Breaking Down the CY 2025 Home Health Proposed Rule

Written by Jeff Aaronson, VP of Advisory Consulting, and Lisa Selman-Holman, VP of Education & Quality, McBee

On June 26, 2024, the Centers for Medicare & Medicaid Services (CMS) issued the Calendar Year (CY) 2025 Home Health Prospective Payment System (HH PPS) proposed rule. This update aims to refine Medicare payment policies and rates for Home Health Agencies. The proposed changes are set to have far-reaching implications for the home health industry, influencing reimbursement structures, compliance requirements and care delivery models. 

The most significant impact of the proposed rule is a near $600 million cut, representing the permanent behavioral adjustment aimed at maintaining budget neutrality. There is also an update to the fixed dollar loss related to outliers, culminating in a net 1.7% top-line cut. 

Permanent and Temporary Adjustments 

The permanent adjustment remains the most significant factor in the proposed rule. This adjustment reflects CMS’s efforts to align payments with the statutory requirements for budget neutrality. For the upcoming year, this adjustment translates into a 3.6% cut. The proposed rule includes an additional permanent adjustment amounting to $711 million. When combined with previous adjustments, this totals more than $20 billion in cuts over a decade to the home health program—a substantial impact on the sector. 

In addition to permanent adjustments, there are also temporary adjustments. These adjustments represent the amount Medicare believes it has overpaid providers since the inception of PDGM. CMS estimates that by the end of 2023, they had overpaid the industry by nearly $4.5 billion. The adjustments proposed for 2024 will add to this figure, as previous adjustments have not been fully implemented, leading to an ever-increasing potential overpayment amount. 

Analyzing the Impact on Payment Rates 

To better understand the practical implications of these adjustments, let’s examine the construction of the rule from the previous year. In 2023, the standard period payment rate was $2,038. With the permanent adjustment factor set at 95.9%, along with changes in case-mix weight and wage index adjustments, the new rate for 2024 is $2,008.12. This represents a reduction of approximately $30 per standard period payment or a 1.47% decrease. 

Every provider will experience the rule differently. The impact can range from neutral to slightly negative, with some experiencing reductions as severe as 10%. However, the majority of providers modeled will see reductions between 2% and 5%. Knowing your data and modeling it accurately is key to understanding your position and planning. 

Case Mix Weight Adjustments 

One significant change in the proposed rule pertains to Case Mix Weight. Depending on the distribution of your patients, this adjustment could have varying effects on your top-line revenue. Providers need to analyze their specific patient mix to gauge the impact accurately. 

LUPA Threshold Changes 

The proposed rule introduces changes to LUPA (Low-Utilization Payment Adjustment) thresholds, particularly by clinical groupings. For 2025, there are notable decreases within the five-visit thresholds for rehab and neuro groupings, which should positively affect LUPA rates for these clinical categories. 

For wound care, an additional HIPPS (Health Insurance Prospective Payment System) code with a five-visit threshold has been introduced, impacting the LUPA rate for this grouping. 

LUPA thresholds by admission source and timing have been adjusted too. For the Community Late category, there are now no four or five-visit LUPA thresholds. Instead, only two or three visits are required to receive a full period payment. This adjustment is expected to reduce LUPA rates in 2025 compared to 2024. 

Functional and Clinical Updates 

The proposed rule includes several functional and clinical updates that provide a look at the changes in the distribution of care periods by the twelve clinical groupings. These updates help illustrate the evolving landscape of home health care and the data points CMS is considering. 

Key changes include an increase in rehab periods and a decrease in cardiac periods. There is also a slight increase in wound care periods. Behavioral health and complex nursing periods remain the least frequent. There has been a gradual return to providing therapy to patients, which aligns with the observed increase in rehab periods. Cardiac periods have remained relatively stable over time. 

Comorbidity Adjustment Distribution 

The distribution of 30-day periods without any comorbidity adjustment has been decreasing over the years, indicating an improvement in coding practices. Providers are becoming more proficient at capturing comorbidities, either through in-house efforts or by outsourcing to experts like McBee. This improvement is reflected in the increased number of periods receiving low or high comorbidity adjustments.  

Medicare continues to refine the comorbidity tables, adjusting pairings and groups to better reflect resource use. For example, in the high interaction list, 36 new pairings were added, while 39 were removed. These adjustments are aimed at ensuring accurate resource allocation. 

Specific changes include the addition of two new groups to the local morbidity list: endocrine three and gastrointestinal two, while three groups were removed, including circulatory seven, neuro four, and respiratory ten. The inclusion and removal of respiratory ten, which contains the COVID code, have fluctuated based on Medicare’s assessment. 

Functional Impairment Distribution 

The distribution of functional impairment levels (low, medium, high) has remained relatively stable, with no more than a 1.7% increase. This stability indicates that Medicare’s adjustments are effectively maintaining the intended balance. Initially, Medicare anticipated a roughly equal distribution across the three levels, and although there has been a slight increase in the high functional impairment level, it remains within manageable limits. 

Proposed OASIS Points Table for CY 2025 

Another change in the proposed rule is the adjustment to the OASIS points table for the calendar year 2025. Every year, CMS modifies the points that categorize patients into low, medium and high functional impairment levels. The goal of the adjustments is to align the distribution closer to the intended third, third, third model.  

Calculating the 60-to-30 Day Payment Estimates 

CMS is also addressing the challenge of calculating the transition from 60-day to 30-day payment estimates. They have requested comments on this approach. The difficulty stems from the old system which relied on several OASIS items to determine the payment case mix, items which may no longer be included in the current assessments. 

To address this, CMS proposes a method to estimate payments based on simulated 60-day episodes. If a simulated episode matches the start of care, they will use that start of care data. For episodes matching a follow-up assessment (typically a research assessment), CMS will look back to the nearest start of care or resumption of care assessment to retrieve the necessary OASIS responses. However, this look-back period can extend significantly, up to the beginning of the calendar year preceding the year of the claim. 

For instance, a simulated 60-day episode with a follow-up assessment on June 1, 2023, would involve a look-back period to a start of care assessment from as far back as January 1, 2022. This extended look-back period raises concerns about the accuracy of the estimates, as patient conditions can change substantially over such a long duration. 

QRP Changes and VBP Changes 

CMS is actively seeking input on several potential changes through requests for information for both the Quality Reporting Program (QRP) and the Value-Based Purchasing (VBP) program. 

Quality Reporting Program (QRP) 

• Composite of Vaccinations: CMS is considering new measures related to vaccination rates. 

• Depression Management: There is already a screening for depression and an OASIS item addressing interventions for depression. The new measure would exempt patients with specific diagnoses, such as depression, bipolar disorder, and dementia. 

• Pain Management and Substance Use Disorders: CMS is exploring measures for these areas as well. 

Following the completion of the first year of VBP, CMS is already contemplating new measures. Proposed new measures include: 

• Meeting Caregiver Needs: Assessing agencies’ ability to meet caregiver needs. 

• Falls with Injury: This measure is motivated by an OIG report indicating that home health agencies fail to report 55% of falls leading to major injuries and hospitalizations. This would likely be a claims-based measure. 

• Medicare Spending per Beneficiary: This measure is included for consideration and can currently be found in Care Compare. 

Discharge Function Changes 

Starting January 1, new discharge function measures will be implemented, but the GG items for dressing and bathing are not included. It has been suggested that CMS replace the “rolling side to side” and “sitting up” items with dressing and bathing measures. 

Health Equity Adjustments 

CMS is proposing modifications to VBP benchmarks, points adjustments, or payment percentages for agencies providing care to underserved communities and dual eligible (patients with both Medicare and Medicaid). This adjustment acknowledges the challenges faced by agencies serving these populations. Skilled Nursing Facilities (SNFs) will begin earning health equity adjustment points for dual eligible status patients starting in 2027. 

Current QRP Updates 

• GG Items: The goal for the GG items is being phased out by the end of the year. 

• Discharge Function: This measure has been added and will be part of VBP. 

• Discharge to Community: A claims-based measure added to Care Compare and VBP. 

• Potentially Preventable Hospitalizations (PPH): This measure has also been added to VBP. 

• ACH and EDU: These measures are being phased out, though existing data will still be reported for some time. 

Proposed Changes to OASIS and CoPs 

The proposed rule introduces significant changes to the Outcome and Assessment Information Set (OASIS) and the Conditions of Participation (CoPs). Here are the key updates: 

Proposed OASIS Changes Effective 2025 

• New OASIS Items: Four new items will be introduced: 

1. 1. Living Situation
   2. Two Food Security Items:
      1. “Are you worried that your food will run out?”
      2. “Has your food run out?”
   3. Utilities

• Modified OASIS Item: Transportation 
  • Current Item A1250 will be simplified to a single question with a timeframe: “Has lack of reliable transportation kept you from medical appointments, meetings, work, or getting things needed for daily living in the past 12 months?” 

Transition from M1800 to GG Functional Items 

• M1800 Items: These items are currently used for payment purposes, but there is an ongoing discussion about transitioning to GG functional items. The exact timeline for this transition remains uncertain, though it may occur as early as 2025 or 2026. 

Suspension of All-Payer OASIS Data 

• Data Submission: The requirement to submit all-payer OASIS data, which includes Medicare Advantage, Medicare Fee-for-Service, Medicaid, Medicaid managed care, commercial insurance, and VA Champus, will be mandatory from July 1, 2025. 

• Effective Dates: 

• • Voluntary submission begins January 1, 2025. 

• • Mandatory submission starts July 1, 2025. 

Clarifications on Data Submission 

• M0090 Date: The proposed rule suggests changing the submission requirement from the discharge date to the start of care M0090 date. For instance, if a start of care assessment is conducted on June 28 but the M0090 date is July 2, the OASIS must be transmitted based on the M0090 date. 

Exemptions 

• Exemptions to OASIS data submission include patients under 18, maternity cases, and those receiving only personal care or “mop and shop” services. 

The proposed changes in the CMS rule for home health care introduce several critical updates and potential impacts. Providers will need to stay informed and adapt to these changes to meet compliance and optimize their operations. Understanding the nuances of the rule, accurately modeling your data and leveraging expert support will be essential for navigating these updates successfully. 

Click here to listen to our recent webinar focusing on the CY 2025 Home Health Proposed Rule