Dive Brief:

  • A proposed rule issued by the Centers for Medicare and Medicaid Services on Monday would cut Medicare rates for home health agencies by $350 million while simultaneously rolling out a new value-based purchasing system created by the Affordable Care Act.
  • The third year of a four-year “rebasing” of the 60-day home care episode rate—intended to recoup several years’ worth of overpayments—kicks in under the 2016 payment rule for the Home Health Prospective Payment System.
  • The proposal also includes a 1.72% cut to the standard episode rate in 2016 and 2017 to counter what the agency calls “nominal” growth in case-mix intensity. In other words, CMS says home-health providers are billing Medicare for more expensive patients than there actually are.

Dive Insight:

According to CMS, Medicare pays almost $18 billion for home-health services for about 3.5 million individuals—a big chunk of change. Add that to the fact the agency is also concerned about systemic fraud in care delivery and it seems unlikely that the agency is going back off of continued cuts in this area ($350 million is a big jump off of the $60 million in cuts home health faced this year).

Home health providers are denying that they are overpaid and insist that they help hold down overall costs by keeping patients out of the hospital. According to the Visiting Nurse Associations of America, rebasing will eventually leave providers with a -9.77% margin on Medicare patients—resulting in closures. The number of home health agencies dropped from 11,781 in 2014 to 11,432 this year.

The new value-based purchasing model will be administered by the CMS Innovation Center and would apply a 5% annual payment reduction or increase for home health agencies in nine randomly selected states. That adjustment would jump to 8% in later years.

Comments on the proposed rule are due September 4.

Want to read more? You may enjoy this story about the federal crackdown on home health Medicare fraud.

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Modern Healthcare (Subscription Required): Home health agencies face $350 million Medicare cut