How A Smaller Home Health Provider Goes Big On Value- And Risk-Based Contracting

Small- and mid-sized home health providers are aware of the disadvantages they face compared to their larger peers. They’re also recognizing, however, that they can use the flexibilities they do have to their advantage.

Take value-based care as an example.

Large providers typically have more resources at their disposal to invest in the infrastructure needed to support value-based care initiatives. They also are better able to make a dent in health plan spending given their larger footprints.

But, on the other end, small- and mid-sized providers can change strategies more quickly and more effectively. They can hone in on a very specific area to make value-based care work, and they don’t need every payer to sign on – just one or two.

The LTM Group is one of the providers that has made value-based care work in a big way.

Based in Ohio, the company also has locations in Michigan and Indiana. It offers home health, hospice and personal care services to about 2,000 patients.

David Kerns, the CEO of The LTM Group, has helped get LTM Group to a point where 90% of its revenue is either risk- or value-based.

Kerns sat down with Home Health Care News on the latest episode of HHCN+ TALKS to discuss the company’s success in value-based arrangements, future growth plans, retention strategies and much more.

HHCN: First, I want to start with your background, David.

David Kerns: My journey in home care started 16 years ago. I have my doctorate in physical therapy. I just so happened to take a job in Alaska as a home care clinician and I really fell in love with it. That was a hospital-based home care and hospice agency. My dad is a physical therapist and I always wanted to be a PT. He was in outpatient physical therapy. In outpatient, a lot of times you’re seeing 15 to 20 patients a day, while in home care, you’re spending that hour right there in the patient’s living room talking to them and their family. That’s really where I fell in love with home care. Like I said, 16 years later, I have an opportunity to be here with The LTM Group.

And background on The LTM Group?

The LTM Group — we were started 17 years ago by a group of clinicians. We’re still clinician-owned, locally owned. Our biggest focus is skilled home care. We have a big footprint here in Ohio. We’ve also expanded to Indiana and to Michigan. We also have a hospice segment, a personal care segment and we have outpatient as well. We’re really trying to hit everything on the continuum, but our core focus is definitely our skilled home care agency.

On that note, I think we’d be remiss to not start the conversation with the final rule, which should be here in a few weeks. What are you expecting from the final rule?

We’re right in line with all the other agencies. I think a good word to use is hopeful. We’re really hopeful for positive news. We’re prepared, if that’s not the case, but there’s definitely been a tremendous amount of advocacy across the board with technology partners and providers. We’re hoping that the government understands the value that home care provides before that’s too late. We’re very hopeful.

What would a positive adjustment or outcome look like for you?

I definitely think we need a positive adjustment. I think everybody would agree with that. If we can at least get back to neutrality with that, I think home care providers have learned to operate on the margins that we currently have. Even though I think we definitely need a tremendous amount of advocacy to continue, especially in this market, I would say that would still be a big win.

In terms of operations, post-final rule, let’s say the negative adjustment still comes down. What would change at the LTM Group? What would you need to adjust a little bit?

We’ve really spent the last six months focusing on two primary things. First of all, we really focus on centralization. We really feel like that’s a big thing that we’ve been able to do to really drive operational efficiency.

We just finished centralizing our intake so now we have our intake department. We partnered with WellSky on that with a new product called Referral Manager. Literally, we’re at about 50% more efficiency with our intake department. That’s really helped us be able to serve more patients, cut costs there and improve our timeliness of care.

We recently did an implementation with Focura with our medical records. We’ve completely centralized our medical records, QA and coding. It’s taken a lot of resources, and we’ve spent the last six months investing in that and for that change. That was in preparation of making sure that we’re where we need to be operationally to really help on the second part, which is retention.

We feel like one of our biggest costs and opportunities to improve is with retention. Any of those indirect costs that we can shift to paying our clinicians better and getting that retention number better is worth it. We feel like if our retention’s better, then our quality scores are better, our productivity is better and our utilization is better. That nurse or therapist that’s only been working here for four or five months — half of that might be onboarding — if you’re able to keep that person on and keep them happy, now your productivity is naturally going to improve. You’re going to be able to take more patients.

We really see that centralization and retention are really two of the biggest areas for us.

In terms of retention, have you been able to improve that of late, and if so, what’s been working?

I don’t know if you’ve read the book “Anatomy of a Turnaround” from Paul Kusserow. That’s an amazing book. I’ve shared that with our leadership team here. He talks a lot in there about his focus in that turnaround on retention and that being the driving factor of them going from a 6% margin to a 14% margin.

Our focus as an organization for our clinicians is patient care. It’s taking care of patients. Everybody else in our organization needs to be focused on the clinicians that are enabling that patient care. Our focus is really to step back and say, “How can we better serve our clinicians?”

Tina Hardwick, our president, has been doing a lot of research on that. Schedule volatility – that’s a big thing that we’ve really been working on in two different ways. When a nurse or therapist has one visit one day and seven visits the next day, you can’t build your life around that. You’re missing your kids’ soccer games, patients are getting frustrated because you’re showing up late and then here you are another day and you’re only doing one visit. A study actually found that clinicians who were in the fifth percentile of schedule volatility — meaning their schedules were very stable — were 40% more likely to stay, whereas clinicians who were in the 95th percentile of schedule volatility — meaning that they had very unstable schedules — were 51% more likely to quit.

There’s a 91% difference in retention based on schedule volatility. It’s something we’re looking at across the organization. How much is that individual clinician’s schedule varying? Then we’re looking at it between clinicians. If you have one clinician who has 10 visits scheduled and another one who has 30 visits scheduled, that’s going to create that person — who probably is your most productive employee — to be upset and leave. Fixing that within their own schedules and within the team schedule, that’s a huge focus that we’re doing right now that we’re really excited about.

The scheduling in home health care is something that I’ve heard about for a long time. I don’t think that any agency has totally figured it out. I know there are some vendors that are trying to aid providers in that. What do you think is going to help out with that? Can that be done on the provider level or do you need to bring someone else in to help out?

From a technology standpoint, there could be so many more efficiencies. It really goes back to providing patient care. We’re a patient-care-centered organization. If our scheduler is able to get that visit scheduled one day quicker, that’s an extra day our clinician can get out there, preventing that patient from being hospitalized. I think it’s something that starts with technology, 100%. Easy-to-use scheduling, I think, is one of the most important things when looking at a technology solution.

You can order a pizza right now and you know exactly when that pizza’s going to be here and who’s delivering it. Yet in home care, it’s dependent on your health and going back to the hospital, you don’t know when they’re going to be here, you’re waiting on a phone call, you don’t know who’s showing up. There’s really a disconnect in our industry and really an opportunity to improve.

Let’s get into your organization more specifically and the things you’re doing well. I was extremely impressed when we first met about the fact that you’re a mid-sized organization and you’re doing a ton of value-based care, risk-based contracting. Can you provide a background on what you’re doing there, and then also explain how you got into that?

I feel like mid-sized providers right now are kind of the sweet spot because we do have efficiencies at scale, we do have market density and we don’t have the huge corporate overhead, so we are able to work with these payers and still serve a large area for them.

Another advantage we have is that we’re able to see those areas that are further out that a bigger company wouldn’t see, more rural areas, more sick patients. It allows us to still have the flexibility to do very specific programming with these folks.

For example, we have a managed Medicaid plan here in Ohio. Us and a small group of other providers are doing a program to prevent rehospitalizations. A large provider isn’t nimble enough to turn around a program very, very quickly and get local results. That’s been a big advantage for us as far as being a mid-sized provider.

Going back to the question on value-based and risk-based contracting, currently about 90% of our revenue is either value-based or risk-based. Our goal with that is really to be at 100%. We have spent a lot of effort over the last four or five years developing our payer innovation team and really getting into the quality side of that. That, I think, is what’s really missing. A lot of organizations, especially smaller or mid-sized organizations like ourselves, go right to contracting. They think, “I’ve got to get a hold of somebody at this insurance company and let them know that I need to get paid more.” We’ve gone about that in completely different ways. We’ve first focused on our quality so we don’t have any agencies that are under four stars. Half of our agencies are five stars. That’s the first thing.

Then the second part of that, with value-based care, you’ve got the quality, but you’ve also got the cost, so really looking at how we’re doing with our efficiency, doing more with less, really controlling our cost.

The analogy that we use when we’re talking about it is trying to sell your car. If you have a car and it’s got a bad motor, it’s got a rusty body, no maintenance done to it — when you go to sell that, you’re not going to get anything out of it. Compare that to having somebody that’s really taking care of the engine, that’s done all the maintenance on the car and it’s a very dependable vehicle. When you go to sell that, you’re going to get a much higher price and then the person buying that car is going to get a lot more value out of it. That’s one analogy that we use.

Focusing first on the quality. Then the cost. Then being able to come to the table with them and say, “Hey, here’s what we have, here’s what we can offer.” That, I think, has really helped us substantially.

How long did it take you to build up that value proposition that you then present to health plans?

That was the reason our company was created by clinicians. They thought that we could do a better job of providing quality care, so that’s been there. What we haven’t had was a clear way to articulate that to our payers and to our referral sources as well. We just invested pretty heavily in data analytics and value-based insights — also from WellSky. With one click of a button, we can see every single payer that we have, exactly what it costs them. We can see every single quality outcome – the rehospitalizations, how many visits we’re doing. It’s pretty incredible.

We can bring that to these specific payers and then we can even dive in and say, “Okay, is it CHF that you’re struggling with as a payer? What are your highest risk patient diagnoses that you really need help with?” Then we can build something custom for them. I would say that’s been one of the biggest things. There’s a lot of providers that are very high-quality providers that just don’t have a way to communicate that with the payers.

You’ve mentioned a lot of integration processes over just the course of the last 15 minutes, all the tech that you have to embed into the organization. What have those been like, and are you happy to be done with some of those processes?

With any integration that you’re doing, it’s a very difficult process. I would say the biggest thing with that is getting the buy-in from the clinicians. We had a very long process of choosing our software company and we tried to involve as many of our clinicians as possible.

You mentioned personal care there as well, do you think that’s going to be a core service line moving forward?

Absolutely. I think the biggest thing with personal care is just price. It’s a pretty simple model. What we pay the caregivers — then that cost gets passed on to our clients. So it’s about being the most efficient that we can be while still offering those caregivers the highest rates.

Unfortunately, those rates for the clients have just gone up so much. Then, you’re seeing across the board, our patients are having to make the difficult decision, “Okay, now this has cost me so much per hour. I was getting eight hours so now I’m going to cut that down to six hours.” They’re still utilizing it, but they only have so much to spend. Our biggest focus there is, again, doing more with less. Trying to cut out any of the excess expenses and being really efficient so we can deliver that to our patients at the lowest possible cost.

Billing rates have obviously been one of the major issues in the home care space.

I would say our billing rates have really increased, but we’ve tried not to increase prices too much just because you have to be hyper-aware of that access to care.

In terms of growth, both by service line and by geography, what are the plans over the next five years?

We see a lot of agencies that have 200 or so locations. Our focus is really on market density and serving the most patients within the areas that were established. We have quite a large footprint through the Midwest that we can capitalize on, and really serve more patients. That’s our first priority there.

We recently switched to WellSky this year. A big part of that decision was that one in three agencies use that system. That software, as opposed to some of the other softwares, does have quite a lot of clients that are smaller to mid-sized providers. One of our goals is to be able to partner with more of those agencies in the future.

For example, we had an agency that we purchased that was in Columbus. They were two and a half stars. We purchased them two years ago. They’re now a five star. Their census has grown by 10 times. We want to find more of those partnerships with smaller agencies that are looking to really scale and partner with a larger organization. That, I think, is a lot of our strategy as well.

You don’t mind fixer-uppers when it comes to M&A?

Absolutely not. I think it all really goes back to the culture. If it’s a fixer upper because there’s people that are in it for the wrong reasons, no. But I think if you can align the culture and find some great people that just need more resources, that’s when you can really unlock a lot of potential.

You are in Ohio, Indiana and Michigan. Do you want to stay in those three states or could it be other states in the Midwest as well?

Yes, we’re definitely open to expanding our geography. I think it would just depend on the opportunity.

What are you seeing in the M&A market right now? When you’re looking around for those smaller types of agencies, do you find that they’re a little bit more difficult to find at this point?

I think finding high-quality agencies is very difficult right now. I think there is a lot of competition, especially in some of those mid-markets with a little bit less capital. In home care right now, I think a lot of people are looking for mid-market versus these massive acquisition opportunities.

What do you believe will separate the quality home health agencies from the less quality home health agencies over the next five years?

I honestly think the biggest thing is retention, I really do. Our clinicians, their number one job is to take care of patients. Our number one job is to take care of our clinicians.

We’re really spending a lot of time with that. We talked about schedule volatility. Another thing that we’re really trying to overcome is the burden from documentation. Unfortunately, over 75% of the time that clinicians are spending in home care is in front of their computer. It’s doing the OASIS. It’s not direct care for the patient. They’re losing that time being with their family as well.

We think that’s another big thing tied to retention. We’re particularly focused on OASIS. Our goal over this next year is to be able to try and cut the OASIS documentation time in half for our clinicians. We’re looking at generative AI and a lot of different technologies so that we can try to create operational efficiencies to help support those clinicians at the start of care.

We really think that that can be a big driver — not only for us to be able to help our clinicians, but also, it allows us to serve more patients.