How Home-Based Care Providers Take On Risk To Avoid Risk

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Taking risk has been a hot topic on the home health and home care conference circuits for some time now. That will heat up more moving forward.

Two realities are driving providers to take on risk themselves.

Home health providers, in particular, could be in sink-or-swim territory in five months. All the while, payers have become increasingly involved in the home-based care business. Risk makes more sense than ever.

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Paradoxically, taking on more risk may insulate home health agencies from other dangers they’re susceptible to – like payment cuts to Medicare fee-for-service rates, for example.

This past week, I talked to two home-based care providers that have been taking risk for longer than most. One has been doing it through the Program of All-inclusive Care for the Elderly (PACE), which has been growing in popularity since the onset of COVID-19. An older model, many within the industry argue that PACE is set up well for the future, both because of the risk-taking opportunity it allows and its home- and community-based focus.

The other is the Minnesota-based Lifespark, which took $62 million in upside and downside risk four years ago and hasn’t looked back since.

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How the company got to where it is today – and where it’s going next – is a good case study for other home-based care providers across the country who are concerned about what the future holds.

In this week’s exclusive, HHCN+ Update, I took a look at the state of Lifespark. To paint the picture fully, I interviewed its CEO Joel Theisen and its new advisory board member Paul Mastrapa, two home-based care veterans.

Risky business

Lifespark announced last week – amid its market expansion – that it would be adding new members to its advisory board.

Those members include: Dr. Sunil Sajan Budhrani, the former CEO and CMO of Innovation Health; Robert Kramer, the founder of Nexus Insights and co-founder of the National Investment Center for Seniors Housing & Care; Amanda Tan, a principal at Accenture; and Mastrapa, who formerly helmed Help at Home, Option Care and Walgreens Boots Alliance’s (Nasdaq: WBA) infusion services division.

In the release announcing those hires, Theisen said in a statement that there is “an incredible opportunity for global risk right now.”

I asked him why.

“Payment reform allows, for the first time, for some of these home- and community-based players to actually arc into the space in a different way,” he said. “For us, the way to have the purest model and to deliver population health is integrated, holistic, complete senior health through global risk, because you’re truly aligning with the fact that you want to keep people well versus keeping people sick.”

Founded in 2004, Lifespark provides home health, home care, hospice, primary care and senior living services. The company also recently announced Matt Nyquist – formerly of UnitedHealth Group’s (NYSE: UNH) Optum – as its new chief population health officer.

When Theisen says payment reform, he’s referring to the opportunities that have arose via policy changes in Washington, D.C., in the 21st century.

Medicare Advantage (MA), shared savings plans from the Centers for Medicare & Medicaid Services (CMS) and the Accountable Care Organization Realizing Equity, Access, and Community Health (ACO REACH) Model are all examples of that.

“The opportunity here is to say, ‘We’re just going to harvest the value and get paid for real outcomes,” Theisen siad. “And that’s global risk. That’s why that’s so important. Out of all the things that are happening – care coming home, tech enablement, an aging population – payment reform is the biggest driver of why we’re sitting here today.”

Theisen and Mastrapa formerly worked together on the founding of a company called Advolife, which LivHome acquired in 2004.

The two are aligned on the type of home-based care they believe in: holistic care models that utilize risk-based payment structures.

“There’s still this vast majority of services that the industry provides through fee for service. And it’s viewed as a cost structure,” Mastrapa told me. “The payment reform, that allows you to really go right to the payer and take the full risk, with the right set of assets that Lifespark has put together. That then really enables you to change the paradigm, more so than if you’re just trying make small, incremental changes through a value-based agreement here or a gain-share agreement there.”

Lifespark was one of the 53 participants accepted into the former Global and Professional Direct Contracting Models, which were ACO REACH’s predecessors from the former administration. It was one of the only home-focused entities among the 53 participants.

The company says that its global risk model is proven to reduce total cost of care, while improving outcomes and “empowering seniors.” Its model is described as a home-based delivery system that utilizes a tech-enabled platform.

Four years ago, the company was at $62 million in upside-downside risk, with about 6,600 patients covered. Heading into 2023, the goal is to have close to $500 million under that global risk structure.

With its new advisory board members, Lifespark is ready to play in the “major leagues,” according to Theisen. That means two things, as far as I can tell: a slow but steady expansion into markets across the country, and a continual emphasis on risk taking.

“We’re going to the major leagues, and the major leagues is in full risk,” he said. “Going into 2023, we’ll have … close to a half of a billion dollars that we’re going to go full upside-downside risk on.”

To fuel that growth – in which Mastrapa will play a heavy part – the company is in the process of raising a “significant” funding round.

“I grew up on the home health business, and those businesses are always margin-compressed,” Theisen said. “It’s always dependent on Medicare or Medicare Advantage … and who’s cutting the rates. And it’s because you’re down the totem pole. You need to get back to apex predator level, which is the payer level, right? Or become your own payer, like in ACO REACH.”

Theisen refers to that as being “commoditized” and “marginalized,” which is a place he does not want to be. Instead, he wants to “harvest the value that Lifespark creates for its patients.”

It’s easier said than done for most home-based care agencies. But there’s not a single good home-based care agency that wouldn’t want to be able to more often harvest the value that it creates for its patients.

“With Medicare, you worry about that stroke-of-the-pen risk,” Mastrapa said. “When you take the patient and their entire non-pharmacy medical spend, that’s your perspective instead. And it’s irrespective of what a unit cost, but instead about how effectively you are using the system. … It’s a good impetus for the industry here – if you’re living off of what Medicare is paying you, you’re probably missing the boat.”

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