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The proposed Home Care Regulations and Changes for Calendar Year (CY) 2023 were released by the Centers for Medicare & Medicaid Services (CMS). If CMS finalizes the changes in this proposed rule, providers may be very disappointed in the magnitude of cuts affecting home health agencies.

When the Centers for Medicare & Medicaid Services (CMS) released its proposed payment rule for 2023, it effectively declared war on Home Care providers. Differing opinions on how the Patient-Driven Groupings Model (PDGM) has affected the industry are at the root of the dispute.

CMS estimates that its proposal would reduce aggregate Home Care payments by 4.2%, or $810 million, the following year. The figure includes a 2.9% increase in Medicare payments, a 6.9% cut to balance out PDGM, and a 0.2% cut for outlier payments.

If the agency goes ahead with its plan, the implications for the Home Care market could be significant. There appear to be two clear consequences: a decrease in transaction activity and a decrease in investment in care innovation. Regardless of what happens with the final rule released in the fall, the proposal itself may be unfavorable enough to cause providers and investors to shift to more bearish mindsets in these areas.

CMS Home Care Regulations and Changes in 2023

2023 Home Care Regulations and Changes

 

Payment Policies

As required by law, CMS continues to assess the transition from its previous payment system to the new Patient-Driven Groupings Model (PDGM). The rule’s proposals would result in a 4.2% decrease in in-home health payments, or $810 million, compared to 2022.

Market basket update

CMS proposes a 3.3% update minus a mandatory 0.4% productivity adjustment, leaving the update at 2.9%.

Budget neutrality and behavioral adjustments

The new Patient-Driven Groupings Model (PDGM) for the Home Health Prospective Payment System (HH PPS) was finalized in 2019 and began with home health periods of care beginning on or after January 1, 2020. PDGM is a case-mix classification system with 432 categories that assigns patients to a home health resource group (HHRG) based on patient characteristics and other clinical data from Medicare claims and the Outcome and Assessment Information Set (OASIS) assessment instrument.

CMS is required to make the new payment model budget neutral in comparison to the pre-PDGM payment model and to assess the agency’s assumptions versus the actual impact of the new system when transitioning to PDGM. CMS concludes that multiple payment adjustments, both prospective-permanent and retrospective-temporary, will be required based on its analysis and simulations.

To offset the increase in estimated aggregate expenditures for budget neutrality, CMS indicates it would need to apply a negative 7.69% permanent prospective adjustment to the CY 2023 base payment rate. Further, CMS indicates the need to recapture $2 billion in overpayments for CYs 2020 and 2021 via a temporary retrospective adjustment.

However, CMS recognizes that lowering payment rates by both adjustments would be significant, and thus proposes only the negative 7.69% permanent adjustment for CY 2023 base payments, rather than the $2 billion temporary adjustment. CMS believes that proposing the permanent adjustment will reduce the need for a larger permanent adjustment over time due to compounding and may reduce the amount of any future temporary adjustments.

Case-mix budget neutrality factor

For CY 2023, CMS will continue to use the most recent complete home health claims data at the time of rulemaking, which is CY 2021 data. The case-mix budget neutrality factor is calculated as the ratio of 30-day base payment rates such that when CY 2023 PDGM case-mix weights (developed using CY 2021 home health claims data) are applied to CY 2021 utilization (claims) data, the total payments are equal to total payments when CY 2022 PDGM case-mix weights (developed using CY 2020 home health claims data) are applied to CY 2021 utilization data.

This produces a case-mix budget neutrality factor for CY 2023 of 0.9895.

Low utilization payment adjustment (LUPA) thresholds

CMS proposed updating the LUPA thresholds for CY 2023 using CY 2021 Medicare home health claims (as of March 21, 2022) linked to OASIS assessment data. The agency believes that CY 2021 home health claims utilization data demonstrate that visit patterns have stabilized and that using CY 2021 data will be more indicative of visit patterns in CY 2023 than the LUPA thresholds derived from CY 2018 pre-PDGM data.

CMS indicates the updated LUPA thresholds would result in:

  • 280 case-mix groups with no change in their LUPA threshold
  • 120 case-mix groups where the LUPA threshold goes down by one visit
  • 18 case-mix groups where the LUPA threshold goes up by one visit
  • 12 case-mix groups where the LUPA threshold goes down by two visits
  • 2 case-mix groups where the LUPA threshold goes down by three visits

Outlier payments

CMS proposes a fixed-dollar loss (FDL) ratio of 0.44 for CY 2023 based on CY 2021 claims data (as of March 21, 2022) and the statutory requirement that total outlier payments do not exceed 2.5% of total payments estimated to be made under the HH PPS. If necessary, CMS will update the FDL with complete claims data.

ICD-10 assignment code changes

CMS proposes many diagnosis codes changes, including:

  • Assignment of 320 diagnosis codes to a different clinical group when listed as a principal diagnosis
  • Reassignment of 37 diagnosis codes to a different comorbidity subgroup when listed as a secondary diagnosis
  • Establishment of a new comorbidity subgroup for certain neurological conditions and disorders

Due to the number of diagnosis codes proposed for reassignment this year, CMS has posted supplemental files on the changes.

Functional impairment revised

The functional impairment level is determined by responses to certain OASIS items associated with activities of daily living and risk of hospitalization, namely M1800 – M1860 and M1033. There are three levels of functional impairment: low, medium, and high. CMS proposes that for CY 2023, claims data from CY 2021 be used to update the functional points and functional impairment levels by the clinical group.

Comorbidity adjustments

CMS proposes updating the comorbidity subgroups for CY 2023 to include 23 low comorbidity adjustment interaction subgroups and 94 high comorbidity adjustment interaction subgroups.

Home Care Value-Based Purchasing Program (HHVBP)

CMS finalized that all home health agencies (HHAs) certified to participate in the Medicare program prior to January 1, 2022, will be required to participate in the HHVBP and will be eligible to receive an annual total performance score based on their CY 2023 performance. CMS is now proposing to make several definitional changes based on feedback.

For FY 2023, CMS proposes to replace the term “baseline year” with the terms “HHA baseline year” and “model baseline year” and to change the calendar years associated with each of those baseline years.

  • Model baseline year is proposed as the calendar year used to determine the benchmark and achievement threshold for each measure for all competing HHAs. CMS proposes to change the model baseline year from CY 2019 to CY 2022 for the CY 2023 performance year and subsequent years. This would enable the agency to measure competing HHAs’ performance using benchmarks and achievement thresholds that are based on the most recent data available.
  • HHA baseline year is proposed as the calendar year used to determine the improvement threshold for each measure for each individual competing for HHA.CMS indicates that the proposed new HHA baseline year allows for the use of CY 2022 data for the HHA baseline year for all measures and would also allow all HHAs certified by Medicare prior to CY 2022 to have the same baseline period, based on the most recent available data, beginning with the CY 2023 performance year. Accordingly, CMS proposes changing the HHA baseline year for HHAs certified prior to January 1, 2019, and for HHAs certified during January 1, 2019 – December 31, 2021, for all applicable measures used in the expanded model, from CY 2019 and 2021 respectively, to CY 2022 beginning with the CY 2023 performance year. Additionally, CMS proposes that for any new HHA certified on or after January 1, 2022, the HHA baseline year is the first full calendar year of services beginning after the date of Medicare certification and the first performance year is the first full calendar year following the HHA baseline year.

 

CMS solicits comments on several agency priorities, including specific actions to take under the expanded HHVBP model to address healthcare disparities and advance health equity.

Telecommunications technology

CMS has finalized the use of telecommunications technology for home health and reporting as an administrative expense over the years. According to CMS, collecting data on the use of telecommunications technology on home health claims will allow CMS to analyze the characteristics of beneficiaries who use remote services. It would also provide the agency with a better understanding of the social determinants that influence who benefits the most from these services, as well as any potential barriers for certain subsets of beneficiaries.

The Medicare Advisory Council (MedPAC) recommended tracking the use of telehealth in the home health care benefit on home health claims to improve payment accuracy in its March 2022 Report to Congress. CMS is now soliciting comments on the collection of such data on home health claims, with the goal of starting a collection on a voluntary basis by HHAs by January 1, 2023. CMS indicates that the information will be required to be reported on claims by July 2023.

CMS recommends using three new G-codes to identify when home health services are provided:

  • Synchronous telemedicine using a real-time two-way audio/video telecommunications system.
  • Synchronous audio-only telemedicine using telephone or other real-time interactive audio-only telecommunications system.
  • Remote patient monitoring (RPM) data is collected and digitally stored and/or transmitted by the patient to the home health agency. CMS would include a start date of the RPM and the number of units indicated on the claim. This may help the agency better understand generally how long remote monitoring is used for individual patients and for which conditions.

Although CMS states that it aims to start gathering this information with these three G-codes on January 1, 2023, it is curious if there are other common uses of telecommunications technology under the home health benefit that would warrant additional G-codes useful for tracking such technology use in the provision of care.

To assist you in understanding the significant reductions proposed in the proposed rule for 2023, as well as how these changes may affect your organisation.

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