Kalon Mitchell sold his company to the post-acute technology organization WellSky in 2018. He then worked for WellSky for five more years, learning the ins and outs of the home health industry in the meantime.

After leaving WellSky, and with some more time on his hands, Mitchell decided to start “Project Sword”, which leverages cost reporting data to analyze the financial position of home health providers at large.

The data shows not an industry enjoying close to 20% margins, but instead one that is in a deeply precarious position moving forward.

The Centers for Medicare & Medicaid Services (CMS) has proposed cuts to home health payments three years in a row. Though its last two final payment rules have not been as harsh as its proposals, they have still come with permanent cuts to payments.

Providers have multiple gripes with these cuts. The first is over the payment methodology that CMS applies, which most providers and advocates strongly disagree with. The second is the rising costs that home health agencies have recently faced. While CMS is cutting home health payment in traditional Medicare, the cost of providing services has skyrocketed – namely due to the cost of labor.

But the final gripe is the one that has turned into a “generational battle” for providers, and that is MA penetration and payment.

Over 50% of Medicare beneficiaries are now under an MA plan, and those plans generally pay far less for home health care than traditional Medicare.

Providers have regularly told Home Health Care News that MA payment for home health services doesn’t cover the cost of delivering care. But providers tend to be mission driven, and also have referral relationships to uphold. Therefore, they continue to take on MA patients, which sinks their overall margins.

Essentially, traditional Medicare subsidizes MA plans in home health care. It’s true that if providers only took traditional Medicare, they would likely enjoy healthy margins. On the other end, though, if they only took MA, they’d likely have inoperable businesses.

While providers have shared these MA payment horror stories anecdotally, it’s been hard to get a good overall picture of what the average home health provider’s margin looks like of late – as both MA penetration and traditional Medicare rate cuts continue unabated.

The whole picture

Whereas traditional Medicare subsidizes MA in home health care, the opposite dynamic exists for hospitals.

MedPAC has repeatedly said that it can only consider Medicare payments when analyzing the home health industry.

“The Commission’s review indicates that FFS Medicare’s payments for home health care are substantially in excess of costs,” MedPAC wrote in its March report. “Home health care can be a high-value benefit when it is appropriately and efficiently delivered, but these excess payments diminish that value.”

At the same time, MedPAC includes all-payer data for hospitals in its reports. For instance, it acknowledged that aggregate hospital margins on traditional Medicare had fallen to -11.6% in 2022, while aggregate “all-payer” margins were at about 2.6%.

But in home health care, the other side of the payment picture is not acknowledged.

“In the MedPAC report, they say one of the supposed foundations of what they’re supposed to do is look at all-payer margins,” Mitchell told HHCN. “And in the chapter on home health, there is no mention of all-payer margins.”

What Mitchell found while working on Project Sword was that MA payments were erasing the healthy margins that could potentially come with a revenue mix dominated by traditional Medicare.

Project Sword and MedPAC’s analyses spit out similar data for Medicare margins, lending credence to Mitchell’s all-payer margin calculations.

When it came to the all-payer outlook, Mitchell found that home health margins sunk below the break-even point.

While 59% of home health agency revenue still comes from traditional Medicare, those beneficiaries now account for only 45% patient censuses.

Cost reporting generally lags, which is why much of the data Mitchell used is from 2022.

But since that point, it’s likely that the situation has exacerbated. MA penetration has continued, while CMS has gone through with another payment cut in traditional Medicare.

“We can see a deteriorating industry, and yet the narrative from CMS and MedPAC is that there’s no better industry to be in than home health care,” Mitchell said. “They have the highest profit margins, and that’s what Congress sees when they look at their report. That’s what they hear when they talk to CMS and MedPAC. But when they talk to agencies and advocates, they hear the opposite.”

Mitchell has been cleaning and trimming the data as much as possible to ensure that his project can turn into a meaningful tool for the industry.

Providers have also told him – and HHCN – that the numbers are on par with what they’re seeing internally.

“We want to take care of everybody, but the reality is that the payments we get from fee-for-service Medicare Advantage don’t typically cover our costs,” Michael Johnson, the chief researcher of home care innovation at Bayada Home Health Care, recently told HHCN. “So, we’ve got to make sure we have the right and best mix. That isn’t any different [than in years past], but we have to take even more clarity and focus on that approach now.”

Bayada has been around for nearly 50 years. It also has hundreds of locations, both in the U.S. and abroad.

While the current payment dynamics are tough, the company has the means to survive. It has the means to find a better payer mix, to become more efficient operationally.

Bayada and other larger home health providers also have a chance to get a better deal with MA plans. That could mean a better per-visit rate or some sort of value-based arrangement.

For smaller providers, that’s not the case.

“We have been very selective on what payers that we work with because of this,” LTM Group CEO David Kerns told Home Health Care News. “But I think especially smaller agencies, they may not have a payer innovation team, for instance. We’re not a huge agency, but we do have some scale. For smaller agencies, it’s hard to get payers to even credential your contract, let alone negotiate a value-based arrangement with you.”

As a result, fewer home health providers exist today than five years ago.

In total, there were 11,353 active home health agencies in 2022, 11,474 in 2021, 11,565 in 2020, and 11,569 in 2019, according to the Research Institute for Home Care (RIHC).

Last month, one of the oldest home-based care providers in the country – VNA Of Greater Philadelphia – closed its doors amid “unsustainable financial losses.”

A home health leader recently told Home Health Care News that one of its MA contracts hadn’t been updated for a decade. When it approached the payer about a rate adjustment, the plan offered a $3 increase.

The Preserving Access to Home Health Act of 2023 included a provision that would have forced MedPAC to consider all-payer margins in home health care, but that did not make it through.

So, with MA reimbursement that sometimes only covers a portion of the cost of care, and CMS reducing traditional Medicare rates, providers are left to their own devices to survive.

A closer look at the data

Mitchell is aware that there are errors in the data used for Project Sword. But those errors aren’t necessarily ones that would change the overall story that the data is telling.

“There are errors in the data. And I don’t know how many people, as I’ve worked on this project, have said, ‘You can’t use that data. It’s full of errors,’” Mitchell said. “My reply to that is, MedPAC and CMS are using it, and they’re providing a very limited perspective on what they’re doing.”

Mitchell has also shown his work as much as possible, and has included spreadsheets and his methodologies on his website.

But another area where there are definitely errors are the cost reports themselves. And that, too, could be hurting home health providers.

“I’ve never heard of a single agency that is making sure that every single one of their expenses is on these cost reports,” Kerns said. “They don’t have every little thing on there that should be on there. You need to recognize a lot of those expenses, and really work closely with whoever is doing your cost reports to make sure those are accurate.”

If anything, that would mean that margins are worse off than they’re portrayed in the reports.

“This has been haunting us for years,” Robert Markette, an attorney with the law firm Hall, Render, Killian, Heath & Lyman, previously told HHCN. “The numbers are all over the place. The baseline problem is that we don’t report it accurately because we don’t take cost reporting seriously. We give CMS the ammunition they need to make their argument that we’re being paid too much. When in fact, I think we’re severely underpaid.”

As for Mitchell, he plans to get the data in front of as many stakeholders as possible in the near-term future.

The final payment rule is generally released in late October or early November, but CMS also plans to continue cutting payments in the coming years.

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That’s according to the Medicare Payment Advisory Commission (MedPAC), which issued its March 2024 report to Congress on Friday. In addition to including information on home health employment levels, MedPAC’s report once again urged Congress to slash fee-for-service (FFS) Medicare home health payments.

MedPAC has repeatedly argued that home health agency (HHA) margins are too high and that providers have generally been overpaid.

“The Commission’s review indicates that FFS Medicare’s payments for home health care are substantially in excess of costs,” the March report states. “Home health care can be a high-value benefit when it is appropriately and efficiently delivered, but these excess payments diminish that value.”

Employment outlook

Home health agencies across the U.S. have struggled with staffing shortages across multiple roles.

The growing demand for in-home care services has partly contributed to the problem. Many reports have also highlighted how home health workers have left their posts for other professions – or retired from the health care workforce altogether.

Yet according to Department of Commerce data on the broader medical home care sector, total employment numbers were about 5% higher in July 2023 than compared to before the pandemic. It’s important to note, however, that the medical home care sector also includes hospice, private-duty nursing, pediatric home care agencies and more.

“While these data measure employment for a broader category of home care services than Medicare HHAs, the latter comprise a significant share of this sector,” MedPAC wrote in its report.

MedPAC notes that reports on home health staffing shortages may only “reflect local labor market conditions” or “other factors not observed in national labor force measures.”

MedPAC’s payment recommendation

When it comes to cutting home health payment, MedPAC is urging Congress to slash 2025 Medicare base payment rates by 7%.

This recommendation comes despite MedPAC recognizing how the cost of delivering home health services has increased.

“In 2022, there was an increase of 4% in the cost per 30-day period for freestanding HHAs, a reversal of the trend for 2021, when we observed cost per period decline by 2.9%,” MedPAC wrote in its report.

Broadly, MedPAC believes home health agencies can withstand payment cuts because their margins remain high. Home health industry stakeholders have often disputed that claim, describing it as a faulty and flawed calculation.

There has even been legislation introduced to change the way MedPAC looks at home health margins.

In addition to cuts and the industry’s employment outlook, MedPAC highlighted how home health utilization is declining. 

In 2022, the volume of 30-day home health periods in FFS Medicare declined by 7.5%, according to MedPAC.

That decline is likely tied to greater enrollment among beneficiaries in the Medicare Advantage program. It’s also likely linked to utilization of skilled nursing facilities (SNFs) returning to pre-pandemic levels.

“Before the pandemic, SNFs were the most frequent first post-acute care (PAC) destination among beneficiaries receiving formal PAC, with home health care services being the second most frequent PAC destination,” the report reads. “In 2020, the two services switched ranks in their share of use after an inpatient hospital stay. Home health care services became the most frequent first PAC service; the share receiving SNF services dropped to the second most frequent first PAC service. However, since 2020, the gap in shares between the two services has decreased.”

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The recommendation is another chapter in the contentious relationship between the commission and the home health industry. It also recommended that Congress eliminate any payment updates for hospice providers in 2025.

MedPAC — established by the Balanced Budget Act of 1997 — regularly informs Congress on Medicare spending and policy.

Repeatedly, its recommendations have come down hard on the home health industry.

According to MedPAC, there were about 11,300 home health agencies in 2022 that served about 2.8 million fee-for-service Medicare beneficiaries. In total, MedPAC estimates Medicare spent $16.1 billion on home health services in 2022.

MedPAC’s main reason for the 7% reduction is because it believes margins in home health are too strong.

Specifically, MedPAC cited home health margins at 22.2% on average — higher than the long-term average of 16.8% since 2001.

Evan Christman, a senior analyst at MedPAC, reported during a public hearing this month that the rise in margin is indicative that Medicare fee-for-service is paying significantly more than the cost.

One factor contributing to these supposed margins is a significant drop in the number of visits per 30-day period. Since the introduction of the Patient-Driven Groupings Model (PDGM) in 2020, these visits have decreased by over 15%, according to MedPAC.

That reduction includes a 3.5% drop between 2021 and 2022.

“Several factors may account for this decline, but an important one may be that the decline and the share of fee-for-service beneficiaries receiving inpatient hospital services — which are common precursors to home health — have declined on a per capita basis by 5.6% since 2020,” Christman said.

Home health providers, as usual, took exception to MedPAC’s calculations and their overall philosophy after the recommendation.

“MedPAC continues to contemplate only traditional Medicare rates and margin,” Choice Health at Home CEO David Jackson told Home Health Care News in an email. “That is a considerable disservice to the over 11,000 Medicare licensed and certified agencies across the nation that are providing care to beneficiaries under both Medicare and Medicare Advantage programs. While I understand the historic stance that Medicare should not supplement cost of care for non-Medicare patients, that premise seems inapplicable given the purpose of Medicare Advantage programs to provide services to the Medicare-eligible population in lieu of Medicare.”

If MedPAC continues to use its current approach to calculating margins in home health care, Congressional members and their staff “will continue to see a partial and distorted picture of reality,” VitalCaring President Luke James also told HHCN in an email.

“MedPAC needs to be instructed to include all Medicare reimbursements and related costs rather than just part A,” James said. “Part C — or Medicare Advantage — now represents more than half of the Medicare beneficiaries in our country. Home health providers didn’t ask for this reality nor did they cause it. But the industry is reeling from the numerous negative implications this reality has caused.”

Association leaders from the Partnership for Quality Home Healthcare (PQHH) and the National Association for Home Care & Hospice (NAHC) called MedPAC’s approach “flawed” and its conclusions “misleading.”

“Policymakers need a holistic, complete analysis that accurately illustrates the state of home health delivery across patients and payers,” PQHH CEO Joanne Cunningham said in a statement. “In particular, policymakers need to seek deeper analysis from MedPAC and other government policy entities about the access challenges happening right now that are compromising this important delivery system.”

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A new study found that caregiver burden is mild to moderate in both the home and acute care facility settings.

The study results, according to its authors, suggest that hospital-at-home programs are a viable alternative for acutely ill patients.

Hospital-at-home programs have already been shown to decrease costs and readmissions while maintaining or improving quality and safety. The Centers for Medicare & Medicaid Services’ (CMS) Acute Hospital Care at Home waiver has allowed over 290 hospitals in the U.S. to engage in these programs, while others have done it outside the waiver.

As utilization increases, researchers at Harvard Medical School wanted to take a closer look at the potential burden being put on paid and unpaid caregivers as the care shifts into the home.

“Concern for increased caregiver burden was cited as a reason for declining participation in home hospitals among 6% of eligible patients,” the authors wrote. “We demonstrate caregiver burden is mild to moderate upon admission and discharge in both home and traditional hospitalization.”

The study included nearly 100 patients who were split up between hospital-at-home and a controlled group that stayed in the hospital. Home patients received twice-daily nurse visits, once-daily physician visits, in-home diagnostics, continuous monitoring, intravenous medications and other hospital-level care.

Home health aides were also used for 12-hour shifts to assist with caregiving.

After the trial period, caregivers completed the Zarit Burden Interview-12 (ZBI-12), which uses a number system to determine workload and burden levels.

“Our study is reassuring against large differences in caregiver burden caused by [hospital at home], suggesting these programs are a viable alternative for acutely ill patients with caregivers insofar as it is unlikely to cause undue burden on caregivers,” the authors wrote. “There was no significant difference in burden between the groups on admission, discharge or burden change.”

The study’s findings come a few weeks after a Medicare Payment Advisory Commission September meeting where the group expressed support for hospital-at-home programs.

Since CMS established the waiver program, it has shown significant results, particularly as it pertains to readmissions and discharges.

Most hospitals in the program had no discharges under the program. When discharges did happen, according to CMS, they were concentrated among a minority of active hospitals.

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Four new executives recently joined Honor’s leadership team.

The new additions to the team include: Linn Free, who was named senior vice president of operations; Stefan Haney, who was named senior vice president of growth technology; Mark Privett, who was named vice president of design; and Tejas Saraiya, who was named vice president of platform sales.

Founded in 2014, Honor is a home care technology company. It owns Home Instead, one of the largest home care franchises in the country.

“We’re thrilled to welcome Linn, Stefan, Mark and Tejas to our executive leadership team,” Honor President Ian Clarkson said in a press statement. “Each are experts in their fields and will strengthen our company to achieve our mission of revolutionizing how society cares for older adults, their families, and care professionals. As we refine our tech solutions and increase their adoption across our Home Instead franchise network, their leadership will be key in enhancing the user experience for our clients, care professionals, and home care network.”

Free will specifically serve as senior vice president of operations for the Home Instead network. He will be responsible for network performance, and will lead franchise development teams. Before joining Honor, Free was the global director of operations for KFC Global.

Haney will be in charge of developing systems for network growth and performance. Most recently, Haney served as the marketplace growth strategy advisor at Vantage International.

As part of his new role, Privett’s focus will be revamping the company’s digital experiences. Privett previously served as vice president of user experience and design at Nerdy.

Saraiya will head up the company’s sales efforts in support of Honor Care platform growth. He serves as the board vice president at Abode Services.

MedPAC’s new executive director

Paul Masi is the Medicare Payment Advisory Commission’s (MedPAC) new executive director.

MedPAC — established by the Balanced Budget Act of 1997 — informs Congress on Medicare spending and policy.

“Leading the staff at MedPAC is a great honor, and I want to thank Mike Chernew and Amol Navathe, MedPAC’s chair and vice chair, for this opportunity. I also want to thank Jim Mathews for his long service to MedPAC,” Masi said in a statement.

Masi succeeds Mathews, who has served in the executive director role at MedPAC since 2017.

“Leading the commission through these last several years has required Jim to navigate unprecedented challenges,” Masi said. “During that time, the commission continued to be an outstanding source of analysis and advice, and it thrived in fulfilling its mission.”

Masi recently managed the Medicare cost estimates unit at the Congressional Budget Office. From 2017 through 2019, he served as the assistant director at MedPAC.

CVS Health names new health care division leader

CVS Health (NYSE: CVS) has appointed Shawn Guertin president of its health services division.

“The health services strategy is really about accomplishing two objectives,” Guertin said last week during Morgan Stanley’s 21st Global Healthcare Conference. “One is to create more accretive earnings growth from year to year. But also, over time, to fundamentally change the growth rates inherent in this company as we build a new business that has more attractive long-term growth characteristics than the enterprise. That’s the big challenge, financially.”

Guertin also serves as the company’s CFO.

“We always were going to have to have someone lead our health services division,” CVS Health CEO Karen Lynch also said. “I’m very excited that Shawn will be taking over the leadership role, which means Oak Street and Signify will report to Shawn, and he will be responsible for unlocking the long-term value, the revenue and earnings power of those businesses.”

In March, CVS Health acquired Signify Health for $8 billion. At the start of the year, CVS Health purchased Oak Street Health for $10.6 billion.

Advocate Health appoints senior vice president of continuing health

Advocate Health has named Denise Keefe senior vice president of continuing health.

Advocate Health is the third-largest nonprofit, integrated health system in the U.S. The health system was created from the combination of Advocate Aurora Health and Atrium Health.

Keefe has been at the company for 30 years. Most recently, she served as executive vice president of Advocate Aurora Health and president of the Advocate Aurora continuing health division.

HCR Home Care branch names director of patient services

Vincent Tata was appointed director of patient services for HCR Home Care’s Finger Lakes location.

In his new position, Tata will be responsible for overseeing the day-to-day clinical operations and all patient care for the agency. He recently served as senior manager of clinical operations at UR Medicine Home Care.

Founded in 1978, HCR Home Care is a provider of home health services across New York state. The company’s service lines include nursing, physical therapy, speech therapy and occupational therapy, speech therapy and more.

HHAeXchange announces new chief technology officer

HHAeXchange has named Tim Brewer as the company’s chief technology officer.

“As we look to our next phase of growth, I’m honored to welcome Tim to the team, and work with him to enhance our suite of solutions and services to connect and support the entire homecare ecosystem,” HHAeXchange CEO Paul Joiner said in a press release. “Ensuring that our technology is meeting the needs of today’s home care providers and payers is our top priority at HHAeXchange, and with Tim’s expertise, we will collectively see to it that our customers have access to the best software possible.”

HHAeXchange is a New York City-based home care technology platform and an aggregator of EVV data for payers and providers.

Brewer brings more than 30 years of experience to the role. He recently served as principal at Unleash Innovations.

“I’m excited to join HHAeXchange at such a pivotal moment for the company, where we are continually improving and innovating our trusted solutions to ensure that we are developing the best tools and technology that meet the unique needs of all homecare stakeholders today and for the future,” Brewer said in a statement. “I’m looking forward to working with the team and building a better home care ecosystem through technology advancements.”

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Last month, the U.S. Department of Health and Human Services (HHS) announced that — for the first time ever — it was releasing ownership data for all Medicare-certified home health and hospice agencies.

This move makes it possible for anyone to review information on the ownership of agencies participating in the Medicare program. This includes over 11,000 home health agencies, according to HHS.

The release of this data is an attempt to increase transparency for consumers looking to make decisions about their care needs. It also aids researchers and enforcement agencies in their efforts.

Home health stakeholders are thinking about the ways this may impact their businesses.

While many believe that it’s too early to tell, some believe that the data will play a role in M&A. Others reject the idea that the data will become a shopping guide for consumers looking for care services.

Home Health Care News heard from six home health stakeholders — including providers, dealmaking experts and policy experts — who weighed in on what this ownership data means for the industry at large.

***

So far, it’s not clear what impact, if any, the recently announced HHS policy relating to ownership of home health agencies will have on the industry, given the large amounts of information already available through various other sources.

Anecdotally, this may just become another data point in the overall information mix. However, as the volume of mandated ownership information begins to accumulate and is analyzed, it may provide some additional insights into consolidation patterns and deal appetite in certain markets, and also serve to validate rumors or other ‘soft’ information circulating in the marketplace regarding ownership. It will also be interesting to see if the availability of this information, in the coming months, helps make acquisition activity somewhat more efficient or impacts overall transaction volume, particularly in the lower mid-market where deal flow does not get the same kind of coverage and visibility as more high-profile transactions. It will be useful to circle back on this in 9-12 months to see if, and to what extent, this data is being used in practice.

— Les Levinson, co-chair of the transactional health care practice at Robinson & Cole LLP

***

Increasing ownership transparency of Medicare-certified home health agencies is an important goal. We need to be able to identify who owns home health agencies and ultimately how they are spending public dollars. Thus, these new data are a step in the right direction. Yet, given recent gaps in similar CMS nursing home ownership data, I worry about the completeness, accuracy, and usability of these planned home health ownership data.

Will these data provide regulators, researchers and patients with a more complete picture of ownership? Will patients use these data to drive business towards higher-performing owners? I hope so, but I do not think this will happen overnight. CMS will likely have lots of work to do over the coming years to ensure these data have their intended effect on promoting increased transparency.

— David Grabowski, member of the Medicare Payment Advisory Commission, and a professor of health care policy at Harvard Medical School

***

The transparency and accessibility of HHA ownership data for our company, in particular, may have a greater meaning in the future than I presume that it will have initially. The complexity of our industry doesn’t easily enable or foster the success of sole proprietors.

Since LLCs and corporations are artificial bodies, by design and nature, linking home health agency ownership identities to individuals and groups makes entities more relatable and perhaps even more approachable. It will be surprising for some to see how many PE firms own home health organizations. The challenge for smaller organizations like ours is that the general expectations for value, quality, and employee perks don’t change based on size, revenue, or margins. So this personalizes your offerings and performance to an extent and either places blame or credit for outcomes either fairly or unfairly.

As for patients and families, I don’t perceive that the accessibility of ownership information will serve as a shopper’s guide. Lastly, for the industry as a whole, consolidators and M&A brokers will have a much clearer path to solicit, approach, and attract business owners to a bargaining table or position.

— Cleamon Moorer Jr., president and CEO at American Advantage Home Care

***

The release of ownership data for all Medicare-certified home health agencies provides the public with greater transparency into the ownership structure. This may be useful for patients and families seeking home health services, as well as for others interested in understanding the overall ownership makeup of the industry. For Jet Health, it allows stakeholders to understand each of our agencies are high-quality providers in the markets we serve, and we are a long-standing, well-established presence.

This information could potentially lead to increased oversight and scrutiny of home health agency ownership structures and financial practices, which might create a higher level of compliance. It could also lead to more competition among agencies, as potential investors may have greater insight into the market. Overall, I believe publishing ownership data for agencies is a positive step toward increased visibility and accountability in the industry. It may also have implications for the broader health care industry, leading to more informed decision-making by patients, providers and policymakers alike.

— Stacie Bratcher, CEO of Jet Health

Editor’s Note: On Tuesday, May 23, Jet Health announced that Larry Nabb would succeed Bratcher as CEO of Jet Health, effective immediately. Bratcher had been in the role since March 2020.

***

Selecting a health care provider is an important decision for all patients. Home health and hospice patients deserve the same level of transparency as patients seeking primary care, urgent care, and other health-related services.

As a home health and hospice provider, VitalCaring is constantly looking for opportunities to improve yesterday’s outcomes, and we welcome a level of transparency that allows patients, their families, and their trusted healthcare partners to make an informed decision when it comes to their healthcare. Medicare star ratings for clinical quality and patient satisfaction are good examples of where systems and processes have improved to help patients and their families more quickly and easily identify a high-quality provider. The star rating system has also served as a differentiator for providers to highlight their star rating in the communities they serve. The results have been positive.

As an active acquirer of other high-quality home health and hospice providers, the recent announcement of enhanced transparency and availability of ownership information will allow us to more quickly identify agencies that fit our partner criteria for acquisition or other means. When combined with other publicly available information and our proprietary database of agencies across the country, we can expand our current capabilities and make our efforts more efficient. Similar to the previous efforts by CMS to enhance transparency, I expect the results here will likewise be beneficial.

— Luke James, president at VitalCaring Group

***

CMS’ decision to publicly disclose ownership data will have no impact on ProHealth Home Health & Hospice. We have always had to disclose that information to CMS and state regulatory agencies and have no concerns with that information being publicly available. I think it will have a more material effect on companies owned by private equity groups because industry watch groups will be able to more closely monitor and aggregate the quality scores of those companies. The aggregation of that data, depending on the trends shown, will either substantiate or disprove the notion that private equity investment in health care is bad for the public.

— David Lester, CEO of ProHealth Home Health & Hospice

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Broadly, the report covers Medicare payment policy, including the Medicare fee-for-service payment systems for home health care.

Roughly 3 million Medicare fee-for-service beneficiaries received care in 2021, and the program spent $16.9 billion on home health services, according to the report.

In total, 11,474 home health organizations were part of the Medicare program.

MedPAC deemed access to home health care adequate in 2021.

Specifically, more than 98% of Medicare beneficiaries lived in a zip code where there were at least two home health agencies that served the area. Also, 87.6% beneficiaries lived in a zip code where five or more agencies served the area.

From 2020 to 2021, there was an 0.8% drop in the number of agencies, which was a rate lower than past years.

“The slower decline in the supply of [home health agencies] suggests that neither the coronavirus pandemic, nor the major revisions to the home health prospective payment system implemented in 2020 had a significant impact on [home health agency] supply,” MedPAC wrote in its report.

When looking at the volume of services, the amount of fee-for-service beneficiaries that were receiving home health care saw a 1.1% drop. The volume of 30-day periods also went down 2.9%.

In general, fee-for-service saw an enrollment decline due to more beneficiaries enrolling in Medicare Advantage.

“As a result, the number of 30-day periods per 100 [fee-for-service] beneficiaries increased by almost 1% in 2021, and the share of [fee-for-service] beneficiaries using home health care increased to 8.3%,” MedPAC wrote. “The average number of in-person visits per 30-day period declined by 4%, but some of the decline could have been offset by greater use of virtual visits through telehealth.”

In terms of quality of care in 2021, the mean agency rate of successful discharge to the community from home health agencies was 52.2%, and the mean agency rate of hospitalizations was 18.2%.

“The pandemic and policies related to the public health emergency confound our assessment of trends in both quality measures,” MedPAC wrote. “Further complicating assessment, the home health payment system now uses a shortened unit of payment — a 30-day unit rather than 60 days — which changes the period used in the post-discharge hospitalization measure.”

The average cost per 30-day period dipped by 2.9% in 2021, which shows a decline in the number of visits per 30-day period. At the same time, Medicare’s payment per in-person visit jumped by 17.7%.

Plus, In 2021, Medicare margins for freestanding agencies averaged 24.9%, compared to 20.2% in 2020 and 15.4% in 2019. This was a historic high.

“These high margins indicate that the increase in payments in 2021 far exceeded the increase in costs,” MedPAC wrote. “In aggregate, Medicare’s payments have always been substantially more than costs: From 2001 to 2019, the Medicare margin for freestanding [home health agencies] averaged 16.4%.”

The estimated margin for 2023 is 17%.

Ultimately, MedPAC determined that access to Medicare home health services is adequate in most areas and that Medicare payments are “substantially in excess of costs.”

“Medicare’s payments for home health services are too high, and these excess payments diminish the service’s value as a substitute for more costly services,” the organization wrote. “On the basis of these findings, the Commission recommends that, for [the] calendar year 2024, the Congress should reduce the 2023 base rate by 7%.”

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Over the years, these positions have allowed him to emerge as an expert in the long-term care and post-acute care spaces. As such, Grabowski is in a position to offer insights on a variety of topics that are top of mind for home health care providers, among others.

Last month, Home Health Care News caught up with Grabowski at the Home Care 100 conference, which took place in Orlando, Florida.

During the course of the conversation, Grabowski talked about how he views home health providers’ “bargaining power” in negotiations with Medicare Advantage organizations, how they can help patients better navigate long-term care and how MedPAC came up with its recommendation for home health care payments.

HHCN: Years ago, you explained to HHCN readers why home health providers often lack “bargaining power” in their conversations with Medicare Advantage plans. Has this begun to change at all over the years?

Grabowski: Maybe marginally so, but I don’t think this has really changed. I don’t know if they’re in any better position today than they were 5, 10 years ago.

Thinking about what Medicare Advantage pays in different sectors, relative to traditional Medicare — you look at a hospital, physician sectors, it’s almost even. You look at dialysis, [that sector] actually gets more from Medicare Advantage. They’re so concentrated and so powerful.

On the flip side, skilled-nursing facilities and home health agencies are paid less in Medicare Advantage. I still don’t think either of the post-acute care sectors have that bargaining power. They might in the coming years.

We know that home health is going to be a big part of the post-acute care space going forward. I think the pandemic created this pivot. I don’t know that it’s pivoting back to skilled-nursing facilities. My sense is that Medicare Advantage is going to need to partner with home health, because it’s going to be a big part of the solution. Where I’m less clear is, what’s that tipping point, and how does home health gain that bargaining power with Medicare Advantage?

MedPAC recommended a 7% Medicare home health cut in 2024. Can you give us some insight into why, and how MedPac came to this conclusion?

This was recommended by the commission. It’s a broader decision, it’s not just mine, but I did vote in favor of it.

The reason I supported the recommendation is that the industry looks really strong across all the metrics that we’ve looked at. Access is good, we think most beneficiaries are able to get home health care across the country.

Looking at the margins, they were incredibly healthy from Medicare. This is one of the real points that needs to be understood, we can’t look at all payers. There are some payers — Medicaid and Medicare Advantage — that maybe don’t pay at-cost, but traditional Medicare is a really strong payer and the margins look really healthy. In our discussion, there was an acknowledgement that home health, much like skilled-nursing facilities and other kinds of post-acute providers, are facing some labor issues. That’s something we need to monitor.

For both home health and hospice, when the 2023 rates were announced, there was this question of why MedPAC was using 2019, pre-pandemic data. Can you talk a little bit about this?

There was a lag. It’s one of the great frustrations that we can’t get data from today. That said, we can, now, look at data into the pandemic and home health and skilled-nursing facilities are both doing really well during this period. I know that both of those sectors have faced some challenges with labor, COVID and lot’s of other issues, which shouldn’t go unacknowledged. But when we look at the metrics, which drives update recommendations, they’re looking very healthy.

You recently wrote an op-ed about the difficulty of navigating long-term care. What ways can home-based care providers help? What should they be doing?

The typical beneficiary and their family knows very little about home health. They don’t know about the benefits, what it can provide, and how it connects to other parts of the health care system.

I think being a good partner in that way could really ease some of the burden on patients, in terms of that navigation. At some point, it’s going to need to be more centralized. Hopefully, home health is going to be a part of those more centralized networks where they’re providing information.

This is a topic we have previously discussed at length — what is the status of a unified payment model for post-acute care services?

I think it’s kind of on pause right now. I think when the Congress first designed, or conceptualized, the unified payment system, the world was very different. If you think back five or 10 years ago, Medicare Advantage wasn’t as prevalent. Alternative payment models, such as ACOs, weren’t as common. Certainly, the new payment systems for home health and skilled-nursing facilities weren’t online yet. It was just a very different landscape, and I think unified payment was really important. I’m less convinced, today, that we need a unified payment model.

Both payment systems and the sort of models of care today are very different than 5, 10 years ago. My sense is that the urgency around the unified payment system is way down. That was a huge issue, and it’s really kind of pivoted.

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This recommendation is in line with previous recommendations by the commission over the years.

The implications of a 7% reduction would mean, among other things, a decrease in government spending by $750 million to $2 billion over one year, according to the commission’s members.

“For beneficiary and provider implications, we expect that access to care should remain adequate and it should not affect the willingness of providers to serve beneficiaries,” Evan Christman, a senior analyst for MedPAC, said during the commission’s public meeting Thursday. “But it may increase cost pressure for some providers.”

The commission — established by the Balanced Budget Act of 1997 — regularly meets as part of its mission to inform Congress on Medicare spending and policy.

According to MedPAC data, Medicare spent $16.9 billion on home health services in 2021.

There were over 11,400 agencies providing home health services to 3.3 million beneficiaries.

Elsewhere in its report, MedPAC suggested that access to home health care is adequate, citing that 98% of beneficiaries live in a zip code with two or more agencies in 2021.

“We saw a total volume decrease but a per capita volume increase,” Christman said. “Agencies had a positive Medicare marginal profit of 25.9% in 2021. For access to capital, the large, for-profit agencies continue to have adequate access to capital and we expect this to continue. The all-payer margins were positive in 2021 at 11.9%.”

MedPAC was not able to measure the quality of care, Christman said, due to the pandemic and public health emergency-related policies.

Margins for Medicare payment and home health costs were 24.9% in 2021, with a median margin of about 28%.

Broadly, MedPAC has long pushed back against high home health margins, though the industry itself says the commission’s analyses are deeply flawed and unfairly inflated.

Because of that, MedPAC has a history of recommending home health cuts. Home health providers vehemently disagree with those recommendations, noting inflation, recruitment woes, needed investments and lesser payouts for services from Medicare Advantage plans.

Apart from home health recommendations, MedPAC also voted to approve recommendations to reduce the 2023 Medicare-based payment rates for skilled nursing facilities by 3%, the hospice aggregate cap by 20% and inpatient rehabilitation facilities rate by 3%.

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The Consolidated Appropriations Act 2021 required the Medicare Payment Advisory Commission (MedPAC) to design a prototype prospective payment system (PPS) for all post-acute care providers, as well as examine its potential impacts.

“Congress required that the design span the four [post-acute care] settings, and base payments on patient characteristics, not the setting,” Carol Carter, a principal policy analyst at MedPAC, said during the presentation.

During a meeting that took place on Thursday, MedPAC assessed the reasons for a post-acute care PPS, and presented possible design features.

The presentation that took place during the meeting was one in a series of others to prepare a mandated report, due June 30, 2023, on a post-acute care PPS.

There are a number of reasons why there is interest in a post-acute care PPS. One of the top ones is that some beneficiaries who have similar conditions and comorbidities are treated in different settings, but because of the separate Medicare payment systems for each setting payments can differ substantially.

Another major reason is that there are perceived flaws in the designs of the home health and SNF payment systems.

“There were shortcomings in the home health and SNF PPSs that encourage providers to furnish unnecessary rehabilitation therapy, and to selectively admit certain types of patients over others,” Carter said.

Plus, the different quality measures and patient assessments made it difficult to compare patients, costs and outcomes across various post-acute care settings.

In order to create a post-acute care PPS, MedPAC began by identifying its key features.

“[This included] using a stay as the unit of service, an adjustment for home health stays,” Carter said. “Otherwise, these stays would be way overpaid and institutional care would be substantially underpaid.”

It also included a uniform set of risk adjusters, a targeted rural payment policy and adjustment for home health stays that occurred late in a sequence of post-acute care.

“Otherwise, these later stays, which have lower costs, would be overpaid,” Carter said.

Other payment adjusters include a short-stay outlier policy and a high-cost outlier policy. The MedPAC analysts found no need for an additional adjustment for teaching status that IRFs currently receive.

Carter noted that further analysis was needed to assess if there should be an adjustment for providers treating high shares of low-income patients.

The analyst also evaluated the design by examining three aspects.

“First, the accuracy of [post-acute care] PPS payments for various patient groups, and we concluded that they would be accurate,” Carter said. “To examine the equity of payments, we looked at the profitability of different types of cases, we concluded that a [post-acute care] PPS could increase the equity of payments. Third, we modeled the impacts on providers, and found that there will be considerable redistribution of payments, from rehabilitation to medically complex patients and from more costly to the less costly settings.” 

The analysts also looked at the implementation issues of a post-acute care PPS. They looked at whether a post-acute care PPS should be budget neutral to the current level of payments.

“The Commission recommended that the aggregate level of payments should be lowered when a [post-acute care] PPS is implemented,” Carter said.

They also examined whether a [post-acute care] PPS should be implemented with a transition.

“Based on analysis of the distribution of impacts, the Commission recommended a relatively short transition to a [post-acute care] PPS,” Carter said. 

To address regulatory alignment, MedPac proposed basing requirements on patients rather than setting.

“For example, if a provider opted to treat patients on ventilators, it would have to meet additional requirements specific to that care,” Carter said.

MedPAC also noted that a value incentive program should accompany the implementation of a post-acute care PPS.

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