CMS Releases Calendar Year 2023 Home Health Rates
By Scott Manson, Managing Director, Advisory Services
In the November 4, 2022, Federal Register, the Centers for Medicare and Medicaid Services (CMS) released its Calendar Year 2023 Home Health Prospective Payment System Rate Update.
The 2023 home health payment update amount will see a 4% rate increase, which is lower than in many prior years but more than the proposed rule by CMS. However, due to other adjustments, the overall net change in rates will be a small 0.7% increase ($125 million in total). The 30-day episode amount includes the 4% increase, minor adjustments for the case mix weight and wage index budget neutrality factors, and a sizeable 3.925% decrease due to the behavioral adjustment factor.
When the home health reimbursement system transitioned to the Patient-Driven Groupings Model (PDGM) it was required to do so in a budget-neutral manner. The actual expenditures under the PDGM were higher than what they were under the prior reimbursement system. This resulted in a permanent behavioral adjustment so that going forward, the PDGM reimbursement will remain budget-neutral and include temporary adjustments to recoup the 2020 and 2021 overpayment variances. CMS determined the full behavioral payment adjustment for 2023 should be a 7.85% decrease in reimbursement but it implemented only half of the amount, resulting in a 3.925% decrease for 2023. It is not clear how or when CMS will implement the remaining half of the behavioral adjustment. The 2023 overall 0.7% increase is favorable to the 4.2% rate cut in the CMS-proposed rule. The behavioral adjustments do not apply to the per-visit low utilization payment adjustment (LUPA) rates.
For 2023, CMS recalibrated the case mix weights and LUPA thresholds for the 432 distinct home health resource group (HHRG) categories. CMS applied regression analysis to the outcome and assessment information set (OASIS), and it also looked at claims and 2020 Medicare cost report information. The changes in the LUPA thresholds and case mix weights will also affect 2023 reimbursement. Service providers in rural areas should also note that the add-ons expired with the calendar year 2022 rates.
One addition to the final rule won’t affect providers in 2023, but could in the future. CMS is finalizing the collection of OASIS data for all payers beginning with the calendar year 2025 home health quality reporting program year. CMS believes that collecting OASIS data will strengthen its ability to assess and report the quality of care home health agencies provide to their entire patient population. Home health providers that maintain two companies (one for private pay and another for Medicare) will see little impact from this change. Other agencies are already completing OASIS for almost all patients because insurers now require it. Medicare-certified agencies with a significant number of private pay patients should begin planning additional resources for the OASIS data collection.
In summary, the CMS Home Health final rule includes an increase that is more favorable than the proposed rule, but is not what many industry providers were looking for with staffing, supply, and other costs continuing to rise.
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