Medicare Home Health Cuts Could Have Ripple Effect on Hospice, Palliative Care

Margin pressures from the proposed cuts to Medicare home health rates could impact palliative care and hospice.

The U.S. Centers for Medicare & Medicaid Services (CMS) in June released its proposed home health reimbursement rule for 2023, which included a 4.2% reduction in aggregate payments totaling an estimated $810 million.

The agency cited budget neutrality requirements to explain the cuts, as well as adjustments related to the Patient-Driven Groupings Model (PDGM), a new payment system introduced in 2020. Many home health providers have decried the proposal, with some calling it a “declaration of war” that threatens their sustainability.


But in addition to the threat to their core business, the rule if finalized could create a chilling effect on those companies’ current or prospective hospice or palliative care programs, according to Bill Dombi, president of the National Association for Home Care & Hospice.

“Certainly, any reduction in revenues from home health will make it much harder to implement new programs such as palliative care, participate in innovations such as hospice [value-based insurance design demonstration], and impact the ability of the provider to recruit and retain staff for any of its programs as demands for higher compensation grow,” Dombi told Hospice News. “In some circumstances, lower home health revenues may lead to the use of hospice revenues to subsidize other programs, rather than to continue to invest in hospice improvements such as technologies.”

Many providers offer home health in addition to their hospice and palliative care services, ranging from large publicly traded firms to nonprofit organizations. Increasingly, home-based health care companies are seeking to extend their business lines more broadly across the care continuum.


Making matters worse for those organizations, the proposed payment cuts if finalized come at a time when costs are skyrocketing for supplies, labor, gas and travel expenses, and wages.

Also, as of July 1, Medicare sequestration resumed after being suspended due to the COVID-19 pandemic. This means both home health and hospice programs are once again seeing their Medicare payments slashed by 2% across the board.

Even providers who expect to see a payment increase from Medicare, including hospices, have argued that proposed rates are insufficient in light of rising costs.

CMS proposed a 2.7% pay hike for hospice care in 2023. Stakeholders in the space have argued that the agency used pre-pandemic data to calculate the rates that do not take into account rampant inflation and other ballooning expenses.

North Carolina-based home health and hospice provider 3HC may reconsider the launch of a palliative care program due to the payment cuts, according to CEO Dean Lee.

“Our hospice has grown significantly, and we keep emphasizing it because we know there’s a lot of unmet need in the hospice side,” Lee told Hospice News. “We had the good fortune to be able to bridge people over [from home health to hospice] to a great extent without a formal palliative care program, but we see a need for that because there are folks who fall in the gap.”

3HC’s planned palliative care program has hit a number of obstacles since the organization began considering it.

The nonprofit began to move towards palliative care shortly before the pandemic, but had to delay its launch largely due to the lack of access to facility-based patients, Lee indicated. 3HC was resuming the development of the program when news of the proposed payment cuts hit. 

“We’re trying to kick it off again, and we see further cuts, which means our palliative program will continue to be on hold,” Lee said. “No money is being invested in this point due to that margin pressure there.”

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