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Home health care agencies will see $810 million in net Medicare payroll cuts next year, according to a draft policy from the Centers for Medicare and Medicaid Services announced Friday.

The proposed rule calls for a 4.2% reduction in overall reimbursement, which is primarily due to a negative payroll adjustment to account for the increase in costs, according to CMS, as a result of the newly implemented payment system.

In 2020, CMS introduced a new reimbursement policy for home care agencies that pays them based on patient characteristics rather than the number of therapy hours provided. CMS envisioned that the new model, known as the patient-managed grouping model, or PDGM, would force home health agencies to bill with the highest pay codes to maximize reimbursement.

The patient-centric grouping model cannot lead to higher Medicare costs, so CMS reduced home care agency fees by 4.36% starting in 2020 to account for the expected response from home care agencies to this model.

Starting next year, CMS is proposing a 7.69% cut to keep the budget neutral. The $1.33 billion decrease will be partially offset by a 2.9% increase in home health care, according to CMS.

CMS also offers a method for calculating how much Medicare would spend if the patient-centric grouping model did not exist. The agency must also retroactively correct previous cost increases and seek comments on how to develop a solution. CMS did not propose temporary adjustments in Friday’s draft ruling, but estimates those cuts will total $2 billion in 2020 and 2021 combined.
“The actions taken by CMS under this proposed rule will help improve patient care as well as protect the sustainability of Medicare for future generations by acting as a responsible steward of public funds,” the agency said in a newsletter.

The agency has requested comments on its initial analysis. last a year without an offer. At the time, home care agencies argued that CMS was not compliant with Medicare law and argued that the patient-managed team model effectively underpaid providers for three years.

The latest CMS offering has also disappointed the home health industry.

“The stability of home healthcare is at risk due to the fact that CMS offers an application. [of] a fatally flawed methodology for assessing whether the PDGM payment model has resulted in budget-neutral spending in 2020,” said Bill Dombey, president of the National Home Care and Hospice Association. this proposed rule is moving forward and we are fully prepared for congressional action and more.”

proposed home health rule seeks comments on the collection of data on the use of telecommunications technology in Medicare home health care applications, including information on access barriers that beneficiaries may face. CMS is also seeking feedback on the development of a health equity measure for home health care agencies.

CMS also proposes to change the base years used in the enhanced home value purchasing model.

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