Home Health Agencies to Renew Suit Over Medicare Payment Rates

The home health industry will turn to Congress—and again to the courts—for redress after absorbing yet another proposed Medicare pay cut this week.

William A. Dombi, president of the National Association for Home Care & Hospice (NAHC), told Bloomberg Law that the organization intends to renew its lawsuit to stop Medicare from calculating home health payments using a disputed methodology that has slashed reimbursements since 2020.

The outcome of the simmering legal battle could drastically alter the payment landscape for Medicare home health providers and affect access to the popular benefit for beneficiaries.

The US District Court for the District of Columbia granted the government’s motion for summary judgment in the suit April 26 because the NAHC filed the complaint before exhausting all administrative remedies. Judge Trevor McFadden’s memorandum opinion said “NAHC’s members sued after reaching only step two” of a five-step process to appeal Medicare reimbursements.

Rather than appeal the ruling, NAHC will use the coming months to “jump through the hoops that the court said we need to jump through, and then go back to court. So the decision has been made to re-file the case” after completing the administrative appeal process, Dombi said.

The association and other industry groups will also push Congress to pass legislation that would block a new proposal to cut overall home health payments by 1.7%, or $280 million, in 2025.

The proposed rule (RIN 0938-AV28 ), released June 26 by the Centers for Medicare & Medicaid Services, would hike payments by 2.5%, or $415 million next year.

But it would also impose a 3.6% pay cut of $595 million as part of a “proposed permanent behavior adjustment” based on the assumption that home health agencies will alter their billing and coding activity to maximize reimbursements. And, it contains a proposed a 0.6% cut of $100 million in the 2025 “fixed-dollar loss ratio for outlier payments.”

It’s the third straight year the CMS has proposed cuts that make it “significantly harder for home health providers to meet the care demands for an increasingly complex and aging patient population,” said a statement from Joanne Cunningham, CEO of the Partnership for Quality Home Healthcare. “The status quo of continuous cuts is unsustainable.”

Due to high labor costs and workforce shortages, “we fear that CMS’s proposed actions for 2025 will have unintended consequences on older Americans who want to receive care at home,” Cunningham said.

Competition for Nurses

The proposed cuts not only jeopardize access to care and services for seniors and their families, but they also make it harder to recruit registered nurses, said a statement on Thursday from Katie Smith Sloan, president and CEO of LeadingAge, which represents nonprofit aging services providers.

“Already stiff competition for RNs will only grow,” Smith Sloan said. The lack of consideration for the shortage of RNs “is one example of how the Biden Administration’s payment approach is simply at odds with its rhetoric in support of aging services and long term care,” she said.

Sens. Debbie Stabenow (D-Mich.) and Sen. Susan Collins (R-Maine) have introduced legislation, (S. 2137) that would block the payment proposal, and eliminate CMS’s authority to alter home health payments based on determinations related to provider behavioral changes. In the House, Reps. Terri Sewell (D-Ala.) and Adrian Smith (R-Neb.), have introduced companion legislation (H.R. 5159).

“There’s a lot going on behind the scenes,” Dombi said of the association’s work with lawmakers to prioritize the bill. “A day doesn’t go by when we’re not in touch” with members of Congress or their staff “because it’s pretty clear CMS is not going to change what we think they’ve done wrong,” Dombi said.

The CMS efforts to curb home health payments come after years of similar recommendations from the Medicare Payment Advisory Commission.

The commission’s March 2024 report to Congress found that home health payments were “substantially in excess of costs.” And while home health care “can be a high-value benefit when it is appropriately and efficiently delivered,” these “excess payments diminish that value,” the report said.

The commission recommended that Congress reduce the Medicare rate for home health agencies by 7% in 2025. From 2001 to 2021, the profit margin for freestanding home health agencies on traditional Medicare beneficiaries averaged 16.8%, the commission report said. “We project an aggregate fee-for-service Medicare margin of 18% for 2024,” the commission added.

Dombi said the MedPAC estimates don’t reflect the lower payments from private Medicare Advantage plans that now cover more than half of eligible Medicare beneficiaries.