In all likelihood, 2019 will go down as one of the most important years in Medicare-certified home health care history.
While many industry-shaping changes didn’t officially begin last year, 2019 did set the stage for several new regulatory and business trends in 2020. Almost all of those trends are somehow linked to the Patient-Driven Groupings Model (PDGM), the massive home health reimbursement overhaul that went live on Jan. 1.
Thriving under such a vastly different business environment will dictate how providers operate over the next 12 months, with small and large agencies each experiencing a unique set of challenges and opportunities. Consolidation will be a theme of 2020, as will adaptation.
As has become an annual tradition for Home Health Care News, we’re turning to our crystal ball and sharing our top trends and predictions for the year ahead.
Last January, for example, HHCN predicted that home health providers across the country would scramble to diversify their revenue streams ahead of PDGM. We also forecasted that home health would wither in rural markets that the Centers for Medicare & Medicaid Services (CMS) would expand its oversight initiatives and that hospital-at-home models would become more popular.
Most of our 2019 predictions came true, so let’s see how we do for 2020. HHCN will release its predictions for home care later this week.
Home health operational strategies will undergo seismic shifts (before February)
Let’s start with one of our more obvious predictions tied to PDGM.
Under the Prospective Payment System (PPS), home health providers increased the use of in-home therapy services — so much so, in fact, that the Medicare Payment Advisory Commission (MedPAC) often criticized the industry’s apparent overutilization. Thanks to PPS, quick-and-easy therapy became a revenue driver for many agencies, with PTs and OTs becoming money-making “rock stars.”
PDGM changes all that by eliminating therapy thresholds. Today, home health therapy reimbursement is connected to patient characteristics — not the number of total visits provided.
“The minute we saw a payment model that ended the relationship between therapy visits and reimbursement, the question was, ‘What does this mean?’” Cindy Krafft, owner and founder of Kornetti & Krafft Health Care Solutions, said during a presentation at the National Association for Home Care & Hospice (NAHC) annual conference and expo in Seattle. “Some felt this was the ‘death knell’ for therapy, that therapy was going to [see a] fire-sale out of home health.”
Before February begins, the majority of home health providers will scale back on therapy, both in terms of visits delivered and also in terms of staff. Echoing what happened in the skilled nursing world with the Patient-Driven Payment Model (PDPM), HHCN has already received emails from PTs and OTs who have been laid off, seen their hours reduced or pay slashed.
“I have been a physical therapist for 30 years and have always been involved in home health care, even when working in other settings,” one emailer wrote. “I just got the word that my salary is being cut in 2020 by 25%. Maybe the execs are getting a pay bump, but seasoned employees … are getting their salaries slashed with no regard for experience or patient quality of care.”
Home health providers, of course, need to remember there are very real dangers when it comes to pumping the brakes on therapy too quickly.
If patient outcomes or satisfaction levels suffer, that will surely be reflected in Home Health Compare star ratings. Additionally, CMS and MedPAC will be watching to see if their suspicions throughout the past two decades have been accurate, meaning historically therapy-heavy providers could be dinged if they completely changed their behavior on a dime.
Of course, PDGM isn’t just going to change therapy. The overhaul will also encourage providers to become more specialized, especially in wound care, an area that generally sees higher reimbursements.
The industry will consolidate at unprecedented levels
As fast as home health agencies shift their operational strategies, the industry will rapidly consolidate as well. PDGM will be a driving factor of that consolidation, though CMS’s plan to phase out Requests for Anticipated Payment (RAPs) will also play a significant role.
Lafayette, Louisiana-based LHC Group Inc. (Nasdaq: LHCG) and its deal for Egan Home Health is a perfect example of PDGM-fueled consolidation. In December, LHC Group CEO Keith Myers told HHCN how his company was able to acquire the high-performing Egan because its long-time owner, Peter Egan, was looking for a smooth exit before PDGM hit full-force.
“I don’t think anybody ever believed the Egan agency would change hands,” Myers said. “It was assumed that Peter would pass it down to his children. But when PDGM came around, its magnitude [changed that].”
How prevalent might the forthcoming consolidation be? Well, in the years after PPS went live, the home health industry lost 25% to 30% of its existing agencies, according to post-acute care financial experts.
In 2020 and beyond, figures are likely to be even higher due to added cash-flow challenges. Currently, many home health agencies finance their operations with up-front payments known as RAPs, which allow providers to secure up to 60% of episodic reimbursements before care is even delivered.
CMS has compared RAPs to a fraud lightning rod — its main argument for doing away with them entirely by 2021. Without access to RAPs, many freestanding home health agencies with tight margins will go out of business, unable to pay their employees or keep the lights on.
“That will take these small agencies out,” McBee Associates President Mike Dordick told HHCN in July. “I thought the 30% [home health closures] number was going to happen at one point or another regardless. The RAP thing just takes previous estimates and lights them on fire.”
Let’s not forget that PDGM itself presents a potential 4.36% behavioral adjustment, a downside that will only exacerbate cash-flow issues for down-and-out agencies.
Even with record-setting consolidation, the home health industry will still be extremely fragmented when 2020 comes to a close. In 2019, the top-10 largest home health providers — led by Kindred, Amedisys Inc. (Nasdaq: AMED) and LHC Group — combined for less than 25% of total U.S. market share.
Regulatory challenges will create home health deserts
As a consequence of PDGM and RAP pressures, CMS will likely create unintentional home health deserts, areas of the country with limited access to home health care services. Unfortunately, many of these deserts will form in the oldest, sickest and frailest population zones.
In 2019, supply was strong; there were about 11,500 home health agencies. In turn, access to home health was “very good,” according to MedPAC, meaning an estimated 80% or so of Medicare beneficiaries lived in a zip code served by five or more home health providers, with 98% living in a zip code served by at least one provider.
Conservatively, if even 25% of agencies exit the market in 2020, logic suggests an increased number of in-need home health patients will lack appropriate care. This undesirable outcome is one that home health advocates have taken to Congress, winning support from the likes of Sen. Susan Collins (R-Maine), Sen. Rand Paul (R-Ky.) and dozens of other lawmakers.
In theory, rural and nonprofit agencies stand to gain under PDGM, though the overhaul will impact each provider differently at the end of the day. Therapy-heavy agencies will be hit extremely hard; nationally, providers in Idaho, Colorado, Maryland, Hawaii and South Dakota have been the most active in that area.
Apart from PDGM and the elimination of RAPs, rural agencies also face a reduction in rural add-on payments.
Unforeseen PDGM challenges will cause CMS to change its course — and fast
If some areas do become home health deserts this year, then CMS will likely take steps to course correct, perhaps reducing some of its recent regulatory efforts. The same holds true to PDGM’s therapy provisions if providers drastically reduce those services in 2020.
If CMS does walk back some of its 2019 activity this year, that wouldn’t be too surprising, as the agency has a history of flip-flopping from time to time.
“[The] thing I’ve learned about this business and CMS is that the pendulum is always at extremes,” Amedisys CEO and President Paul Kusserow said in September at the annual HHCN Summit.
Even if CMS doesn’t change course on PDGM, the RAP elimination or the Review Choice Demonstration (RCD), providers should at least expect a quieter year regarding new regulation introduced. Agency officials understand that they laid the foundation of massive home health industry change in 2019, so all signs point to 2020 being a “sit back and observe” kind of year.
Additionally, if industry advocates get their way, CMS may end up being forced to change its tune on one particular point: PDGM’s 4.36% behavioral adjustment. Currently, there are dozens of members of Congress that have co-sponsored legislation that would force CMS to only make adjustments based on observed evidence — not assumptions.
Industry insiders are hopeful the legislation will eventually pass through both the House and Senate.
“We’re not there yet. We’re not quite over the goal line,” NAHC Director of Government Affairs Calvin McDaniel said in October. “We do anticipate that we’re going to see some movement on some meaningful legislation over the next couple of months.”
Despite high hopes for PDGM refinement, HHCN believes providers should temper their optimism. There are a few bigger topics in the Capitol Hill spotlight right now — impeachment, to name one — stealing lawmakers’ attention.
Only time will tell if home health care gets the attention it deserves.
Medicare Advantage, telehealth will finally take off
Medicare Advantage (MA) and telehealth will also dominate home health trends in 2020.
Overall, working with MA hasn’t been a main goal for home health providers, as most feel plans fail to grasp the value of in-home care from patient outcomes and cost-savings perspectives. MedPAC data suggests providers might be right, too.
While Medicare-only home health margins hover around 15%, all-payer margins — which include MA — are about 4.3%. That’s a huge gap, so it’s no wonder providers normally gravitate toward fee-for-service Medicare.
The average home health agency gets about 55% of its funding from Medicare. Meanwhile, MA typically accounts for about 15% of the average agency’s reimbursement stream, according to MedPAC.
All that’s starting to change, however. MA players will increasingly look to keep their members out of the hospital and emergency rooms in 2020 by partnering with home-based care organizations — or by acquiring them, taking a page out of Humana Inc.’s (NYSE: HUM) 2018 playbook.
“Interest is higher than ever,” Christy Vitulli, senior vice president of payer relations and network innovation at Amedisys, told HHCN in July. “I think payers are recognizing that the cost of health care is not going down fast enough for them. They’re recognizing that populations of their patients and their members are aging, and facility costs are continuing to rise.”
With the Medicare Advantage penetration rate rising to about 40% in 2020, home health providers also understand they need to ramp up their MA activity to stay relevant.
The use of telehealth technologies is also primed to take off in 2020.
Among the most popular telehealth companies is Hoboken, New Jersey-based Health Recovery Solutions (HRS), which connects home-based care agencies with a remote monitoring platform that features blood pressure monitors, scales, pulse oximeters and other tools.
Sentara Home Care, Valley Home Care and Ohio Living Home Health and Hospice are just some of the providers working with HRS. While using HRS, Virginia-based Sentara saw its 30-day all-cause readmission rate drop to 9.09%, a mark far lower than the state hospital readmission rate average.
In a December survey of more than 150 home health providers conducted by Definitive Healthcare, 28% said they planned to launch new telehealth services in 2020 or 2021.
Telehealth has been relatively slow to catch on due to reimbursement roadblocks, but even those are starting to lessen.
Watchdogs will more aggressively hunt for fraud
In September, the Bay Area’s largest home health provider was charged by feds in a $115 million fraud scheme.
In October, a Texas physician was found guilty of partaking in a $16 million home health fraud scheme.
Most recently, watchdogs sentenced a husband and wife to several years in prison for their roles building “a vast empire of fraud” by submitting more than $38 million in false and fraudulent claims tied to their operations in Florida.
While the Office of Inspector General (OIG), CMS and other groups have tried to curtail home health fraud over the years, it remained high in 2019. As a result, providers should anticipate more oversight and investigations in 2020.
President Donald Trump called on CMS to reinforce Medicare program integrity in an October executive order. To do so, CMS Administrator Seema Verma hinted that her agency will turn to innovative detection tools, including artificial intelligence.
“Program integrity must focus on paying the right amount, to legitimate providers, for covered, reasonable and necessary services provided to eligible beneficiaries while taking aggressive actions to eliminate fraud, waste and abuse,” Verma wrote in a CMS blog post. “Our health care programs are quickly evolving; therefore, our program integrity strategy must keep pace to address emerging challenges.”