LHC Group CEO: New Payment Model Could Be ‘Penny Wise and Pound Foolish’

The Patient-Driven Groupings Model (PDGM) is a once-in-a-generation type of change to the home health landscape, yet there is little data to back it up, according to Keith Myers, CEO and chairman of LHC Group (Nasdaq: LHCG).

Myers is also chairman of the Partnership for Quality Home Healthcare, among the groups that together submitted more than 1,300 comments to the Centers for Medicare and Medicaid Services (CMS) on the 2019 home health prospective payment system rate update and PDGM.

The public comment period officially closed at the end of August.


Home Health Care News connected with Myers to talk about the Partnership’s comments, outlined in a recent letter addressed to CMS Administrator Seema Verma.

Myers elaborated on the Partnership’s main concerns with PDGM and explained how LHC Group tries to stay ahead of the regulatory curve.

There’s a lot to cover, a lot of material that was in the Partnership’s letter to CMS. If you had to boil it down to a handful of key takeaways, what would those be for you?


First of all, we believe that CMS should not implement cuts to the new payment model based on potential changes in behavior without actual, observed evidence of a behavior change. That’s just so commonsense — and there’s a precedent for that.

I would say that’s our No. 1 priority.

Taking a larger view, we’re trying really hard — the industry as a whole and the Partnership, I think, especially so — to work with CMS as a trusted partner, to help advise them on the policy decisions that they make, to do the right thing in building a strong and functional home health industry that can leverage our capabilities to move patients downstream from costlier settings.

People want to be cared for at home. We understand the need to be fiscally responsible and to be efficient, to harvest efficiencies wherever possible, but time and time again we see these rules come out not well thought out, without real meaningful input from people who have good reputations and who have been in the industry for a long time.

It’s quite frustrating at times.

The other thing I would say in terms of priorities for us is that any payment changes that would occur because of an observed behavior change should be limited. We believe it should be limited to a 2% ceiling of adjustments in any given year. To do anything that would put this industry at risk — the lowest cost setting — is penny wise and pound foolish. Anything more than a 2% cut in one fiscal year doesn’t allow much room or much time to make whatever adjustments have to be made.

And there’s everything else tied to that — bank financing, vendors and all those people ancillary to home health who support the industry.

When I first started digging into PDGM, one of the things that jumped out, of course, was the change in the 60-day unit of payment to 30 days. But I understand there’s some confusion on whether that means agencies need to be re-certified every 30 days.

We think that aspect of [PDGM] needs further clarification.

We don’t see that as something CMS intended to do. But we also don’t see that as being very clear, and it’s incredibly important that it is.

As someone who’s being doing this for three decades, when we admit a patient in home health we admit the patient for 60 days. The physician, hospital systems and everyone that transfers patients to us, they believe they’re transferring them to us for 60 days. I understand that CMS may have some concern about some patients that are short length of stay and get discharged in 20, 25 days. They feel like they’re paying for 60 days of service when you only provide maybe three weeks of service — just pulling something out of the air. I get that. I understand the need to approach that. But that’s not the norm in this industry.

If you change that and it were to be interpreted as a 30-day certification period, that means at the end of every 30 days, we would have to go back to physicians and get new orders for our patients. That would be very disruptive. You’d have patients being discharged from home health earlier than they should be. I believe it would result in increased re-hospitalization rates.

I think I have a good perspective on that. A main part of our business is we joint venture with hospitals and health systems. I have a good feel for when patients go back to hospitals, get admitted, and what causes that.

We report every so often on how streamlined communication throughout the care continuum is still so challenging. I imagine if you basically doubled the amount of communication that would have to take place between home health and a physician, that could throw a wrench into things.


And you also send a signal to physicians that, in some ways, there’s a policy statement that discouraged home health. That message could be received that way from physicians, and I’ve had physicians ask me about that.

The letter from the Partnership also brought up how PDGM could improperly skew the star rating system. What did it mean by that?

There are models that we run that show, as structured now, PDGM could take low-quality provider ratings and basically show their ratings as being higher, with the reverse also being true. We can make a case where there are situations where PDGM creates a disadvantage to high-quality providers.

I’m speaking about what we’ve seen with our own data. At LHC Group, for some time, we’ve been at the top of the pack in terms of quality star ratings. We’ve modeled this in some scenarios and saw that there really might be an unfair result to us.

We’ve voiced that in our LHC Group comments as well.

That kind of reminds me of the value-based purchasing conversation, too. Prioritizing improvement over achievement.

Exactly. It is the same conversation.

Something else people have brought up concerns with regarding PDGM is admission source. It’s my understanding that PDGM may inadvertently cause home health agencies to kind of look toward institutional referrals over community-based referrals. Does that track with what the Partnership has seen and heard?

I would say that a little bit differently.

[PDGM] disincentives the industry from taking patients from the community.

This goes back to one of the areas of opportunity in the future for home health that’s basically untapped. We think of home health now as a post-acute service. We’re stuck under that label. But there’s a huge pre-acute opportunity for home health. When patients begin to decline, physicians can often see that occurring, see the trend line. I believe home health, more and more, will intervene on a pre-acute basis and avoid the hospitalization in the first place.

This clearly disincentives that. That’s what troubles me.

It’s not so much that home health agencies will try to get more patients from hospitals. We all do that now. We know taking patients from hospitals under the “post-acute label” is where we’ve been. But it really disincentives the larger opportunity to generate savings for the Medicare system as a whole in my mind.

That’s a really interesting point. So much of the conversation is focused on preventing hospital re-admissions, but we don’t always talk about preventing hospital admissions in the first place.

One of our medical advisors on our medical advisory board, a highly respected guy and a practicing physician, he uses this example quite often. There’s a 93-year-old patient he has who we’ve cared for several times. She is a frequent flyer. She is in and out of the hospital where he practices at on a regular basis. She needs home health constantly. But because we have a homebound requirement and this lady, at 93, still drives about a mile and a half to church on Sundays — because she likes to do that, and her children let her do it — she doesn’t technically qualify for home health.

She goes into the hospital two or three times a year. It frustrated this doctor to no end.

He always says, “If this lady could receive home health, she would never go into the hospital.”

She becomes noncompliant. She goes into the hospital, is discharged, can’t drive for 60 days or 90 days, so then then qualifies for home health. We go in, get her back compliant. But then the cycle just repeats.

That’s a good example of the type of individual with multiple chronic conditions that home health could really be effective with on a pre-acute basis if policy were shaped to allow us to do so.

And PDGM isn’t a step forward in that regard. It’s potentially a step back?

It certainly signals a step back. It signals that [CMS] wants home health to take patients from hospitals on a post-acute basis. It disincentives taking admission from the community.

There are so many other different points we can talk about when it comes to PDGM. We could talk about LUPAs, therapy changes. What else really jumps out that we haven’t touched on yet?

The primary concern that we have with the whole approach is that it’s not data-driven. There are so many assumptions that are being made — absent of any piloting. This is the most significant change, as proposed, to this industry in 20 years.

As somebody who runs a business of LHC Group’s size, I can’t imagine making any sort of system change that we wouldn’t pilot in a location and then learn from the pilot, perfect the model, before deploying it across the enterprise.

That’s a huge concern — and the fact we had one technical expert panel (TEP) meeting and the members of the TEP were given no feedback.

That’s a good transition point. In general, as a leader for a major home health business, how do you prepare for something such as PDGM? How do you lead a company through this degree of change while keeping sustained success in mind?

I think there are a couple of things to say to that.

One, we’ve always been at LHC Group very engaged in the industry and very much a collaborator, a consensus builder. We try to play a big role in that, to have the industry work together, to reach out to lawmakers on the Hill and policymakers at CMS.

All the effort that we put into TEPs, the comment letters and all is strong evidence of that. We never give up. We may get discouraged at times, but we never give up.

We make investments through the Partnership. We’re also members of the National Association of Home Care & Hospice. We’re members of the Alliance for Home Health Quality and Innovation.

Having done this for three decades, I understand the risk in the system. You can’t have rules that are not well thought out proposed by people who don’t have real experience in how this business works.

The way we prepared, we manage the company very conservatively. LHC Group has very low leverage. We’ve never levered the company up. We try to stay very nimble with regard to the analytics we use and the systems we use. We want as much flexibility as we can have.

Then, we really focus on controlling waste anywhere we can, especially non-clinical costs.

Those are really the only things you can do in this business to prepare for the unexpected.

You’d sum that up by saying we plan for the worst and hope — and work — for the best.

I want to wrap this up on a positive note here. The Partnership’s letter did bring up some positives, specifically having to do with value-based purchasing and remote patient monitoring. Can you recap the thoughts there?

That was the one big positive. We’re really pleased to see that in the rule. We’re huge proponents of value-based purchasing. We think that’s the direction we need to go because value-based purchasing will accelerate, we believe, the movement of more patients downstream to home health. That’s good for everyone.

With regard to telehealth — it’s about time. We are so hamstrung in this industry with telehealth. There’s so much we can do with telehealth, but it’s historically been disincentivized in every way within the home health benefit, to the extent of it being considered a non-allowable cost on our cost reports.

Written by Robert Holly

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