This post describes the fourth and final round in this lawsuit, the final CMS rebuttal. If you want to catch up, you could read my previous three posts or the original documents associated with this process. Here are the documents.
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 (2/23/24)
The final response from CMS has nothing substantially new, but some of their arguments are phrased differently. In this post, I am going to present the arguments presented by CMS, as I understand them, and my own perspective on them after reviewing all four rounds of the lawsuit.
Round 4
This is an outline of the CMS brief.
The NAHC lawsuit should be dismissed
CMS payment methodologies cannot be contested
NAHC members have not exhausted administrative remedies
If not dismissed, the court should decide for CMS because
CMS properly implemented the budget-neutrality requirement
CMS determined the impact between assumed and actual behavior
CMS eliminated the use of therapy thresholds in the CMW
NAHC relief is overbroad
The NAHC lawsuit should be dismissed
The CMS payment methodology cannot be contested
The first part of this CMS argument is that the court can’t rule on the lawsuit because the language of the originating legislation protected CMS regarding legal actions against the inner workings of their payment models. As CMS mentions, this is to protect them against lawsuits regarding the implementation of different aspects of the PDGM formula and how CMS chose to apply them.
The problem with this argument is that NAHC is not contesting any calculation of reimbursement made through the payment model (PDGM) toward reimbursement of a claim. What is being contested by NAHC are the CMS adjustments being made annually to all claims collectively and then applied back against HHAs through the permanent and temporary adjustments.
These adjustments have no relationship to PDGM or any subcomponent of PDGM. In fact, they have no relationship to the specific behavior of any agency. These adjustments are a tax applied equally to all HHAs to compensate CMS for the collective difference between total actual PDGM payments and what would have been paid under PPS for the same claims.
It is important for everyone to understand what this means. Not only is the current home health payment model unrelated to therapy visits, it is unrelated to services performed by any particular HHA as submitted on the claim or any clinical factors related to the patient for that service period.
Walking through the current process, a claim is submitted for 30-days of service by an HHA. It includes clinical factors that influence the PDGM payment. These factors are used by CMS to calculate a Case Mix Weight (CMW) for the claim multiplied by a base payment and then the wage index for the location where the patient was treated.
It is the base payment that is reduced by the tax or behavior adjustment before it is ever applied to the payment. This negative adjustment is intended by CMS to rebalance the aggregate totals between PPS and PDGM annually, but at the agency level, the tax is completely unrelated to any reductions in visits actually implemented by the agency either annually or at the claim level. In other words, under the current definition of budget neutrality by CMS, this part of the payment formula is applied to all claims equally, regardless of the services provided by the HHA or the clinical acuity of their patients.
In my previous blog posts using cost report data, we saw significant differences between therapy visits provided to patients by different categories of HHAs. In particular, the dramatic difference in visits per period for small agencies vs larger ones.
This cost report data shows that smaller agencies provide significantly more visits than average per PDGM claim. Since the CMS tax on the base payment is related to the industry average therapy visit reductions, this tax is applied unequally to smaller agencies who were and are unable to implement this visit reduction strategy. This means that this part of the payment is unrelated to either the PDGM or PPS payment model since it is not applied to individual claims using either method. It also means that if you did not reduce your therapy visits at a rate equal to or greater than the industry average, you are paying for the behavior of others.
These small agencies are 56% of all agencies, they are fighting for survival and this tax targets them specifically and unfairly.
Imagine if all of us paid income tax based on the average income of all individuals instead of our own income. Some people would enjoy a windfall, but most of us would see tax increases unrelated to our own situation.
NAHC members have not exhausted other administrative remedies
I glossed over this the first time this was presented by CMS in round two, but I want to walk through this process now so you can examine its practicality. When CMS talks about administrative remedies in round two and in this final rebuttal, they talk about the fact that the HHA participants in the lawsuit had chosen not to appeal the claims through the existing process available for all CMS claims. This appeals process is designed to allow HHAs to appeal specific claims through the Medicare Administrative Contractors (MACs).
This process is intended to allow agencies to appeal specific claim reimbursement when they feel the claim was not paid properly, or more commonly, when it is improperly denied in the opinion of the HHA.
This process is used frequently to deal with administrative issues, incomplete claims, and disputes on the status of claims. Some claims that go through this process are later corrected and paid by the MACs. This is a valuable administrative process that improves the accuracy of revenue cycle transactions through any health plan.
Here is an example of a common use of this process. A patient who initially participated in hospice begins to experience improvements in their condition. They decide to withdraw from hospice and begin treatment for the clinical issue originally determined to be a terminal condition. The hospice is required to submit the Notice of Termination/Revocation (NOTR). In this example, the hospice failed to properly report the NOTR. Later, the patient elects to receive treatment by an HHA who submits a Medicare claim for the first 30 day period. Because CMS still shows this patient as being in hospice, the claim is rejected. The HHA then appeals the claim to the MAC with documentation supporting their position. Assuming the facts are corroborated by the hospice and acknowledged by the MAC, the HHA claim is later paid.
In round two, CMS proposes that HHAs, in particular the two in the lawsuit, should have submitted the claims with the invalid base payment rate to the MACs for review. The problem with this solution is that the issues with the permanent adjustment applied to the base payment are not claim related. In order to “exhaust this administrative remedy”, all agencies would have to submit all claims from the beginning of 2023 to the MAC. A process intended to address individual and unique claim problems would be flooded with millions of claims.
CMS takes the position that they should have done this anyway. Let’s say that they did. In round one, NAHC presents specific claims from the two agencies in the lawsuit. Let’s assume that these two claims were appealed through the MACs as CMS argues they should have been. The agencies would document the base payment rate that was used, with the permanent adjustment, and then the same payment without this payment cut, and contend to the MAC that the wrong base payment was used and why.
MAC Option 1
The MAC could then rule that HHA was correct and was owed the amount of the permanent adjustment for these claims. This amount would then be posted back to the agency on a future remittance as an adjustment to these claims. Using this ruling, these agencies would then submit to the MAC the thousands of additional Medicare claims they had filed since the beginning of 2023 for the same reason. Each would then be manually reviewed by the MAC staff and individual claim adjustments would be processed and applied to future remittances.
The MACs, using a process intended to review a small percentage of individual claims, would process each claim through an additional manual workflow within their organization. Once word got out, all other agencies would repeat the process. In the end, every HHA claim since the beginning of 2023 would be processed twice by CMS, once for the original claim payment and then again through the MAC appeal process for reimbursement of the permanent adjustment.
MAC Option 2
The other option, and the most likely one, would be that the MAC would deny the adjustment for these claims. I would imagine they would justify the denial in that they do not regulate the amount used for the base payment of claims, but are given this amount by CMS annually as part of their contract to adjudicate these claims for CMS. Since the basis for appeal applies to all claims for every HHA, it would be useless to submit additional appeals if these original appeals were denied. In my opinion, and the opinion of NAHC, it would be pointless to go through this process to begin with.
The reason why these agencies bypassed this process is that it is obvious to everyone, with the possible exception of these CMS lawyers from the justice department, that these reimbursement issues are not related to individual claims.
They are not even related to individual agencies or anything but the aggregated actions for the industry as a whole. Hundreds of millions of home health claims cannot move through an audit process designed for a small percentage of them. If all claims since 2023 have the same issue, the issue must be solved collectively for all of them without disabling all valid claim appeals by flooding the MAC appeals process with all claims being reviewed for the same reason.
If not dismissed, the court should decide for CMS because…
CMS properly implemented the budget-neutrality requirement
In this round, CMS restates its argument that it met congress’s budget neutrality requirement in two ways, first in that it calculated a total to determine budget neutrality in 2020 of $16.6 billion in aggregate. Then they argue that they maintained this budget neutrality by continuing to calculate claims in 2020, and after, using the prior payment model making this the actual total owed by HHAs through the behavioral adjustment.
If this was the intent of congress as CMS understood it, why even create PDGM as a payment model? Why not simply modify PPS so that there were no longer any therapy thresholds? Why go through all the effort to design a new payment model with revenue that mirrored costs and then not use it to calculate actual reimbursement?
In this section of their response, CMS makes this argument.
The facts regarding the situation reveal this to be a false choice According to CMS, they believe that they had two options to maintain budget neutrality, to pay current claims under the old payment model or to continue to reimburse HHAs each year, under PDGM, at a base rate that would equal $16.6 per year, every year.
The solution was actually quite simple: use the $16.6 billion applied to the estimated PDGM claims in 2019 to determine a budget neutral base rate per claim and then use this base rate for claims in 2020.
CMS did this by coming up with the $1908.18 base rate for 2020. For whatever reason, they seem to neglect this obvious option in their response. If this was the base rate equivalent for the $16.6 billion when divided by the claims for 2019, it could be the base payment rate used to measure budget neutrality as well in future years. As beneficiaries transitioned to Medicare Advantage and the home health market services grew or diminished under Medicare, the base payment per claim would not be altered. If it was budget neutral to begin with, as CMS stated, then it should have been budget neutral moving forward.
As I discussed in previous posts and NAHC did in their response from round three, no reasonable person expected the aggregate total to remain the same from year to year and NAHC never took this position in their rebuttal.
CMS determined the impact between assumed and actual behavior
As NAHC pointed out in their brief in round three, and I have pointed out repeatedly in my posts, CMS never reconciled the accuracy of their estimated “behavior changes” in their initial predictive analytic attempts in 2020 and 2021 using the actual data for these years, when it was available. This was required by congress in the legislation and was acknowledged by CMS.
CMS argues that they, in fact, did compare estimated to actual behaviors when they recalculated 2020 - 2023 PDGM claims under PPS.
Pointing out the obvious, these are not behaviors, these are two different payment models, the old one and the new one. Describing the differences in these payment models and what they calculate for the same claims is not the same thing as describing new behaviors associated exclusively with the new payment model, as CMS did with their initial behavioral adjustment.
Let’s say, for the sake of argument, that the original behavior predictions made by CMS regarding revenue increases turned out to be correct, that agencies used the three predicted behaviors, LUPAs, comorbidity, and altered primary diagnosis codes to increase their revenue by 8.4%. Since the actual implemented permanent adjustment in 2020 and 2021 was only half of this total, agencies would have the other half recorded as the temporary adjustment to be paid to CMS at a later date. CMS would then have continued this permanent adjustment as long as they could continue to measure this increase in relative revenue represented through the actual average payments compared to the original budget neutral base payment ($1908.18). This was the intention of the BA in the legislation, simply to allow CMS to maintain budget neutrality under PDGM if
If this happened, would CMS still have pivoted to the older payment model as the “true” representation of budget neutrality in 2023? I find this to be highly unlikely. It is more likely that it was the failure of these original predictions to happen that led to the pivoted definition of budget neutrality (PPS vs PDGM aggregate totals) since this retroactive redefinition allowed CMS to avoid this embarrassment and the associated financial liability of their initial failed attempt at predictive analytics.
CMS eliminated the use of therapy thresholds in the CMW
CMS argues that they developed a new payment model (PDGM) that eliminated therapy thresholds, as instructed by congress. They maintain, correctly, that NAHC acknowledges this. The problem is that PDGM is not the actual model used to determine reimbursement, it is PPS. In other words, CMS created PDGM without the influence of therapy visits in determining payment, but they don’t actually use it to determine what the industry owes CMS.
PPS was replaced by PDGM specifically to “unlink” therapy visits from reimbursement. CMS then reimplements PPS to determine “actual behaviors” and what is owed to CMS in total. If PPS is still used to calculate the annual totals owed by HHAs to CMS, and PPS is linked to therapy visits, then therapy visits are still linked to payments. You don’t need to be a lawyer to figure that much out.
Conclusion
CMS concludes in their rebuttal that these payment cuts do not threaten the industry and the two agencies used by NAHC as examples are unique and do not represent the impact to everyone. In fact, since these adjustments are made to the base payment rate, by definition, they affect everyone equally. Every HHA is impacted at the same rate. They state that these cuts will not result in a loss of access to care “given the stability of the home health sector”. This stability they refer to does not include substantial losses from Medicare Advantage, another HHS blow to HHAs, and ignores the dramatically increasing number of agencies reporting negative income in their cost reports with the implementation of these cuts. Here is a reprint of this chart from a previous post:
This is without any impact from future payments toward the temporary adjustments included, as recommended by MedPAC.
In their brief, CMS takes on a very arrogant tone toward NAHC and home health. For over a decade, they have developed data, along with MedPAC, that portrays home health agencies as extremely profitable. This data is then used to support efforts like these to reduce spending on the home health benefit and improve their own financial position. Their data is incomplete and incorrect and it is feeding this vicious cycle that is tearing down a vital part of healthcare. This data, intended by CMS to defend these choices, is probably assumed by leaders at CMS to be an accurate representation of the industry. In my opinion, it is an example of “getting high on your own supply”. The people at CMS making these decisions believe the data others in their own organization, and MedPAC created to portray a false point of view of the home health industry.
As far as what happens next, Bill Dombi of NAHC told me that the judge in this case averages about 90 days before rendering a decision. When it comes out, I will share it with you as soon as I can.
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