SNF-to-Home Diversion Opportunities Skyrocket for Home Health Providers

The nursing home industry has taken the brunt of the nation’s coronavirus blow, with more than 40% of all U.S. COVID-19 deaths involving skilled nursing facilities (SNFs). Those staggering statistics have prompted fewer seniors to receive care in the setting, both for voluntary reasons and because many SNFs stopped accepting new patients and started discharging others due to transmission concerns.

As a result, nursing home occupancy fell sharply — by about 10% — between the end of 2019 and late May, equating to a loss of about 100,000 residents, Skilled Nursing News reported earlier this month. And given errors in reporting, the true number could be even higher.

While it’s unclear when the COVID-19 crisis will end, one thing’s for sure: The virus will have a lasting impact on the SNF industry. In turn, that will likely equate to more SNF-to-home diversion opportunities for home health providers, a trend SNF operators have denounced in the past.

Industry giants like LHC Group Inc. (Nasdaq: LHCG), Amedisys Inc. (Nasdaq: AMED) and Encompass Health (NYSE: EHC) have already pounced on the opportunity.

“[SNF diversion] is picking up more steam right now,” LHC Group Chief Strategy and Innovation Officer Bruce Greenstein told Home Health Care News. “This is something I hope sticks around long after COVID is over … whether home health is engaged formally in a SNF diversion program or unknowingly participating.”

HHCN predicts it will, and so does Amedisys President and CEO Paul Kusserow.

“Even if everybody this time next year is on a vaccine, I think the idea of wanting to be home, to the safer, to be away from places of infection [will remain],” Kusserow said Tuesday during a presentation at the BMO Capital Markets’ 2020 Prescription for Success Healthcare Virtual Conference. “It’s going to be a long haul back for the SNFs.”

Simply put, SNF-to-home diversion occurs when a home health provider takes on patients who might traditionally end up in a SNF, redirecting them from institutional settings to the home. The process means an expanded census for home health providers and lower health care spending for the nation.

LHC Group — which is well-known for its joint venture partnerships with hospitals, among other things — has long practiced SNF diversion. But amid COVID-19 it has seen those opportunities increase, as many nursing homes were hesitant to accept new patients, especially from hospitals.

“Hospitals were calling us and saying, ‘Hey, is there a way that you can help out in taking patients that would otherwise go to the SNF?’” Greenstein said. “So early on [in the COVID-19 crisis], we started to work with hospital partners in building this.”

National data from analytics and metrics firm Trella Health helps to quantify the scope of the industry-wide opportunities: In Q1 2019, SNFs received 21.1% of all in-patient hospital discharges, compared to 23.3% for home health.

Of that 21.1%, Amedysis has its eyes set on “jump ball business” — referrals that could appropriately go to either home health providers or SNFs. About 10% of patients that go to SNFs fall into that category, Kusserow said during his recent presentation.

“We think now, obviously, that business is going to shift into the home,” Kusserow said. “We also think there’s actually another 10% to 20% — probably close to 10% — that, if we could add some custodial care to it, we can take care of these patients quite well. We need to be able to figure out how to add that custodial piece, and there’s a big ability to steal share.”

In the recent past, SNF operators have stood by their claims that all possible SNF-to-home diversion has already happened. They say that the patients left in their facilities truly need to be there.

Take Genesis HealthCare (NYSE: GEN) CEO George Hager for example. Genesis is the parent to hundreds of SNFs nationwide.

“To anyone [who] would want [to] or has toured a skilled nursing asset, I would challenge you to look at the patients in our building and find patients that could be cared for in a home-based or community-based setting,” Hager said in March 2019. “The acuity levels of an average patient in a skilled nursing center have increased dramatically.”

Transitional Care Management CEO Brian Cloch echoed similar sentiments last June, suggesting that SNFs could be more economical, at least when it comes to the custodial long-term care population. His organization develops, owns and operates transitional care facilities. 

“Going into a SNF is going to be a far better deal … Medicaid managed care firms who own risk, they’re going to look for the lowest-cost provider they can find,” Cloch said. “When they try to shift into the home, they’re going to realize that the people living at home are in and out of the hospital so much that it’s increasing their cost.”

But amid COVID-19, home health providers have proven their ability to care for higher acuity patients while saving money and keeping them safer from the virus than their congregate competitors. 

The benefits of that performance will be lasting, according to Encompass Health Corporation (NYSE: EHC) CEO Mark Tarr. Like his industry peers, Tar also sees it as an opportunity to drive more patients to home health via SNF diversion.

“I think the whole period of this pandemic helps to really put an exclamation point on our goals and our quality outcomes,” Tarr said during a presentation at William Blair’s virtual Growth Stock Conference earlier this month. “From a more global standpoint, it’s helped to point out the differences of the post-acute settings and how certain patients have much better outcomes.”

The COVID-19 emergency will only accelerate what Encompass Health has already been doing: Taking patients on the low-end of the SNF acuity spectrum who would have had a lower length of stay and treating them instead with home health.

“[We’re] developing clinical programs that would allow those patients to bypass a post-acute in-patient stay altogether and receive quality treatment in the home,” Tarr said. “What we see during the pandemic is an acceleration of those trends that we believe will be sustainable, given the difficulty that many of the SNFs have experienced during this timeframe.”

And even beyond corporate super powers like Encompass Health, LHC Group and Amedisys, the entire home health industry stands to benefit from the new opportunity.