Fixing the ‘Toxic’ Home Health-Medicare Advantage Relationship

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The home health industry’s battle with Medicare Advantage (MA) plans for fair rates has gone from a few stakeholders saying “the quiet part out loud” earlier this year to nearly every major provider in the country talking about the issue with regularity.

My colleagues and I have covered the topic extensively. But we’ve moved beyond the question of how providers feel about MA rates for home health and moved onto the next: How can the problem be solved?

Taking a step back, here are a few of the certainties we know:

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– All signs point to MA being the dominant insurer type among Medicare beneficiaries by the end of the decade.

– MA pays far lower rates for home health services compared to fee for service (FFS). Encompass Health Corporation (NYSE: EHC) said this week that MA rates are at a 40% “discount” compared to FFS. Intrepid USA Healthcare Services confirmed that number was about in line with its experience – and even suggested the rates were sometimes lower than that.

– Two companies with significant market share in MA – Humana Inc. (NYSE: HUM) and UnitedHealth Group (NYSE: UNH) – have already – or are in the process of – acquiring two of the largest home health providers in the country in Kindred at Home and LHC Group Inc. (Nasdaq: LHCG), respectively.

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– Some have described MA as the federal government’s “darling.” But the Office of Inspector General (OIG) recently published a report condemning MA organizations for limiting beneficiaries’ access to necessary care and denying payments to providers for services that are covered under Medicare and MA billing rules.

“It’s been a challenge because, not only is the rate lower, but the processing of the claims is 6 to 8 times harder for your back office revenue cycle,” Intrepid USA CEO John Kunysz told me. “They just put in so many hurdles.”

Based in Texas, Intrepid USA provides home health and hospice services, with over 60 locations spanning across 17 states. 

In this week’s exclusive, members-only HHCN+ Update, I explore the tumultuous relationship between the home health industry and MA, and also try to highlight some potential solutions for the road ahead.

No longer the quiet part

When Bruce Greenstein, LHC Group’s chief strategy and innovation officer, brought the industry’s gripes to center stage earlier this year, it sounded like a plea to his peers.

“I have to say, we’ve been glossing over this as an industry for far too long,” Greenstein said in February.

“We are getting our clocks cleaned,” he added. “And we just tend not to talk about it.”

Most providers I talked to privately agreed that there was not only a problem with rates, but that every home health provider would have to come together and say “no” to MA plans if they wanted to make a difference.

Some thought, however, that the problem would persist no matter what – because there would always be a home health agency out there willing to take those reduced rates.

“Well, what’s the quality of that home health care provider that’s taking that rate?” Kunysz said to me, responding to that notion. “What kind of service are you truly getting? You know, imagine a fast food industry without some kind of a food inspector. It may be food, but it may not be quality food.”

And in just the last month or so, providers have taken that collective, hard stance.

“I think home health, in the past, [it] has been a bit exploited because it’s been a very fragmented industry,” Encompass Health CEO and President Mark Tarr said Tuesday at the BofA Securities 2022 Healthcare Conference. “And so there’s been an element of treating it like a commodity by some of the payers, knowing that if one agency wouldn’t care for the patient, well, there’d be others that would be willing to step up.”

Encompass Health also added those concrete numbers – that the rates it was seeing from MA were 40% lower than FFS.

All of that is important, considering MA enrollment trends.

“We know what the penetration of Medicare Advantage is in the senior population, and that’s accelerating,” Amedisys CEO Chris Gerard said on his company’s first quarter earnings call. “We’ve also stated many times that we’ve got to be able to change the relationship between providers and Medicare Advantage in order to really extract the good value out of the care that we drive – and get paid fairly for it.”

With clinicians on short supply, home health providers have even begun to de-prioritize MA patients. Yet that puts them in a sticky situation; they don’t want to not prioritize any patient who could benefit from home-based care. It only makes economic sense, given the staffing situation.

Kunysz told me that, even if the rates were not that of traditional Medicare’s – say, 90%, or even 80% – Intrepid USA would be able to make it work.

But at only 60%, or less in some cases, it just isn’t feasible.

“Part of what else happens is they have incentive programs within their revenue cycle operations to stall or deny payment as much as possible, which is inappropriate,” Kunysz said. “They really are being onerous in this.”

Humana – which is in the middle of all of this, being both a payer and provider of home health care – opened up about the subject Tuesday at the BofA Securities conference.

To the credit of Susan Diamond, a home-based care veteran and Humana’s CFO, she acknowledged that the MA rates for home health are something that will need to be addressed as it accepts the value that home-based care brings to beneficiaries.

“I think there are some service categories – home health is one example – where as an industry, MA tends to contract at rates below Medicare fee for service,” Diamond said. “I can see that being a space where we might see more pressure from home health agencies to revisit reimbursement, if they find that it’s insufficient, particularly relative to the fee-for-service business, and might cause them to prioritize Medicare fee-for-service patients over ours, which would be not an ideal outcome. And so I think we need to work with them to make sure that our patients maintain access to care.”

Solving the problem

The easiest way to solve the problem would be for, as Diamond alluded to, a raising of rates that would bring the parties closer together on what is fair and what’s not.

But there are other ways to go about it if things don’t work out that seamlessly, Kunysz told me.

The first is government involvement.

“The government’s going to have to help in this arena,” Kunysz said. “They’re going to have to start going in, making and streamlining some standards, based upon your primary diagnosis and what you’re referred for. ‘This is a standard pre-authorization level that makes sense clinically.’ I think this would be great. … I think standardized authorizations that could go through so they don’t have the ability to delay and deny care is one quick solution.”

Secondarily, he believes that the appeals process needs to be consistent.

“A process where the payers can’t use contractual games to make trying to get reimbursed or appeal a denial too burdensome for us to even bother with,” Kunysz said. “And I would like them to go in and analyze their claims and paying methods to stop incentivizing the [MA] people for inappropriate denials of care.”

The OIG report mostly validated those claims, but it doesn’t suggest – nor do Kunysz, Tarr, or Gerard suggest – that all MA stakeholders are out to exploit home health providers.

It’s possible, however, that home health leaders vocalizing their concerns – paired with the OIG report’s findings – could be the synergy required to lay the groundwork for that bridge between MA and the home health industry.

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