MedPAC Calls for Home Health Payment Rate Reduction

Situation Report | December 21, 2020

The Medicare Payment Advisory Commission (MedPAC) met last week for a series of sessions to discuss recommendations that the panel will consider presenting to Congress.

This is an annual process where commissioners discuss recommendations in December, vote in January, and present a report to Congress in March.

MedPAC staff reported that traditional fee-for-service (FFS) Medicare home health spending in 2019 totaled $17.8 billion — about 4.4 percent of all Medicare FFS spending — consistent with recent years.

There are over 11,300 active agencies providing 6.1 million episodes of care to 3.3 million beneficiaries, a slight decrease from 2018 and a continued slow downward trajectory.

Despite a decreasing number of agencies, MedPAC staff report that patients “have good access to care” with 86 percent of beneficiaries residing in a zip code served by at least five home health agencies, and 99 percent residing in a zip code served by at least one home health agency.

MedPAC staff reported an average Medicare FFS profit margin of 15.8 percent, and all-payer profit margins at 5.9 percent. However, this analysis does not include margins from hospital-based agencies who traditionally have low or negative margins — an exclusion that HCA has repeatedly taken issue with.

MedPAC staff predict a 14 percent profit margin in 2021 based on a decreased base payment rate due to the Patient Driven Groupings Model (PDGM) behavioral assumptions as well as added expenses for personal protective equipment (PPE) and other COVID-19-related impacts.

MedPAC staff suggested a 5 percent cut to the base PDGM payment rate, consistent with MedPAC recommendations from many years past, with the exception of this past year, when a 7 percent cut was recommended. While not specifically stated, the return to a 5 percent payment reduction is likely attributable to lower projected profit margins and the result of added COVID-19 expenditures. Commissioners voiced unanimous support for this proposed recommendation. A formal vote will follow in January 2021.

MedPAC’s recommendations are advisory in nature and any payment changes would require an act of Congress.

HCA will examine these proposals carefully and will oppose any recommendations that adversely impact home health finances at a time when approximately two-thirds of New York certified home health agencies have negative margins and face extraordinary new pressures in the COVID-19 pandemic that are not accounted for in the historical data on which MedPAC bases its analysis.