CMS released the CY 2024 Home Health payment update just before the July 4th holiday. The payment update would have been typical for the industry, 2.7% but home health is now subject to a behavioral adjustment to account for coding changes in response to the implementation of the Patient Focused Grouping Model. That model created new weights to emphasize medical care like wound management and deemphasize physical and occupational therapy. After accounting for a 5.1% decrease for the behavioral adjustment and other small changes, CMS estimates payments to home heath agencies will drop 2.2% when compared to 2023. The CY 2023 payment updates was also estimated as a reduction of 0.70%.
In this reimbursement environment, the challenge is a great one. Home health care generally supports the day-to-day free care offered by family and friends and reduces institutional costs. However, it is also very inefficient, prone to fraud and difficult to regulate. For those reasons it has been in a political doghouse off and on for decades. It does not help that the industry itself does a lot of whining. It is almost entirely beholden to Medicare, options for revenue streams are limited.
Everyone knows this and for that reason AMED and LHCG have been swallowed by UNH. EHAB remains and perhaps can make a go of it through a good contracting strategy.
Nursing facilities, on the other hand are supported by Medicaid, Medicare and VA benefits as well as commercial pay which tends to increase flexibility. Nursing facilities are more efficient and better coordinated with hospitals discharge. For some reason nursing facilities are less prone to fraud. They may not serve the goal of better outcomes quite like home health but as resources get scarce, the "value-based" purchasing mentality erodes.
The nursing facility business is facing possible mandatory staffing minimums which we expect to be imposed as we head into what is probably going to be the strangest election year since 1960. It is also quite possible that these minimums may be accompanied by some reimbursement support. The White House's goal is to increase union membership. That will not be accomplished if nursing facilities lower head count in response to higher SG&A. The mechanisms to do so are not clear, however. One possibility is the latitude usually offered the Secretary of HHS to consider "other factors."
We wait to see but for now, nursing facilities are winning the reimbursement game. The proposed Medicare payment update for 2024 is 3.7% or about $1.2B
Emily Evans
Managing Director – Health Policy
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