In A Tough Operating Environment, Home Health Providers Are Snatching Back Control

Home health providers are in a challenging operating environment, despite their services being more in demand than ever. Their leaders are trying to grapple with those two realities.

They want to be the ones that benefit from higher demand, instead of another outsider like UnitedHealth Group’s (NYSE: UNH) Optum, CVS Health (NYSE: CVS) or any other company that can escape the operating environment while capitalizing off of the care-to-home shift.

“We’re building five different home care delivery entities, and the founding principle of all these – based on lessons I learned in previous tours of duty – is that clinical culture is the most important thing,” SCAN Group CEO Sachin Jain said earlier this month at the Home Care Innovation + Investment Conference in Chicago. “We’re interested in building entities that are going to be around in 100 years, that are mentioned in the same sentence as the Mayo Clinic, Mass General and Cleveland Clinic. [We’re focused on] building those reputations, as opposed to building the next thing that’s going to sell to Optum.”

While the SCAN Group is not a traditional home health provider, Jain’s point of view resonated with home health leaders in the room.

Selling to Optum – or the other entities interested in home-based care capabilities – is a good exit for leaders that have been in the business for a long time. There’s nothing wrong with that strategy in a vacuum.

But there are plenty of providers that believe they can build their own home-based care powerhouses without the help of the larger health care payers and retailers. In doing so, they’ll also be able to control their own destinies.

“I don’t see why we as an organization can’t be our own convener and take our own risk at the back end, and build our own networks,” Elara Caring CEO Scott Powers also said at the conference. “Attack it that way, versus letting somebody else come in. Because, frankly, these conveners are going to be middlemen who want to make money, and they’re going to try to make money on the spread by taking the risk. If they grow, that’s just what’s going to happen.”

Dallas-based Elara Caring offers home health, hospice, behavioral health, palliative care and personal care services. Its footprint includes 200 locations that spans across 17 states.

To Powers’ point, it’s not just the outsiders’ acquisitions that are threatening home health providers’ strategic visions. It’s, of course, the Centers for Medicare & Medicaid Services (CMS), which sets the Medicare fee-for-service payment rates. But it’s also those conveners, which play a large part in setting the payment and spend on behalf of Medicare Advantage (MA) plans.

Even LHC Group – which is now sister companies with a convener underneath Optum – has issue with the current state of affairs between providers and conveners.

“Those conveners are going to continue to try to build that network and take risks associated with it,” Powers continued. “But, as a provider on the other side, I believe if you don’t maintain relationships with your payer sources, of course you’re going to get commoditized. At the end of the day, I think there’ll be some short-term benefits, like a convener saying, ‘Look, we’re going to drive more institutional care into the home, and we’ll see benefits of that.’ But, over time, I don’t think that just simply being one in a pool of many is a relationship we’re going to want with our payers.”

Large home health providers like Elara Caring, the New York-based VNS Health and Enhabit Inc. (NYSE: EHAB) have all been vocal about beginning to refuse patients from certain MA plans.

That’s in line with the overarching theme of home health providers taking back control. They have a service that payers and other health care organizations want, and they can leverage that.

“We have – for the first time – substantial leverage if the goal is to manage total cost of care,” Bruce Greenstein, chief strategy and innovation officer at LHC Group, said at the conference. “The advantage comes when the convener is responsible for all of the post-acute care costs. That’s when we’ll see some recognition.”

LHC Group, while part of Optum, is still one of the largest home health providers in the country – and operates as such. It has a footprint across 39 states.

Also based in Dallas, Enhabit has 253 home health locations and 107 hospice offices in 34 states. As its come into its own – following a spinoff from Encompass Health Corporation (NYSE: EHC) – it has had to prioritize certain payers to gain more respect and better payment from other payers.

To date, the company has made a handful of nationwide deals with both payers and conveners.

“One bad part of that is that there are some member access issues now for those [deprioritized] plans,” Enhabit CEO Barb Jacobsmeyer said at the conference. “But, frankly, we are not going to staff to take care of those access issues, if it’s for substandard rates.”

It’s about gaining more control. While Jacobsmeyer said that many MA plans that Enhabit has spoken with aren’t ready to enter into risk-based agreements, that’s what most of the large-scale home health providers want.

That allows providers to get rewarded for the quality work they are putting in, as opposed to investing in resources – that lead to quality outcomes – only to receive what they consider substandard rates from both the MA plans and CMS.

“Everyone needs access to the home and what it provides,” Powers said. “It’s a very sticky consumer experience with a lot of engagement, and there’s an untapped set of value that’s sitting there in the home.”

Despite staffing struggles and a tough payment environment, access to home-based care remains crucial. And that, ultimately, is to the the home health provider’s advantage.