As the breadth and depth of home health care continues to grow, providers are exposed to an abundance of opportunities. To get a crack at that upside, however, providers will need to overcome and adapt to a litany of challenges.
Those that don’t could contribute to the consolidation that the home health industry is already seeing. Emerging opportunities, challenges and industry shrink were among the many topics addressed during a recent webinar hosted by Netsmart.
“Typically, the big are acquiring other bigs, but we are seeing early signs of some middle-market-size consolidation as well,” National Association for Home Care & Hospice (NAHC) President William A. Dombi said during the webinar.
Yet Dombi pointed out that places like California have seen surges in home health agency growth that run counter to the consolidation trend.
As NAHC’s leader, Dombi has seen decades of home health industry growth and consolidation, along with new tailwinds and headwinds that have emerged. Currently, the largest of those headwinds has been the Medicare payment policies set forth by the U.S. Centers for Medicare & Medicaid Services (CMS), which has sought to adjust how providers are paid under the Patient-Driven Groupings Model (PDGM) over the past couple years.
“Now, having been doing this for over four decades at this point in time, this is probably Generation 5, in terms of market consolidation,” he said. “Overall in that time, people have prematurely sung the song [of] ‘The rest in peace of the small provider of services. I’m not going to jump on that bandwagon, other than just simply to say you’re always watching what’s happening in terms of the marketplace at large.”
The 2024 final home health payment rule included a 0.8% aggregate payment increase and a permanent prospective adjustment of -2.890%, plus dozens of other notable changes to home health care.
Though the final rule was better than the proposed rule, Dombi noted that providers still face a $455 million reduction in their payment rates.
“This is all happening because of the view that the Medicare program has of home health agencies being overpaid, under the new [PDGM] model,” he said.
In this landscape, and with providers facing the barrel of temporary adjustment, there might not be much of a benefit left in the future.
“If all of these happen, we are going to see just a bare skeleton left of the home health benefit,” Dombi said.
With these cuts, NAHC has estimated that 48% of all home health agencies will have overall negative margins in 2024.
“The reason for the negative margins is not simply the Medicare rate itself because the Medicare payment rates still on average bring a pretty healthy margin, but most of that margin is used to subsidize other payers, particularly, Medicare Advantage plans and Medicaid,” Dombi said.
Currently, more than 50% of Medicare enrollees are under Medicare Advantage. This has resulted in a financial loss to the home health agencies.
There are a number of avenues that NAHC is using to counter these rate adjustments.
“The action plan has Congress on our side, both in the Senate and in the House,” Dombi said. “Democrats, as well as Republicans, with legislation that would eliminate the authority to bring these rate adjustments, both permanent and temporary, to bear any further. It requires MedPAC to be a lot more transparent and to expand its analysis, so that it looks at the whole home health agency, not just the silo of Medicare fee-for-service that shows a margin.”
NAHC has also thrown its weight behind a lawsuit against CMS and the U.S. Department of Health and Human Services (HHS).
“We’re in the midst of briefing that case now,” Dombi said. “We have a brief actually that’s due on Friday. Then there’ll be one more round of briefing for the government on this, and the Department of Justice is pulling out all the stops, in terms of defending their action. We’re feeling pretty good about the lawsuit, but we are not putting all our eggs in the basket of the lawsuit. Lawsuits can take wild turns, but they also can take a long time.”