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As Medicare Advantage (MA) penetration continues, home health providers are leaning on regional MA contracts to shore up their bottom lines.
These types of contracts are proving beneficial to mid-sized providers, as well as some of the largest providers in the country.
“For us, getting it right at a local level is success in Medicare Advantage,” Frontpoint Health CEO Brent Korte told Home Health Care News. “Hypothetically, when we acquire a company in Kansas, we will likely have an approach that is very regional to wherever we will be working in Kansas versus what we’d do, say, in North Texas.”
The Dallas-based Frontpoint Health is a home health and hospice provider comprised of three locations. Its leaders have specifically tailored the company’s strategy to be successful taking on mostly MA business.
Even though MA historically pays far less for home health services than traditional Medicare does, the former’s penetration is stark enough that providers are adapting their business models.
In doing so, they’re trying to find the right payer partners to work with.
“We are having quicker success with these regional MA plans,” Enhabit CEO Barb Jacobsmeyer said last month. “We’re at the table with all the national plans, but it just moves very slowly. That’s why we’ve really put a focus on these regional contracts because they do understand that value proposition, they can make those decisions quicker, and they can really then track the impact that we make with those patients.”
Enhabit Inc. (NYSE: EHAB), also based in Dallas, has 252 home health locations and 105 hospice locations across 24 states. It spun off from Encompass Health Corporation (NYSE: EHC) in July 2022.
Korte isn’t surprised to hear that large providers such as Enhabit are having success at the regional level. He believes that it comes down to an elemental idea in health care that is often overlooked.
“What is fundamental about health care, that I feel like is so often missed in legislation, is that it’s all local,” Korte said. “It’s all community-based. Someone in southern Wisconsin, someone in Washington and someone in West Virginia, they may all have UnitedHealthcare, but the rules that dictate UnitedHealthcare in their state and in their region are all very different. That has to do with the way insurance law works — and more importantly — the market differences, because consumers still drive the health care market.”
Different markets – and the patients within them – require different home health strategies.
“For any large provider, if you have a centralized insurance function, you’ve really got to get that right,” Korte said. “As a veteran of post-acute care on the West Coast and in the Pacific Northwest, the way insurance is approached in the Seattle market is probably the exact opposite of the way it’s approached in North Texas.”
Additionally, providers can offer more value to regional plans, as they can take on a larger percentage of patients. Almost all home health providers would struggle to make a meaningful impact on a national plan’s beneficiary population.
For now, providers like Enhabit are using their “payer innovation” teams to nail down good payer partnerships in specific regions.
By doing that, it will put Enhabit in the position – in the long run – to turn away MA beneficiaries from plans that are not paying a satisfactory rate for services.
“We’d love today to just stop taking the payers that pay those large [fee-for-service] discounts,” Jacobsmeyer said. “Unfortunately, today, we know that we have to go to our referral sources and we have to be able to accept more than just traditional Medicare to be seen as a good provider for them. Today, we’re having to take those. But in these regions where we’re able to get regional contracts, if that increases the list that we can take to those referral sources — region by region — we’ll be able to start turning away some of those payers that are not paying us fairly at this point.”
The providers that will be successful contracting with MA plans will be solving key issues for those plans. That’s why, instead of just arguing for higher rates, forward-thinking agencies are laying out their value propositions to plans, telling them what problems they can solve from the outset.
“It gets back to the HRO philosophy: the High Reliability philosophy,” Korte said. “You have to answer a complex question with a complex solution. It’s never just, ‘We’re going to do this across the board.’ Providers will fail if they attempt to do that.”
For Enhabit, that has meant putting an emphasis on increasing the number of its clinical transition coordinators (CTCs) who — among other duties — collect information from referral sources. That information is then put to use in regional negotiations.
“There are two options,” Korte said. “One, you have your insurance case management team at a local level. Two, you centralize it with absolute focus on those complexities. If providers don’t approach it that way I think they’re in trouble. They need to understand those local markets.”
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