Confessions of a Home Health Agency Owner: ‘CMS Is Trying to Put Agencies Like Mine Out of Business’

For decades, home health agencies have learned to operate — and often thrive — in the midst of massive change.

But since the start of 2019, that change has felt overwhelming for some agency owners, particularly those who run mom-and-pop businesses with razor-thin margins. Above all, perhaps, the decision by the Centers for Medicare & Medicaid Services (CMS) to eliminate home health pre-payments — or Requests for Anticipated Payment (RAPs) — has been most difficult to manage.

CMS finalized its plan to phase out RAPs in its 2020 home health payment rule, outlined in October 2020. Under the plan, CMS started reducing pre-payment levels for existing agencies this year, with the goal of eliminating them by 2021.

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New home health agencies were blocked from RAPs entirely in 2020.

In this latest installment of the Confessions series, HHCN spoke with a home health agency owner who sounded off on cash flow challenges — and how it sometimes feels like CMS is pushing agencies like his out of business. The subject of this interview — a registered nurse and long-time home health executive who launched his own agency in 2019 — is kept anonymous so he can speak without fear of retribution.

During the interview, the source also discussed his agency’s experience during the COVID-19 pandemic, in addition to his personal experience battling the virus as somebody who tested positive.

The home health agency owner’s responses are below, edited for length and clarity.

HHCN: To start off, how has your agency handled the transition to the Patient-Driven Groupings Model (PDGM)?

Agency owner: PDGM has been a positive for our operations. If you still look at an episode as a 60-day episode, our average revenue per episode has actually gone up.

The big challenge has been Low Utilization Payment Adjustments (LUPAs). LUPAs were always something we kept an eye on, but you really have to keep an eye on them now, particularly during the second 30-day portion of an episode of care. We’ve gone to using a lot more PRN visits in an effort to address LUPAs during the second 30-day period.

How have you handled cash flow during the transition to PDGM?

As far as reimbursement and cash flow goes, we got our actual Medicare certification in January 2019. We missed being eligible for RAPs by 18 days or so. That’s been difficult. In the best-case scenario, we can get money in 45 days of care. In a realistic scenario, that runs closer to about 60. So, we’re covering a full episode of payment for all the people we care for. For an agency like us — one that’s looking to grow but not a huge corporate agency — not being able to get those up-front funds makes cash flow a challenge.

What positives do you see in PDGM?

You won’t hear me say this a lot, but I think most of the changes CMS and Medicare made were appropriate and long overdue.

I think CMS is putting an emphasis on chronic care. It’s putting an emphasis on skilled nursing, taking the emphasis off of rehab and the acute treatment of a condition or illness. I think for what CMS is trying to accomplish in decreasing overall Medicare costs, PDGM is going to end up showing positive results.

Your home health agency is in the Sunbelt region, which has been hit hard by the coronavirus recently. How are you and your staff holding up?

We’re doing OK. Keep in mind, we’re not in an extremely populated area. Out of a county population of about 200,000, I think we’re still at less than 3,000 overall cases. I actually had it.

You tested positive for the COVID-19 virus?

Yes. I had it. One of my nurses had it, too. We recovered from that, then came back to work.

COVID-19 has definitely had an impact on our home health referrals. I think that’s mostly because people are being cautious, not wanting home health services because they’re nervous about having people in their house. I think I read this in an HHCN story, but people need to understand that home health agencies are the firemen — and not the fire. I couldn’t agree with that more.

Patients get very nervous, but when we go into a home, we’re making sure that we’re not bringing COVID-19 to them. We also make sure we’re not taking it out. We have had a fair number of COVID-19 patients or testing-pending patients. I don’t think we have had any that have passed away, so that’s good.

I had no idea that you had the COVID-19 virus. What was the experience like? How are you feeling now?

It was interesting. I think the strangest thing for me was the loss of taste and smell. You don’t really realize how much you use those senses until you don’t have them anymore. It was so odd. I could take cologne, spray it on my arm, see it on my arm wet, smell it — and then smell absolutely nothing. That’s how I first realized I had it. I felt sick probably for four or five days, with body aches that were bad enough where I had to push myself using my arms to roll over in bed. But probably by the fifth day, I started feeling back to normal.

It’s been about two-and-a-half months now since I had it. The biggest issue since has been fatigue. Even after I felt “normal,” my endurance was way, way down. The nurse who got it around the same time as me had more flu-like symptoms, where she had a mild cough and fever of 102 degrees.

I never had a temperature higher than 99.7 degrees. With her, too, her experience lasted for pretty much a whole two weeks, whereas mine was pretty much done and over after five days. It was an interesting disease process. We caught it very quickly in the office, so both of us quarantined very quickly.

As somebody operating a home health business as we talk here on Aug. 21, what are currently your biggest challenges?

Staffing is always a challenge, particularly because we operate in an underserved area. But I am very blessed right now; I have one of the best crews that I’ve probably ever had in my whole career.

Cash flow is by far the biggest challenge. Sometimes, it feels like CMS is trying to put agencies like mine out of business. Sometimes, it seems like CMS and regulators want to leave the big corporate agencies as the only ones they have to deal with.

I’ve been saying that for 10 years, but some of the latest plans and initiatives really drive that home. I’m mainly talking about getting rid of RAPs. I mean, the only agencies that can sustain that are those that have large cash reserves.

What’s the downside to consolidation, in your view?

I think you lose innovation. I think a lot of the home health innovation comes from the mom-and-pop shops that have had to be creative. Just look at us — I’ve always had a different take on home health care. What the regulators are saying and doing now, I’ve always felt that way. Since the late 80s, I’ve had chronic illness programs. I think that’s why PDGM — and the actual reimbursement amounts we’re seeing — did not affect my operations as much as other people who were very focused on patients with acute issues.

When it comes to cash flow during the public health emergency, there were a couple of lifelines out there for for agencies. Did you apply for any advance or accelerated payments from CMS, for example?

We absolutely did.

Now, I think where that falls very short is the repayment component. Basically, CMS is going to keep everything you bill. So the advance and accelerated payments were helpful, but that’s a very short lifeline, I guess I would say. If at the end of the two months or the three months, CMS plans on keeping 100% of anything I bill until I’m paid up, that’s kind of a wash. All I did was push back my pain point, right? It’s a net zero.

What about the Paycheck Protection Program (PPP)? Did you apply for a PPP loan?

We did.

How has that helped? How have you used those funds?

To me, that was the key lifeline, to be honest with you. We saw no issue using PPP as long as we used it in “the buckets” that the government mandated PPP be used in. We should qualify for forgiveness on that. We used the program to help with payroll. I was still hiring staff when other agencies around us were laying their staff off. We needed those workers to take care of our patients. Looking ahead, I’m still planning for growth, so I didn’t want to lose anybody.

I have some things happening in my business where I think there’s going to be a fair amount of growth. On PPP, I think forgiveness is the right way to go. We were able to keep contributing to the economy. We didn’t get rid of our people. The work kept going. I think that program was great.

Did you request a loan in the under $150,000 category or the above-$150,000 category?

It was actually $150,000 exactly. I think when I looked last, it was considered a “small loan.”

It was a no-brainer and a good business decision to use PPP. The important thing is to keep funds siloed, only using them for certain expenses.

This has been one of the challenges we’ve been hearing pretty frequently: Does your agency provide care inside of long-term care facilities or assisted-living communities? If so, were you shut out from those at all?

We have patients who are in assisted living, for sure. At the beginning of COVID-19, they pretty much kicked us out. We are seeing those assisted-living facilities ease up now.

They’re not as ready to send us referrals as they used to be, though. So it still hurts from that standpoint, but they are allowing us back in. The other interesting pain point that’s related to facilities: I had some employees who were per diem employees who also worked at a skilled nursing facility (SNF) full time. They worked for me on a per diem basis. After COVID-19 hit, a lot of those individuals working in SNFs were no longer allowed to work for us. I lost a fair amount of skilled staff overnight. Within the last week, some of those people have been told they can resume whatever they were doing outside of their full time job.

But for two or three months, we basically had to stop doing occupational therapy (OT). It’s a high utilization-low resource area that I’m in, so there aren’t a lot of OTs around. There’s a lot of sharing. When they locked SNFs down, we essentially had to stop taking any patients that required OT because my occupational therapist got locked down in her primary job.

What about virtual visits or telehealth? Is that something that you’ve turned to during the public health emergency?

We definitely did turn to telehealth at the beginning, when everyone was trying to get their feet on the ground. Don’t get me wrong — I think virtual visits and telehealth visits should be a part of home health if officials really want to limit COVID-19 exposure. Telehealth and virtual visits are also great when it comes to keeping people on service and managing chronic illness. At the very least, virtual visits can help you determine if an in-person visit is needed.

But based on our experience and from talking to other people in home health, there’s just no motivation for doing them. In some cases, they actually hurt you in home health. We did them on certain types of patients, but we had to make sure that by doing them, it didn’t drop us into a LUPA.

Do you have any concerns about being able to stay in business or are you feeling pretty good about where you are at?

I have no intention of staying a mom-and-pop agency. We’re at an acquisition moment ourselves. We’re also talking with accountable care organizations (ACOs) about doing joint ventures or mergers. I’m very plugged into the ACO landscape. I think they are the future of Medicare.