New Medicare Policies Threaten Home Health, Hospice Providers

Smaller home health and hospice providers will struggle to survive in the face of new policies and proposals that could deeply impact both industries, says Healthcare Market Resources in a market research letter that points to growth as a solution. 

The home health and hospice industries are threatened by several policy efforts underway or in the works that would decrease the number of providers, change reimbursements to reduce long-stay care, and shift payment models toward integrated care. 

Fewer Medicare-licensed providers are easier to manage and less likely to engage in fraudulent activity, and Medicare policymakers “seem focused on reducing the size of the provider communities,” says HMR. One way to keep—or make—the industry smaller is to rebase payments, and the Affordable Care Act included reduced reimbursements for home health. 

A majority of home health agencies are expected to lose money on Medicare business thanks to a four-year, 11% cumulative reimbursement cut implemented this January. 

Regulations are also expected sometime in 2014 that would have the effect of discouraging long-stay patients in hospice while raising the median length of stay for the hospice industry above 17 days.

“The reduction [in reimbursements for hospice benefits] will likely be sufficient to shake the financial underpinnings of smaller hospices with a skewed length-of-stay mix,” says HMR. 

A health care industry-wide shift toward managed care and integrated payment systems will likely also impact hospice and home health providers. The industries will have to work with Dual-Eligible Demonstration projects that integrate care and align financing for beneficiaries who are dually eligible for Medicare and Medicaid. 

“With 27 states initially expressing interest to participate, there is clear evidence that this is a concept whose time has come,” says HMR. 

In order to survive all the potential policy changes, home health and hospice providers will need to grow their revenues via a number of routes, including organic growth, acquisitions, geographic expansion, or mergers with other agencies. 

“These hits to the top line of home health agencies and hospices are of such a magnitude that they cannot be countered by simply reducing costs or resource utilization,” says Healthcare Market Resources. “The only solution is to increase the size of your organization so that you can spread overhead expenses over a broader base.” 

Read more at Healthcare Market Resources. 

Written by Alyssa Gerace

Alyssa Gerace

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