Nursing Homes, Home Health Marked for Medicare Cuts in 2023


January 13, 2022 6:08 pm

A federal advisory commission will recommend to Congress that traditional Medicare lower payments by 5% to nursing homes, home health agencies, and inpatient rehabilitation facilities in 2023.

After assessing payment adequacy, the Medicare Payment Advisory Commission found that the three provider groups were receiving sufficient reimbursement for the services they provide.

MedPAC provides lawmakers with analysis and policy advice on the taxpayer-funded Medicare program. Its recommendations are nonbinding, but Congress utilizes commissioners’ expertise when making funding decisions.

Each year, the commission advises Congress about how to update payment rates for health providers that treat Medicare beneficiaries. All final recommendations for 2023 will be included in the commission’s March 2022 report to Congress on Medicare payment policy.

In 2020, traditional Medicare paid $28.1 billion to nursing homes on behalf of 1.2 million beneficiaries. A 5% pay cut would lower Medicare spending on nursing homes by more than $2 billion in fiscal year 2023 and more than $10 billion over five years, the commission reported. Nursing homes had a 16.5% aggregate profit margin on Medicare beneficiaries in 2020—19.2% for facilities that received federal provider relief funds, the commission reported. Next year, the commission projects a 14% margin.

In 2020, Medicare paid $17.1 billion for home health services for about 3.1 million beneficiaries, the commission reported. Home health providers are projected to see a 17% aggregate profit margin on Medicare beneficiaries in 2022, it reported. Inpatient rehab facilities are projected to have an aggregate profit margin of 14% on Medicare beneficiaries next year, the commission projected.

The panel voted to recommend hiking the 2022 Medicare base payment rate for acute care hospitals by 2% in 2023. That includes a .5% increase for inpatient rates.

Payments to Doctors

The panel voted to recommend no payment update for physicians and other clinicians in 2023, but these providers could receive positive or negative payment adjustments for providing quality care under the Merit-based Incentive Payment System, or MIPS, which measures an eligible clinician’s performance against their peers.

They could also receive a 5% payment bonus for participation in an advanced alternative payment model in which they’re eligible for bonuses for providing high-quality care and risk payment reductions when they don’t.

Medicare paid $64.8 billion to 1.3 million physicians and clinicians in 2020, down $8.7 billion from 2019, the commission reported. Federal provider relief funds helped offset those lost payments, which were due mainly the Covid-19 pandemic.

The panel also adopted a second recommendation to require physicians and other health professionals to use a “claims modifier” to identify when they’ve provided audio-only telehealth services. The Centers for Medicare & Medicaid Services already requires the modifier for audio-only telehealth services related to substance abuse disorder and mental health issues.

Surgical, Dialysis, Hospice

The commission also finalized a draft recommendation to eliminate a scheduled 2% rate increase for ambulatory surgical centers in 2023, citing adequate payments. In 2020, fee-for-service Medicare paid $4.9 billion to ambulatory surgical centers on behalf of about 3 million beneficiaries.

The commission also finalized a draft recommendation to require surgical centers to provide annual cost reports to the CMS. The commission has called on the Department of Health and Human Services to require such reports from surgical centers since 2009. Without the documentation of revenue and profit margins, the commission says it’s difficult to recommend payment rate adjustments for surgical centers.

Dialysis facilities would see a 1.2% payment hike under another final commission draft recommendation. In 2020, Medicare paid $12.3 billion to dialysis centers on behalf of 384,000 beneficiaries. About 7,800 dialysis centers are Medicare-certified. In 2022, the commission expects dialysis centers to have a projected 1.8% profit margin on Medicare beneficiaries, the panel noted.

Hospice providers would see no payment increase in 2023 under another commission final draft recommendation. In 2020, Medicare paid over $22.4 billion to hospice providers on behalf of over 1.7 million beneficiaries, the commission reported. Hospice providers are expected to have a 13% aggregate profit margin on Medicare beneficiaries in 2022, the commission reported.

The commission also finalized a draft recommendation calling for a 20% cut in Medicare’s annual per-patient payment limit, or “aggregate cap,” for hospice providers in 2023.

The hospice aggregate cap is $31,298 in 2022. If a hospice provider’s annual Medicare payments divided by the number of beneficiaries exceeds the cap amount, the facility must repay the excess payments. In 2019, 19% of hospices exceeded the cap.

The commission also passed a draft recommendation that would require adding a wage adjustment to the aggregate cap to reflect area pay differences.