How LHC Group Quietly Acquired an ACO Management Company, Doubled ACO Activity

When LHC Group (Nasdaq: LHCG) acquired Almost Family in 2018, a number of additional assets came with the deal, including Imperium Health Management, one of the country’s largest accountable care organization (ACO) management companies.

Rather than sell the business, LHC Group decided to embrace it.

“We did not even hesitate to embrace the ACO segment of the business,” Bruce Greenstein — executive vice president, chief innovation and technology officer at the Lafayette, Louisiana-based LHC Group — told HHCN. “Instead, we made investments, and we’re growing it like crazy.”

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As a result, the number of Medicare ACOs under company management doubled in 2018, growing to 30 ACOs covering 460,000 Medicare lives, compared to 16 covering 140,000 Medicare lives in 2017, according to company SEC filings.

One year after the acquisition, Imperium Health CEO Gary Albers says this is just the beginning.

“We’re excited to see where this thing could go,” Imperium Health CEO told HHCN. “From a home health perspective, it could be the most critical point in the care continuum to help us deliver the most appropriate level of medicine.”

Motivating factors

In many ways, LHC Group’s decision to grow its ACO arm is in-line with its long-held strategy of partnering with hospitals and health systems, Greenstein said.

Because hospitals are one of the biggest participating segments for ACOs, LHC Group felt its acquisition of an ACO management group would be warmly received by current and prospective partners.

“That’s absolutely been the case,” Greenstein said. “Even if they have their own ACOs, there’s always interest in camaraderie around collaborating and figuring out how to do what we all do better.”

Additionally, LHC Group was interested in what ACO data could tell them about spending patterns and care consumption for Medicare enrollees across the country.

“One of the first findings we uncovered … is just what large proportion of post-acute experiences go to the skilled nursing facility (SNF) [side],” Greenstein said, noting that some studies suggest as many 50% of admitted SNF patients could be treated at home.

“This equates to large sums of savings and usually, overwhelmingly, patients and their families are much more comfortable and safer at home instead of a skilled nursing facility,” he said.

Although LHC Group still has an positive view of SNF diversion, some executives in the post-acute care space actually believe home health care’s ability to draw Medicare beneficiaries away from SNFs has topped out.

Doubling down

While most people associate ACOs with the Medicare Shared Savings Program (MSSP), only about half of all of LHC Group’s ACOs fall into that category. LHC Group also has a number of ACOs operating in state Medicaid or commercial health insurer programs.

“It really has become the label for a population management health program where the providers — and typically the primary care providers — will become bonused for managing the overall preventive care and the overall spend for their patient populations,” Greenstein said.

As an ACO management company, Imperium Health guides ACOs through what it takes to begin, remain compliant and succeed in their respective programs.

“When you think about what we’re trying to do from a patient outcomes perspective, it really runs parallel whether it’s commercial, Medicare Shared Savings Program, Medicaid or even direct-to-employer,” Albers said.

In 2018, Imperium Health partnered with Franklin, Tennessee-based Community Health Systems, the largest provider of general hospital health care services in the United States in terms of number of facilities.

Imperium Health created 15 MSSP ACOs around the hospital, Albers said, all of which are largely to thank for LHC Group’s 2018 ACO bump. And the company will likely see more ACO deals in 2019, Albers said.

“We’ve got another nationwide contract that we’re reviewing right now with another major payer that we hope to be rolling out here in the second quarter of this year,” he said.

Financial results

Since MSSP ACOs were created by the Affordable Care Act, home health care agencies have been interested in getting involved, viewing them as a way to remain relevant as payment shifts to reward value over volume.

The goal of the program is to improve care and reduce total Medicare spending. In return, ACOs — which serve 10.4 million of 38 million fee-for-service Medicare beneficiaries — receive reward payments for the savings they achieve. However, ACOs that perform poorly can also be financially penalized.

For home health care providers, winning ACO partners can be easier said than done. And if agencies are chosen to participate, it can be difficult for them to be compensated fairly.

Meanwhile, SEC filings indicate LHC Group gets a portion of the Medicare Shared Savings Program payments its ACOs receive.  

The company recorded a net service revenue of $3.7 million related to the 2017 ACO service periods, though LHC Group had yet to receive the money at year-end.

“As of December 31, 2018, no net service revenue was recognized related to potential MSSP payments for savings generated for the program periods then ended, if any, as it remains unclear as to if performance obligation has been met by any ACOs served by the Healthcare Innovation segment,” a 10-K report filed in February reads.

LHC’s ACO management company is part of its Healthcare Innovations operating segment, which also includes a managed long-term care assessments business line and nurse practitioner business line.

Changing philosophy

LHC Group hasn’t always been this bullish on ACO involvement. In 2015, company leadership told HHCN they were very cautious and selective with LHC Group’s ACO involvement. At the time, LHC Group was participating in 10 ACOs.

Today, the company has changed its tune, Greenstein said.

“We see there are a lot of opportunities there,” he said. “We think that post-acute care is the piece that’s most highly variable in what’s left in the uncoordinated American health care system, particularly Medicare. We’re really excited to get access to more ACOs and more patients that we can help organize their care, get better clinical outcomes and save money for the Medicare trust fund.”

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