a road sign that says "medicare rate increase ahead"

CMS Fact Sheet for PPS 2023 Final Rule

On October 31, 2022, the Centers for Medicare & Medicaid Services (CMS) issued the calendar year (CY) 2023 Home Health Prospective Payment System (HH PPS) Rate Update final rule, which updates Medicare payment policies and rates for home health agencies (HHAs). This rule includes routine updates to the Medicare Home Health PPS and the home infusion therapy services’ payment rates for CY 2023, in accordance with existing statutory and regulatory requirements. As described further below, CMS estimates that Medicare payments to HHAs in CY 2023 will increase in the aggregate by 0.7%, or $125 million compared to CY 2022.

CMS is finalizing a methodology to determine the impact of differences of assumed and actual behavior changes on aggregate expenditures, as well as a permanent prospective payment adjustment to the home health 30-day period payment rate to account for any increases or decreases in aggregate expenditures. This methodology and adjustment are due to the implementation of the Patient-Driven Groupings Model (PDGM) and 30-day unit of payment as required by the Bipartisan Budget Act of 2018, which amended Section 1895(b) of the Social Security Act. CMS is phasing-in the permanent adjustment by finalizing a -3.925% permanent adjustment for CY 2023. The -3.925% permanent adjustment is half of the full permanent adjustment of -7.85% (-7.69% in the proposed rule). This rule also discusses the comments received on the best approach to implement the statutorily required temporary payment adjustment for CYs 2020 and 2021, and those comments will be considered for future rulemaking.

The rule includes a discussion of the comments received on the future collection of data regarding the use of telecommunications technology during a 30-day home health period of care on home health claims, for which we will begin collecting data voluntarily January 1, 2023, and will then require on a mandatory basis July 1, 2023. Additionally, this rule finalizes changes to the Home Health Quality Reporting Program (HH QRP) requirements; changes to the Expanded Home Health Value-Based Purchasing (HHVBP) Model; and summarizes the input received on the health equity request for information (RFI) for both HH QRP and HHVBP.

CY 2023 Payment Updates and Policy Changes — Updates for HHAs and Home Infusion Therapy Suppliers

Updates to the HH PPS for CY 2023

This rule finalizes routine, statutorily required, updates to the home health payment rates for CY 2023. CMS estimates that Medicare payments to HHAs in CY 2023 will increase in the aggregate by 0.7%, or $125 million, compared to CY 2022, based on the finalized policies. This increase reflects the effects of the 4.0% home health payment update percentage ($725 million increase), an estimated 3.5% decrease that reflects the effects of the prospective permanent behavioral assumption adjustment of -3.925% ($635 million decrease) that is being phased-in, and an estimated 0.2% increase that reflects the effects of an update to the fixed-dollar loss ratio (FDL) used in determining outlier payments ($35 million increase). We note that the overall impact of the -3.925% permanent behavioral assumption adjustment is -3.5%, as the permanent adjustment is only made to the 30-day payment rate and not the Low Utilization Payment Adjustment (LUPAs) per visit payment rates.

This rule finalizes recalibration of the PDGM case-mix weights and updates the low utilization payment adjustment (LUPA) thresholds, functional impairment levels, comorbidity adjustment subgroups for CY 2023, and the FDL used for outlier payments. This rule also finalizes the reassignment of certain diagnosis codes under the PDGM case-mix groups.

PDGM and Behavioral Changes

On January 1, 2020, CMS implemented the home health PDGM and a 30-day unit of payment as required by Section 1895(b) of the Social Security Act. The PDGM better aligns payments with patient care needs, especially for clinically complex beneficiaries that require more skilled nursing care rather than therapy. The statute requires CMS to make assumptions about behavior changes that could occur because of the implementation of the 30-day unit of payment and the PDGM. In the CY 2019 HH PPS final rule with comment period (83 FR 56406), CMS finalized three behavioral assumptions (clinical group coding, comorbidity coding, and LUPA threshold).

The statute requires CMS to determine annually the impact of differences between assumed behavior changes and actual behavior changes on estimated aggregate expenditures, beginning with CY 2020 and ending with CY 2026. CMS must also make temporary and permanent increases or decreases, as needed, to the 30-day payment amount to account for such increases or decreases. Additionally, in the CY 2019 HH PPS final rule with comment period (83 FR 56455), we stated that we interpret actual behavior change to encompass both the three behavior changes that were assumed by CMS when determining the budget-neutral 30-day payment amount for CY 2020, and any other actual behavior changes not predicted at the time the 30-day payment amount for CY 2020 was determined. In the CY 2022 HH PPS proposed rule, CMS first solicited comments on a repricing methodology to determine the impact of behavior changes on estimated aggregate expenditures. This methodology predicts what the Medicare program would have spent under the pre-PDGM payment methodology, using actual CY 2020 and 2021 data and, thus, accounting for actual behavior changes as a result of the PDGM. In other words, CMS ran actual claims under the prior system and compared it to the claims under the PDGM system, which allowed a comparison of aggregate expenditures under both systems in order to determine the estimated aggregate impact of behavior change. The CY 2023 final rule finalizes that repricing methodology.

Using the finalized methodology and updated claims data for the final rule, CMS determined that Medicare paid more under the new system than it would have under the old system and would have to make a -7.85% permanent adjustment to the 30-day payment rate in CY 2023 (as compared to -7.69% adjustment in the proposed rule). However, to mitigate such a large decrease in home health payments in a single year, we are finalizing to phase in the permanent adjustment by reducing it by half for CY 2023. That is, we are finalizing a -3.925% permanent adjustment to the 30-day payment rate in CY 2023 to ensure that aggregate expenditures under the new payment system (PDGM) would be equal to what they would have been under the old payment system. The remaining permanent adjustment, along with any other potential adjustments needed to the base payment rate to account for behavior change based on data analysis, which are all required by law, will be proposed in future rulemaking.

While the statute also requires CMS to determine one or more temporary adjustments to offset retrospectively for such increases or decreases in estimated aggregate expenditures, CMS has the discretion under the statute to implement these adjustments in a time and manner deemed appropriate. Therefore, CMS is not implementing a temporary payment adjustment in CY 2023.

Permanent Cap on Wage Index Decreases 

To achieve the policy goal of increased predictability in home health payments, while aligning with the FY 2023 Inpatient Prospective Payment System final rule and other rules, this rule finalizes a permanent, budget neutral 5% cap on negative wage index changes (regardless of the underlying reason for the decrease) for home health agencies to smooth year-to-year changes in the pre-floor/pre-reclassified hospital wage index.

Recalibration of PDGM Case-Mix Weights

Each of the 432 payment groups under the PDGM has an associated case-mix weight and LUPA threshold. CMS’ policy is to annually recalibrate the case-mix weights and LUPA thresholds using the most complete utilization data available at the time of rulemaking. In this rule, CMS is finalizing recalibration of the case-mix weights (including the functional levels and comorbidity adjustment subgroups) and LUPA thresholds using CY 2021 data to more accurately pay for the types of patients HHAs are serving.

Comment Solicitation on the Collection of Data on the Use of Telecommunications Technology under the Medicare Home Health Benefit

CMS finalized policy changes regarding the use of services furnished via telecommunications systems in the CY 2021 HH PPS final rule. However, the collection of data on the use of telecommunications technology under the home health benefit is limited to a broad category of telecommunications technology costs under administrative costs on the HHA cost report (reported at the agency level). In the CY 2023 HH PPS proposed rule, CMS solicited comments on the collection of data on the use of such services furnished using telecommunications technology on the home health claims (at the individual beneficiary level). Collecting data on the use of telecommunications technology on home health claims would allow CMS to analyze the characteristics of the beneficiaries utilizing services furnished remotely, and could give us a broader understanding of the social determinants that affect who benefits most from these services, including what barriers may potentially exist for certain subsets of beneficiaries. CMS plans to begin collecting this data on home health claims on a voluntary basis beginning on January 1, 2023 and on a mandatory basis beginning on July 1, 2023. Further program instruction for reporting this information on home health claims will be issued in January, 2023.

Updates to the Home Infusion Therapy Benefit for CY 2023

CMS is updating the home infusion therapy services payment rates for CY 2023 as required by law. Section 1834(u)(3) of the Social Security Act specifies that annual updates be equal to the percent increase in the Consumer Price Index for all urban consumers (CPI–U) for the 12-month period ending with June of the preceding year, reduced by the productivity adjustment for CY 2023. The CPI-U for June 2022 is 9.1% and the corresponding productivity adjustment is a reduction of 0.4% based on IHS Global Inc.’s third-quarter 2022 forecast of the CY 2023 productivity adjustment (which reflects the 10-year moving average of changes in annual economy-wide private nonfarm business TFP for the period ending June 30, 2022). Therefore, the final home infusion therapy payment rate update for CY 2023 is 8.7%. The single payment amounts are also adjusted in a budget neutral manner using standardization factors for geographic area wage differences using the geographic adjustment factors (GAF). The CY 2023 GAF standardization factor that will be used in updating the final HIT payment amounts for CY 2023 is not available for this final rule. However, the standardization factor, the final GAFs, national home infusion therapy payment rates, and locality-adjusted home infusion therapy payment rates will be posted on CMS’ Home Infusion Therapy Services webpage[1] once these rates are finalized.

Finalization of All-Payer Policy for the Home Health Quality Reporting Program

CMS is ending the temporary suspension of OASIS data collection on non-Medicare/non-Medicaid HHA patients. HHAs will be required to submit all-payer OASIS data for purposes of the HH Quality Reporting Program (QRP) beginning with the CY 2027 program year, with two quarters of data required for that program year. We are finalizing a phase-in period for January 1, 2025 through June 30, 2025, in which failure to submit the data will not result in a penalty. 

Baseline Years in the Expanded Home Health Value-Based Purchasing (HHVBP) Model

For the Expanded HHVBP Model, CMS is finalizing to:

  • Add definitions for HHA baseline year and Model baseline year, and remove the previous definition of baseline year;
  • Change the HHA baseline year from CY 2019 to CY 2022 for existing HHAs with a Medicare certification date prior to January 1, 2019, and from 2021 to 2022 for HHAs with a Medicare certification date prior to January 1, 2022 starting in the CY 2023 performance year; and,
  • Change the Model baseline year from CY 2019 to CY 2022 starting in CY 2023.

Health Equity Request for Information (RFI)

CMS requested stakeholder feedback on our work around health equity measure development for the Home Health QRP and the potential future application of health equity in the HHVBP Expanded Model’s scoring and payment methodologies. The comments received are summarized in this final rule.

For additional information about the Home Health Prospective Payment System, visit https://www.cms.gov/Medicare/MedicareFeeforService Payment/HomeHealthPPS/index.html and https://www.cms.gov/center/provider-Type/home-Health-Agency-HHA-Center.

For additional information about the Home Health Patient-Driven Groupings Model, visit https://www.cms.gov/Medicare/MedicareFeeforService Payment/HomeHealthPPS/HHPDGM.html.

For additional information about the Home Infusion Therapy Services benefit, visit https://www.cms.gov/Medicare/MedicareFeeforServicePayment/HomeInfusion Therapy/Overview.html.

The final rule can be downloaded from the Federal Register at: https://www.federalregister.gov/public-inspection/2022-23722/medicare-program-calendar-year-2023-home-health-prospective-payment-system-rate-home-health-quality


[1]Home Infusion Therapy Services Billing and Rates. https://www.cms.gov/medicare/home-infusion-therapy-services/billing-and-rates