Preliminary 2020 Claims Suggest Medicare Home Health Payment Rates Set Too Low

Published Wednesday, September 2, 2020

by Alex Hartzman

Dobson | DaVanzo analyzed preliminary 2020 Medicare Home Health claims and found that agencies may be underpaid on a case basis in 2020 due to the dual pressures of payment system reform and the ongoing COVID-19 public health emergency (PHE). Home health agencies concurrently experienced a decline in home health episode and visit volume, primarily due to the COVID-19 pandemic, but also due to issues stemming from the transition to the new home health reimbursement system—Patient Driven Groupings Model (PDGM). Under PDGM, a provider gets penalized if they deliver fewer visits to a patient than the threshold set by CMS. Prior to the pandemic-related state actions (in January and February), there were many more cases penalized for having too few visits within an episode than CMS targeted in its rulemaking; this is likely the result of PDGM but was subsequently exacerbated by the PHE.

This work, sponsored by the Partnership for Quality Home Healthcare, was submitted during the CY2021 HH PPS proposed rule public comment period and will be made available in the federal register. In it, we examine the extent to which home health agencies have conformed to behavioral assumptions, the basis of prospective CMS rate reductions in 2020. Ultimately, we found evidence that the system has a base payment rate which leads to payments that are 6% lower in implementation than expected in prior rulemaking. CMS reduced rates for 2020 by 4.36% on the basis of assumed provider behavioral responses to the new payment system.

Regardless of the cause (CMS rate reductions, implementation of the new payment system, PHE, hurricanes, and so on), average home health case payments are below the budget neutral level specified as the target spending level in the Bipartisan Budget Act of 2018. PDGM implementation and the COVID-19 PHE are entangled, making it difficult to firmly attribute the observed payment rate to one or another factor. Realistically, all healthcare providers have been affected by the PHE to some extent and it is unclear how long it will take or the extent to which it will to return to pre-pandemic activity levels.