There’s no curbing investor appetite for home care assets — and major payers will likewise continue to drive M&A activity in the home health, hospice and personal care spaces in the coming year.
That’s according to Elara Caring CEO G. Scott Herman, who discussed industry consolidation, tailwinds and change during a recent appearance on the Disrupt podcast for Home Health Care News. Backed by Blue Wolf Capital Partners and Kelso & Company, Addison, Texas-based Elara Caring is the new home health giant formed as a result of a three-way merger between Great Lakes Caring, Jordan Health Services and National Home Health Care in 2018.
Building a longitudinal care platform that can manage patients across the care continuum is Elara Caring’s No. 1 focus, according to Herman. Preparing for the Patient-Driven Groupings Model (PDGM) is also a top priority, as is making headway toward risk-sharing agreements.
Below are some highlights from Herman’s Disrupt appearance, edited for length and clarity.
Before being named CEO of Elara Caring, Herman served as the CEO of Via Christi Home, as president of Harden Home Health and Hospice and, most recently, as CEO of National Home Health Care and Jordan Health Services.
HHCN: Elara Caring is a relatively new major player in the home-based care world. But the three companies you brought together — Jordan, Great Lakes and National — have been around for a while, right?
Herman: We were very excited to bring three market leaders together, joining three completely complementary footprints and creating a comprehensive service offering with skilled home health, hospice, personal care and behavioral health.
This is a great opportunity to reshape things.
For our readers who aren’t familiar with Elara Caring, can you please provide a brief overview in terms of size and geographic footprint?
Elara Caring is one of the nation’s largest providers of home-based care, with a presence in the Northeast, Midwest and Southwest. We currently have 225 offices providing care in 16 states with 35,000 team members.
We have an average daily census right around 65,000.
That’s definitely got some heft to it. What’s the backstory on how Elara Caring came together in the first place? What were the goals of bringing together those three distinct companies?
Elara Caring was formed in May of 2018 with the vision of joining three market-leading companies and forming a post-acute continuum capable of making a national impact for chronically ill patients.
Our size and geographic distribution allow us to concentrate our resources in many areas — and hopefully change the care model by bending the cost curve and improving outcomes. It is our intention to establish a national platform that demonstrates lower total cost of care and improved outcomes along a longitudinal timeline.
We seek to imagine patients across years — not just days or weeks.
You were previously in the CEO role at National Home Health and Jordan Home Health Services. What has the transition into this new role overseeing all of Elara Caring been like?
As the CEO of Jordan Health Services, we were a regionalized skilled care and hospice player — with a sizeable personal care footprint — trying to develop a continuum in a compartmentalized way. Our objective was to develop regional mass and become a platform that could be a launch for a product like Elara Caring.
My move to National Home Health Care was based on Blue Wolf Capital Partners and their vision of creating a home care company that meets post-acute care continuum needs in development.
That move coupled with the stellar clinical record of Great Lakes Caring is what really brought these three companies together with a vision to design a post-acute segment like we discussed.
What are the key areas that Elara Caring will be focused on moving ahead throughout the remainder of 2019 and beyond? Maybe that’s a good time to talk more about your longitudinal focus.
This year we’re focused on better understanding and managing large chronically ill patient populations. Chronically ill seniors, in particular, are best managed over that longitudinal timeline.
To best aggregate long-term data and create meaningful clinical interventions, we have continued to align programs and large caches of data to manage and serve this population. For example, a patient in our full-care continuum has a 30-day all-cause hospitalization rate of 7.5% when compared to the national average of 20% and 28%, among chronically ill patients.
This is a large part of our value proposition at Elara Caring — and it should also be very important to other providers as they begin to align with managed care organizations, large capitated health plans, integrated health care delivery systems and, of course, CMS.
Additionally, we see opportunity in the behavioral health space as more and more patients seek long-term mental health support in the home.
Behavioral health can mean different things to different people. What do you mean exactly?
We define behavioral health as any support provided to patients in the home to support their mental health and well-being. That’s pretty broad, so I’ll narrow that down a little bit.
It’s a growing segment for us at Elara Caring and a place where we see great opportunity for expansion. The home care industry inherently provides isolation, and that isolation can create several new issues, many of which are behavioral.
To address patients in a holistic manner, mental health is one of those areas we must develop and are focused on. Social isolation is a big focus of what we’re doing with this expansion.
Social isolation, loneliness and other social determinants of health have been priorities for a lot of companies. Humana Inc. (NYSE: HUM) is one. Why do you think that those are so important at this point in time?
Home-based seniors suffer from a variety of conditions inherent to declining health conditions and aging. As an industry, we struggle with the identification and treatment of behavioral health because we’re focused on that medical learning.
Our objective is to provide support services for our patient populations, adding another layer of support.
We also serve patients with serious mental health disorders. One of the more alarming things we uncovered, in our behavioral health program, is that about 40% of our patients are being seen for some sort of opioid or drug dependency. Addiction is a huge and growing segment in the home-based behavioral health business, and we’re seeking to expand support for this population over the next several years.
Much like many segments of our health care business, our behavioral health business focused on opioid and addiction services is responsible for executing the plan of care for the patient. The most effective treatment for opioid addiction is medication regimen compliance.
I’m thinking back to the overview and background of Elara Caring. Did these three companies merge because they were relatively similar and shared strengthens — or did they each bring something unique to the equation?
All three entities brought unique opportunities to the table.
Jordan had established the ability to move patients around with a continuum and established some of those very critical elements that are key to doing that. Great Lakes had developed a very good organic sales model based on outcomes and data, the ability to bring new business into the organization and drive growth through an ability to partner with hospitals, health systems. National Home Health Care had a great footprint in personal care and established some leading practices around value-based purchasing agreements.
Value-based purchasing in the Northeast has become something that’s pretty prominent. We currently have about 30 value-based contracts within the organization.
You mentioned value-based purchasing, but what’s going on with Elara Caring and risk-sharing arrangements?
We currently have those 30 value-based arrangements. Those are really precursors setting us up for those risk-sharing conversations. Our approach to risk-sharing arrangements is one where we want to be in control of the environment where we’re taking risk.
That control is regulated by our ability to control information and patient flow.
Those discussions and those arrangements are underway and we’re working on those under some very specific dynamics that the organization has set forward.
I don’t think there can be a single Disrupt conversation we can have with a home health care executive where we don’t touch on PDGM. We’re only nine or so months away now. What’s Elara Caring doing to prepare for the overhaul?
We — like every provider — are preparing for PDGM. We’re absolutely looking at the potential and overall impact. But our unique patient mix, care continuum and data-driven predictive analytics approach — with a focus on that longitudinal care for patients — fits nicely within the model.
We’re evaluating each of our markets and developing customized plans based on our analysis. But how we’ve developed and now approach patient care gives us a very positive lens on assessing PDGM.
Any specific PDGM points that Elara Caring has identified as potential challenges?
It’s how the data is correlated and how it’s applied. Patient case-mix and the acuity mix of patients within the organization have an impact. Because we look at patients within that longitudinal focus, we tend to have a more chronic patient mix, in general, with pockets of very acute measurement.
In those areas, we have chronic measurement over long lengths of time, lengths of stay, We’re having pretty positive impacts there. We’ve spent time developing tools to monitor those patients in that fashion, so we have a pretty good feel for what’s happening with PDGM, its impact and how it actually has a positive uptick for the organization.
What else is Elara Caring watching at the national level?
At the national level, we’re focused on the future of Medicare Advantage with the addition of personal care services and the potential addition of hospice to MA plans. We view these changes as positive for this organization and any organization that understands leading indicators and how to act on data.
Exactly how Elara Caring is built is what these programs play to.
On the state level, we’re focused on minimum wage and Medicaid budget conditions. Those are always top of mind.
What’s your take on what we’re seeing in terms of M&A action, much of which is being driven by private equity, which Elara Caring knows a thing or two about?
We’re likely to continue to see an uptick in consolidation across the industry. There’s a need to consolidate fragmented markets — and there’s really a need to consolidate data in order to manage chronically ill patients.
Recent activities in public markets and payer segments kind of support this thesis. Rollups are going to continue and there seems to be no curbing the appetite investors have for the home care space.
Is Elara Caring out there looking for deals?
Like all large-scale providers, we’re always on the hunt for deals. We’ve done several in our past. We’ve done some even in this transitional period. Now, as we’re really locking in on having our integration completed and on target, we start to really source them.
We do have an internal M&A team. Those M&A team members work with external brokers to source deals. That ebbs and flows with the market and particular geographies.
We have a very disciplined philosophy with M&A.
Following up on this point of M&A activity, large public payers have been looking at the home health industry and home-based care overall. You think of Humana going after Kindred at Home and Curo Health Services. Do you think that’s something we’ll see continuing?
“Yes. I certainly believe large public payers and their need to work in the Medicare Advantage world and control those patient populations — once again, for long periods of time — fits right into the wheelhouse of Elara Caring.
The need to have those covered lines and assets and companies that can provide that care across a long timeline in a controlled manner … that’s pretty critical. Many of those conversations we’re having with payers revolve around what we’re building and why we’re building it — how we get patients to cross these care lines succinctly and in a controlled manner with great outcomes and increasing length of stay.
We believe there is going to be a lot more payer movement in the home care space, whether that’s through acquisition, startup or something else along those lines.