LHC Group’s Innovation Head: ‘Within 10 Years, We’ll See the End of Fee-for-Service as We Know It’

Thanks to leadership changes at the federal level, the evolution of Medicare Advantage (MA) and a seemingly constant flow of new value-based payment models, providers should begin to plan for the end of fee-for-service Medicare.

That’s according to LHC Group Inc. (Nasdaq: LHCG) Chief Strategy and Innovation Officer Bruce Greenstein, who discussed the future of health care and embracing risk last week at the Home Care 100 conference in Aventura, Florida.

“If you think that over the last few years the Centers for Medicare & Medicaid Services (CMMI) has been producing too much for you to keep up with, keep your seatbelt buckled,” Greenstein told Home Care 100 attendees. “There will be a lot more coming.”

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Specifically, Greenstein’s comments on CMMI and what providers should expect were prompted by a question related to Brad Smith, who officially became Adam Boehler’s replacement for running CMS’s innovation arm earlier in January. Prior to joining CMMI, Smith co-founded and served as CEO of home-based palliative care provider Aspire Health before it was acquired by Anthem Inc. (NYSE: ANTM) in 2018.

Boehler was widely known as a supporter of value-based payment models and in-home care. Smith will likely bring more of the same, according to Greenstein. The LHC Group executive is a former Washington veteran himself, having previously served as chief technology officer for the U.S. Department of Health and Human Services (HHS).

Although he doesn’t know Smith directly, early signs point to lots of activity from CMMI’s new leader, Greenstein said.

“I was texting with a pal that came from the government world not long ago,” he said. “I asked, ‘What’s the early word on Brad?’ The word was the guy has definitely hit the ground running. He’s going like crazy, and [CMMI] is trying to provide him with a good understanding of how the bureaucracy works so he can create more models like Adam Boehler had the chance to do.”

In the early going, Smith is tasked with building out CMMI’s Primary Care Initiative, unveiled in April. On a high level, the Primary Care Initiative creates five new, risk-based payment models through two main pathways: Primary Care First and Direct Contracting.

While the details of each new payment model are still being rolled out, they’ll likely create ample opportunities for all types of home-based care providers, Greenstein said. That’s especially true for those who provide palliative care under the new Seriously Ill Population (SIP) payment option. 

Today, palliative care is often paid for by MA, private insurance or on a private-pay basis.

“Primary Care First really should involve quite a bit of activity from care-in-the-home providers,” he said. “We’d probably offer [palliative care] a whole lot more if we can get paid for it without losing money. We’re just able to pay the bill [at this point].”

On its end, the Lafayette, Louisiana-based LHC Group has already signed up for being a provider in the Primary Care First program. Its participation in the new value-based payment models adds to the company’s already extensive history in risk-sharing and value-based arrangements.

LHC Group’s organizational risk profile, for example, includes participation in the Medicare Shared Savings Program (MSSP) and Next Generation accountable care organization (ACO) models. Its profile also includes risk-based MA contracts and participation in the Home Health Value-Based Purchasing (HHVBP) model.

On top of those efforts, the company also is active in Model 3 of the Bundled Payments for Care Improvement initiative (BPCI), in addition to BPCI Advanced and hospital-at-home demonstrations.

With those and other value-based payment structures emerging, providers can no longer afford to sit on the sidelines and exclusively focus on fee-for-service Medicare, Greenstein cautioned. That doesn’t mean giving up all fee-for-service business in the present, but there’s inherent danger in neglecting the fact that the home-based care market is in the middle of rapid, sweeping changes.

“Work hard to understand what the opportunities are because you don’t want to be passed up or commoditized in the process,” he said.

Understandably, many providers are somewhat reluctant to move away from a predominately fee-for-service reimbursement mix.

In 2018, the average home health fee-for-service Medicare margin checked in at 18%, according to the Medicare Payment Advisory Commission (MedPAC). For 2020, MedPAC estimates that margins will hover around 21%.

Meanwhile, all-payer margins — including MA — are about 4.3%.

Looking at the home health industry as a whole, the typical agency gets about 55% of its funding from Medicare, with Medicare Advantage making less than one-fifth of the representative agency’s reimbursement stream, according to MedPAC.

“Don’t give up any fee-for-service business because you’re so excited about MA,” Greenstein said. “But don’t lose sight that the market is definitely changing every single day. My one prediction is — especially with somebody like Brad, regardless of what you think about the Medicare program and different administrations — that we’ll continue on a fairly predictable path.”

“Within 10 years, it’ll be the end of fee-for-service as we know it,” he added.

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