HealthSouth CEO: Bundled Payment Headwinds Are Overblown

A major post-acute care provider is beating back expectations that its exposure to bundled payment models would impact its bottom line. With minimum exposure to bundled payment markets for the Comprehensive Care for Joint Replacement (CJR) model, HealthSouth Corporation (NYSE: HLS) is looking at the bright side of these shifts instead of worrying about potential lost patients or higher costs.

“All of this noise that this is going to be the death note for the company and that this is such a significant headwind, we believe is significantly overblown,” HealthSouth President and CEO Jay Grinney said at the UBS Global Healthcare Conference this week.

While HealthSouth operates in some markets with mandatory CJR bundled payment models, the overall exposure for the company is minimal, according to Grinney.

“About 2,000 of our patients are in CJR markets today,” Grinney said. “It represents about 2% of our Medicare discharges and 1.5% of total discharges. It’s not a huge headwind for the company by any stretch of the imagination.”

Additionally, there are unlikely to be any downsides to these models for the remainder of the year, as penalties don’t being until 2017, according to Grinney. [This year] remains an opportunity to “figure out who to partner with,” Grinney said.

Coming off a positive start to 2016, the company plans to continue leveraging its position in bundled payment markets through Encompass Home Health.

HealthSouth sees a big opportunity to utilize their successes in home health and data from Encompass to partner with other inpatient providers. By proving that the “spend,” or the payment from Medicare, is less for home health care compared to skilled nursing, HealthSouth may be able to capture more discharges and secure more partnerships with acute care hospitals.

“There are a lot of markets where our hip fracture 90-day spend is less expensive than the spend going into the nursing home,” Grinney said. “We’re obviously going to be exploiting that. We’re going to take that information and go into the acute care hospitals, go to the CEOs, the medical directors, and show that data to help them think through how they are going to respond to CJR.”

Bundled payment models also open up an opportunity to surpass skilled nursing for some patients. Encompass’ focus on higher acuity patients also has an advantage point for capturing hip and knee patients.

“We think Encompass has a unique opportunity to capture patients that historically maybe went from the acute care hospital into a skilled nursing facility (SNF), and maybe move them into a home health environment,” Grinney said. “We think that focusing on the higher acuity patients, they will be able to bypass procedures that would otherwise go into skilled nursing and could go into Encompass care.”

Written by Amy Baxter