Home health industry insiders throughout 2019 have frequently speculated on the “carnage” likely to take place next year when the Patient-Driven Groupings Model (PDGM) pushes smaller, ill-equipped agencies out of business.
Generally, the narrative goes something like this: As the biggest overhaul to home health reimbursement in two decades, PDGM will significantly disrupt agency cash flow and therapy utilization while dramatically complicating documentation and coding processes. Due to those challenges, up to 30% of home health agencies will go out of business, with the largest providers cleaning up on the M&A front.
While there’s merit to that story, there’s also a key caveat.
Instead of going under, many smaller home health agencies will likely see explosive growth following PDGM, possibly doubling or even tripling in size.
“A lot of the smaller agencies are able to make changes a lot quicker than some of the larger ones,” Simione Healthcare Consultants Managing Principal William J. Simione III said at the 2019 National Association for Home Care & Hospice (NAHC) conference in Seattle. “They’ll be able to be nimble. They just need to make sure they’re keeping their eye on the ball and that they’re looking at data.”
More than 10,300 freestanding home health agencies currently exist in the market, according to the most recent chartbook from the Alliance for Home Health Quality and Innovation. A sizeable portion fall under the “small agencies” category, a label often defined as businesses with annual revenues of less than $1.5 million.
To grow in a PDGM landscape, smaller agencies will need to make sure their finance and operations departments are strongly aligned and aware of one another’s unique challenges. Billing staff, for example, will have to deal with new 30-day payment periods, while operations teams will have a completely new case-mix model.
“Do as much planning as you can, but you’re going to make mistakes — and that’s OK,” Simione said. “What you have to do is be able to identify mistakes quickly, then figure out what the root cause was and how you’re going to fix that.”
Simione isn’t the only industry expert with a positive outlook for smaller, nimbler agencies.
Home health care technology company Axxess is also “bullish on PDGM” and “respectfully disagrees” with threats of carnage and widespread bankruptcies, founder and CEO John Olajide told Home Health Care News.
Today, many home health agencies have teamed up with technology partners such as Axxess, giving providers established relationships that will ultimately help them navigate PDGM’s LUPA pitfalls and questionable encounter dangers, according to Olajide. That’s somewhat different than the era surrounding the launch of the Prospective Payment System (PPS) when many agencies were forced to deal with the major change alone.
From 1999 to 2002, there were at least 117 total bankruptcy cases involving home health providers, an HHCN review previously found.
“We want to temper the carnage message to allow agencies to pick their heads up and collect themselves enough to focus on learning what they can still do now in the final [days] to prepare their team and get the assistance they need to make the PDGM transition,” Olajide said. “We have heard from several agencies this fall that the ‘carnage message’ has paralyzed them in terms of finding the focus to ready themselves. It’s still not too late to engage with a technology partner that will hold your hand to get your agency up and running, that will stick with you through the transition into 2020 and beyond.”
Keys to survival
Apart from being nimble, smaller home health providers often have the advantage of providing high-quality care at a lower cost. That trait will likewise help keep them afloat once PDGM kicks in on Jan. 1 — now just four weeks away.
Broadly, it’s the home health agencies that are both nimble and armed with specialized care offerings that will thrive the most under PDGM, according to McBee Associates President Mike Dordick.
“The small provider that is nimble, that has specialty programs and that can pivot quickly is going to survive,” Dordick said at the Seattle NAHC conference. “[With PPS], there were a lot of larger not-for-profits of scale that had just as many issues and couldn’t pivot quickly that ended up in bankruptcy and couldn’t make it.”
About 69% of home health agencies currently provide specialized care offerings targeting heart failure, COPD, dementia and other conditions, a Tuesday study from data and analytics firm Definitive Healthcare found. But just 4% plan on launching or expanding specialized care lines within the next two years.
“Get ready for the change,” Dordick said. “If you can pivot and be ready when other people start to have trouble, you may triple in size. You may not be considered a small provider for long.”
Another tip for smaller agencies ahead of PDGM: Pay close attention to any opportunity to increase reimbursement, no matter how small.
That includes taking advantage of PDGM’s new co-morbidities lever.
Depending on a patient’s secondary diagnoses, a 30-day period may receive no co-morbidity adjustment, a low co-morbidity adjustment or a high co-morbidity adjustment under PDGM. When present, even a low co-morbidity adjustment could trigger a couple hundred dollars in added reimbursement during an episode of care.
About 60% of home health cases are currently categorized as no co-morbidities, according to Dordick, who said that’s likely to be less than 30% after the first year of PDGM.
“Don’t be afraid to look at the co-morbidities,” he said. “It’s not gaming the system. Those patients have co-morbidities, but we’re just not coding for them today. There hasn’t been a good reason to.”