This post describes the third round of four in this lawsuit, the final NAHC rebuttal to the CMS arguments presented in round two. Rounds one and two are presented in my last two posts. If you want to catch up, you could read these posts or the original documents associated with this process. Here are the documents so far, the final one should be out by the end of the month, when it does, I will cover it in my next weekly post and include it in this list.
NAHC vs CMS Lawsuit by round
NAHC lawsuit is filed with opening arguments (10/13/23)
CMS response to lawsuit (12/15/23)
NAHC files rebuttal through brief to the court (1/19/24)
CMS responds with their final arguments (2/26/24)
The NAHC response is well written, researched and presented. They contradict the weak CMS positions presented in round two and they further clarify their own positions from the initial lawsuit.
Before I explore this content with you, I want to make an important point about this effort by NAHC. CMS decided in the 2023 proposed rule to pivot their definition of budget neutrality to what current PDGM payments would have been under the prior model, PPS. From my own perspective, CMS did this without any valid argument for doing so. They even present in their arguments in round 2 that they have the right to define budget neutrality and use therapy visits in the payment formula in any way they choose based on the language in the regulations and the authority it gives them.
This decision by CMS has cost the home health industry $1.5 billion for the first behavior adjustment (BA) in 2020 and 2021. On top of that, they insist that an additional $3.5 billion in debt is owed through 2022 with more to be added each year after as aggregate PDGM payments continue to exceed annual payments recalculated under PPS.
As someone that has spent several years studying the transition to PDGM with claim and cost report data, I have a unique perspective of the reality these numbers represent. The damage being done by this decision and the injustice it represents to home health providers, and healthcare access in general. This situation alone has driven me to write this blog.
I have built a website exclusively to present the arguments and data used by CMS and MedPAC to portray home health agencies as fat and healthy and the real data that shows that they are not. Both of us use the same data for these assumptions, the cost reports. I am paid by no one, I represent no organization and nowhere in my site or my blog, with 18 posts so far, do I make any sales pitches or promote any organization or other commercial efforts.
This may be the last project I work on in a long and moderately successful career, but I will give it my best shot. This is how important this issue is to me. It should be equally important to everyone else that has a stake in home health. As you are reading this, dozens of agency leaders are sitting down at their desks and making desperate decisions on how to survive. Many of them will not make it. Due to the time lag in the data, these agencies are dying off like trees falling in the woods, with no one around to see it happen, until it is too late.
This problem can’t be solved by me, any individual HHA or enterprise HHA, it has to be supported and driven by an organized and collective effort. NAHC is doing this through this lawsuit and their efforts to pass legislation in congress. As I see it, the survival of home health as we know it depends on their success.
Whatever the outcome of these efforts, NAHC has done their job. They have taken the only avenues available to them to reverse the damage created by CMS to home health providers. They have made the most of these opportunities. To the degree that you can support them in this effort, as they describe on their site, you should take the opportunity to do so. CMS will not back down without one or both of these efforts having some level of success.
Round 3
NAHC organizes their responses into two major categories, the first one deals with the CMS violations of congressional mandates associated with the creation of PDGM. The second section deals with the legal arguments regarding judicial review of the case. These positions are related to the final rule for 2023, but they apply to the 2024 final rule as well as all future rules presented by CMS for as long as this problem continues to exist.
I am not a lawyer, so I will focus on the first section of their response in this blog.
Here is an outline of how this section of the legal brief from NAHC is organized.
CMS violation of congressional mandates
CMS did not measure the differences between actual and assumed behaviors and reconcile them
The CMS rule violates congress’s budget neutrality requirement
The CMS rule violates congress’s requirement to remove therapy thresholds as a factor that influences payment
If you are interested in how these arguments are presented, and you should be, please review the document. I will focus on these positions and the arguments presented by NAHC that I felt were the most compelling and my impressions of these positions without repeating them in their entirety.
CMS did not measure the differences between actual and assumed behaviors and reconcile them
In my post on round one, the initial submission of the lawsuit by NAHC, I contended that NAHC should have focused more on this issue above the others. This was not because this was the most important or damaging aspect of this effort by CMS, but because it is the easiest to prove.
Even if you felt that the CMS argument to pivot to a new definition of budget neutrality in 2023 and to make it retroactive to 2020 was justified, this did not eliminate this requirement by congress to measure the accuracy of the predictions associated with the original BA in 2020 and 2021 and to reconcile them with the actual data when it was available.
In the NAHC response, they hammer this point home. To comply with this legislation, CMS should have measured the accuracy of these predictions, published their calculations and created a transaction to record the difference. Then, if they could justify the pivot and their retroactive application of it, they would then apply the results to this adjusted amount. Instead, they simply ignored this responsibility and claimed this effort was irrelevant and included in the totals and their new definition of budget neutrality. By not taking these steps to account for these transactions, they violated the legislation from congress and overstepped their authority as an agency.
CMS was given the authority to predict behaviors by HHAs that might increase spending on home health under Medicare and include them in the formula, as they did in 2020 and 2021. When they executed the budget neutrality pivot in 2023, they failed to demonstrate how the actual behaviors the pivot represented, the reduction of therapy visits by HHAs, represented a real increase in spending on home health by CMS.
In this section of the brief, NAHC made this argument much clearer than I presented it in any of my previous posts. This is on page 16 of 39.
The CMS rule violates congress’s budget neutrality requirement
In this section of the response, NAHC has a more difficult time responding to the CMS position because the position is not established on any numbers comparing PDGM actual behaviors to predicted ones, but on two different payment models.
Instead of measuring these PDGM behavior changes they originally predicted, or even ones they may have missed, CMS measured behavior under PDGM as it would have impacted the previous payment model PPS. Not only is this a position unsupported by data, it does not meet any standard for logic.
Once again, NAHC points this out as coherently as they can under the circumstances, also pointing out how weird the CMS arguments actually are. This is from page 19.
NAHC continues in this section of the brief to describe similar cost reductions under skilled nursing that occurred under their new payment model, This payment model also disconnected therapy minutes from the payment formula with SNF providers benefitting from reduced costs when they reduced these services. I discussed these in detail in my blog.
The CMS rule violates congress’s requirement to remove therapy thresholds as a factor that influences payment
In this section of the brief, NAHC focuses on how the connection of therapy visits to payment, ordered to be eliminated by congress, still exists under the pivoted CMS definition of budget neutrality. This is the core of the argument between CMS and NAHC. CMS does not deny this, they admit that congress required that this connection to therapy visits be eliminated in the new payment model (PDGM). They then argue that this does not mean that they can’t include therapy visits when calculating budget neutrality since they have the exclusive legal authority to define the elements of the payment formula without contradiction by NAHC or others.
NAHC points out, correctly, that if you use therapy visits to adjust the payments in the formula through recalculating PDGM claims under PPS, then the payment formula is still connected to therapy visits. Furthermore, if you reduce payments due to the fact that therapy visits decreased, you are punishing HHAs for the behavior that congress intended HHAs to change under this legislation. Once again, NAHC states this very well in their response on page 24.
One of the major challenges of this lawsuit for either party is that their case must be understood by a judge who will rule on this lawsuit. The topics are familiar legal issues, but the context is not. In the end, the judge may consider one case stronger or weaker in the other, but in order to make a ruling that is “fair”, they need to understand what is at stake for both parties. NAHC creates an analogy in this section of their response to try to relate the arguments to a scenario the judge is more likely to understand. In their analogy, NAHC creates a similar scenario as it applies to law clerks and their work to support the legal process through preparing documents for the court.
Bill Dombi of NAHC told me that CMS, in their response, had presented issues to the judge that were confusing and intended to “muddy the process”. This was NAHCs well structured attempt to let the judge visualize what was happening in a manner that would be clear to him or her given their knowledge of their own work and the workflow of the court.
Not being in the law business, I found this more difficult to follow, but I was not the audience for this document. In the lawsuit, only one opinion matters, that of the judge. Whether it was this judge or another one on appeal, it was important to NAHC for the judge to understand the context of the NAHC and CMS positions so they could understand the lack of logic and fairness CMS presented in their arguments.
In my last post, I had included my own analogy, but later removed it because it became too long. I will include it now.
The Plumbers Prospective Payment Formula
Let’s imagine that some condition occurred several years ago and the federal government was responsible for paying half of all home plumbing bills. Initially, they paid these bills as we do. They consisted of a service call and service hours associated with the plumbing service visit. As time went by, they collected the invoices from plumbers and the detailed hours and service visit rates they included as well as the payments they made.
Over time, the hours per service visit submitted by plumbers began to increase under the new payment model. Analyzing the data, the government developed a new payment model. In this model, they categorized each service call by the purpose of the visit, breaking them into groups like these:
Water leaks
Clogged toilets
Installing appliances
Maintenance visits
Etc.
Using their data, they calculated the service hours typically provided by plumbers for these service calls and other factors like distance traveled, age of the building, etc. They created a new payment formula based on the average relative costs for these groups expressed as a Case Mix Weight (CMW) applied against a base payment and adjusted by the wage index. They introduced this new payment model, the Plumbers Prospective Payment Formula (PPPF) and declared that it should be budget neutral with the prior payment formula.
This new model would not incentivize service hours, as the previous model did, and instead would offer a flat fee based on the issue generating the service call. After this model was introduced, service hours provided by plumbers began to decline on government paid invoices. In the first two years, they went down by about 15%, but overall spending on the plumbing visits remained neutral under PPPF.
The agency responsible for this payment model felt that this “windfall” to plumbers was unfair, even if it was budget neutral. They used a clause in the legislation intended to make adjustments to maintain budget neutrality if aggregate plumbing payments exceeded previous aggregate spending.
They created the “Plumbing Services Equity Tax” representing the difference between what was paid under the new payment model and what would have been paid under the previous model if plumbers were still paid based on the hours worked. Each year, plumbers were paid the PPPF rate and then the aggregate plumbing invoices were recalculated under actual hours worked and the aggregate total comparison (difference in payment models) would be used to calculate the debt owed by plumbers to the government (The Plumbing Temporary Adjustment).
To maintain the viability of the plumbing business, they only charged half of the debt each year as a tax against current plumbing invoices (plumbing permanent adjustment) and the rest would be charged to the industry later as an additional tax (plumbing temporary adjustment).
This tax reduced current PPPF payments and dramatically reduced overall spending by the government on plumbing. It also dramatically reduced plumber profit margins. Under this new payment model, plumbers no longer received budget neutral reimbursement compared to the old model, but steadily declining revenue for the same services. It did not matter if you were a plumber who reduced hours on government invoices or not, you paid the same tax all other plumbers did.
As time went by, plumbers who were just getting by under the old payment model began reporting losses under the new one. Plumbers became more difficult to find and less likely to make service calls under the government program. Many plumbers silently went out of business while others tried to create new business models not dependent on government reimbursement.
People had more clogged toilets and dealt with them longer before they were fixed. Eventually, the plumbing industry shrank to a point where homes and businesses who needed this service often had no vendors to provide it. Smaller plumbers suffered the most and were the first to fail. Eventually, after the situation reached a crisis, congress suspended the payment model and went to a new reimbursement strategy intended to rebuild the industry. This new legislation was so expensive that eventually plumbing spending was much more costly to taxpayers than it would have been had the original payment model just stayed in place.
Soon, the small business plumbers were replaced by larger plumbing conglomerates that leveraged the new legislation to maximize their revenue. The quality and personal service of the small business plumber was a thing of the past, as was any concept of budget neutrality for the taxpayer.
If you are trying to illustrate what is happening to home health to anyone, the plumbing analogy might be easier to understand, but considering the audience is a judge, the NAHC analogy serves the purpose better.
After reading this NAHC brief multiple times, it is difficult to understand how any judge, with or without the analogy, might see any remaining argument standing for CMS. Soon, CMS will offer their response in the fourth and final round of this lawsuit. I, for one, can’t wait to see what arguments they present. As soon as I have processed their response, I will post their responding brief and my understanding of it.
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