(480) 923-0802

Our Take: Home health industry group sues federal government over rate cuts

Jul 17, 2023

The National Association for Home Care and Hospice (NAHC), a trade group representing 33,000 home health and hospice providers, filed a lawsuit against the Department of Health and Human Services (HHS) challenging payment methodology that led to a rate cut of 3.9% for home health agencies in 2023 and could result in a rate cut of 5.7% in 2024 based on a proposed CMS rule.

“Home health agencies again must withstand billions of dollars in payment cuts as cost of care continues to rise and still be expected to deliver the care to which our patients are entitled to as a Medicare benefit,” said Ken Albert, chairman of NAHC. “Since these cuts took effect in January, providers have reduced service areas, turned away thousands of patients, and halted the use of innovative technologies in order to stay afloat and serve some patients.” 

“We have done everything possible to get Medicare to understand the disastrous consequences of its actions,” said William Dombi, president of NAHC. “We have presented hard facts, deep legal analyses, and extensive data to Medicare that demonstrate the errors in its policies, to no avail. As a last resort, we have filed this lawsuit to protect Medicare beneficiaries and the home health agencies that care for them.”

Along with requesting that the 2023 rate adjustments be reversed, the group is seeking an injunction directing HHS to withdraw or suspend the final rule for the payment model until “appropriate revisions” are made.

Our Take: We briefly mentioned the rate cuts and the NAHC lawsuit last week but felt the situation warrants a closer look, as the cuts could have a substantial impact on health systems that offer home health care and hospice services through their owned business segments.   

In 2020, CMS implemented a new value-based, patient-centered payment model for home health services called the Patient-Driven Groupings Model (PDGM). Rather than using the volume of therapy visits to adjust payment for home health episodes, the model relies on clinical characteristics and other patient information.

The budget-neutrality mandate is stipulated under the Bipartisan Budget Act of 2018. The intent is for the payment system to result in neither a net increase nor a net decrease in total Medicare payments. 

To comply with this requirement within PDGM, CMS is to apply behavioral assumption adjustments to base rates to account for changes in provider behavior not related to changes in patients served or services delivered that increase payments. Each year through 2026, CMS is to measure its predicted behavior changes for the year against actual behavior changes, as well as the impact of the actual behavior changes on expenditures, and make any necessary payment adjustments.

How the behavioral adjustments are calculated has been an ongoing source of contention between the home health industry and HHS/CMS. 

In its lawsuit, NAHC alleges that HHS has “unlawfully slashed the payments provided for home health services” by using the same methodology used in the previous payment model, the Home Health Prospective Payment System — connecting payments to the amount of therapy provided. The group claims the final rule for PDGM does not measure changes in behavior, assumed or actual, and does not calculate the difference of their impact on expenditures. 

Further, NAHC claims in the lawsuit that the final rule for PDGM “unlawfully rebases home health payment rates to reduce overall expenditures,” thereby ignoring the budget-neutrality mandate, and says the final rule violates Congress’ orders by continuing to tie payments to the amount of therapy provided. 

CMS is accepting comments on the proposed payment rule for 2024 through the end of August.  

What else you need to know
HCA Healthcare reported a security breach last Monday in which hackers accessed data for an estimated 11 million patients and posted the data online. The Nashville, Tenn.-based health system said the stolen data included patients’ contact information, date of birth, gender, and certain service-related information, but no clinical details, payment information, or sensitive information such as passwords or Social Security numbers. According to HCA, the incident appeared to be “a theft from an external storage location exclusively used to automate the formatting of email messages.” The health system said it discovered the breach on July 5 and immediately disabled user access to the storage location. HCA noted that the breach did not disrupt day-to-day operations or patient care. MedCity News reported that the breach affected 1,038 hospitals and physician clinics across 20 states, or about 40% of HCA’s facilities. A class-action lawsuit against HCA was filed last week in Tennessee alleging negligence in safeguarding patients’ protected health information. 

CMS is proposing lump sum payments totaling $9 billion to rectify underpayments made between 2018 and the third quarter of 2022 to approximately 1,600 hospitals participating in the 340B drug discount pricing program. The proposed payments are in response to the Supreme Court’s ruling last year that HHS exceeded its authority when it initiated a steep cut in reimbursement rates in 2018 for certain outpatient drugs only for hospitals participating in the discount program. In a fact sheet CMS said 340B hospitals received about $10.5 billion less in payments as a result of the rate cuts, but the agency noted that many drug claims for calendar year 2022 were processed or reprocessed at the higher default payment rate after the payment policy was vacated in late September — and as a result, providers have already received an estimated $1.5 billion of the total $10.5 billion. CMS also estimates that hospitals were paid $7.8 billion more for non-drug items and services during the affected period than they would have received if the 340B payment policy had not been in effect. To maintain budget neutrality, as required by law, CMS is proposing to offset that $7.8 billion by reducing payments to hospitals for non-drug items and services by 0.5%, starting in 2025, for about 16 years. The comment period on the proposed rule ends Sept. 5.

CVS Caremark and GoodRx are partnering on a program called Caremark Cost Saver, which will give eligible commercially insured members of the pharmacy benefit manager’s clients access to GoodRx’s prescription pricing on generic drugs starting Jan. 1, 2024. Plan members will be able to use their existing benefit card at in-network pharmacies, and they will automatically pay the lowest out-of-pocket cost as determined by GoodRx. The amount they pay will count toward their deductible and out-of-pocket limit, which usually isn’t the case when using GoodRx outside of a prescription benefit. Through the partnership, GoodRx will receive a fee from CVS Caremark for its services. GoodRx established a similar arrangement with Cigna’s Express Scripts in November. 

Baylor Scott & White Health will add 41 urgent care clinics to its network through a new partnership with Tempe, Ariz.-based NextCare Urgent Care. “Through this venture, the NextCare sites across [Texas] will be integrated into our ecosystem,” said Pete McCanna, CEO of Baylor Scott & White Health. The Dallas-based health system said NextCare’s sites in “fast-growing areas, including Houston, San Antonio, and Abilene,” will expand Baylor Scott & White Health’s presence into new markets. NextCare has more than 170 clinics in 12 states. 

Aspirus Health, a 17-hospital health system based in Wausau, Wis., signed a letter of intent for Duluth, Minn.-based St. Luke’s to become an affiliate. The two non-profit organizations will proceed with due diligence and, if closing conditions are met and regulatory approval is obtained, they anticipate completing the affiliation in early 2024. The combined health system would have 19 hospitals, 130 outpatient locations, a staff of nearly 14,000, and a health insurance arm. It would serve northeastern Minnesota, northern and central Wisconsin, and Michigan’s Upper Peninsula, according to the announcement

Illumina is facing a fine of approximately $476 million levied by the European Commission for completing the $7.1 billion acquisition of Grail in 2021 without official regulatory approval. Illumina said it plans to appeal, calling the fine “disproportionate.” The commission also fined Grail, but only a “symbolic” amount of about $1,125. In April, the Federal Trade Commission ordered Illumina to divest Grail; Illumina is also appealing that mandate. 

The FDA approved the first over-the-counter birth control pill on Thursday: Opill (norgestrel), a progestin-only oral contraceptive. The approval was granted to Laboratoire HRA Pharma; Dublin, Ireland-based Perrigo acquired HRA Pharma for approximately $1.9 billion last year. The product will be sold online and in stores starting early next year, Perrigo said in a press release.  

Correction: Almost Family’s 2015 revenue was reported incorrectly in last week’s Our Take. The correct amount was $532 million. 


Contact Darwin Research Group and we will get right back to you.