The U.S. Centers for Medicare & Medicaid Services (CMS) published its FY 2025 home health proposed payment rule Wednesday. With it, the agency signaled that more significant cuts could be on the way for providers.

To rebalance the Patient-Driven Groupings Model (PDGM) and make it budget neutral, at least according to its internal methodology, CMS is proposing a permanent prospective adjustment to the CY 2025 home health payment rate of -4.067%.

For CY 2023 and CY 2024, CMS previously applied a 3.925% reduction and a 2.890% reduction, respectively.

“This adjustment accounts for differences between assumed behavior changes and actual behavior changes on estimated aggregate expenditures due to the CY 2020 implementation of the PDGM and the change to a 30-day unit of payment,” CMS wrote in a fact sheet on the proposed rule.

The CMS proposed rule includes a CY 2025 home health payment update of 2.5%, which is offset by an estimated 3.6% decrease related to the PDGM rebalancing and an estimated 0.6% decrease that reflects a proposed fixed dollar loss.

Overall, CMS estimates that Medicare payments to home health agencies in CY 2025 would decrease in the aggregate by 1.7%, or by about $280 million, compared to 2024 levels.

Continued cuts

Over the last few years, CMS has generally proposed large cuts, then finalized smaller cuts. But even when the cut is lowered between the proposed and final rule, providers lose out on those finalized cuts.

So, for instance, even a 1.7% cut may not appear very large. But an over 4% permanent cut is extremely significant.

Additionally, CMS also mentioned the clawbacks it intends to collect from the industry for perceived past overpayments. Those now sit at about $4.55 billion.

“The Administration has repeatedly expressed its support for care in the home, recognizing it as a high quality, lower cost alternative to institutional care settings that expands access to Medicare beneficiaries in the location in which they prefer to receive care: Their homes,” Stacey Smith, the vice president of public policy at AccentCare, said in a statement shared with Home Health Care News. “The home health community has repeatedly offered solutions to CMS that would reduce spending, while at the same time maintaining payment levels for those agencies that deliver high quality care and play by the rules. Yet CMS persists in its mathematical gymnastics that will give rise to nothing short of inferior health outcomes, lower patient satisfaction and stranding at-risk, older adults in higher cost, institutional care settings.”

Smith went on to describe the cuts as “draconian,” and called for Congressional action.

Home health access has been reduced and referral rejection rates have skyrocketed over the last few years, partly due to cuts. Providers have advocated against further cuts – and potential clawbacks – nonstop since CMS began revisiting the PDGM framework.

“For the third consecutive year, CMS has proposed cuts that make it significantly harder for home health providers to meet the care demands for an increasingly complex and aging patient population,” Partnership for Quality Home Healthcare CEO Joanne Cunningham said in a statement. “The status quo of continuous cuts is unsustainable: Medicare’s continued application of permanent cuts to home health further undermines a community that is facing historic labor costs and workforce shortages. We fear that CMS’s proposed actions for 2025 will have unintended consequences on older Americans who want to receive care at home.”

In addition to the cuts, CMS is also proposing: a recalibration of PDGM case-mix weights; updates to the Low-Utilization Payment Adjustment (LUPA) system, including an occupational therapy LUPA add-on factor; further delineations for the home health wage index; and more.

“Each of the 432 payment groups under the PDGM has an associated case-mix weight and LUPA threshold,” CMS explained. “CMS’ policy is to annually recalibrate the case-mix weights and LUPA thresholds using the most complete utilization data available at the time of rulemaking. In this proposed rule, CMS is proposing to recalibrate the case-mix weights – including the functional levels and comorbidity adjustment subgroups – and LUPA thresholds using CY 2023 data, to more accurately pay for the types of patients HHAs are serving.”

The association of nonprofit providers, LeadingAge, also pointed out the mounting staffing pressures that are materializing in home health care, due to payment cuts and other regulatory decisions. 

“As the only association that represents providers across multiple aging services care settings, we take a holistic view of proposed rules. Payment decreases, including this proposed 1.7% cut to home health providers, jeopardize older adults’ and families’ ability to access needed care and services,” LeadingAge CEO Katie Smith Sloan said in a statement. “Put today’s action from CMS into context: registered nurses are a core component of home health care. Our mission-driven and nonprofit members battle daily in a very competitive labor market to recruit and retain RNs, which are in short supply. Coupled with the Biden administration’s nursing home staffing rule’s nurse-onsite 24/7 component, already stiff competition for RNs will only grow. A payment decrease presents real challenges for our members. Without staff, there is no care; ultimately, older adults and families will suffer.”