Home health stakeholders are urging the Centers for Medicare & Medicaid Services (CMS) to address an alleged forecast error in the home health market basket for 2021 and 2022.
Broadly, CMS calculates the expected impact of cost inflation for home health agencies annually. In order to do this, CMS relies on a forecasting methodology from a private entity that is applied to the most recent cost data available for home health care.
“That forecasting tool attempts to gauge cost trends as an indicator of where future costs in the upcoming year will end up,” William A. Dombi, the president of the National Association of Home Care & Hospice, told Home Health Care News in an email. “As with any forecasting, errors can and do occur once actual cost changes are known. Over the years, these errors have sometimes been in the provider’s favor and other times not.”
The forecasting errors for 2021 and 2022 were significant, according to Dombi.
They resulted in a 5.1% shortfall in the annual payment rate updates for those years.
Last month, The Partnership for Quality Home Healthcare (PQHH) and the NAHC penned a joint letter to CMS. In the letter, PQHH and NAHC recommended that CMS advance a proposal for a one-time forecast error correction for 2021 and 2022 in the upcoming proposed rule.
“After a conversation we had with senior officials at CMS – who were asking about some of the economic conditions related to workforce, and the costs of retention and recruitment – we did take the opportunity to follow up our conversation with a letter that really focused on showcasing the fact that in 2021 and 2022, for home health, the market basket was significantly off,” PQHH CEO Joanne Cunningham told HHCN. “This translates to billions of dollars that did not go into the rate structure for home health, which is really important.”
Cunningham noted that the economic conditions that home health agencies are working under are not being reflected in that market basket update appropriately.
“Workforce issues continue to be a serious and significant challenge for providers, and this is one way for CMS to recognize that reality,” she said. “The data is pretty clear. The question is if CMS is going to do anything about it.”
If CMS chooses not to address the forecast error, home health stakeholders fear that it will have a long-term effect because the shortfall is permanently built into the base rates.
Over the course of a ten-year period, a 5-point error will lead to a $10 billion or more loss.
On the flip side, if CMS agrees to make the adjustment, the 2024 base rates will increase by 5% or about $850 million, according to Dombi.
“With that change permanently in the base, [home health agencies] will avoid a $10 billion loss,” he said.
Dombi pointed out that CMS is in a position to correct the forecast error without further congressional authorization.
“We are hopeful that CMS will recognize the need to do so,” he said. “Similar support came to nursing homes in 2003.”
Similarly, Cunningham believes that PQHH and NAHC data-backed push could make a difference for providers.
“I’m always optimistic that when you present data and a solid policy argument to CMS, they respond accordingly,” she said.
Enhabit Inc. (NYSE: EHAB) also weighed in on the forecast error – and the rest of its expectations for the upcoming proposed rule – during a first-quarter earnings call earlier this month.
“I don’t think that we would be surprised to see the other half of that behavioral adjustment come through,” Barb Jacobsmeyer, Enhabit’s CEO, said during the company’s recent earnings call. “I think we will be surprised if they propose to implement any of the temporary cuts in 2024 on top of the other half of the permanent. It’s possible they would lay out some sort of schedule for how it would be applied. A forecast error correction has been requested of CMS when we look at the market basket rate. I anticipate we get that other half, I think what’s going to be critical is what sort of market basket we get with that.”
Companies featured in this article:
The National Association for Home Care & Hospice, The Partnership for Quality Home Healthcare
