Payers Continue To Take Short-Sighted View Of Home Health Care

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Home health providers want better rates and arrangements from Medicare Advantage (MA) plans. The plans, on the other hand, sometimes still can’t figure out what they want from providers.

Some of the largest home health companies have begun to make headway with MA plans.

“I think the payers are recognizing that this is not a commodity business; there is a real need to partner with high-quality providers in the communities,” Pennant Group Inc. (Nasdaq: PNTG) CEO Brent Guerisoli recently said.


But a simple recognition of the value of home health care is not always sufficient, particularly within regional or nationwide plans.

Enhabit Inc. (NYSE: EHAB), for instance, has spent the last couple of years diversifying its revenue to include more of a MA mix. But, in doing so, it has had to get better rates from MA plans to ensure its bottom line doesn’t sink too far.

The company has been successful at that, agreeing to dozens of new contracts that have allowed it to inch closer to sustainability.


The negotiations haven’t always been easy.

I wrote last year about how some health plans didn’t even have point people specifically assigned to home health care, an obvious thorn in a provider’s side.

Enhabit CEO Barb Jacobsmeyer also explained Wednesday, at the Leerink Partners Healthcare Crossroads Conference, that even if there is a point person, they’re sometimes incentivized only to keep costs down.

“The most resistance is when you find that they’re siloed within their negotiating departments,” Jacobsmeyer said. “If it is the group that handles just home health, frankly, what we’ve learned is that they have a bonus, or incentive, to keep their unit cost in place. If they’re not talking across the hall with those that are focused on emergency room visit cost, acute care utilization costs, that’s where we see the barrier.”

I also wrote last summer about the leg up that home health-friendly MA plans would have in the future.

In order for there to be more “home health-friendly” MA plans, though, plans need to take a more holistic view of health care costs across the continuum.

Right now, that’s not always happening. And that’s the topic of this week’s exclusive, members-only HHCN+ Update.

A short-sighted view

Earlier this month, I spoke with CareCentrix CEO Steve Horowitz about post-acute care, payers and the friction between the stakeholders involved on each side.

He made something clear: Home health costs going up, generally, is a good thing.

“You actually want more home health,” Horowitz told me. “You want your home health costs to go up. You don’t want to overpay for anything, but you want your home health cost to go up, because it’s a cheaper setting than if you were taking care of the patient in the facility.”

Now a part of Walgreens Boots Alliance (Nasdaq: WBA), CareCentrix is a home-based care coordination platform, as well as a value-based care enabler.

If one department is squeezing down home health costs, they may believe they’re doing their jobs. But, on the other end, as Jacobsmeyer pointed out, emergency care and rehospitalization costs may be skyrocketing.

“I can cut home health costs in a heartbeat, or DME costs, or inpatient utilization,” Horowitz continued. “But every time you squeeze it, something else blows up. That’s the hard part, if you think about it only in a silo.”

To be fair to MA plans, the Centers for Medicare & Medicaid Services (CMS) arguably takes the same approach. Models like the Home Health Value-Based Purchasing (HHVBP) Model have saved Medicare billions, only for CMS to turn around and continue to cut home health payment rates.

That’s part of the reason why home health advocates have urged CMS, The Medicare Payment Advisory Commission (MedPAC) and others to take a more holistic view of home health payment. Advocates urge these groups to consider MA payments rates to home health agencies, but also the savings that greater home health access could bring to the entire health care system.

“As the nation faces a debt ceiling of $34 trillion and climbing, it’s no surprise that the federal government is under pressure to find ways to cut program costs and crack down on overspending,” a dozen home health advocate and provider voices wrote last week in an op-ed for HHCN. “What is surprising is that the program they continually target in budget cutbacks has an impressive record of saving the government billions: Medicare-certified home health care.”

That evoked something Michael Johnson – Bayada’s home health and hospice leader – told me last year, which is that all CMS policymakers have “is a hammer,” meaning that cost-cutting in home health care was their one vehicle to make a difference.

In MA, the little leverage that providers do have is the fact that plans need home health services for their patients, and access is dwindling with fee-for-service rate cuts.

Enhabit has drawn a hard line: It won’t take more than a 25% “discount” on rates from plans. That discount is compared to the fee-for-service Medicare rate. Instead of 40% discounts, Enhabit has achieved either episodic contracts or per visit contracts that are generally 10% to 25% below Medicare fee-for-service rates.

The company still prefers the more value-based, episodic arrangements, but those require collaboration between plan and provider.

“It really aligns their incentives with ours,” Jacobsmeyer said. “We want to be paid better, but we also want to help them where their pain points are, and that is having a timely and efficient movement of patients in institutional settings [back into the] home.”

It seems everyone knows – or assumes – that more responsible home health utilization equals lower costs for a population, whether that’s a small sample size or a nationwide one.

CareCentrix, which is in the middle of these arrangements, should be an authoritative voice on the subject.

But there are other experiments currently ongoing that should bear proof of that assumption. And that lies within the large payer organizations that own home health organizations, like Humana Inc. (NYSE: HUM) and UnitedHealth Group (NYSE: UNH).

Specifically, CenterWell President Sanjay Shetty told me earlier this year that one of his goals is to prove home health care’s worth to Humana – and everyone else.

Although some home health providers are queasy at the idea of these large payers owning top providers, they do offer hope in that way.

“It’s an opportunity for us to continue to evolve the thinking around home health, which is giving home health its due for driving outcomes along the entire continuum of care,” Shetty told me. “I think, hopefully, that proof point will help. The other thing that’s important to keep in mind is that CenterWell will never be able to provide 100% of care to all Humana members, even as big as we are. We are absolutely dependent on a broad payer network and a broad provider network.”

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