CMS on Monday (July 6) proposed cutting home health pay by 1.72 percent in each of two years on top of the pay rebasing that industry expected. The agency also proposed testing a value-based purchasing model that would put home health companies at risk for up to 8 percent pay cuts by the end of the pilot, which is far higher than similar programs for other types of providers.

CMS proposed the additional pay cuts to get back what Medicare paid in past years for what the agency believes was due to home health providers overcharging Medicare by coding patients as sicker than they really are. The pay cut would reduce Medicare spending by $300 million next year, CMS estimates, and the following year it would likely save a similar amount.

“[W]e propose to reduce to the national, standardized 60-day episode payment rate in CY 2016 and CY 2017 by 1.72 percent in each year to account for estimated case-mix growth unrelated to increases in patient acuity (nominal case-mix growth) between CY 2012 and CY 2014,” the proposed rule states.

Industry disagrees with that assessment. Bill Dombi, vice president of law for the National Association for Home Care and Hospice, said patients are getting sicker and home health providers are coding appropriately.

The other big-ticket item in the proposed rule is a pilot that CMS plans to run in nine states: Massachusetts, Maryland, North Carolina, Florida, Washington, Arizona, Iowa, Nebraska and Tennessee. Much like Medicare initiatives in other sectors, such as for nursing homes and hospitals, the Home Health Value-Based Purchasing model would tie pay to performance. CMS proposes measuring performance on 29 outcome and procedural measures.

Dombi noted that hospitals still aren’t subject to even 2 percent pay cuts for poor performance. The design of the nursing home value-based purchasing model is finished but the program hasn’t taken effect. When it does, nursing homes risk is capped at 2 percent, Dombi said.

Conversely, home health companies would be at risk for up to 5 percent of their pay at first, rising to 8 percent by the 2022 performance year. Next year would be the first performance year, and CMS would begin adjusting pay based on 2016 performance in 2018. CMS estimates the initiative would save some money by reducing Medicare spending in other sectors, such as hospitals. However, the program is budget neutral to the home health sector. Money cut from home health providers for poor performance is given to home health providers that perform well.

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