A proposed payment change by the Centers for Medicare and Medicaid Services would cut $350 million from payments to home health agencies while establishing a similar value-based reimbursement model that is being rolled out across the industry.

CMS also said it applied a rebasement adjustment, a payment cut to recoup high reimbursements made in the past, for the third year of the planned four-year adjustment. As a result of that, and a changing case-mix, CMS plans to cut payment for 60-day care episodes by nearly $81, or 1.72 percent. The agency said the proposed rule would save the government $380 million.

According to CMS, about 3.5 million beneficiaries receive home health services from more than 11,850 home health agencies in the United States, costing Medicare $17.9 billion a year.

In addition to the rate cuts, CMS said it would create a value-based purchasingsystem similar to what hospitals are experiencing.

The Home Health Value-Based Purchasing model would be set up in nine states across the country and require facilities to shift some of their payments to value-based instead of fee-for-service. Participants would see payments adjusted by 5 percent in each of the first two payment adjustment years, 6 percent in the third year and 8 percent in the final two payment years.

The program would be tied to the Home Health Quality Reporting Program, which requires all agencies to submit data on varied patient conditions and outcomes. The proposed rule would standardize the reporting.

Agencies that don’t submit data could see a 2 percent reduction in their payment.

Home health agencies have said they are already struggling with costs. In fact, a recent study by the Partnership for Quality Home Healthcare found profit margins for publicly traded home health companies averaged just 2.4 percent in 2014 while profit margins have fallen by two-thirds over the past five years, from 7.1 percent in 2010 to 2.4 percent in 2014, according to the analysis.

At the same time, the industry has been hit with major fraud settlements. The federal government recovered $186 million in 2014 from civil fraud Medicaid cases involving home health care agencies, according to the Office of the Inspector General.

Click here to see the original article on the Healthcare Finance News website.