Back in October, Hospice and Home Care of Juneau closed after 20 years in business.
A month earlier, Trinity Health At Home in Springfield, Illinois, shut its doors and laid off 60 employees.
At the start of the new year, Oahu Home Healthcare announced it was shutting down, leaving just eight at-home care agencies on the most populated island in Hawaii.
More and more, small- to medium-sized providers are shuttering permanently due to staffing constraints and margin pressures. Home health insiders believe that this trend is troubling not just for providers in jeopardy, but for the industry as a whole.
“The industry got a reprieve this year from CMS,” Mike Dordick, the president of McBee Associates, told Home Health Care News. “If that doesn’t happen again, you’re going to start to see not just small agencies close, you’re going to see some of the large players say, ‘There’s no point in serving these rural markets and some of these areas because we’re losing money.’”
McBee Associates is a health care services and consulting firm that works with providers in a wide range of states. In 2019, prior to the pandemic, Dordick told HHCN that he believed there would be about a 30% reduction in the number of providers over the next several years.
Of course, the public health emergency changed projections. It gave providers financial stability and “masked” some of the financial troubles that were inevitable, Dordick said.
In the first quarter of 2019, there were 9,624 home health providers that filed at least one claim with CMS, according to McBee’s data. In the first quarter of 2022, that number was at 8,670, a 10% reduction.
That reduction is partly due to mergers, and partly due to closures.
“There are a lot of providers teetering on the edge right now,” Dordick said. “You’re seeing these one-off scenarios that exist where you get one provider in Hawaii closing and another one in Pennsylvania closing. The concern I have is in certain markets, you’re going to start seeing deserts where there won’t be any certified home health agencies, especially in rural areas.”
Staffing issues
Because of its unique geographical and population circumstances, all of Hawaii’s health care organizations are represented by one association. Hilton Raethel is the president and CEO of the Hawaii Association of Healthcare (HAH).
Raethel oversees about 170 health care organizations, including the dwindling number of home health care agencies.
A few months ago, the leaders of Oahu Home Healthcare had told Raethel and his team they were closing down, mainly due to low reimbursement rates and workforce shortages.
According to its own statewide health care workforce report, the HAH found that home health care had the highest workforce vacancy rate of any health care segment at 39%.
“The overall health care vacancy rate in the state of Hawaii is 17%, which was up from 10% in 2019,” Raethel told HHCN. “When you have an agency that is relatively small, trying to take care of 100 patients or so, managing those shortages is very tough. The workforce environment creates a very big challenge to continue.”
The case in Oahu is an example of a larger issue at hand, Dordick said.
Pre-pandemic, home health providers were fighting for referrals. Today, more patients than ever before are not being seen or taken care of because of staffing shortages.
“There just aren’t enough caregivers for these patients,” Dordick said. “There’s more need with an aging population, and that staffing shortage is causing it to be worse. The wage increases may force profitability issues and closures. From my perspective, it hasn’t really hit yet, but that’s not helping anything.”
Reimbursement challenges
Reimbursement challenges, brought on by value-based payment models, delays in payments and CMS’ rate cuts are also causing closures.
For larger companies like Amedisys Inc. (Nasdaq: AMED) and LHC Group (Nasdaq: LHCG), the uncertain reimbursement environment isn’t as much of a headwind because of their scale.
However, that might not always be the case, according to Dordick.
“When you think about Amedisys, LHC Group, Bayada, Enhabit, you haven’t seen these big groups do it yet, but eventually they’re going to have to sit down and look at their margins,” Dordick said. “If CMS does this again [and proposes another payment cut], you may see some of the large providers close locations. That’s when these closures start to become a real issue.”
In Hawaii, Blue Cross Blue Shield covers about 50% of the population, Raethel said. The second largest insurer is Kaiser. When Blue Cross shifted to more value-based models, it took resources, time and money for small providers to make that transition.
“When you have transitions in payment, people have to reconfigure systems and write polices. It ended up being a bigger effort than [Oahu Home healthcare] anticipated,” Raethel said. “That change in payment methodology and the delays in payment — along with the workforce — pushed them to a point where they said, ‘Look, we’re just going to focus on our other two segments of the business and wind down our home health.”
Most employees have already found jobs elsewhere in the Hawaii health care system, and the patients will be taken care of by one of the other eight agencies.
But transitions of care and closures are rarely that seamless.
Dordick said a key for smaller agencies is to understand their cost structure and to take a close look at what their core mission is.
“You see a lot of these agencies also sell themselves instead of closing,” he said. “Each organization has to look at what their core mission is and determine if certain business lines can be managed elsewhere or in a different way.”
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