Home Health Executive Forecast: 2020 Trends, Challenges and Opportunities

From the monumental Patient-Driven Groupings Model (PDGM) and the unexpected pre-payment phaseout to the expanding Review Choice Demonstration (RCD), 2019 was a whirlwind year for the home health industry.

Those three regulatory hurdles — and other changes — likely set up an even more chaotic year in 2020.

Home health industry insiders and top executives widely expect PDGM to steal the show next year. But they also anticipate technology advances, value-based care initiatives and M&A to play major roles.

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Below are predictions from 13 home health CEOs and industry insiders. Home Health Care News will highlight home care predictions in a follow-up piece published later in December.

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I don’t think we’re in for big surprises on what will shape home health in 2020. I believe the implementation of PDGM combined with the revisions made to CMS’s RAP payment policy will cause significant disruption among many home health providers — especially in the second and third quarters. For providers based in RCD states, I expect that to further exacerbate challenges.

Challenging circumstances always give rise to accelerated innovation and change. The specific way in which forward-thinking providers deliver care to optimize patient outcomes will likely improve and become more patient-specific than they have been in the past — and patients will benefit. On a market-by-market basis, I think we will see the more dominant providers taking more market share from their smaller and less sophisticated competitors.

I believe regional and national providers will be better equipped to weather the storms that 2020 will bring, especially in geographic areas projected to be subject to greater rates cuts related to PDGM.

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— Luke James, president of Encompass Health – Home Health & Hospice

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The transition to PDGM is the factor that will shape home health in 2020. From a clinical care and documentation standpoint to a back-office process standpoint, adapting to these changes will require adjustments to the day-to-day operational work of our teams. These changes — and other changes across the broader health care system — will continue to drive the formation of more effective partnerships between home health providers and both acute and post-acute networks.

While there will be changes and challenges in implementing and adapting to PDGM, we continue to see home health being elevated as part of the overall care continuum. As excellent providers throughout the industry continue to deliver improved clinical outcomes in the lowest-cost setting, we anticipate increased demand for our services — and that payers will see increased value.

We also anticipate PDGM — coupled with the impact of the RAP reduction and eventual elimination — will drive more consolidation.

— John Gochnour, COO of The Pennant Group

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In 2019, the home health industry experienced a lot of uncertainty. While demand for services overall increased significantly, there were also major payment reform changes, a focus on integrated clinical care and renewed support from private equity investment.

Now, all eyes are on 2020, as these trends continue to impact the industry. Specifically, there are the legislative changes, including the highly anticipated final version of PDGM that goes into effect Jan. 1.

Americans are rapidly aging and experiencing more complex health issues and co-morbidities. Patients deserve home care that factors in all aspects of their health, so it will be more important than ever for the home health industry to focus on consolidating care. One example is behavioral health, and I predict we’ll see continued expansion in this space.

At Elara Caring, our Behavioral Health Business is continuing to grow – we’re currently serving patients in Connecticut and Texas, and we have plans to expand this program to all our service areas over the next several years.

— Elara Caring CEO Scott Powers

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Obviously, the biggest factors that will shape home health in 2020 are the moldability and adaptability of organizations to the changes PDGM and RCD bring. It’s going to be an interesting few months going into 2020, but I believe every organization, regardless of size, has the ability to steer their organization in any direction — if they align their clinical, operational and financial goals.

I think 2020 will be a catapult year for the industry in relation to continued growth — specifically leadership growth. The industry has historically siloed clinical, operational, sales and financial, but these departments will learn to team up and not work against each other. For example, I think clinical will lean on finance to better understand lean management, while sales will lean on clinical to determine a “worthy” referral.

I’m excited for the challenges that PDGM and RCD will bring. I know that sounds insane, but I have always been an advocate for the underdog. We, as an industry, have studied, prepared, collaborated and made required changes, so I am hopeful that we will come out on top and see the fruits of our labor.

— Summer Napier, CEO of Healing Hands Healthcare

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Foundational to the care delivery model, PDGM changes will most likely clear the playing field for agencies that were able to embrace and adjust.

Further consolidation amongst hospitals, rehabs and physician groups may present short-term challenges for referral partnerships for independent agencies. Due to more complicated home health business operations, billing practices and reduced revenue, unified organizations may start outsourcing their home health services, thus presenting new opportunities for super-effective independent operators.

A new reimbursement model may force home health services to shift from a hand-holding and chronic-care-management approach toward short-term intervention, with care plan goals shifting from treatment to patient education.

I predict strategic home health providers will look into diversifying their service lines and payer portfolio (at least this is what LifeCare is planning to do). But looking forward to the next year, I am worried about a number of things. As a smaller agency, we are worried about the cash flow. How long will it take CMS to start processing payments under the new regulations? Will we be able to meet the new stringent turnaround times for internal processing? How will patients and health care providers react to shorter episodes of care with fewer visits? How will cuts in services affect actual patient outcomes?

Winston Churchill once said: “A pessimist sees the difficulty in every opportunity; an optimist sees opportunity in every difficulty.” For this upcoming year, a Churchill perspective is key.

— Jane Shekman, CEO of LifeCare

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I believe home health is on a path to reductions in length of stay, as health systems and managed care accelerate a push for a more efficient and effective home health experience. With PDGM moving the industry to a 30-day episode, there will be a push for greater effectiveness of care.

Competition for nursing labor will continue, with agencies needing to be more creative in how they attract and retain the staff they need. M&A will accelerate in the later half of 2020, but the acquisitions will be even more focused on platforms or high-quality assets with sustainable business models.

Managed care’s innovative use of home-based platforms will expand, and more pilots and value-based programs will be tried. The creep toward more effective use of in-home telemonitoring and other technology will continue, both within and outside of the core home health platform.

— AccentCare CEO Steve Rodgers

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The need for excellence in home health care will only grow, and 2020 will be a year that defines how clinical growth can and will occur. With the advent of new technologies, I am excited to see how these will be embraced to enhance the home-based clinical experience and expand possibilities once only dreamed about.

The new model for payment, PDGM, begins with “patient-driven” for a reason. In 2020, we’ll see home health providers moving towards a more holistic management strategy versus an episodic treatment approach. As a nurse, I feel this is the best way to provide care. Anytime there is change to the status quo, it forces us to think differently and to innovate.

— Anna-Gene O’Neal, division president for Brookdale Health Care Services

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Obviously the rollout of PDGM will be the biggest factor, but what will the aftermath look like? That’s the important question as it pertains to M&A, consolidation and course-correction. The providers that navigate PDGM by being proactive, rather than reactive, will be the ones that thrive in the new model.

For next year, I’m most excited about the expanded role of data and business intelligence in helping providers maintain and differentiate in their markets.

— PlayMaker Health CEO John Griscavage

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What will be the biggest factors that shape the home health and home care industries in 2020? PDGM and workforce shortages.

In 2020, home health will have increased focus on care planning and service utilization. Meanwhile, home care will focus on improving staff retention through career advancement opportunities.

— William A. Dombi, president of the National Association for Home Care & Hospice (NAHC)

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In 2020, the home health sector is expected to undergo the most drastic series of reimbursement and regulatory changes since the Balanced Budget Act of 1997, and many industry leaders fear that the result may be similar.

While CMS delivered a bit of a reprieve on the PDGM front, it stuck to its guns regarding the phaseout of the RAP. We believe the combination of PDGM and phaseout of RAPs will wreak havoc on providers’ revenue cycle, as billing and coding changes will take a toll on collections, resulting in increasing DSO and working capital needs while hampering cash flow generation.

In the U.S., the average home health agency generates about $1.5 million revenue. Based on analysis performed by Homecare Homebase, which processes about 40% of the industry’s visits data, operators are expected to see their cash collections cycle lengthen by 23 to 25 days, resulting in $90,000 to $100,000 cash flow shortages for the average mom-and-pop provider.

We’ve been closely following the home health and hospice industry for the last 15 years, and one of the things we observed is that there is usually a spike in M&A activity about 12 to 24 months after major regulatory or reimbursement changes. Given the robust home health and hospice M&A market that we have seen over the last three years (and with valuations at unprecedented levels), we expect consolidation to continue … perhaps even at a more accelerated pace, though multiples are likely to compress somewhat.

We foresee operators diversifying their business models and service offerings as they look to evolve into more comprehensive and integrated, end-to-end providers to serve customers along the full continuum of care. Provider and payer collaboration is on the rise, and we expect to see increased importance being placed on hospital referral relationships. Acute care health systems will look to more actively manage their post-acute networks and seek to establish preferred relationships or joint ventures with best-of-breed providers with a focus on quality outcomes, increased patient satisfaction and tangible cost savings.

— Eugene Goldenberg, managing director at Edgemont Capital Partners

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Next year, it’s obvious that PDGM will dominate the headlines. But in my opinion, the lasting legacy of payment reform will be home health providers tapping into their clinical, operational and financial information like never before. We’ll see the home health field begin to stratify based on how well they convert their data into actionable analytics. As the best performers optimize their reimbursements from smarter coding and internal efficiencies, they’ll also begin to systemize care plans that deliver the best outcomes. That means they’ll be able to leverage their clinical staff in a smarter, more impactful way.

With value-based contracting and a unified payment model just over the horizon, home health providers that align their people, processes and technology will win. And analytics will drive it all.

— Craig Mandeville, CEO and founder of Forcura

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The biggest factor shaping home health in 2020 will continue to be cost. Americans spent $3.65 trillion on health care in 2018 — and that number is expected to rise by more than 5% per year going forward.

While companies like Amazon and Google are looking for ways to disrupt the health care model, the real cost savings are going to come from helping people manage their chronic conditions successfully and avoiding expensive hospitalizations — and that happens in the home and community. So, finding cost-effective ways to help people stay active, eat well, and manage their medications in their day-to-day lives while also keeping them well-connected with their community physicians has never been more important.

These factors are also driving the increasingly sophisticated — and often collaborative — home-based care management approaches being developed by insurers, physician groups and home-based care providers like VNSNY. We recently contracted with a large insurer to manage the care of their high-risk members at home for a 60-day period following hospital discharge (to make sure those members’ recoveries stay on track).

Larger home care organizations, along with the insurers and medical centers they’re contracted with, are getting better and better at capturing granular data about their patient populations and then analyzing that data to understand exactly who should get what care when, in order to optimize patient outcomes. The new PDGM methodology, with its more detailed categorization of patient conditions, is going to require this growing capability.

— VNSNY Chief Administrative Officer Michael Bernstein

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We all know that with challenges come opportunities — and also threats. Home health has never seen a paradigm shift in payment and clinical reconstruction in nearly two decades like we are about to see with PDGM starting in January. And my state of North Carolina and few others are to assume RCD beginning in a few short months. State associations have been leading the way along with the nationals in agency preparations as best as we can.

Other continued predictions I see are further Medicare Advantage footprinting, more hospice scrutiny, especially in audits by the MAC’s and federal oversight.

— Tim Rogers; president and CEO of the Association for Home & Hospice Care of NC and the SC Home Care & Hospice Association

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