Tale of Two Home Health Providers: ‘Value-Based Care Gap’ Growing Wider

Earlier in June, the Trump administration and the U.S. Centers for Medicare & Medicaid Services (CMS) touted a “renewed national commitment to value-based care.”

But for that renewed commitment to take off in the home health care space, government officials need to act fast, industry insiders caution. There’s a widening value-based care gap between larger home health providers and smaller mom-and-pop shops.

“I see a big gap that’s continuing to widen between the top, really large home health, hospice and personal care providers and the smaller, regional chains,” Fred Bentley, a managing director at Avalere Health, told Home Health Care News. “This was a gap that was very much present prior to COVID-19, based on my conversations with home health executives and senior leadership in the industry. But now it’s only going to widen.”

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Washington, D.C.-based Avalere is a health care consulting firm that specializes in strategy, policy and data analysis for life sciences companies, health plans and providers.

Broadly, value-based care refers to the concept of paying providers based on the quality of their care instead of the volume of services they deliver. In the home health care space, value-based care pathways include the Home Health Value-Based Purchasing Model (HH VBPM), accountable care organizations (ACOs) and even the Patient-Driven Groupings Model (PDGM), to some extent.

Outside of those avenues, home health providers can also enter into value-based care arrangements with Medicare Advantage (MA) plans and payer partners.

Citing health disparities among minority communities and low-income populations within Medicare fee-for-service during the COVID-19 crisis, CMS Administrator Seema Verma suggested that accelerating the shift toward value-based care is one of her agency’s top priorities.

More than 325,000 Medicare beneficiaries had a diagnosis of COVID-19 between Jan. 1 and May 16, according to CMS data.

Black Medicare beneficiaries were hospitalized with COVID-19 at a rate nearly four times higher than white beneficiaries. Meanwhile, dual eligible beneficiaries — individuals enrolled in both Medicare and Medicaid — likewise had higher rates of hospitalization.

“Now more than ever, it is clear that our fee-for-service system is insufficient for the most vulnerable Americans … ,” Verma said in a June 22 announcement. “The transition to a value-based system has never been so urgent. When implemented effectively, it encourages clinicians to care for the whole person and address the social risk factors that are so critical for our beneficiaries’ quality of life.”

‘A pretty bright line’

There are several reasons for the widening value-based care gap between larger home health providers and smaller agencies.

On a basic level, larger providers likely have more time and resources to devote toward value-based payment pathways. Lafayette, Louisiana-based LHC Group Inc. (Nasdaq: LHCG), for instance, even controls an entire ACO management company, thanks to its 2018 acquisition of Almost Family.

“We did not even hesitate to embrace the ACO segment of the business,” LHC Group Chief Strategy and Innovation Officer Bruce Greenstein previously told HHCN. “Instead, we made investments, and we’re growing it like crazy.”

Large providers also have the advantage of scale over their local or regional peers. That comes in handy when negotiating with MA plans, which sometimes prefer to work with a single partner that covers a large footprint rather than several separate organizations.

Moorestown, New Jersey-based Bayada Home Health Care, for example, has had ample success securing value-based payment arrangements with payers. The nonprofit provider announced a major risk-based arrangement with AmeriHealth Caritas in March 2019.

“It’s [our] only one that spans over a large geographic region and encompasses multiple specialty practices, including home health, hospice, Medicaid personal care and pediatric private-duty nursing,” Bayada CEO David Baiada told HHCN at the time. “These are natural partnerships for us — they incentivize us for work that is already a top priority within our organization, pushing us toward continued improvement and finding efficiencies.”

The advantage of scale also holds true with ACOs.

“With an ACO that maybe covers a large geographic area, they often want to work with a partner who can manage a lot of their business,” Bentley said. “They don’t want to be signing small, sub-scale relationships that they then have to manage.”

Data is another component contributing to home health care’s value-based care gap that can’t be overlooked. Generally, large providers are equipped with refined predictive analytics tools that help them deliver the right amount of care at the right time — and in the most appropriate setting.

Smaller home health agencies focused on making payroll can’t always afford such tools.

“In terms of the clients we work with, there’s a pretty bright line between those organizations that have the executive and mid-level experience and knowledge with risk-based payment models, that have the analytic sophistication to manage them,” Bentley noted.

Supporting small agencies

To support smaller home health agencies during an accelerated shift toward value-based care, the federal government would likely need to double down on some of the financial lifelines it put in place amid the COVID-19 emergency.

That includes CARES Act relief funding, forgivable small business loans and other mechanisms.

For the most part, small and mid-sized home health agencies are devoting their full attention and resources to surviving coronavirus disruptions, which range from admissions dips to skyrocketing personal protective equipment (PPE) costs.

More than three months removed from the start of the COVID-19 crisis, many of the nation’s big home health providers have navigated through those disruptions, with many returning their attention to value-based care once again, Bentley said.

“There’s obviously an uptick we’re seeing across many states, so we’re not anywhere out of the woods yet,” he said. “But I do think health care providers have started to get a handle on that — home health providers, at least the big chains. They are continuing to move forward with their planning and developing some of these new models, really furthering their experimentation and diversification.”

PDGM and VBPM

Apart from ACOs and unique arrangements with payers, there’s also the Home Health Value-Based Purchasing Model.

Implemented in 2016, VBPM was designed to pay home health providers in nine states based on outcomes and the value of services delivered. Many home health providers have done well under VBPM, including Baton Rouge, Louisiana-based Amedisys.

CEO Paul Kusserow discussed his company’s bullish outlook on VBPM during a May 2018 earnings call.

“As the percentage of payment in [VBPM] grows from 3% to 8% by 2022, we will see meaningful revenue upside for our performance,” Kusserow said. “We encourage CMS to expand VBP nationwide.”

Since 2018, however, the Obama-era VBPM has largely stalled out, partly due to an administration change, some policy believe.

“Truthfully, haven’t heard much about it,” Bentley said.

PDGM is another area that incrementally shifts all home health providers more toward value-based reimbursement. In crafting PDGM, CMS’s goal was to more closely tie payment to patient characteristics, making sure most resources go to complex, high-needs cases.

“It moves the industry ever so slightly toward a model where providers are tracking and getting reimbursed for underlying patient acuity,” Bentley said.

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