Home Health Insiders Hearing About Agency Exits Less Than 10 Days into PDGM

We’re less than 10 days into the Patient-Driven Groupings Model (PDGM), but already some industry experts are hearing about the forthcoming shutdown of home health agencies.

PDGM — the biggest home health reimbursement overhaul in two decades — began on Jan.1.

“Right now, it’s really early to see some of these scenarios,” Mike Dordick, president of McBee Associates, said during a Home Health Care News outlook webinar on Tuesday. “I am getting some calls from agencies who are looking to close at this point. They were on the edge of organizationally making it through under [the Prospective Payment System] and this is the final straw.”

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The news should come as no surprise to those who have been following the matter closely from an M&A perspective. Throughout 2019, home health industry experts warned that PDGM “carnage” was inevitable, with one of the results being a high rate of small and mid-size agencies having to close shop.

Typically, agencies that bring in annual revenues of less than $1.5 million are considered small.

According to some estimates, up to 30% of existing home health agencies are expected to go out of business due to PDGM. Historically, a similar trend occurred with the implementation of the PPS years ago.

“I know that not everyone in the industry agrees with me about this, but I’ve been constant in what I believe will happen,” Dordick said. “My view is that you’re going to see 25% to 30% less agencies. That may mean consolidation, where they are taken over, or it may be overlapping providers that don’t need to be kept open.”

This will be especially true in markets that are already flooded with home health providers, according to Dordick.

Currently, there are over 10,500 freestanding home health agencies that exist in the market, according to the Alliance for Home Health Quality and Innovation. By the end of 2020, the impact of PDGM may bring this number down to roughly 8,000, according to Dordick.

During the webinar, Dordick also touched on PDGM’s impact on therapy and other possible operational ramifications.

“The therapy change is probably one of the areas that have to be watched the closest,” he said. “From what we’ve been hearing from CMS, it’s something they will be watching closely. Ultimately, the industry has to be careful with providing the right services, at the right time.”

Nearly half of home health providers that participated in a 2019 survey conducted by the National Association for Home Care & Hospice (NAHC) said that they anticipated decreasing their therapy utilization in 2020,

While it’s still too early to know what the total outcome of PDGM will be, providers can look to their skilled nursing facility (SNF) counterparts and the Patient-Driven Payment Model (PDPM) for a preview.

PDPM, which began on Oct. 1, 2019, is another payment overhaul that scarps volume-based therapy reimbursement. So far, there have been multiple reports about therapy cuts in the SNF world.

In the early going, PDGM implementation appears to be going smoother than PDPM, according to Dordick.

“CMS had released six different [PDPM] groupers, starting Oct. 1, and this happened over a weekend where the EMRs had to go through and reprogram to get claims out,” Dordick said. “There were constant releases that had to take place through that time period. I’ll knock on wood as I say this — we haven’t heard that yet under PDGM in home health. That’s not saying that it [won’t] happen.”

Dordick also touched on one of PDGM’s biggest but least-talked-about challenges during the Tuesday webinar: questionable encounters. Broadly, questionable encounters — or QEs — are claims with primary diagnoses that don’t fall under one of PDGM’s 12 clinical groupings.

To avoid QEs, Dordick recommended that agencies work with the physician or referral source to determine if there are other conditions that could be the primary diagnosis.

“In most cases, when we have seen these questionable encounters, they can be coded differently,” he said. “That means you have to go back and get the referral written differently or get additional documentation. Having access to health information exchange can help you find additional visit notes that you may not have gotten from the referral source.”

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