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Home health referrals are well above where they were before the pandemic, but not necessarily at the expense of skilled nursing facilities (SNFs).
There are now more patients in need of home health services, and those patients tend to be sicker. At the same time, agencies are struggling to meet demand in a tough recruiting and retention environment.
Those takeaways and others are according to new data reporting from CarePort.
Specifically, home health referral volumes have reached 122% of 2019 levels. At the same time, SNFs have reached 104% of their referral volume. That is as of this past October.
“In relative terms, there just continues to be a gap between home health and SNFs, and I expect that gap to continue to widen, because I think COVID led a change in patient preference in terms of going home,” Lissy Hu, president of connected networks at CarePort, told Home Health Care News. “And the response to that by the health systems and payers – because it’s a higher value setting and a lower cost setting of care – is that payers and providers are putting more technology and systems in place to accommodate those patients who can be in the home.”
CarePort – a part of WellSky – is a care coordination software platform. It helps health systems and hospitals connect with post-acute care providers, such as home health agencies.
While increasing home health referrals are mostly welcomed news for providers in the space, more referrals does not exactly mean more business and more bottom-line revenue.
As the referral rates have been rising, referral rejection rates have also been climbing. In January, for instance, the home health industry’s rejection rate was 58%, according to CarePort. That was at least 16% higher than pre-pandemic levels.
“The growth in home health demand has been running about 14% to 15% this year in our referral volume – and the growth in hospice is north of 20%,” Joshua Proffitt, the president and COO of LHC Group Inc. (Nasdaq: LHCG), said early in 2022. “If you look at how we’re modeling, if we’re only putting 5% to 7% for organic growth, that would indicate that we’ve got some headwind to the growth potential baked in for labor dynamics.”
Some of the publicly traded home health companies have indicated recently that staffing trends are improving, which would ideally lower referral rejection rates.
Hu believes that better care coordination – within home health agencies and health systems, plus through new models from the The Center for Medicare & Medicaid Innovation – will also help lower those rejection rates, thus allowing home health agencies to better take advantage of demand.
“There’s a lot of pent up demand for the home, but we’re not always able to service those patients,” Hu said. “Because if you don’t have the structure in place, and the care coordination in place, then they kind of have to go to a facility, right? So as we have more of those structures in place – and they’re more at scale – we’re going to continue to be able to serve more of those patients who want to be in the home.”
There may be more patients eligible for home health services than ever, but there are also less agencies to take on those patients than there previously were.
While that doesn’t necessarily mean there’s less capacity overall, it’s still a trend worth considering as potential fee-for-service Medicare rate cuts threaten the lifeblood of the industry.
There were 9,378 agencies in 2020, compared to 9,893 in 2019, and 10,852 in 2014, according to the Research Institute for Home Care’s recently released 2022 Home Care Chartbook.
Other referral trends
Even though SNF volume has recovered, home health agencies are seeing higher acuity patients of late.
While the average hospital length of stay is down from last winter – at the peak of the Omicron wave – it is still higher than it was before the pandemic.
Also as of Oct. 2022, hospital length of stay was 11% higher than Oct. 2019 for those referred to home health care. For SNF referrals, the preceding hospital length of stay was 12% higher in October compared to three years prior.
Higher-acuity patients entering into the hospital means higher-acuity patients in the home health space. What providers do in reaction to that will be another trend to watch in the new year.
“It’s the million dollar question, right?” Hu said. “And so as we think about home health and taking care of these higher-acuity patients, I think a lot of home health agencies are now investing in care coordination, analytics and training their workforce to service some of these higher-acuity patients. I think we’re going to see more of that than in the past.”
In regards to staffing troubles, those were best reflected in the amount of contract labor being utilized by agencies. Those utilization rates are three times what they were before the pandemic.
Monetarily, that can amount to multi-million dollar hits to a company’s bottom line throughout the year.
“Retention and recruitment are areas that we’ll focus on. We want to continue to be able to replace that high-cost contract business with our own W2 staff,” former Amedisys Inc. (Nasdaq: AMED) COO and CEO Chris Gerard said in late 2021. “We’re running around 4% of our business being performed by contractors, where there’s considerably higher costs than with our own staff.”
Waning SNF-to-home momentum
While a slew of home health providers invested in SNF-at-home programs and supported SNF-to-home efforts in Washington, D.C., over the last two years, the U.S. Centers for Medicare & Medicaid Services (CMS) seems less interested in greater SNF diversion.
In a Dec. 15 proposed rule, the agency aimed to address just that, specifically within Medicare Advantage (MA).
“For example, if an MA patient is being discharged from an acute care hospital and the attending physician orders post-acute care at a SNF because the patient requires skilled nursing care on a daily basis in an institutional setting, the MA organization cannot deny coverage for the SNF care and redirect the patient to home health care services unless the patient does not meet the coverage criteria required for SNF care in §§ 409.30-409.36 and proposed §422.101(b) and (c),” the proposed rule states.
Some post-acute patients are inherently SNF patients. They are simply too sick or too impaired to be in the home environment. But home health agencies hoped that SNF troubles during the pandemic would allow them to not only get more referrals, but also gain a greater share of post-acute patients from SNFs.
In part, that was the reasoning behind the introduction of the Choose Home Care Act of 2021.
“I think CMS obviously is always concerned about fraud, waste, abuse and payment, as they’re mandated to,” Hu said. “Still, I would say that what we’re seeing is that home health is being used in new ways.”
For instance, the rising popularity of hospital-at-home programs – and the extension of the Acute Hospital Care at Home waiver in the recently passed omnibus spending bill – is a place where Hu believes home health care services will be leveraged more often.
In addition, with more value-based programs coming together – either within privately-held companies or through the government – could mean more opportunities for home health services to be utilized.
“There was another report released by CMS in November and one of the four pillars that they talked about was servicing patients in the home,” Hu said. “So, certainly, I think we’re going to continue to see more utilization of home health, and it’s going to be a core component of many of these payment models.”