The wait is over. The Centers for Medicare & Medicaid Services (CMS) has announced its CY 2023 Final Rule for the home health prospective payment system. The bottom line? Home health agencies will receive an increase in payments by a net 0.7%, or $125 million, in the next calendar year. And while this seems like a victory for home healthcare advocates, the fight for adequate reimbursement is not finished yet.

When CMS issued its proposed rule for 2023 in June 2022, reaction from the industry was swift. CMS was proposing a massive cut: more than $1 billion in the first year alone. CMS listened to home healthcare industry leaders and factored their concerns into its final rule, ensuring providers have avoided the most severe cuts — for this year.

So what is ahead for 2023? The final rule reflects a 3.925% cut to Patient-Driven Groupings Model (PDGM) rates, which is one half of a permanent rate adjustment, now increased to 7.85%. Increased labor and transportation costs continue to plague home health providers, and the CY23 rate adjustment includes a market-basket update increase from the proposed 2.9% to 4%, intended to partially offset these expenses.

While home health providers and industry insiders are pleased that CMS recognized their concerns, the final rule fails to address the underlying methodology for calculating behavioral assumptions and budget neutrality. Additionally, many are concerned about the timing of the remaining 3.925% rate adjustment and CMS’s proposed clawback of $2.1 billion in “overpayment” to home health providers following the transition from PPS to PDGM in 2020 and 2021. The timing of these pending actions looms large as agencies plan for the future. 

Overwhelmingly, Medicare beneficiaries are seeking care in the home — in fact, 94% of Medicare beneficiaries say they would prefer to receive post-acute care in their homes. Payment cuts would be devastating to homebound Medicare beneficiaries and could severely limit their access to highly skilled care within the desired setting of their home, particularly for beneficiaries living in rural and medically underserved areas. Coupled with inflationary pressures and increased labor costs, these future cuts also make it increasingly difficult for home health providers and will further drive inequities in health care access and outcomes.

In addition to the impact on home health providers and Medicare beneficiaries, it is important to note the downstream consequences for overall Medicare spending. While there is an increasing demand for home health — a 33% increase in referrals sent to home health — home health acceptance rates have decreased by 15% as home health agencies have been forced to turn beneficiaries away due to labor costs and staffing shortages. Additional reductions in reimbursement to home health providers will further exacerbate these pressures and result in fewer home health options, as demand for skilled healthcare in the home grows. 

Over the last several months, industry leaders have been meeting with members of Congress to advocate for home health. There is strong support among elected officials for the invaluable work these providers do and for sustaining that work with appropriate funding and resources. Many are hopeful that lawmakers will take action on The Preserving Access to Home Health Act (S. 4605/H.R. 8581), which would require any cuts to home health payment rates be put on hold until 2026. Advocates say that by delaying the proposed cuts, CMS and the home health industry can work together to develop a payment model that protects access to care and more clearly outlines how to achieve budget neutrality in home health.

Looking forward, innovation will be critical to the success of the home healthcare industry. Home health providers will be challenged to use every tool available to meet the needs of their communities, maximize efficiencies, improve outcomes, and reduce unnecessary hospitalizations. Adequate payment is critical to ensuring home health providers and their partners can meet the needs of patients in a way that is cost-efficient and improves outcomes. The home health industry and partners — including WellSky — will continue to champion the success of care providers across the country. Now it’s up to CMS and others in government to do their part as well.

Tim Ashe is chief clinical officer of healthcare technology company WellSky.