Home-Based Care Providers Can’t Afford to Overlook These Legal ‘Sleeping Giants’ in 2020

Home-based care providers have no shortage of regulatory hurdles and legal changes to keep them on their toes.

For most home health agencies, the Patient-Driven Groupings Model (PDGM) and Review Choice Demonstration (RCD) are top of mind. Meanwhile, home care agencies have minimum wage hikes and electronic visit verification (EVV) to worry about.

With so many changes happening at once, it can be hard for providers to see the forest through the trees. But agency operators shouldn’t lose sight of two larger overarching industry trends: consolidation and the rise in wage-and-hour litigation.  

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Lawyers cautioned attendees about both issues at the 2019 Home Health Care News Summit last week in Chicago.

“Consolidation is certainly the trend of the future,” panelist Emina Poricanin, partner and home care practice leader at New York-based Hodgson Russ, told summit attendees. “[And] for me, the sleeping giant is the wage and hour issues that come up.”

Consolidation considerations

Traditionally, the home-based care industry has been filled with independently owned and operated mom-and-pop agencies. But that’s started to change in recent years.

Due to added regulatory complexities, the trend will only accelerate in the years to come, according to Matt Wolfe, partner at North Carolina-based Parker Poe Adams & Bernstein LLP.

That’s especially true for home health providers, who are about to be hit with an onslaught of operational changes, from PDGM and RCD to the potential phase out of RAPs.

Even top home health executives have dubbed the regulatory and reimbursement changes “the perfect storm,” a once-in-a-generation combo primed to pummel smaller providers in particular.

“If [PDGM] goes through in full force, there’s going to be carnage in this industry,” Amedisys Inc. (Nasdaq: AMED) President and CEO Paul Kusserow said at the summit. “We can’t allow that to happen.”

When it comes to staying in business, capital is key, Wolfe said. That way, agencies will be able to keep up with payroll while they adjust to payment delays and possible reimbursement reductions of more than 8%.

“You can’t start saving for a rainy day when the clouds erupt,” Wolfe, who was also a panelist, told summit attendees. “You have to do it now — not just because of the payment reform [or] the coming of RCD, but because of all the additional tools that the federal and state government have to mess with your cash flow. That can be through payment suspensions, … [Additional Development Requests] and additional [Recovery Audit Contractor] audits.”

Historically, regulatory changes have triggered an uptick in audit activity, Wolfe said. Such will undoubtedly be the case under PDGM, too, he believes.

“They’re not going to provide you any type of grace period to come into compliance with the expectation,” Wolfe, who often represents agencies during audits, warned. “If [CMS] is providing clarification about what PDGM is, make sure you get that documented because you’re going to want to retain that five years later when you’re getting a recoupment demand for hundreds of thousands or millions of dollars [based on] a different interpretation of what’s required.”

In the short term, agencies that don’t have access to rainy-day capital run the risk of having to consolidate or close in 2020. In fact, some experts estimate 30% or more of all home health agencies will be forced to shut their doors following PDGM’s implementation.

On the flip side, larger, more fiscally stable companies have heralded PDGM as an opportunity to grow through acquisition by picking up struggling companies. But Poricanin, who often represents companies in M&A deals, warned attendees that there are a number of legal implications to consider first.

“If you’re doing a stock deal, I always describe it as stepping into the shoes of the company you’re buying,” she said. “You become them after the sale closes — so you better make sure that whatever you bought is nice and clean because any liability that the seller had, you’re going to inherit and have to deal with it.”

Wage-and-hour litigation

Often, companies that acquire smaller agencies are surprised to be hit with wage-and-hour litigation years after the pre-acquisition issues occurred.

Such is the case in New York, where Poricanin practices and where there’s a six-year statute of limitations for wage-and-hour claims. 

“The plaintiff’s lawyers have gotten very smart in recent years,” she said. “They’ve discovered this class-and-collective way of bringing wage-and-hour claims against home care agencies. When you have thousands of workers, any liability is that much compounded.”

Some common examples include overtime lawsuits and payment disputes, as was the case for the legal fight surrounding the hotly debated 13-hour rule in New York.

“[The Fair Labor Standards Act] is not very intuitive, and a lot of providers are still only learning about the requirements of those laws when they get sued or when they get a plaintiff’s lawyer’s letter threatening a lawsuit,” Poricanin said.

There will certainly be many more legal fights breaching old and new labor issues in the year ahead.

Poricanin suggests agencies do self-audits under attorney-client privilege every few years to make sure their practices are compliant.  

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