Traditions Health is a burgeoning home health provider.
The company’s footprint is expanding, and all the while, it is figuring out how to best deal with payer diversification, technological innovation and mitigating the effects of Medicare fee-for-service payment rate cuts.
Its CEO, David Klementz, had a one-liner that resonated with the crowd at Home Health Care News’ Capital + Strategy event recently.
“We are payer agnostic, but we’re payer selective,” he said.
Payer agnosticism is a relatively new strategy for home health companies, but one that’s becoming more popular. The same goes for being payer “selective,” a strategy that will allow home health providers to make the most out of their relationships with managed care organizations.
Klementz was formerly an executive at Encompass Health (NYSE: EHC). He joined Traditions as CEO nearly two years ago.
The company recently moved its headquarters from College Station, Texas, to Nashville, Tennessee. Backed by Dorilton Capital Advisors, it offers home health, hospice and palliative care to more than 25,000 patients annually. It has more than 130 locations – across 18 states – and 3,1000 care professionals in its network.
As for its future, that will include home health, hospice and palliative care co-locating, strategic investments and those selective payer partnerships.
HHCN sat down with Klementz at Capital + Strategy to talk about those goals. And, to glean more perspective from an at-scale home health provider attempting to become a power player amid industry-wide turbulence.
That conversation is below, edited for length and clarity.
HHCN: A lot of home health discussion has taken place today. What have you found interesting?
Klementz: I think the approach to getting a handle on different, higher-acuity levels of services is something I’ve noted. It’s something we need to contemplate at the right time.
We’re not ready just yet. But I think there’s something there, and we’ll be looking into that when we’re in a better position to do so.
But you do have scale. It feels really important to be a provider of scale right now – to deal with the brunt of Medicare fee-for-service rate cuts and to strike the right deals with MA plans.
Right, because you have to manage the cost to care, and the cost for care.
You can’t control as much the cost for care. But if you have scale, you can optimize the cost to care. It’s a challenge in this space, because most of the providers aren’t used to operating that way.
And you’ve heard me talk about us being a home health system, and operating like an acute care system, and being professionalized like an acute care system. It’s my belief that if you have a home health system that has that sophistication, competency and discipline, that you’ll be an outlier in the space.
On that note, we’re also becoming Joint Commission certified. We’re going through that for the whole company, which is, I think, unique in this space. I think those sorts of things are important for commitment to quality, but also the professionalization of the space.
What are some of the other differentiators for Traditions?
Joint Commission certification, for one.
I think our quality outcomes are good. When I first got to Traditions, our hospice side of the business was at about 75% of the national average for quality. Less than a year later, we were up to the 100th percentile. I was hesitant to go out to managed care and joint venture partners until we got quality fixed.
The first six months to a year was about getting quality right. It didn’t mean we were giving bad care, it was things like documentation that needed to be amended. A lot of things, right? So we got through that. Now you see us more aggressively in de novos and in managed care.
The last thing we wanted to do is go out to managed care without that, or approach a joint venture opportunity, and the first thing they look at is quality. And that’s now a differentiator for us. That comes first. And I think for acute system joint venture partners, managed care programs, I think when you show that level of commitment, and then you get the result – that’s going to be a key differentiator.
Are the analytics you have access to also helping out in those conversations with stakeholders, whether it be payers or health systems?
Yes, and there’s two aspects to it. On the home health side, it’s about how you load up the visits for patients that are high risk so you reduce readmissions, so you get the right functional improvements. And also, how do you look at when someone in home health may be appropriate to transition to a different setting?
On the hospice side, we have analytics that look at a patient’s data and when they’re declining. And the reason for that is to ensure we’re there more often on those last seven days of life. And that’s really about quality of care. That’s when you want to be there.
So, we do ingest a lot of data to drive our clinical outcomes.
From a personal perspective, is it nice being an independent provider now, as opposed to being attached to a health system?
I like what I do. It’s different. And it was hard for me to leave the hospital space. It’s a different culture. It’s very data driven, very structured. So for me, the biggest adjustment was how do I bring that to this space, which is very compassionate by nature. So, how do you blend those two cultures in an effective organization?
But I’ve enjoyed it. I go out to the field, to a branch, one week every month to try to stay connected to our clinicians. I think that’s important. As we get scale in this space, it’s still about local markets. You still need to tie the clinicians in, show support for the clinicians, to be able to aggregate their support for the organization. So you have to spend a lot more time doing that than you may in a hospital where it’s a fixed facility.
Is co-location of home health and hospice the biggest goal moving forward?
Yeah, in terms of growth elsewhere, it’s about if it’s a geographic area that we’re not in and it’s a quality asset we’d like to acquire. We don’t want to do another fixer-upper.
Then it’s augmenting the continuum in a market. Layering on palliative care, for instance, on top of home health and hospice.
What is the next step, what do you want to ultimately accomplish at Traditions in the near term?
Well, we intentionally paused acquisitions last year. Partly because the foundation of the organization, which is not where I wanted it to be. We could not keep piling on other cultures, with other missions, without addressing that.
So we paused that, and integrated the last one about August of last year. So we’re going through a period of getting our system stabilized, getting optimization right, getting our contracts in place, the supply chain, things like that. All of those things to get the solid foundation.
We still have a pipeline of deals, but we’re a lot more selective – someone that’s got a good compliance program, that has appropriate patients, that has a reasonable set of skills, stuff like that.
And you’re finding there’s less of those assets out there today?
Yes, but more so on the hospice side, I guess. It’s a very fragmented space. It’s a bit of a challenge. We’re one of the only mid-sized providers out there. You got the real big ones, and then a lot of mom-and-pops. We’re somewhere in the middle.
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