Coronavirus Could Lead to More Home Health Bankruptcies, Legal Experts Predict

The Patient-Driven Groupings Model (PDGM) was supposed to be the biggest disruption to hit the home health industry in decades. That is, until the coronavirus took the nation by storm.

Just as agencies were getting a handle on the revolutionary new payment reform, they had to pivot yet again to respond to the COVID-19 emergency. As a result, a number of smaller home health providers are struggling to keep their heads above water.

And while agencies’ preparations for PDGM largely silenced claims of expected “carnage” related to the reform, providers might not be as lucky when it comes to weathering the coronavirus chaos. At least, that’s what Roger Strode — a transactional health care lawyer and partner at Milwaukee-based national law firm Foley & Lardner LLP — and his colleagues predict.


“A lot of these small businesses, they don’t have massive amounts of days cash on hand,” Strode told Home Health Care News. “There may be a number of them that are barely struggling to hang on right now, so consolidation may be quicker and easier because there may be a lot of them looking for a lifeline here. We may see a number of bankruptcies in this area, especially with some of these smaller agencies.”

Bankruptcy predictions are nothing new for the home health industry. Last summer, sources predicted the implementation of PDGM and the phasing out of Requests for Anticipated Payment (RAPs) could put as many as 30% of home health agencies out of business.

But in early March, the National Association for Home Care & Hospice (NAHC) had yet to hear of any widespread closures — though the organization’s insights were admittedly anecdotal.


“What we’re finding from providers is that they are digging deep into the weeds of PDGM at this point, with very specific operational- and compliance-type questions,” NAHC President William A. Dombi told HHCN in early March. “We’ve not heard anything about large closures of agencies or any kind of panic in the streets.”

However, Dombi noted during the conversation that cash flow concerns may not take hold until April — by which time providers were already in the thick of dealing with the coronavirus.

Since the virus took hold, commercial bankruptcies across all industries have increased. Chapter 11 filings by companies restructuring debt increased 14% year over year in Q1, according to data compiled by Epiq Systems and reported by the American Bankruptcy Institute. Then last month, there were another 560 Chapter 11 filings — up 26% from April 2019.

So far, at least one home health provider is represented in that commercial bankruptcy spike — an agency out of Massachusetts that offers services under Medicare and Medicaid. The provider, which reports $7.2 million in assets and $38.1 million in liabilities, filed for Chapter 11 protection May 4, court documents show.

However, that filing is not related to the coronavirus, S. James Boumil, the attorney representing the agency, told HHCN. But that doesn’t change the fact the coronavirus is putting strain on home health providers.

“I have eight clients in the industry, and three of them have come to the point where they’ve had to consider some sort of a filing,” Boumil — senior partner and owner at Boston-area Boumil Law Office — said. “Only the one that was not coronavirus-related [has filed].”

It’s hard to get a handle on just how many providers are in a similar boat.

One reason for that is that bankruptcies can be filed in any number of state-located federal bankruptcy courts. Foley & Lardner attorneys told HHCN they were not aware of any free home health bankruptcy repository, though some aggregators collect and sell that information for a fee.

Still, many small home health agencies have told HHCN they’re struggling. It all comes down to cash flow, which the coronavirus has undoubtedly interrupted.

While the Centers for Medicare & Medicaid Services (CMS) and Congress have lifted homebound requirements, tweaked the Review Choice Demonstration rollout and introduced a number of financial relief programs, they have yet to allow telehealth reimbursement — or for virtual visits to count toward low-utilization payment adjustment (LUPA) thresholds.

As a result, home health providers are being forced to provide free care. In order to keep patients safe, many agencies have started to provide telehealth visits rather than in-person visits when appropriate to mitigate the risk of COVID-19 virus transmission.

In turn, many providers have seen substantial decreases to revenue and increases in LUPA rates over the past several weeks.

On top of that, elective surgeries are down, with personal protective equipment (PPE) demand — and prices — also up.

“You could have bought a surgical mask for 35 or 45 cents in bulk a year ago, and now they’re $2.50 or $3.50 for one mask, if you can find them,” Boumil said, noting that his clients each have between 200 and 500 home health aides. “PPE was probably the most immediately burdensome [expense for my clients.] The other part, which was eventually addressed, was paperwork requirements.”

For Boumil’s clients on the brink of bankruptcy, staying in business will come down to making payroll and keeping caregivers equipt with the proper PPE, Boumil said.

While it’s harder than ever for providers to stay afloat, those who do will likely see more demand and respect for their services in the future, as the coronavirus makes patients and policymakers recognize the home as the safest setting of care, especially for the elderly.

“There’s gonna be a light at the end of the tunnel here as states start to open up again,” Strode said. “And providers are going to start doing elective procedures again. … So if you can hang on another couple of months, you might be fine.”

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