health billing and home health coding.

The Biden administration has announced plans to cut $810 million from Medicare payments to home health agencies as part of a set of new changes to payment calculations. The proposed changes to the rule, the 2023 Home Health Prospective Payment System (HH PPS) Rate Update, which was released in June, updates rates for home health agencies and makes a call for comments on the collection of telehealth data in home health claims.

A Drop in Payments
CMS has proposed a decrease of 4.2% in Medicare payments to home health agencies for the 2023 year—amounting to a decline of $810 million in comparison to 2022 rates. They are also suggesting a 2.9% increase in home health payments, an increase that was ultimately negated considering the 6.9% drop that reflects adjustments for home health behavioral assumptions.

These changes are a result of reforms that launched back in 2020 around home health payments. They are in turn related to a spending law from 2018 that required CMS to “better align payments with patient care needs, especially for clinically complex beneficiaries that require more skilled nursing care rather than therapy.” This required CMS to create new assumptions about home health behavioral changes and to also shift the payment rate to a 30-day period from a 60-day unit. Each year, CMS has to determine the impact of differences between actual changes and assumed behavioral changes, ongoing from the year 2020 to 2026.

But for 2023, CMS is kicking off a re-pricing methodology that will determine the impact of behavior changes for estimated aggregate expenditures. As a result of this new method, CMS has proposed a permanent downward adjustment to the 30-day rate of 7.69%. According to the CMS fact sheet,  “Collecting data on the use of telecommunications technology on home health claims would allow CMS to analyze the characteristics of the beneficiaries utilizing services furnished remotely, and could give us a broader understanding of the social determinants that affect who benefits most from these services, including what barriers may potentially exist for certain subsets of beneficiaries.” [1]

Provider Reactions
Providers, who are responsible for navigating these changes through home health billing strategies, have voiced their concerns – concerns that they have been vocal about since the skilled-nursing facilities and hospice rules were released and the rebalancing of the Patient-Driven Groupings Model (PDGM) got their attention. The president of the National Association for Home Care & Hospice, Williams A. Dombi, released a comment to Home Health Care News, “We are very disappointed in the CMS proposed rule issued today. The stability of home health care is at risk as a consequence of CMS proposing the application of a fatally flawed methodology for assessing whether the PDGM payment model led to budget neutral spending in 2020. That has been made clear to CMS in the 2021 rule making and in multiple discussions since.”

Providers are probably concerned that the proposed rule doesn’t account for the complex factors they have to consider in maintaining operations, including increased labor costs, inflation rates, and the ongoing costs associated with the COVID-19 pandemic. Dombi stressed the increased costs for staff and transportation in particular [2].

How Home Health Companies Can Respond
Home health leaders are now forced to ask questions of how to balance their costs, including looking at home health billing and home health coding staff, and considering working with home health billing services among other home health solutions.

One strategic focus that will be most valuable right now, is monitoring and adjusting cash flows so that they are as optimized as possible and so that the coming changes don’t have as much of an impact. Leading advisors suggest avoiding pitfalls. It’s important to clean up common issues that you might have in cash flow management. This includes [3]:

Adjusting to No-Payment RAPs
No-payment RAPs have caused many agencies significant difficulties. Some have seen up-front cash flows drop from 60% to 20% to nothing in just a couple of years. If you aren’t aware of how this change has affected your cash flows, now is a good time to take a look.

Navigating an Increase in Managed Care
Because of an increase in managed care, you’ve likely noticed blows to your cash flows including delayed payments – a change that’s put more burden on you on both the front and back end. With patients constantly changing payers, your work has increased and become more complex, including on the home health billing side.

Adjusting to Medicare Claim Issues
Problems with Medicare claims are on the rise, and home health companies are the ones that have to make the adjustments. Some providers have seen issues with information processed incorrectly or incorrect payments going to providers. This has meant that home health companies have had to be vigilant in their revenue cycle, often beyond the phase of home health billing and home health coding. Some providers have seen Medicare paying old rates weeks into new regulations.

So where does this leave home health providers? You will need to stay on top of Medicare updates and issues, adjusting your home health billing and coding practices to keep up. You will also need to make sure communication between clinical operations and revenue cycle keeps up with the growing complexities on the insurance side to ensure that your home health coding practices are always up to speed.

And as you move forward, keep in mind that many providers investigate outsourced home health solutions to home health coding companies or something similar to keep up with growing complexity that they’d rather not manage in house. To find out how we can help you on that journey, contact us today.

[1] U.S. Department of Health and Human Services, “Social Determinants of Health,” 20 June 2022. Available: https://health.gov/healthypeople/priority-areas/social-determinants-health.
[2] U.S. Centers for Medicare & Medicaid Services, “Using Z Codes: The Social Determinants of Health (SDOH) Data Journey to Better Outcomes”. Available: https://www.cms.gov/files/document/zcodes-infographic.pdf.
[3] A. Robeznieks, “Social determinants of health and medical coding: What to know,” American Medical Association, 13 May 2022. Available: https://www.ama-assn.org/practice-management/cpt/social-determinants-health-and-medical-coding-what-know.

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