Why Texas Home Health Agencies Could Face Bleak Future

Attempts in Texas to slash Medicaid funding for pediatric therapy services could significantly impact home health companies, and agencies in the state have expressed concern about what reduced payments could mean for their sustainability.

A state district judge last month blocked cuts to a therapy program for poor and disabled children, which had been slated to take effect Oct. 1. Now, in the midst of a legal battle that has ensued since lawmakers ordered an approximately 25% decrease in Medicaid funding for such services, the Texas Health and Human Services Commission must determine other ways to reduce payments to therapists while keeping businesses that rely on the cash flow afloat.

Dallas-based Care Options for Kids, one of several businesses suing the state over the cuts, is one home health agency with a hefty chunk of money hanging in the balance—as much as $4.5 million per year, said President and CEO Michael Reiswig.

Among the largest pediatric home health agencies in Texas, Care Options employs about 400 people and provides speech, occupational or physical therapy to about 2,600 children at any given time, all paid for by Medicaid. Last year, Care Options earned a 5.6% profit for its owners, including the private-equity firm Ancor Capital Partners, which owns one-third of the company.

For years, state officials have deemed Medicaid funding for therapists is unnecessarily high, and lawmakers took note last session, calling for a $100 million payment cut to the program. Meanwhile, the number of Medicaid patients receiving therapy services, whether at home or in a facility, has grown by almost 40% since 2009.

“The state arguably has had bad public policy in place for a number of years, or incorrect reimbursement rates,” Billy Millwee, a former Texas Medicaid director, told the Texas Tribune. “Well, now you have a whole industry that has built a business model on that, and it’s serving the Medicaid population, so you don’t turn it on a dime.”

Despite hard hits now faced by home health agencies, state records suggest cuts have had a more dramatic impact on rehabilitation facilities and independent therapists over the years. Still, the future for home health providers appears bleak, particularly if the cuts are administered in their entirety.

If cuts force Care Options to close, for example, Reiswig testified in court that care for children in some markets where his company is the only home health therapy provider would be jeopardized. Others, including not-for-profit therapy providers, have requested to be exempt from the Medicaid cuts, because they consider themselves a different sort of health provider.

Not everyone views the cuts as quite so dire, though. Private insurers that work with the Texas Medicaid program have indicated that they already pay well below the state’s rates for therapy, and that they don’t anticipate any issues, according to the Texas Tribune.

“We would have no problem with our Medicaid members accessing a therapist with the proposed rate cuts,” Mary Dale Peterson, CEO of Medicaid managed-care organization Driscoll Children’s Health Plan, told the Texas Tribune. “We have plenty of therapists in our network.”

Where the Texas Health and Human Services Commission will go with its payment reductions remains unclear, and the cuts will stay in limbo at least until January when legal proceedings resume. What it comes down to, most agree, is further assessing how companies use their Medicaid dollars.

“If there are a few people out there who are unscrupulously profiting off of these Medicaid rates, then deal with them,” said Tod Marvin, CEO of Easter Seals Central Texas, a provider in the federal-state Early Childhood Intervention program. “But the huge vast providers of Medicaid services—to suggest that if one is doing it, all are—shows a level of misinformation and uneducated perspective.”

Written by Kourtney Liepelt