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The odds are stacked against home health providers.
Even while more care is heading to the home, providers have three fundamental problems. The first is that there is an insufficient workforce to meet demand. The second and third are both rate-related.
The Centers for Medicare & Medicaid Services (CMS) is actively reducing home health reimbursement in Medicare fee for service. Other than advocacy efforts, there’s not much providers can do about that. At the end of the day, CMS – generally – has the final say.
Meanwhile, Medicare Advantage (MA) plans don’t even pay as well as CMS under traditional Medicare. And, unfortunately, there are more Medicare Advantage (MA) beneficiaries today than ever before. Tomorrow, there will be more than there was today.
CMS’ finalized and proposed rate cuts both threaten the industry. But even if it may not feel like it, providers do have some control over the two other factors.
They can get better at recruiting and retaining talent, and they can prove their value to MA plans and demand a better payment set-up.
It’s not easy. But providers are finding ways – because they have to.
In this week’s exclusive, HHCN+ Update, I take stock of home health providers’ recent successes in MA and staffing.
Staffing wins
One of the biggest drags on home health providers’ finances over the last few years has been contracted labor.
In late 2021 and early 2022, for example, contracted labor was costing large home health providers millions. Even if only 4% of a company’s labor was acquired through those means, it was a significant tailwind.
On a second-quarter earnings call Thursday, Enhabit Inc. (NYSE: EHAB) leaders suggested it may be possible to completely eliminate contract labor by the end of the third quarter.
Geoff Abraskin – the president of hospice for Amedisys Inc. (Nasdaq: AMED) – shared similar optimism with me regarding contract labor last month.
“We’re seeing some green shoots from people applying for jobs,” he said. “We actually just had our best two months in terms of fills. We’re seeing contractor costs coming down, so that’s a big positive for us.”
Enhabit, meanwhile, had its best quarter for net nursing hires since it began tracking the metric. In total, it had 203 net new full-time nursing hires in the second quarter.
Addus HomeCare Corporation (Nasdaq: ADUS) averaged 81 new hires per business day in the second quarter, which is contextually a very strong number.
The caveat for Addus is that hiring has been much more seamless in personal care. Still, clinical hiring has also seen “modest” improvements.
“We have seen modest improvements compared to this time in 2022,” Addus CEO Dirk Allison said. “Hiring in our clinical segment continues to improve overall, but there are certain markets that have been more difficult, and that has impacted our growth in those markets.”
Addus chalked part of that success up to its new candidate management system, which has shortened the time between application and hire by as much as 10 days.
Part of Amedisys’ staffing success has also come from a new candidate tracking system, according to its Chief People Officer Adam Holton.
“This year, we put in a new applicant tracking system,” Holton told me in May. “And I think for the first time in my career, I’ve seen the difference between an average applicant tracking system and a world-class one. And – legitimately, with nothing else being different – what that actually can do for you. In an increasingly digital world, you can get to many more candidates.”
While competitive hiring is – to some extent – dependent on rates, there is evidence to suggest that the best home health providers are continuing to find better ways to hire and hold onto talent.
MA negotiations
Avoiding MA’s penetration and emergence is no longer an option for most home health providers.
But there are two issues they’ve run into when trying to engage with the MA plans that will – in part – dictate their futures.
The first is point people. Despite the need for home health care, many health plans don’t have a specific individual that is in charge of the administration of home health services. If they did, at the very least, conversations could be had.
But even if the plan does sit down with home health providers, sometimes they aren’t ready or willing to go at risk with them. While home health providers are sometimes considered the archaic ones, many are finding it’s the plans who aren’t ready to pay based on value.
Enhabit CEO Barb Jacobsmeyer first brought up that conundrum in June. But her company has also agreed to dozens of new contracts with MA plans this year.
Things are slowly changing.
“I think there’s been light years of progress,” Bayada CEO David Baiada told HHCN, referring to discussions with health plans. “Bayada has been one of the largest providers of home-based care to the managed care industry for over 25 years. And in the last five years, we’ve seen a significant acceleration in our engagement and strategic dialogue with the payer community.”
In Pennsylvania, Abraskin noted that Amedisys had completed successful pilots with MA plans. Specifically, in a partnership with Aetna, Amedisys was able to reduce hospitalization rates by 3.5%.
Enhabit, Amedisys and Addus have provided regular updates on their MA battle because they’re public companies.
But smaller companies are making strides, too, even if those strides come while they grit their teeth through frustration. They’re finding out what the plan needs, looking into the right numbers, and, ultimately, building the case that they should be paid more, or at least differently.
“We’ll be able to take data [on] how we reduce the cost of care — especially around emergency room visits and rehospitalizations — and take that to Medicare Advantage payers,” Allison said in May.
Companies featured in this article:
Addus HomeCare Corporation, Amedisys Inc., Bayada Home Health Care, Enhabit Inc.
