CMS Administrator Marilyn Tavenner (CMS photo)

The Centers for Medicare & Medicaid Services (CMS) thinks home health agencies over-report their costs by an average of 8 percent.

CMS gave evidence from home health agency audits as one justification for a proposed 3.5 percent cut in the Medicare home health agency payment rate that it would use in calendar year 2014.

CMS, an arm of the U.S. Department of Health and Human Services (HHS), plans to publish the proposed home health payment system rate update regulations (CMS-1450-P) in the Federal Register Wednesday.

The Patient Protection and Affordable Care Act (PPACA) requires CMS to phase in home health care rebasing adjustments over a four year period, officials said in a preamble to the proposed regulations.

Comments on the proposed regulations are due Aug. 26.

CMS officials noted that could have come up with a different cut in home health payments by adjusting cost estimates to reflect the results of the audit that showed that home health agencies have been inflating their reported costs by an average of 8 percent.

“We considered setting our target national, standardized 60-day episode payment rate for rebasing at 5 percent below the estimated cost per episode that we derived from the 2011 cost reports,” officials said. “We plan to continue to evaluate these alternative factors for rebasing.”

Officials said they also considered adjusting the payment rate for expected changes in the mix of cases but believe they need more data to do that.

The National Association for Home Care & Hospice (NAHC) said CMS came up with its payment reduction proposal after assuming that home health care providers have a margin, or difference between revenue and costs, of 13.63 percent.

NAHC figures show the margin is closer to 8 percent to 9 percent, the group said.

“NAHC is seeking clarifications and a full disclosure of [the] calculation data and methodology,” NAHC said. “At this point, NAHC believes that the proposal is based on an unsupportable calculation.”

NAHC estimated that the CMS rate cut could lead to about half of home health care providers would be getting less money from CMS than they need to cover the cost of providing care.

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