All The Payment Factors Included In The 2025 Home Health Proposed Rule

Providers examining the 2025 home health proposed payment rule may be experiencing some déjà vu, according to William A. Dombi, the president of the National Association for Home Care & Hospice’s (NAHC).

“Much of what we see in the rule is just, on the payment side of it in particular, an update from ‘23 and ‘24,” he said during a recent webinar hosted by NAHC.

On June 26, the U.S. Centers for Medicare & Medicaid Services (CMS) unveiled its home health proposed payment rule for 2025.

The proposal includes a payment decrease in the aggregate by 1.7%, or by about $280 million.

“That needs qualification,” Dombi said. “That’s $280 million, not to what it would otherwise have been, but rather, in contrast to what it’s expected to be for 2024.”

Providers examining the proposed rule will also see a 2.5% net inflation rate update.

“The 2.5% is a creature of the annual inflation update of 3%, minus the productivity adjustment of 0.5, netting out at 2.5%,” Dombi said. “This is in the same range that we saw for proposed rules affecting inpatient hospital services, skilled nursing facility care and hospice services that were issued by and large in April of this year, and are moving towards final visitation sometime probably in the neighborhood of the end of July. This number of 2.5% will be updated in the final rule, using more recent data than they use for this calculation.”

Dombi pointed out that CMS has refused to increase the inflation updates, for all sectors, based on what wasn’t accounted for each year.

The proposed payment rule also comes with a $100 million reduction in the spending tied to a change in the outlier formula. The change will decrease the frequency of episodes qualifying for outlier payment, Dombi noted.

“The outlier fixed dollar loss ratio is the element of the outlier formula that’s going to be leading to a decrease in the number of outlier episodes,” he said. “When the FDL goes up, it means you have fewer and fewer episodes that will qualify because you’ve got to be above the normal PDGM episodic rate, in terms of cost, at a higher level, before you trigger outlier payments.”

Additionally, CMS proposed a permanent prospective adjustment to the 2025 home health payment rate of -4.067%.

The budget neutrality adjustment is a combination of what was left over when CMS took the almost 5.8% projected, permanent adjustment and cut it in half to 2.89%.

“Kicking the can down the road doesn’t kick the can into a trash can, it just postpones the application of that, so now we see CMS taking that 2.89% leftover from last year and adding to an additional 1.125%,” Dombi said. “They don’t add up together to 4.067 because of the compounding effects of these kinds of things.”

During the webinar, Dombi reiterated NAHC’s view that CMS current methodology is not compliant with Medicare law.

“CMS is on the opposite side of it — their feet are in concrete on this methodology,” he said. “They didn’t even try to defend it this time around. They had been doing so for the last several years.”

Dombi also pointed out that CMS is still tweaking PDGM, including an annual recalibration of the 432 case mix weights, and a resetting of LUPA thresholds. He also urged providers to pay close attention to the wage index.

“I’ve done 38 years of payment rate updates on the Medicare program,” Dombi said. “I’ve probably said it all 38 times — always check out the wage index. This year, there are more changes than there normally are. They have not only applied the 5% cap on any decreases in wage indices. There has been a significant change in the geographic areas that are designated for your particular counties where you provide service.”

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