The federal government delivered a double whammy to home healthcare operators on Monday.

The U.S. Supreme Court declined to hear a challenge to a Department of Labor rule that applied federal minimum wage and overtime requirements to home healthcare workers, and the Centers for Medicare & Medicaid Services also announced proposed changes that would reduce Medicare payments to home health agencies by $180 million in 2017.

The home care rule, which was published in October 2013 and went into effect in October 2015, redefined the “companionship” exemption to the Fair Labor Standards Act so that nearly 2 million home healthcare workers were not excluded from requirements that they be paid at least the federal minimum wage for all hours worked as well as overtime pay when they work more than 40 hours in a week. Advocates for the direct-care workforce were pleased with Monday’s Supreme Court decision.

“Finding skilled, committed workers for caregiving jobs is becoming increasingly difficult,” said Paraprofessional Healthcare Institute President Jodi M. Sturgeon. “The DOL home care rule is a first step toward addressing this labor shortage.”

LeadingAge supports a “livable wage” for home care staff, Peter Notarstefano, the organization’s director of home and community-based services, told McKnight’s Senior Living. “They have a difficult job and play an important role in helping older adults and persons with disabilities remain in the community,” he said.

When the rule went into effect, however, “home care providers had to change their operations by increasing the use of part-time workers and restricting work hours to avoid overtime costs,” Notarstefano added. “There is already a shortage of home care staff in many areas of the country, especially more rural and frontier locations. Consumers have to deal with multiple caregivers that may have a negative effect on continuity of care.”

The labor rule previously had faced legal challenges. In late 2014 and early 2015, in two rulings, a federal judge vacated the rule, but later in 2015, the D.C. Circuit Court of Appeals said that the measure fell within the powers of the FLSA. Monday, the Supreme Court declined to review that decision in a challenge that had been brought by several home care trade associations and the International Franchise Association. That keeps in place the lower court’s ruling.

Labor Department Secretary Tom Perez said in a blog post on Monday that the decision would help ensure quality care for older adults and people with disabilities. Val J. Halamandaris, president of National Association for Home Care & Hospice, however, said in an online post that the rule negatively affects these individuals’ ability to access home health services. Legislation being considered by Congress would reinstate the exemptions, which had been in effect since the mid-1970s, he noted. The NAHC also has taken steps to obtain Medicaid rate support, along with a tax credit to private-pay clients, for the higher costs associated with overtime, he added.

Proposed payment changes

Also Monday, CMS said that its proposed changes for 2017, to be published in the Federal Register on July 5, would reduce Medicare payments to home health agencies by 1%, or $180 million.

The proposed decrease reflects the effects of the 2.3% home health payment update percentage ($420 million increase); the rebasing adjustments to the national, standardized 60-day episode payment rate, the national per-visit payment rates and the non-routine medical supplies conversion factor ($420 million decrease); the effects of the –0.97% adjustment to the national, standardized 60-day episode payment rate to account for nominal case-mix growth for an impact of –0.9% ($160 million decrease); and the effects of the proposed increase to the fixed-dollar loss ratio used in determining outlier payments from 0.45 to 0.56 for an estimate impact of –0.1% ($20 million decrease).

Approximately 3.4 million beneficiaries received home health services from approximately 11,400 home health agencies, costing Medicare approximately $17.8 billion in 2015, according to CMS. The proposed changes, the agency said, would foster greater efficiency, flexibility, payment accuracy and improved quality.