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2018 was a banner year for the Medicare-certified home health care industry.
Big providers got even larger through creative mergers and acquisitions. Admissions and utilization numbers held strong. New telehealth opportunities started to emerge. And, in general, revenues remained high.
The upcoming year brings much uncertainty, however, with the main culprit being the Patient-Driven Groupings Model (PDGM).
PDGM is likely going to dominate the home health care conversation for much of 2019, but don’t look past these other important trends. Check out trends in the non-medical home care industry as well, which Home Health Care News covered in a previous story.
Diversification of revenue streams
In years past, home health care companies were typically just that — providers that specialized in providing Medicare-certified, skilled home health services in the home setting. That notion is drastically changing, as providers look to diversify service offerings to cover a bigger chunk of the continuum of care and insulate themselves from unforeseen regulatory challenges.
Baton Rouge, Louisiana-based Amedisys Inc. (Nasdaq: AMED), which has steadily grown its personal care line while also ramping up its pursuit of hospice, is a prime example of the industry-wide diversification trend.
In October, Amedisys announced it had reached a $340 million agreement to acquire New Jersey-based Compassionate Care Hospice — one of the largest hospice providers in the United States. Upon completion of the deal, Amedisys is projected to become the third-largest U.S. hospice provider.
By building its hospice presence and being able to take care of patients as they age and near the end of their lives, Amedisys becomes a one-stop-shop for payer and health system partners. Amedisys’ investment into hospice also comes in tandem with PDGM, the most substantial overhaul to the home health payment system by the Centers for Medicare & Medicaid Services (CMS) in decades.
CMS finalized PDGM — mandated to be budget neutral by the Bipartisan Budget Act of 2018 — in October. Among its provisions, PDGM is designed to remove incentives to over-provide therapy services by more strongly weighting clinical characteristics and other patient information, according to CMS. PDGM also halves the old 60-day unit of payment to 30 days, doubling billing requirements for providers.
Amedisys CEO and President Paul Kusserow told investors during a third quarter 2018 conference call that Amedisys’ ongoing “pre-PDGM” plan has been to add to its hospice business because of the segment’s more favorable reimbursement environment. Once Compassionate Care Hospice is under Amedisys control, the company expects to eventually have more than 50% of its EBITDA stemming from hospice, he said.
Additionally, as home care providers angle to be involved in Medicare Advantage (MA) for the first time, home health providers will also try to become more valued partners with MA plans. Data on home health care’s ability to keep patients at home — the lowest cost setting — will be key to accomplishing that goal.
At least one provider — Lafayette, Louisiana-based LHC Group (Nasdaq: LHCG) — has been able to win more favorable payment rates by demonstrating the cost savings that home health can achieve for insurers.
HHCN’s prediction: Health plans will finally be convinced that home health drives cost-savings, and will roll out large-scale programs to increase beneficiaries’ access to this care
Partnership formation is a high-stakes game of musical chairs
The M&A engine for the home health industry remained strong in 2018, fueled by providers’ desire to diversify revenues and become a one-stop-shop for payers. Wholesale acquisitions, such as Amedisys’ Compassionate Care deal, will continue to be one route to diversification of services and revenue in 2019, but forging joint ventures and other partnerships focused on the home will take on increased importance as well.
Why are partnerships so important? Integrated care delivery models that tie together physicians, health systems, post-acute care providers, technology venders and others have been shown to provide significant value to the health care system in curbing emergency department visits and re-hospitalizations.
LHC Group has a big jump on the partnership game in terms of building hospital relationships, being the preferred in-home health care partner for 330 hospitals around the country.
In some ways, the rush to form partnerships will resemble a high-stakes game of musical chairs. Home health providers need to suss out their markets and their business models and make moves to forge partnerships that make sense from a competitive standpoint, whether that’s with a private duty partner, a hospice, a pharma company, an insurer or other entities.
Home health providers won’t be the only ones on the lookout for partnerships. In fact, many senior housing, assisted living and independent living communities will look to make connections as well. The pressure is on to move quickly, establish relationships, formalize contracts — or risk being left on the sidelines and out of the game.
HHCN’s prediction: Home health companies have an increasing variety of startups to work with, which will make them more attractive partners for large health systems or payers. Look for home health providers to forge relationships with companies like “grandkids on demand” startup Papa, which can help alleviate seniors’ loneliness.
Home health withers in less dense markets
Delivering home health care in rural markets comes with a unique set of challenges, such as medically complex populations and remote geographies with great distances between patients. Rural add-on payments — or small payment bumps to certain rural home health providers — have played an important role in keeping home-based care providers in business in these places.
Those rural add-on payments are the targets of sweeping change in 2019. Rural home health providers’ bottom lines may suffer as a result.
In its proposed payment rule for calendar year 2019, CMS suggested allocating rural add-on payments in a more targeted fashion, breaking down rural counties into “high utilization,” “low population density” and “all other.” The upshot: some rural providers will be getting less money than they have in the past.
Although early in the year, reports have already begun to detail how rural home health providers will be affected by the changes, mandated by the Bipartisan Budget Act of 2018. Seven of Vermont’s 10 home health and hospice agencies will lose significant funding — as much as $1.2 million annually — due to the rural add-on adjustments, for example.
There are more than 3,000 total counties or equivalent areas when taking into account all states, Washington, D.C., and the U.S. territories of Guam, Puerto Rico, the U.S. Virgin Islands, according to an HHCN review of CMS data. More than 2,000 of those are considered rural in respect to add-on payments. Combined, rural and equivalent areas had more than 1.2 home health episodes in calendar year 2015, the most recent year for which data was available.
Expanded telehealth opportunities for home health companies may provide some relief.
HHCN’s prediction: The landscape seems ripe for new legislation to boost home health in rural areas. The Trump Administration has tried to develop a perception that it values rural America, so any setbacks to health care delivery in those places would hurt that image. Rural add-on payments have largely been year to year, but a slew of headlines about lack of home health in rural communities could lead to a more permanent solution.
CMS takes pilots to the next level
From its Review Choice Demonstration (RCD) to the Value-Based Purchasing Model (VBPM) and bundled payment programs, CMS has been launching targeted home health programs over the past several years in a limited number of states. Almost always, there’s a stated intention to scale up these programs over time.
In 2019, look for this to start happening, namely with RCD and VBPM.
RCD — a revised version of CMS’ Pre-Claim Review Demonstration (PCRD) that was ultimately paused — requires providers in participating states to undergo pre- or post-payment review with their Medicare claims. The goal is to reduce instances of improper billing. Additional options exist for providers that show they can consistently satisfy billing requirements.
Similar to 2016, the rebooted PCRD initiative was supposed to begin with home health agencies in Illinois in December, then expand into the states of Ohio, North Carolina, Texas and Florida. CMS is slow getting out the gate, but RCD will hit outside of Illinois in 2019, HHCN predicts.
RCD is coming down the pike despite the fact that the home health improper payment rate decreased to 17.61% in 2018.
The big question in regard to CMS demonstrations: Will CMS finally expand its nine-state Value-Based Purchasing Model? HHCN votes yes. CMS fine-tuned VBPM to weight achievement over improvement as part of its final home health payment rule for 2019. That may signal agency intentions for a broader rollout, which many home health providers would support, industry experts speculate.
Apart from RCD and VBPM, there’s also noise about new bundled payment programs.
In August, Center for Medicare and Medicaid Innovation (CMMI) Director Adam Boehler said it’s “a possibility” that CMMI will create a home health bundled payment model, continuing the shift away from traditional fee-for-service.
HHCN’s prediction: Home health providers won’t be able to stop pre-claim review this time around, and RCD will hit Illinois and at least one other state in 2019. CMS will propose expanding VBPM sometime toward the middle of the year. Despite Boehler’s comments, the industry won’t see a home health bundled payment model.
The home becomes a more crowded site of care
In 2019, home health aides, therapists and private-duty workers will be routinely joined by on-demand house call physicians, urgent care teams, virtual caregivers, hospital-at-home technicians and a a cadre of other home-based care professionals — maybe even handymen.
Hospital-at-home programs, in particular, are poised to gain steam.
In 2018, findings out of Mount Sinai at Home found that patients who participated in hospital-at-home programs had lower readmissions rates, shorter hospital stays and fewer emergency department visits.
“If [hospital-at-home] were a drug, it would be a blockbuster drug,” Bruce Leff, director of the Center for Transformative Geriatric Research and one of the biggest supporters of hospital-at-home programs in the U.S., told stakeholders at the American Academy of Home Care Medicine’s annual meeting late last year.
The potential benefits of wraparound care are huge, but home health companies need to be prepared for working with all of these other entities — or at least peacefully and productively co-existing with them.
HHCN’s prediction: Other countries have more mature hospital-at-home programs than the United States The U.S. will begin to make up the ground in 2019. One reason: CMS will unveil a new innovative payment model for hospital-at-home programs. The agency has already spent the paste few years evaluating at least two possible concepts.
“If [hospital-at-home] were a drug, it would be a blockbuster drug.”
Bruce Leff, director of the Center for Transformative Geriatric Research
Predictive analytics becomes a must-have
In home health care, focusing interventions on high-risk patients is mission-critical, as the need to reduce hospitalizations and readmissions while managing length of stay is ever more important. Plus, staffing pressures mean workers must be deployed strategically.
“Predictive analytics” has been a buzzword for a while, but it’s no longer a futuristic capability that only a few early adopters are seriously experimenting with. Some of the biggest players are investing in predictive analytics companies or working with analytics firms — PreparedHealth, Complia Health and others — to be ready for Medicare Advantage and health system opportunities.
In August, Amedisys acquired a minority stake in Nashville, Tennessee-based predictive analytics firm Medalogix. Founded in 2012, Medalogix has four main predictive analytics product lines — all aimed at decreasing unplanned hospitalizations and keeping patients in the appropriate care setting. Medalogix Bridge, for example, helps providers more effectively identify patients nearing the final days of their life, a valuable insight for those with dual home health care and hospice business lines.
“In order for us to move into where the world’s going to from a risk-based environment, we need to have the data, business intelligence [capabilities] at an individual patient level to drive better outcomes,” Amedisys CEO Kusserow previously told HHCN. “You have to be able to predict on a very regular basis who’s your highest risk and how you are going to alter your care plan so you can stop unnecessary hospitalizations.”
An agency will officially be behind the curve if its care is not driven by data by the end of 2019.
HHCN’s prediction: Look for Amedisys’ competitors to keep pace by investing in predictive analytics businesses of their own. Best Buy Health purchased technology company GreatCall Inc. in 2018 — don’t be surprised if the electronics retailer got involved in home health care predictive analytics somehow. The same holds true for the usual list of disruptor suspects as well: Google, Apple and Amazon.
Additional contributions by Tim Mullaney