The Centers for Medicare & Medicaid Services’ (CMS) proposed home health payment rule, released Wednesday, included significant cuts for the third straight year. Those cuts, among other proposed changes, raise questions over the stability of the industry in the coming years.

It has providers asking themselves and others the question: “Why us?”

For an industry that demonstrably saves money for the larger health care ecosystem, such harsh and continued cuts seem to be contradictory, home health stakeholders believe.

“These cuts are nothing short of draconian,” Stacey Smith, the vice president of public policy at AccentCare, said Wednesday.

On top of those cuts is the threat of CMS clawbacks for what the agency believes to be overpayments to home health agencies over the last five years. That clawback number has risen to $4.55 billion in total – more than $966 million than CMS previously estimated. And it will keep growing until further, temporary cuts are implemented.

CMS has expressed that it doesn’t want to put multiple cuts – of the permanent and temporary variety – on top of each other. But some providers see more cuts, for more years, that will keep them in payment purgatory. They would rather rip the Band-Aid off.

“CMS is not proposing the implementation of temporary adjustments, now estimated at a truly bewildering $4.5 billion,” Stephens wrote in an analyst’s note yesterday.

“Bewildering” and “draconian” feel like two descriptors of the 2025 proposed rule that most providers and advocates would agree with.

In this week’s exclusive, members-only HHCN+ Update, I’ll dive deeper into the cuts, but also consider a few other noteworthy proposals included in the rule, including changes to the Home Health Value-Based Purchasing (HHVBP) model, the Conditions of Participation (CoPs) and more.

Predictably unsustainable

In 2022, CMS proposed a 4.2%, or $810 million, decrease to aggregate payments for 2023. It ultimately finalized a permanent behavioral adjustment cut to the Patient-Driven Groupings Model (PDGM), but also finalized a 0.7%, or $125 million, increase.

In 2023, CMS proposed a 2.2%, or $375 million, decrease to aggregate home health payments for 2024. It finalized a 0.8%, or $140 million, increase compared to 2023 aggregate payments, while again implementing permanent cuts.

Wednesday, it proposed a 1.7%, or $280 million, decrease to aggregate home health payments for 2025.

The final rule is expected in late October or November, but the jig is up. Providers believe CMS, to push its cost-cutting agenda, lessens the blow in the final rule to get provider and advocate heat off its back.

And with that, it’s time to evoke the Paul Kusserow quote that I revisit when proposed and final payment rules are released.

“My concern is the game that we play with CMS,” Kusserow – then the CEO of Amedisys Inc. (Nasdaq: AMED) – told me two winters ago. “It’s a long, exhausting game. They come up with a proposed significant cut. The whole industry gets all worked up about it and runs to Washington. I’ve done this, and everybody in our business has. We lobby, lobby lobby, they get a lot of pressure, and then they come back with something that is just mediocre. It’s not enough for us to get Congress all worked up about it to pass legislation. But it’s enough to keep us in purgatory. We have to get through this dribbling sense of inadequate reimbursement.”

While providers have become acutely aware of this game, it appears CMS will continue to play it.

In this game, though, CMS still slides in permanent cuts that will have long-lasting effects on the home health industry. And what’s most disheartening about that for providers is the fact that home health care is one of the only industries that is both future-facing and cost-saving.

“Home health care is a proven, efficient spend in that it reduces the total health care cost for the entire system,” Choice Health at Home CEO David Jackson told me. “It continues to be frustrating that we are looked at in a silo, and not seen for the significant value that we bring. … It’s frustrating for providers, who are seeing an increased difficulty in retaining and maintaining staffing levels that are sufficient to serve the public.”

Indeed, home health care does save health care systems and health care payers money. It’s why private payers want more home health services for their members, not less.

It’s also why HHVBP saved Medicare hundreds of millions during its demonstration period, and why it is expected to save Medicare billions more over the coming years. It’s important to note that the home health-focused HHVBP is among the few CMS Innovation Hub initiatives that has produced savings – a fact that recently led to its head, Elizabeth Fowler, having to testify in front of Congress.

During that hearing, Republican Chair of Energy and Commerce Cathy McMorris Rodgers (R-Wash.) said she has “a hard time believing any objective observer could look at the results thus far and describe CMMI as a success.”

What’s more, though more home health care is good for the overall system, Medicare fee-for-service cuts almost guarantee there will be less services to go around for an aging population moving forward. That’s particularly the case because of Medicare Advantage (MA) penetration, with MA plans already paying far less for services than traditional Medicare.

It is not CMS’ job – it has asserted – to consider MA payments for home health services. Because of that, an incomplete picture of home health agency profits are often painted by the Medicare Payment Advisory Commission (MedPAC) and others.

“MedPAC needs to be instructed to include all Medicare reimbursements and related costs rather than just Part A,” VitalCaring President Luke James previously told HHCN. “Part C — or Medicare Advantage — now represents more than half of the Medicare beneficiaries in our country. Home health providers didn’t ask for this reality, nor did they cause it. But the industry is reeling from the numerous negative implications this reality has caused.”

Instead, providers are banking on higher rates from MA plans, as well as tech investments to reduce costs on the back end. But there’s no guarantee those measures alone will be enough, particularly for the thousands of providers without scale.

“Mom-and-pop agencies are a necessity for the delivery of care in the United States,” Jackson said. “They serve smaller communities, niche communities. I’m always fascinated at what a nurse in rural East Texas or West Texas has been able to do, that a big company just never would have done. … That is something I think we need to foster in the system.”

What else is in the proposed rule

Every year, in addition to the estimated decrease or increase in base payment, there are many other elements of a proposed rule to consider.

The now-nationwide HHVBP model could change. CMS is accepting comments for consideration around future performance measure concepts. In the past, some providers argued that certain HHVBP measures were out of home health providers’ control. For instance, patients in extremely poor condition when received by home health agencies are sometimes unlikely to get better, no matter how exemplary the care they receive is.

In addition to that request for information, CMS is also considering how it could further embed health equity measures into HHVBP.

Jackson noted that cuts on their own have the chance to worsen health equity.

“Nurses are going to be magnetized to these more affluent markets,” Jackson said. “It’s going to hurt the ability to obtain talent in rural markets, in markets that have difficulty finding staff. That’s going to have a negative impact on health equity.”

That will likely be exacerbated by the minimum staffing level requirement in nursing homes, which will naturally make the competition for nurses more fierce in post-acute care.

CMS is also taking a greater look at home health access. In the past, MedPAC has viewed access based on how many agencies exist per U.S. county. But counties vary by size, as do home health agencies. Providers have argued that access is worse off than the agency-per-county metric would suggest.

“We are seeking public comments on factors that influence the services HHAs provide, the referral process, limitations on patients being able to obtain HHA service, such as rural location and availability of staff, plan of care development, and the HHA’s communication with patients’ ordering physicians and allowed practitioners,” the 250-page proposed rule read. “We ask the public for data, detailed analysis, academic studies, or any other information to support their comments that provide a direct link to patient health and safety.”

Outside of questions around initiation to care, CMS specifically wants to know the answer to this question: “What challenges, barriers, or other factors, such as workforce shortages, particularly in rural areas, impact rehabilitative therapists and nurses in meeting the needs of patients at the start of care and early in the plan of care?”

Of note is also that CMS seems to accept some industry data – for instance, regarding health equity – but not all. Last year, CMS scoffed at most of the data that the industry put forth around referral rejection rates and contemporary home health access.

CMS also proposed an “acceptance to service” policy, which it believes at least some home health agencies already have.

“This new standard would require the HHA to develop, implement, and maintain through an annual review a patient acceptance to service policy that addressed criteria related to the HHA’s capacity to provide patient care, including, but not limited to, anticipated needs of the referred prospective patient, case load and case mix of the HHA, staffing levels of the HHA, and competencies and skills of the HHA staff,” the proposal read. “In addition, we propose the HHA would have to make public accurate information about the services offered by the HHA and any limitations related to the types of specialty services, service duration and service frequency.”

The staffing-specific requirements could be the successor to the nursing homes’ minimum staffing level mandate. While it’s unlikely a similar mandate would come into home health care, given its one-to-one nature, a more stringent policy around staffing capabilities could come to fruition.

Potential mitigators

More lobbying efforts will follow this proposed rule. The Partnership for Quality Home Healthcare CEO Joanne Cunningham believes that this year being an election year will actually bode well for the industry.

Jackson said the same.

“In an election year, we need to be loud,” he said. “We need to be vocal.”

In the past, the industry has had no issue getting measures like The Preserving Access to Home Health Act introduced. The issue has been getting it to move after introductions in the House and Senate.

CMS may again reduce the cut by the time the rule is finalized. But it’s clear that the agency is not budging on its behavioral adjustment thesis.

Despite it being unlikely, Congressional action may be home health providers’ best bet in 2024.