Implications of the 2023 Home Health Payment Rule Likely to Affect Hospices

As home health operators prepare for the impact of meager reimbursement levels for 2023, hospices must also prepare for a ripple effect.

The U.S. Centers for Medicare & Medicaid Services (CMS) recently found a 0.7 percent increase in the base rate for home health care in 2023. Although that’s an improvement from the 4.2 percent overall cuts the agency first proposed in August , the small increase still means home health companies need to tighten their belts.

Also, the 2023 increase is only a temporary decrease. The agency plans to phase in additional reductions over the coming years, as Enhabit Home Health & Hospice (NYSE: EHAB ) CEO Barbara Jacobsmeyer noted in its third-quarter earnings call.

“The temporary fixes are still being set,” Jacobsmeier said. “CMS has not changed its methodology at all, which is very problematic for the industry. 2023 already has a slight delay with provisions in its final rule resulting in an estimated net increase in home health payments of 0.7%. The industry does not see this as a victory and we will work with our industry partners to determine the next steps.”

These payment concerns come as home health and hospice providers continue to feel the effects of the headwinds of COVID-19, including a disruption in referral flows.

One of the key considerations is that many companies provide both services and a reduction in reimbursement for both will affect their overall financial performance.

“When you look at who provides home health and hospice, you have a lot of providers that do both. Today, there are home health agencies that have hospices that are keeping their heads above water financially. They profit from hospice,” National Home Health and Hospice Association President Bill Dombey told Hospice News. “And there may be some who profit from home health care, keeping the hospice side of it going. I can’t imagine that one wouldn’t affect the other.”

Widespread pressure on the workforce has also had a huge impact. In 2022, suppliers continue to spend dollars to boost hiring while adjusting wages and purchases for skyrocketing inflation. In addition, they still need to buy higher-than-historic amounts of supplies like personal protective equipment

Labor shortages have reduced clinical capacity for both home health and hospice, contributing to declines in patient volume and length of stay. Refusal rates hit record highs in 2021, a trend that has continued into 2022, according to data from CarePort, a WellSky company.

In January, rejection rates reached 41 percent among hospice providers and 58 percent for home health agencies, CarePort reported.

Given the small increase in home health reimbursement — with further cuts on the horizon — one potential implication is that capacity could shrink even further. This, in turn, may mean a decline in the number of hospice referrals coming from home health agencies.

“The lack of payment increases to keep pace with general inflation and competitive market dynamics will in some markets – if not many markets – continue to limit the capacity of home health care providers to absorb all the referrals that are being made.” sent their way,” WellSky Chief Clinical Officer Timothy Ash told Hospice News. “So if you just follow that logic, if fewer patients are enrolling in home health agencies, I think the downstream impact on palliative and hospice providers may actually be slightly reduced referrals coming from those organizations to home health.”

In light of labor shortages and rising costs, both hospices and home health care providers are relying on technology to increase efficiency and streamline processes. This includes systems such as telehealth, predictive analytics, robotic process automation and remote patient monitoring.

These technologies have shown promise in terms of streamlining administrative work, early identification of changes in patient condition and needs, and reducing travel costs and unnecessary home visits.

Some carriers have also begun to apply some of these technologies to their recruitment and retention strategies.

But concerns about reimbursement may mean some providers will have to think twice about making this kind of investment.

“We need margin to be able to reinvest in the infrastructure in our own organizations and then in the delivery of healthcare in our digital economy,” Ken Albert, president and CEO of Androscoggin Home Healthcare + Hospice told Hospice News. “The more margins go down, the infrastructure, including the human resources component of what we do, will be challenged.”

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