Home Care Technology: The Rowan Report

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by Tim Rowan, Editor

In a 223-page document, CMS issued its plan for reimbursing Home Health providers in 2023. While it may not give providers reason for a sigh of relief, it does at least offer a bit of a breather. The draconian cuts in the proposed rule were cut in half, with the rest looming like the sword of Damocles over Calendar Year 2024.

As always, NAHC President Bill Dombi was able to synthesize the tome for us:

"First, CMS bumped up the proposed adjustment from 7.69% to 7.85% as a result of further data from 2021. Then, CMS lowered the 2023 adjustment to 3.925% (one-half of 7.85) based on its view that HHAs could not withstand the full adjustment in the first year of adjustments. From that point, CMS applied adjustments from the case-mix weight recalibration, wage index update, and the inflation update."

The net outcome can be found on page 141:

TABLE 17: CY 2023 NATIONAL, STANDARDIZED 30-DAY PERIOD PAYMENT AMOUNT

CY 2022 National Standardized 30-Day Period Payment	CY 2023 Permanent BA Adjustment Factor	CY 2023 Case-Mix Weights Recalibration Neutrality Factor	CY 2023 Wage Index Budget Neutrality Factor	CY 2023 HH Payment Update	CY 2023 National, Standardized 30-Day Period Payment
$2,031.64	0.96075	0.9904	1.0001	1.040	$2,010.69

PREDICTING YOUR BEHAVIOR

To arrive at a behavioral adjustment factor, the Final Rule explained, CMS "compared the CY 2018 and CY 2019 simulated 30-day periods of care with behavior assumptions applied and actual CY 2020 and CY 2021 30-day periods of care." This methodology, CMS said, found that the three assumed behavior changes did occur as a result of the implementation of the PDGM.

"By controlling for therapy levels, we were able to determine the change in 60-day episode case-mix weights was largely driven by therapy utilization. The decrease in therapy visits led to a decrease in case-mix weight, and therefore, a decrease in aggregate expenditures under the pre-PDGM HH PPS."

CMS reminded readers (p. 26) that it is required to estimate each year's expenditures in a budget-neutral manner, but it is not required to actually spend the entire estimated amount. E.g., in 2020, CMS estimated Home Health costs at $16.2 billion, but actual costs came to $15.1 billion, largely due to its inaccurate forecast of HHA behavioral changes. The 2023 final rule document makes clear that CMS is not required to "make up the difference."

In response to comments submitted by providers and associations, CMS justified one additional downward adjustment to the $2,010.69, 30-day payment rate. (p. 122) Reminded that Home Health is a labor-intensive service, and that labor represents 75 percent of HHA costs, commenters suggested that Home Health should not be subject to the so-called "productivity adjustment." CMS responded that Congress, through Section 1895(b)(3)(B) of the Social Security Act, requires CMS to ignore industry-specific labor costs and adjust payments based on nationwide productivity standards that take the entire economy into account.

REASON FOR HOPE?

In discussing the coming Home Health Value-Based Payment system, CMS seemed to acknowledge for the first time that in-home care reduces overall Medicare costs by reducing hospital and SNF payments.

"The overall economic impact of the expanded HHVBP Model for CYs 2023 through 2027 is an estimated $3.376 billion in total savings to FFS Medicare from a reduction in unnecessary hospitalizations and SNF usage as a result of greater quality improvements in the HH industry."

PERHAPS NOT:

The document (p. 8) followed that hopeful statement with a clarification about what it intends to do with its $3.376 billion savings, "As for payments to HHAs, there are no aggregate increases or decreases expected to be applied to the HHAs competing in the expanded Model."

EDITOR'S COMMENTS

When Congress wants to influence citizen behavior, it modifies IRS rules. For example, Congress uses IRS law to encourage charitable giving, corporate investment, home-buying, and moving from fossil fuels to renewable energy sources. Likewise, when Medicare providers see a change from care practice that is reimbursed and care practice that is not, they change their behavior in response to the financial incentive.

Hospitals changed from typical 10-day to more frequent 3-day lengths of stay when DRGs were introduced. HHAs went from 10 PT visits to 14 when CMS changed that incentive. HHAs, of course, were scrutinized and often punished for that predictable behavior change, though hospitals were not subjected to the same scrutiny in the mid-80's for sending patients "quicker and sicker" to Home Health.

Given the reality of this known, longtime human behavior, this writer finds it odd that CMS expresses surprise when a payment change results in HHA clinical behavior change. One is reminded of Casablanca's Captain Renault. "I'm shocked, shocked!" When people are paid to provide a clinical service such as physical therapy, they will provide it. When they are not paid to provide PT, they will get CMS's message and stop providing it.

However, CMS does not employ the usual tactic of watching to see behavior change and then moving to correct it. CMS guesses how a payment change might result in HHA behavior change and pre-emptively reduces reimbursements, just in case. This does not always work out well for CMS. In the 2023 final rule, CMS struggled to justify its billion-dollar over-estimate of how HHAs would change behavior in response to 2022 reimbursement rules:

"In other words, we are not required to compare our original estimated aggregate expenditures (estimated at $16.2 billion) to actual expenditures (that is, $15.1 billion), and make up the difference. Rather, under the statute, we re-estimate aggregate expenditures under the pre-PDGM based on actual behavior changes, as derived from actual claims."

©2022 by Rowan Consulting Associates, Inc., Colorado Springs, CO. All rights reserved. This article originally appeared in Home Care Technology: The Rowan Report. homecaretechreport.com One copy may be printed for personal use; further reproduction by permission only. editor@homecaretechreport.com