Movements in Home Care, Home Health

• May 10, 2023
• Jennifer Boese

There are trends helping propel care to the home for both medical and non-medical needs. Additionally, the pandemic necessitated care at home, provided many health care flexibilities and the American Rescue Plan Act sent states additional funding through a temporary 10% FMAP increase for certain Medicaid home and community-based services (HCBS). 

At the same time, home health and home care, like all of health care, face countervailing forces. Those include staffing shortages, lower wages, lack of infrastructure, lack of sufficient technology, increasing need to care for higher levels of acuity, and the end of the public health emergency (PHE) flexibilities and funding.

Home health and home care Home health care includes a wide range of health care services that can be given in your home for an illness or injury. It is reimbursable by Medicare and is usually less expensive and more convenient than a hospital or skilled nursing facility (SNF).   Home care may be available through home and community-based supports (HCBS) and covered by state Medicaid programs. HCBS can include medical and supportive services for activities of daily living (such as eating, bathing, and dressing) and instrumental activities of daily living (such as preparing meals, managing medications, and housekeeping) due to aging, chronic illness, or disability. Some Medicare Advantage payers may cover home care or private pay, but it is not covered by traditional Medicare.

As the industry moves forward, what are a few things to keep in mind?

1. Drivers of health care. Demographics, value-based payments, aging in place, technology and more are all driving the demand for care at home, which is also propelling interest. See our broader industry trends article for more insights.
2. Your business model. While these drivers are helping push demand, the flip side will be whether reimbursements are enough in your existing business model or if change is needed. Some drivers of health care — Medicare Advantage or value-based care as examples – may not result in the same levels of reimbursements provided under traditional Medicare or Medicaid. Further, even traditional Medicare may face reduced reimbursements. For home health, we are waiting for the 2024 proposed rule from the Centers for Medicare & Medicaid Services (CMS). The 2023 rule included only part of the behavioral adjustment that CMS says is needed for budget neutrality due to home health’s transition to the patient driven groupings model. Additionally, new payers like Medicare Advantage or value-based care may add on layers of regulatory complexity, such as more paperwork (think prior authorizations) or reporting requirements (think quality metrics). Regardless, long-term there will be plenty of demand for home health and home care services, but the key will be a business model that can still maintain a margin within these new payers or approaches. 
3. Mergers, Acquisitions, Consolidation. It’s important to recognize care at home may be an attractive target for private equity/investors and even payers due to the long-term demand for these services. We’ve watched with interest large mergers, such as Amedisys and Options Care Health, plus large payers purchasing home health companies – think United Health’s purchase of LHC. We’ve also seen plenty of private equity interest in home health (and hospice for that matter). This may lead to some consolidation to drive better value and scale.
4. Regulations. It’s important to recognize the government is also watching this space as well. This includes CMS’ first-time release of ownership data for all Medicare home health (and hospice) agencies. Ownership data has been released for skilled nursing and hospitals with additional proposed reporting requirements for these settings, and CMS indicates it views ownership details as a part of understanding the quality of care in various settings. CMS is also upping its review of quality, access and payments in Medicaid HCBS. In late April, CMS released a proposed rule meant to improve HCBS by setting national standards and requirements. This includes proposed policies requiring states to establish grievance systems and to require at least 80% of HCBS payments for personal care, homemaker and home health aid services be spent on the compensation of direct care workers. The proposed rule would also publish the average hourly rate paid to these workers, among other requirements.
5. Understand your data and value. Amidst all of this, it’s important you understand your operations, financial model and key metrics so you can position your company well. It’s important to understand your organization’s marketing strategy given the makeup of your target geographies’ referral sources from institutional settings (hospitals, SNFs, etc.) to direct physician referrals. Navigating payor change, when to take on Medicare Advantage and Managed Medicaid contracts, knowing what price point you can take on contracts to keep a margin means cost accounting is important. Establishing key performance indicators (KPIs) and the operational team to manage to those is vital, particularly with high trends in turnover and retirement of seasoned nurses/operators with experience and high business acumen. Utilizing an outsourced CFO to work hand-in-hand with your team can be key.

How we can help

If you need help understanding where the market and payers are going with respect to care at home, how your operations stack up to competitors or what a future state may look like for you, reach out today. From outsourced CFOs and accounting assistance to understanding your KPIs and the competitive landscape, we’re here to help. 

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