Medicare Finalizes Transition of Home Health To Value-Based Reimbursement Model

The Centers for Medicare and Medicaid Services (CMS) has finalized its proposal to expand the experimental Home Health Value-Based Purchasing (HHVBP) Model to all 50 states and conclusively transition Medicare home health services to outcome-driven, value-based reimbursement beginning in calendar year (CY) 2023.

As described in more detail below, the Model allows for percentage payment adjustments based on performance in quality domains that include patient safety, care coordination and efficiency and cost reduction.

CMS first implemented the original, experimental HHVBP on January 1, 2016 to test whether payment adjustments tied to quality performance could improve efficiencies and quality of care for Medicare beneficiaries.

The original HHVBP Model’s participants were Medicare-certified home health agencies (HHAs) located in nine states: Arizona, Florida, Iowa, Maryland, Massachusetts, Nebraska, North Carolina, Tennessee and Washington. CMS adjusted participants’ payments based on improvements over baseline data and performance relative to in-state peers. Top-performing providers received percentage increases to their Medicare payments each year, while the lowest performing providers received percentage deductions. CMS reported an average 4.6 percent improvement in quality scores and average savings of $141 million per year to the Medicare program from CY 2016 through CY 2018. Based on these results, the agency first announced its plan to expand the HHVBP nationally in January of this year.

The nationally expanded HHVBP will reflect the original model with some slight variations. For example, rather than competing against in-state peers when measuring quality outcomes and improvements, HHAs will be divided into two national cohorts: larger-volume and smaller-volume cohorts. The final rule provides that HHAs that “do not perform as well as other competing HHAs in the same volume-based cohort” may have their final payments reduced by up to -5 percent, while HHAs that “perform similarly to others in the same volume-based cohort” may have no payment adjustment at all. HHAs that outperform competitors within their volume-based cohort will receive a percentage increase to their final payments of up to +5 percent.

In response to industry feedback, CMS has delayed implementation of the expanded HHVBP Model until CY 2023 and designated CY 2022 as a transitional period, during which Medicare-certified HHAs may prepare for and learn about the reimbursement transition with support from the agency. CY 2023 will therefore serve as the first performance year and CY 2025 as the first payment year, with payment adjustments in that year tied to CY 2023 performance.

Baseline data, against which CMS will measure quality improvements, will be taken from CY 2019. For newly certified HHAs, specifically those certified on or after January 1, 2019, CMS will collect baseline data from the first full calendar year of services following Medicare certification. For example, an HHA certified in CY 2020 will use CY 2021 as its baseline performance year. Note that HHAs certified in CY 2019 will use CY 2021 as their baseline performance year - rather than CY 2020 - to avoid the “potentially destabilizing effects of the [COVID-19 public health emergency] on quality measure data in CY 2020.”

The final rule extensively discusses CMS’ plans to collect and analyze performance data, quantify quality outcomes, and adjust improvement benchmarks over time. The final rule also outlines a process through which CMS may amend, replace, or eliminate certain quality measures as needed and in collaboration with participating HHAs. As further explained in the final rule, CMS will issue both quarterly, interim performance reports and annual, final performance reports each calendar year and will issue sample reports in CY 2022 for educational purposes only. HHAs may challenge the contents of these performance reports via appeals and reconsideration processes to avoid erroneous payment adjustments in subsequent payment periods.

Finally, and of note to HHAs in states participating in the original, experimental HHVBP Model, CMS finalized its proposal not to apply any payment adjustments in CY 2022 and to end the original Model early. As CMS explains, CY 2022 payment adjustments would have relied on performance data collected in CY 2020, which ultimately contained significant and unavoidable anomalies related to the COVID-19 outbreak.

The final rule, scheduled for publication in the Federal Register on November 9, may be found here. Over the course of the next year, we anticipate additional guidance and learning opportunities as CMS - and the home health care industry - prepare for this nationwide transition. If you have any questions about the final rule, or would like to discuss options and strategies to prepare for the transition, please contact Jesse Neil or Tyson Bickley.