Medicare Payment Rates to Home Health Agencies Set to Decrease Beginning in 2023

Medicare will begin reducing payments to home health agencies on January 1, 2023, to comply with federal budget neutrality requirements. The first reduction of 3.925% is expected to be part a series of annual payment reductions as home health agencies have exceeded Medicare’s payment projections each year since the implementation of a new payment system known as the Patient Driven Groupings Model (PDGM) in 2020. It is unclear what impact these payment reductions will have on ASHA member employment. However, ASHA will continue to track our members’ employment experiences and advocate with the Centers for Medicare & Medicaid Services (CMS) and the home health industry for additional changes that mitigate the impact.

In the proposed rule, Medicare suggested it might reduce payments to home health agencies by 7.85% in 2023, but in the final rule CMS acknowledged that such a dramatic reduction would have serious consequences for the industry. In implementing a smaller payment reduction, Medicare clarified that it intends to hold the industry accountable and recoup all overpayments beginning in 2020 through 2022 and beyond. As a result, the industry should expect additional future payment reductions on an annual basis to achieve compliance with federal law. While many stakeholders, including ASHA, argued for a targeted payment reduction for ‘bad actors’ to avoid unintended consequences on patient care from an across-the-board payment reduction, Medicare has proceeded with its industry-wide approach of achieving budget neutrality. 

As the Medicare program worked through the development of PDGM and assessed its impact on home health agency behavior, CMS determined that a change in the payment methodology would impact provider behavior and made an initial payment reduction when it implemented PDGM on January 1, 2020. However, home health agencies changed their behavior in ways the program did not anticipate including a more significant drop in therapy service delivery. As a result, Medicare is required by law to recoup overpayments and adjust baseline spending to avoid future overpayments. Unfortunately, the primary home health industry trade group declared that reductions in therapy delivery were solely in response to the transition to PDGM and not other factors, such as the impact of COVID-19, making it challenging to blunt Medicare’s analysis and proposed payment reductions. 

What’s Next

Understanding the impact on the quality and outcomes of care for Medicare beneficiaries and job satisfaction for clinicians working in home health is critical. Ongoing collection of ASHA member experiences, through surveys and other mechanisms, will be used to help inform ASHA’s advocacy with the home health industry and Medicare.

Questions?

Contact reimbursement@asha.org.