Amid regulatory changes and a big push to move home health into the digital realm, consolidation predictions made by some of the biggest players in home health are coming true. And as leaders look to the future, there continues to be agreement about large-scale trends, if not always on the best course of action to take in response.
Speaking at the National Association for Home Care and Hospice (NAHC) annual conference in Nashville, top executives from home health care agencies across the country debated how best to survive and thrive as the sector continues to narrow. As pressures from the shift to value-base purchasing (VBP) are also looming, executives shared what has worked for their business.
Many of the panelists previously predicted in a 2008 forum that big companies in home health would continue to get bigger, while the smaller agencies would “go away” through acquisition or shuttering their doors.
“These things that were predicted are actually occurring,” said Mark Heaney, president of Addus HomeCare Inc., a national provider of personal home care and support services based in the Chicago area.
Diverging Courses for Success
Some larger home health companies are finding success after an upswing in M&A activity in the last year. Encompass Home Health and Hospice, which was acquired by HealthSouth for $750 million, appears to be a winner.
Since last year, the company’s revenue has grown to $300 million, according to CEO April Anthony. In addition, the number of referrals jumped from 35 per month to close to 700 after the acquisition, she said. Anthony has described the merger with the hospital-based home health company as a “synergy between partners,” and argues that operating with more coverage will make home health agencies more valuable.
While Encompass has integrated with HealthSouth, Addus HomeCare has divested out of home health over the last seven years and focused on personal care, according to Heaney. By reducing utilization of services to personal care, Addus has made itself a leader in that space and has also anticipated the move to a value-based purchasing payment system, Heaney said.
“We’re reconfiguring ourselves for a new payer,” Heaney said.
Over the last several years, the company began shifting its services along the continuum of care, predicting that the future of health care was outside of a hospital/acute setting. Instead of providing home care after a hospital visit, Addus moved to provide “pre-acute” personal care.
While the strategy appears shrewd, based on share price performance over time, the future may not be arriving as quickly as Addus would like—the company badly missed expectations in terms of its third quarter financial performance, in part because states are lagging in their adoption of managed care.
Another company that is positioning itself is Sutter Care at Home, a North Carolina home and hospice company. Sutter Care CEO Marcia Ressig noted how the company has predicted similar outcomes as Addus, though taken an opposite approach by expanding home health services. While also gearing up for VBP programs down the road, Sutter Care has taken course to ensure strong partnerships with hospitals.
In addition, Ressig predicts that as consolidation accelerates, the company may also partner up with other providers.
“We do envision that we will have networks of providers,” Ressig said. “We won’t be able to take all referrals.”
All three executives agreed that consolidation and mergers in the sector will continue to advance in the coming years. Anthony predicts that the “narrowing of the networks” will happen more often on the basis of star ratings and quality assurance, with VBP being the driver.
As home health agencies look for partnerships in the future, they will need to prove their value through coverage and quality. Unlike Addus’ strategy, Anthony believes that a wider array of services is more valuable and will make companies more viable as partners.
“Quality doesn’t matter much if you simply don’t have enough coverage to be a valued asset,” she said.
Heaney noted the need for home care will also continue to expand, as 10,000 baby boomers turn 65 every day, and predicted that personal care spending will surpass nursing care spending this year.
“People are living longer and they are going to do it at home,” he said. “Longevity is not in facilities.”
Written by Amy Baxter