The Centers for Medicare & Medicaid Services (CMS) last month proposed an overhaul to the current prospective payment system for the home health industry with a sweeping new model that experts say would drastically increase billing efforts and force a move away from therapy services.
So far, the potential negatives of the Patient-Driven Groupings Model (PDGM) have not hurt home health stocks, however.
Even with industry concerns surrounding PDGM starting to pop up, home health stocks performed strongly in July, according to the latest Home Health Index (HHI) by Stoneridge Partners. Updated monthly, HHI tracks the market values of Amedisys (Nasdaq: AMED) and LHC Group (Nasdaq: LHC Group). Baton Rouge, Louisiana-based Amedisys and Lafayette, Louisiana-based LHC Group are two of the largest publicly traded home health companies in the United States.
Overall, the Index jumped nearly 15% in July compared to June.
Home health stocks largely outperformed the market as a whole. The S&P 500, for example, gained about 4.3% compared to the previous month.
One reason behind the strong showing for Amedisys and LHC Group stock is likely CMS’ proposed $400 million Medicare payment increase to home health agencies for next year, according to Stoneridge Partners President Rich Tinsley.
“The proposed payment rule from CMS is projected to increase Medicare payments to home health agencies in calendar year 2019 by $400 million, or 2.1%, so that’s certainly a good sign for providers,” Tinsley said. “And even though there are still important concerns regarding PDGM, it is a step forward from the Home Health Groupings Model, mainly in the sense that PDGM offers budget neutrality even after CMS’s 2019 2.1% increase.”
The Home Health Index was given a particular boost by Amedisys’ stock, which climbed nearly 23% in July compared to the previous month. Year to date, Amedisys’ stock has more than doubled in value.
LHC Group’s stock in July jumped by 6.8%. Year to date, LHC Group’s stock is up by nearly 49%.
In addition to Amedisys and LHC Group, the Index also tracks Frisco, Texas-based Addus HomeCare Corporation (Nasdaq: ADUS). Addus is not factored into the Index, however, because the company derives most of its revenue from Medicaid sources.
Addus’ stock gained more than 18% in July compared to the previous month; its stock prices are up 92.67% year to date.
PDGM seeks to change the current 60-day episode of care unit of payment in the home health industry to 30 days, while stopping the use of the number of therapy visits to determine payment. PDGM would also change how home health agencies are reimbursed for patients that come from institutional settings versus community-based settings.
Additionally, the model could also alter the way that home health providers are reimbursed for treating patients with comorbid conditions.
PDGM would be implemented Jan. 1, 2020 if included in CMS final rule.
“This is something the industry was mostly prepared for,” Tinsley said.
Written by Robert Holly