Medicare scraps future pay model for home health companies

The stocks of publicly traded home health companies soared Thursday after the Centers for Medicare & Medicaid Services tossed out a controversial new payment system that would have cut Medicare payments to home health providers by $1 billion in 2019.

Between the lines: This is yet another example of health care's lobbying power. The home health industry hated Medicare's proposed pay system, talked with the right people, and consequently got what it wanted.

What happened: CMS said this week in the 2018 final rule that it will not move forward with a new payment system called the "home health groupings model." Home health companies have drawn scorn from independent policymakers for their lofty Medicare profit margins, and the new system was an attempt to reduce payments through shorter episodes of care. But now that groupings model "is dead and unlikely to reappear," Gary Taylor, a J.P. Morgan health care analyst, wrote Thursday.

The winners: Stock prices of home health companies Almost Family (up 26%), Amedisys (up 14%), Kindred Healthcare (up 7%) and LHC Group (up 10%) soared Thursday on the news.

Behind the scenes: This change didn't happen in a vacuum. Federal records show Mick Mulvaney, the director of the Office of Management and Budget, held a teleconference last week with Amedisys CEO Paul Kusserow, Kindred CEO Ben Breier, Amedisys lobbyist Robb Walton (who works for Haley Barbour's lobbying firm, BGR Group) and other home health officials to chat about the final rule.