Less than a month before election day, the Democratic and Republican candidates for president are dueling over home-based care plans.

Vice President Kamala Harris announced on “The View” this week a proposal that would allow home care to be administered through traditional Medicare.

On the same day, former President Donald Trump and his campaign released a rebuttal, pointing toward home care-related policy implemented from 2017-2020, plus additional plans for a potential second term.

Harris’ proposal is a more lofty one. It would also – if implemented – create a massive tailwind for home care providers across the country. But, as LeadingAge President and CEO Katie Smith Sloan pointed out after the proposal, “we cannot overstate that without staff, there is no care.”

Trump, meanwhile, pointed to expanded supplemental benefits in Medicare Advantage (MA) as a way for seniors to access more home care-related services. His campaign team also focused on economic points that it believes will make aging in place easier for Americans under his leadership.

In this exclusive, members-only HHCN+ Update, I make the mistake of venturing into the presidential candidates’ plans for home-based care. Specifically, I examine how viable the plans are, and what they could mean for providers, if implemented.

Home-based care takes center stage

Home-based care providers were likely pulling their hair out over the predictable confusion that arose from Harris’ proposal Tuesday.

Home health care is already a robust benefit provided under the Medicare program, and generally includes services delivered to seniors after an acute health event.

Home care is not currently available under traditional Medicare, however, and generally includes non-medical services to help with activities of daily living.

The only place where home care is paid for under Medicare is through MA supplemental benefits, and MA pays for just a sliver of all home care provided currently.

So, yes, Harris’ proposal would be groundbreaking, if implemented. It would completely change the scope of the Medicare program.

As for the companies it would directly impact, pick a notable name in home care.

Currently, home care providers have a large addressable market: seniors with the ability to pay out of pocket for home care services; Medicaid beneficiaries in need of home- and community-based services (HCBS); veterans in need of home care, paid for through Veterans Affairs (VA); and a small portion of MA beneficiaries and long-term care insurance clients.

If home care were paid for by Medicare in the future, that would take the concept of “unlimited demand” to a new level. There are over 30,000 home care agencies in the country, almost all of which would have a new market opportunity if Medicare became another means to pay for home care.

The one potential downfall for providers would be former private-pay home care clients being able to use Medicare to pay for services. Private-pay home care doesn’t come without challenges, but it remains one of the most profitable forms of home-based care business.

Home health providers – which already provide care to Medicare beneficiaries, almost exclusively – would also see a business boon. Many of them already provide home care, and the ability to care for clients through one revenue source in both service lines would be massively beneficial.

After all, home-based care is responsible for one of the only successful Center for Medicare and Medicaid Innovation (CMMI) demonstrations of late. The Home Health Value-Based Purchasing (HHVBP) Model – now implemented nationwide – has already saved Medicare billions, and is likely to save many more billions moving forward.

“We think access to personal care services could at least double from six million customers today. By our estimate, the extra spending would expand the [total addressable market] by ~30% to $110 billion per year,” Macquarie Capital wrote in an analyst note this week. “Since Medicare covers home-based medical services, we expect a wider adoption of the integrated care model following added personal care services coverage. This could also expedite the transition to value-based care. Providers could benefit from aligned incentives, streamlined operations and cost synergies.”

Then comes the question of viability, however.

Harris is not the first person to propose such an idea. Home care stakeholders have suggested it for years, but so have other policymakers.

“When the Affordable Care Act was passed, a component similar to this was included and that ultimately was stripped out,” Tyler Giesting, a director of health care and life sciences at West Monroe, told me this week. “I think we’ve seen it fail in the past for reasons that come down to: can it be economically viable? The challenge would be getting something like this passed, in the way that it has been described so far.”

The Harris campaign has suggested that it would pay for the proposal, in part, by cutting Medicare payments for drugs. It estimated that the proposal would cost around $40 billion per year.

But other estimates suggest that it would cost closer to $400 billion.

Harris sees the proposal as a way to aid the “sandwich generation” – adults that have aging parents to take care of, as well as children. Those responsibilities make it tough to maintain employment.

For Harris, the key would be to convince the right stakeholders of the overall value of home care. It wouldn’t be enough to just prove that more Americans could continue contributing to the economy if they had additional help at home for their older relatives.

Harris’ team would need to instead pitch this as a long-term cost savings project. If more seniors had access to home care, less seniors would be driving up U.S. health care costs in hospitals, emergency rooms and more costly brick-and-mortar facilities.

That is already a battle home care providers face. They are regularly trying to convince payers that more home care equals less overall cost. But a concrete plan, and concrete evidence of those potential savings, would have to be laid out.

“It’s one thing to have this idealistic proposal perspective, and it’s another to actually put it into action with a detailed plan,” Giesting said. “Then, there’s also getting it passed and put into law.”

A detailed plan is key. Even if we accept the idea that more access to home care could ease burden on Americans, while also keeping overall health care costs down, the implementation of the proposal through Medicare would need to be tirelessly thought out.

For instance, New York’s Consumer Directed Personal Assistance Program (CDPAP) – which allows family members to be paid to care for loved ones in need of home care – has been a fiscal disaster for the state.

Self-directed care has potential. It allows unpaid caregivers to be compensated, and for home care recipients to direct their own care. But it’s also hard to oversee.

For what it’s worth, if the proposal did move forward, I think the best way to go about it would be to prioritize care from existing, quality home care agencies. Agencies that train and vet their caregivers, ones that have been providing care professionally for a long time.

Trump proposals

The Trump campaign’s home care proposals are more understated. And, like Harris’ plans, more details would be needed to project true impact – for potential home care beneficiaries and providers.

“President Trump will prioritize home care benefits by shifting resources back to at-home senior care, overturning disincentives that lead to care worker shortages and supporting unpaid family caregivers through tax credits and reduced red tape,” the Trump campaign wrote in a release, in preparation for Harris’ announcement this week.

The campaign also evoked MA supplemental benefits. MA supplemental benefits – through the primarily health related pathway and the Special Supplemental Benefits for the Chronically Ill (SSBCI) pathway – were created during Trump’s presidential term.

The benefit that allows for home care services is dubbed In-Home Support Services (IHSS). MA plans have pulled back on offering IHSS in 2024, however.

“The Trump administration provided new Medicare Advantage supplemental benefits that included modifications to help keep seniors safe in their homes, respite care for caregivers, transportation coverage, additional in-home support services and assistance and non-opioid pain management alternatives,” the release continued.

The campaign also pointed out other indirect factors that have led to home care inaccessibility of late, such as inflation, which it believes it can continue to bring down.

Spotlight and policy

Home-based care being in the nationwide spotlight is a good thing for providers and older Americans.

But it’s also worth taking stock of where that spotlight has gotten us before. The Biden-Administration has been laser-focused on home care, but mostly HCBS through Medicaid.

Meanwhile, home health providers have been left behind. Advocates are in the throes of a three-year long fight against continued rate cuts from the Centers for Medicare & Medicaid Services (CMS), as other home-based care proposals are taking shape from both campaigns.

Home health providers are seeing their traditional Medicare payments cut, while also receiving payments from MA plans that often don’t cover the cost of care. All the while, MA penetration continues.

In April of 2023, I wrote about why federal support for home-based care is missing the mark.

While proposals from both campaigns this week contain some good elements, that fact remains true.

As home-based care takes center stage once again, Medicare-certified home health providers are forced to stand behind the curtains, at a time when their margins are evaporating.

“I would also want to remind the Biden, Harris administration that the existing Medicare home health program is under assault currently, and has been since 2020, with billions of dollars in cuts that have diminished access to care, so I think that investment and a stabilization of the existing Medicare home health benefit is something that is also needed,” Partnership for Quality Home Healthcare CEO Joanne Cunningham told HHCN this week. “With this news, I would just offer that recommendation and reminder.”

The post With The Election Nearing, Candidates Battle Over Home-Based Care appeared first on Home Health Care News.

The proposal focuses on helping the “sandwich generation,” or adults who are caring for their aging parents while also raising children.

“There are so many people in our country who are right in the middle,” Harris said during her appearance on the show. “They’re taking care of their kids and they’re taking care of their aging parents, and it’s just almost impossible to do it all, especially if they work. We’re finding that so many are then having to leave their job, which means losing a source of income, not to mention the emotional stress.”

About 53 million adults in the U.S. care for a spouse, elderly parent or relative, or a child with special needs. This is an increase from 43.5 million in 2015, according data from a 2023 Guardian Life report.

Broadly, Harris is proposing to allow Medicare to cover home care, which is a proposal that has been raised by industry stakeholders regularly in the past. Currently, Medicare covers home health care – generally delivered after an acute event – but not home care, which is generally a non-medical service.

“They want to stay in their home,” Harris. “They don’t want to go somewhere else. Plus, for the family to send them to a residential care facility, to hire somebody, that is so expensive.”

Katie Smith Sloan, president and CEO of LeadingAge, pointed out that the demand for senior care continues to grow.

“Our country’s population is aging – and the demand for long-term care and services is growing,” she said in a statement. “Nonprofit providers of aging services have long warned that our current patchwork approach to long-term care delivery and financing is broken. Too many people struggle to access the help that’s needed as we age. Today’s announcement is truly exciting, and unique. Rarely do we see a proposal with this level of specificity included in a Presidential platform. Adding home care to the Medicare program, a much-needed component of a broader long-term care financing reform effort, will offer millions of older adults and families access to services that promote quality of life and safety as people age at home. At the same time, we cannot overstate that without staff, there is no care. Continued attention and investment in the workforce, as noted in the proposal, remains essential.”

Currently, Medicaid is available for low-income seniors that need access to home- and community-based care services (HCBS).

However, long waiting lists have been a persistent issue that limits access to these care services. More recently, MACPAC examined the use of presumptive eligibility and expedited eligibility as a way to speed up the process.

Then again, a small portion of seniors in the U.S. are covered by Medicaid.

Harris explained the reason behind the focus on Medicare for these latest efforts.

“This is about Medicare, because otherwise people have to spend down everything they’ve got to be eligible for the care they need as a Medicaid recipient,” she said.

She also noted that her proposal was about helping individuals get ahead, and not just get by.

Joanne Cunningham, the CEO of the Partnership for Quality Home Healthcare, called the development “important and welcome” news.

“It shows a tremendous understanding of what … the sandwich generation’s needs are, and the needs that many older people have in order to live independently in their homes,” she told Home Health Care News. “I would also want to remind the Biden, Harris administration that the existing Medicare home health program is under assault currently, and has been since 2020, with billions of dollars in cuts that have diminished access to care, so I think that investment and a stabilization of the existing Medicare home health benefit is something that is also needed. With this news, I would just offer that recommendation and reminder.”

The National Alliance for Care at Home also applauded Harris for pushing care at home into the spotlight.

“By raising the topic of expanding care at home in such a visible way, in high profile way, this is another acknowledgment that American families really are hoping for stronger access to care at home, that people want to age in place with dignity and independence,” Dr. Steve Landers, CEO of the National Alliance for Care at Home, told HHCN.

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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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The report found that patients receiving care through the program differed demographically from those at traditional inpatient facilities. Generally, hospital-at-home (HaH) patients were more likely to be white, live in urban areas, and less likely to receive Medicaid or low-income subsidies. These differences may be due to the criteria established by participating hospitals to identify suitable patients for this type of care.

Patients receiving care at home generally experienced fewer catheter-associated urinary tract infections. Mortality rates were also lower. Those with less complex respiratory and infectious conditions had lower 30-day readmission rates than those in traditional inpatient settings. However, readmission rates for patients with more complex respiratory infections were higher for those receiving care at home.

The study found that patients receiving care at home through the initiative resulted in lower Medicare spending during the 30-day post-discharge period. Furthermore, even though at-home patients received the same services as those in traditional hospital settings, they used fewer of the same services. This suggests that hospitals experience lower costs over time when providing care to patients in their homes.

The study also revealed that at-home patients required care slightly longer than those in traditional settings, but the difference was negligible (less than a day).

Feedback collected from patients, caregivers and family members about at-home care was overwhelmingly positive. Patients reported feeling more relaxed, less anxious and less depressed at home, which seemed to facilitate their recovery. Caregivers and family members believed better health outcomes were one of the main benefits of receiving care in a familiar and comfortable environment.

“People who have been in a brick-and-mortar hospital and also cared for in their home report that they sleep better in their beds and that it is less noisy and confusing,” Nancy Foster, vice president for quality and patient safety at the American Hospital Association (AHA), recently told Home Health Care News. “For older folks who sometimes get confused when they’re away from home, this is a way for them not to experience those challenging effects of being hospitalized but still receive hospital-level care.”

Lessons learned

While the feedback received was primarily positive, it also revealed some limitations and opportunities.

One concern was the potential need for additional care, especially for patients with limited mobility. While approved hospitals are expected to provide all nursing care, including help with daily activities, CMS received feedback that, at times, family members took time off to be with their loved ones or hired extra nursing aides.

Another common concern was the program’s effective implementation. Specifically, there was potential for confusion among clinicians and hospital staff regarding the services provided and among patients about what services are covered by Medicare.

Overall, feedback from patients and caregivers aligned with existing evidence on HaH programs; they generally viewed the care provided as safe, effective and a positive experience.

“Clinicians, doctors and nurses who have been involved in the HaH program are enthusiastic about it,” Foster said. “It allows them to have a deeper relationship with their patients, to see more of what their home life is like, and to be able to advise them on how to recover well and then how to stay well from whatever condition brought them into the hospital, even if that hospital was their home.”

The waivers and flexibilities associated with the AHCAH initiative expire Dec. 31, and its future remains unclear.

“By the end of the year, Congress will need to act to extend the Medicare waiver,” Foster said. “We’ve heard considerations of a bill that would extend it for five years, but we don’t know whether that will be passed.”

Foster added that if the bill is not passed, no fee-for-service Medicare or Medicaid patient could be cared for at home.

“Congress is concerned that we can demonstrate high-quality care being delivered, that we are not putting a tremendous burden on family members or other loved ones in the home, and they have expressed concern about whether this would be equitable,” Foster said. “However, we see a dominance of people with more limited means benefiting enormously from the hospital-at-home program.”

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Noli and Isabel Tcruz of Washington Township, Michigan, were sentenced on Sept. 4. Noli Tcruz received six years in prison, and his wife was given three years and two months.

The Tcruzes were convicted and sentenced for schemes related to their operation of several Macomb County home health care companies. These companies purported to provide legitimate medical care to Medicare beneficiaries but engaged in fraud.

“My office will diligently investigate and prosecute all types of fraud driven by greed,” U.S. Attorney Ison said in a statement. “Noli and Isabel Tcruz’s fraud harmed taxpayers and the government programs our tax dollars fund, including Medicare and COVID-19 programs. Health care professionals and providers have an opportunity and a duty to help people lawfully. Still, we will not hesitate to pursue individuals like these defendants who breach those duties to line their own pockets.”

The Tcruzes were involved in a roughly $5 million scheme to illegally offer kickbacks and bribes in exchange for referrals for home health care for Medicare beneficiaries. They also failed to pay their personal and business taxes.

After their last home health company closed in February 2020, Noli Tcruz began committing COVID-19 program fraud. He used a family member’s identity and company to deceive and defraud the Small Business Administration and Health and Human Services, obtaining over $250,000 in pandemic assistance funds.

Two physicians, Dr. Terry Baul and Dr. David Calderone, admitted to accepting kickbacks and bribes in exchange for referring Medicare beneficiaries to the Tcruzes. As part of their plea agreements, the two physicians were required to pay more than $3 million in restitution and forfeiture judgments. Additionally, they have been excluded from participating in Medicare and other federal health care programs.

“Paying kickbacks to induce referrals for medical services in federal health care programs is illegal and can lead to the delivery of unnecessary services, wasting valuable taxpayer funds,” Mario M. Pinto, Special Agent in Charge of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG) said in a statement. “HHS-OIG will continue collaborating with our law enforcement partners to ensure that those who engage in unlawful kickback schemes in our federal health care programs are held accountable.”

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Every year, home health providers await the release of the U.S. Centers for Medicare & Medicaid Services’ (CMS) proposed payment rule. While home health providers are likely months away from seeing a proposal, it’s worth examining if what’s happening in other care settings could offer a clue of what to expect.

CMS released the 2025 proposed payment rules for hospice and skilled nursing facilities (SNFs) in March.

On the hospice side, the proposed rule included a 2.6% increase in the per diem base rate.

Aside from the pay raise for hospices, the proposal also included a market basket index update, and notable changes to some of the geographic areas subject to particular indices.

“There are rural areas that became urban and urban areas that became rural in the new CBSs — core based statistical areas,” William A. Dombi, president of the National Association for Home Care & Hospice (NAHC), told Home Health Care News.

CMS also proposed moving forward with the Hospice Outcomes & Patient Evaluation (HOPE) tool, a patient assessment instrument that has been in the works for years, one that will replace the Hospice Item Set.

Still, Dombi has largely described the hospice proposed payment rule for 2025 as “plain vanilla.”

“In some respects, it’s ho-hum,” he said. “There’s nothing really dramatic or game-changing there. At the same time, as people start filtering through the proposal, and start hitting some of those issues, such as the HOPE instrument and the RFI relative to a new payment model, they get a little more curious about it. There certainly hasn’t been any high-level negatives.”

Though the proposed rule for hospice didn’t inspire extreme positive or negative reactions, Dombi pointed out that he has seen uniform disappointment in reaction to the 2.6% inflation update from providers. Many felt this was too low.

“It’s a disappointment in terms of the number, but it’s a number which can change,” Dombi said. “It’s a number which is pretty much based upon data subject to a forecasting instrument which has perplexed people for decades.”

Dombi also noted that one of the more interesting aspects of the proposal was the request for information regarding system reform on the payment model.

“CMS taking a step into further payment reform for hospice is one thing we’ve all been watching for,” he said.

Notably missing was anything related to program integrity efforts, which Dombi noted was something that providers have expressed a need for.

Dombi believes that there are some connections between the hospice proposed payment rule and the upcoming home health proposal.

“The core based statistical area, and the inflation update, are probably the only clues that we could get out of the hospice rule,” he said. “It might show some sort of understanding of what to expect in the home health rule.”

Another reason home health providers may want to keep their eyes on this proposed rule is that many of these organizations also have hospice service lines. Leaders at these organizations need to factor in the hospice rule to determine what the impact will be on their overall business.

“Those companies that have both home health and hospice can start planning for 2025 — at least preliminary planning,” Dombi said.

SNF proposed rule

The proposed rule for SNF operators includes an increase to payment rates by approximately 4.1%, or $1.3 billion.

Joel VanEaton — executive vice president of PAC regulatory affairs and education at Broad River Rehab — believes that this is a mostly positive update.

“There were comments from people [saying] it’s not enough to cover costs in the world we find ourselves in now, but it is a good thing for skilled nursing facilities that we didn’t have a reduction this year,” he told HHCN. “The last two years, we’ve had a 2.3% parity adjustment to our case mix indexes. We did have payment updates, but that parity adjustment took away some of that.”

The other big change was related to the wage index. For SNFs, wage indexes are essentially based on the geographical location of the facility, and the hospital wage data that’s associated with that geographical location.

Similar to hospice, changes to CBSs meant that some counties went from urban to rural and vice versa.

“There were some wide swings in relation to the impact of the wage index, but fortunately, a couple of years ago CMS put in place a permanent 5% cap on reductions in wage index,” VanEaton said.

Aside from those who believe the 4.1% increase isn’t enough, the reaction to the SNF proposed rule has mostly been positive, according to VanEaton.

“It’s a positive thing that you’re not going to end up worse off than you were the prior year,” he said.

In general, the connections between home health and SNFs may be less obvious than the ones with hospice.

But it is of note that, for now, home health providers seem to be getting the short end of the stick when it comes to annual payment updates.

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“We didn’t expect it to be that flat and that consistent for 2023,” Mark Kulik, senior managing director at M&A firm The Braff Group, said during a presentation at Home Health Care News’ Capital + Strategy conference last week. “That was disappointing by any measure. If you speak to anyone, certainly at our firm, it was a disappointing year for ourselves with the lack of transactions and the lack of deal flow.”

Kulik noted that there are a number of forces negatively impacting health care dealmaking, including high interest rates, inflation, U.S. staffing shortages and global unrest.

In the last 40 years, there have been seven tightening cycles that occurred from the increasing of the Fed rate.

In 2022, the rate of increase was profound, according to Kulik.

“It seemed like every month, or every two months, the Fed was coming out with another increase of 25 to 50 basis points — bumping it up and bumping it up and bumping it up,” he said. “Last year, it took the shortest amount of time, roughly 16 months, to go from the first rate increase to 5.25, where it’s hovering right now. This is akin to the Fed jamming the brakes on the monetary policy to help slow down the economy because inflation was occurring.”

Though this was a tool to slow down the economy as a response to inflation, this policy ended up also impacting dealmaking by skyrocketing the cost of capital to buyers.

When looking at home-based care deal trends, hospice saw a 67% dropoff. In 2021, 67 hospice transactions took place, compared to 40 the following year, and 23 in 2023.

“We went from phone calls trying to find every hospice for sale in the country, to virtually no one calling and asking for hospice,” Kulik said.

On the Medicare-certified home health side, there was 33% dropoff in deals. In 2021, there were 86 home health deals, compared to 75 in 2022 and 54 last year.

“Pre-pandemic [transactions] were in the 50 to 60 range for transactions, and then it spiked up to 86 transactions in 2021,” Kulik said. “No one would have ever predicted that with PDGM coming out.”

In 2023, there were 7 Medicaid home care transactions, which was the same amount of deals that took place the previous year. In 2021, this sector saw 16 transactions. Driving this downturn is the unresolved proposed 80-20 rule, an internal factor versus the aforementioned external ones, according to Kulik.

The private-duty nursing space checked in at 29 deals in 2023, compared to 37 in 2022 and 53 in 2021.

One of the main reasons behind the previous deal volume in the home-based care space was private equity interest between 2017 to 2023.

“In that timeframe, as private equity was doing transactions, it forced the strategics to step up their game, relative to their interest level and prices that they offered to sellers,” Kulik said. “So private equity is a big superstar relative to activity and also valuations.”

Looking ahead, the Fed has indicated that a series of interest rate cuts will likely take place this spring. Still, inflation sitting at roughly 3% could delay cuts.

“Until rates drop, and until there’s some certainty that the marketplace and the Fed is heading in that direction, it puts a chokehold on activity because it presents risks to the marketplace,” Kulik said.

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While there’s still plenty of oversight, the spotlight on home health and personal care providers appears to have dimmed somewhat. Instead of focusing on home health and personal care, watchdogs are increasingly targeting hospices, nursing homes and other areas.

The active work plan for the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG) reflects this idea.

Publicly available online, the active work plan reflects OIG audits, evaluations and inspections that are underway or planned. As of March 2024, there were 241 items listed on OIG’s active to-do list.

Of those 241 items, just five – or less than 3% of the total list – involve home health, personal care or related services, such as consumer-direct programs, according to a Home Health Care News review of the active work plan.

Among those efforts is a look at state electronic visit verification (EVV) policies and implementations for personal care and home health services. The 21st Century Cures Act mandated EVV for personal care by Jan. 1, 2020, and for home health by Jan. 1, 2023, with extensions given for the vast majority of states.

“Once implemented, EVV could increase the risk that Medicaid beneficiaries’ needs are not being met, potentially compromising their health and safety,” OIG’s work plan states.

Specifically, OIG is reviewing EVV progress in accordance with federal and state requirements, along with any developed policies and procedures for ensuring Medicaid beneficiaries receive their qualified in-home care services.

Despite significant reductions over the past decade, home health improper payment rates remain a focus for OIG as well.

In 2014, the improper payment error rate for home health claims was 51.4%, according to U.S. Centers for Medicare & Medicaid Services (CMS) data. That error rate was tied to about $9.4 billion in claims.

By 2021, however, the error rate had plummeted to 10.2%, with an estimated $1.84 billion in improper payments.

OIG in its active work plan said it’s more focused on individual home health agencies (HHAs) with a history of questionable claims.

“Recent OIG reports have similarly disclosed high error rates at individual HHAs,” the work plan explains. “Improper payments identified in these OIG reports consisted primarily of beneficiaries who were not homebound or who did not require skilled services. We will review compliance with various aspects of the home health prospective payment system and include medical review of the documentation required in support of the claims paid by Medicare.”

Another area of focus for OIG is Medicaid consumer-directed personal assistance programs.

Generally, consumer-directed programs provide an alternative way of receiving home care services, giving consumers more control over who provides their care and how it is provided. Instead of working with a home care provider, the consumer, or the family member, friend, or guardian directing care, performs caregiving functions usually done by an agency.

Previous audits and investigations have found vulnerabilities in consumer-directed personal care programs. In some cases, individuals are reimbursed for furnishing services that are never rendered. In others, a consumer shouldn’t have been eligible for the program in the first place.

“Let’s say you hire your niece and your niece doesn’t show up,” Bill Hammond, a senior fellow for public policy at Empire Center, previously told HHCN. “Are you going to rat her out? Are you going to call the state and say, ‘Don’t pay my niece this week because she didn’t show up?’ In fact, your niece and you may have an agreement that she’s not going to show up ever.”

OIG’s work plan says the watchdog is working to determine whether selected states made Medicaid payments for consumer-directed personal assistance program claims in accordance with applicable federal and state regulations.

Medicare’s acute- and post-acute-care transfer policies are yet another focus area for OIG.

Effectively, Medicare pays hospitals a per diem rate for early discharges when beneficiaries are transferred to another prospective payment system hospital or to post-acute-care settings, including home health care. This is based on the presumption that hospitals should not receive full payments for beneficiaries discharged early and then admitted for additional care in other clinical settings.

Past OIG reviews found several instances where Medicare payments to hospitals did not comply with Medicare’s post-acute-care transfer policy.

“Under the acute- and post-acute transfer policies, these hospital inpatient stays should have been paid a reduced amount,” the work plan notes. “Additionally, we will assess the transfer policies to determine if they are adequately preventing cost shifting across health care settings.”

In comparison to the relatively few mentions of “home health,” the term “nursing home” comes up dozens of times in OIG’s active work plan.

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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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A similar trend could be happening in home health care in one major county, U.S. Centers for Medicare & Medicaid Services (CMS) data suggests.

In hospice, the surge of new providers and potentially fraudulent activities has been concentrated in Arizona, California, Nevada and Texas. In home health care, it’s Los Angeles County.

After becoming aware of the data on new hospice openings and following a series of scathing media reports, CMS implemented a Special Focus Program (SFP), effective Jan. 1, while also finalizing a new rule forbidding change in majority ownership during the 36 months after initial Medicare enrollment, including acquisitions, stock transactions or mergers.

In August, the agency additionally announced it was considering administrative action against 400 hospices.

“Unfortunately, hospices are profiting from fraud at the expense of beneficiaries far too often,” CMS said at the time.

Meanwhile, some of the aforementioned states have pushed forward stronger rules and regulations, too. For example, in 2021, California passed two reform laws that included a moratorium on new hospice provider licenses until the state health department weeded out bad actors.

A California Department of Justice (CDOJ) report detailing the state’s history of lax oversight helped fuel that initiative. 

“The state’s weak controls have created the opportunity for large-scale fraud and abuse,” CDOJ indicated in its report.

Back in the spotlight

Hospice fraud and the related oversight efforts were back in the spotlight last week, when ProPublica reported that new hospices in California are still receiving Medicare certification with clear instances of fraud happening in the other states as well.

In one instance last year, 15 new hospices received Medicare certification, all operating from the same two-story building in Los Angeles, according to ProPublica.

In another: A location in Phoenix was approved for three new hospice licenses, all at the same location as dozens of other new providers in the previous two years.

According to a review of Medicare claims data shared with Home Health Care News and Hospice News, California had 102 newly enrolled hospices in 2023. In Arizona, the number of new hospices increased by 25 during the same period, while Texas and Nevada saw 72 and 25 new providers, respectively.

Across the board, no other state experienced an influx of more than 15 new hospices, with most states reporting single-digit enrollment figures.

In total, approximately 69% of all newly licensed hospices in 2023 were situated in Arizona, California, Nevada and Texas.

The review was conducted by an industry source familiar with the Medicare claims data. This source also told HHCN and Hospice News that multiple new hospices had been enrolled in California since the time ProPublica finalized its story.

Industry groups, such as the National Hospice and Palliative Care Organization (NHPCO), are taking notice.

“While CMS has implemented many of our program integrity recommendations to root out bad actors, the data make it clear that more needs to be done, and that the hospice Special Focus Program is not the right tool for fraud prevention,” Ben Marcantonio, NHPCO COO and interim CEO, told Hospice News in an email last week.

The home health connection

The numbers point to something similar possibly happening in the home health industry, largely in LA County.

And if that is indeed the case, it casts doubt on how CMS and the Medicare Payment Advisory Commission (MedPAC) gauge the overall home health market, in terms of size and beneficiaries’ access to care.

From the start of 2019 through June 2023, the number of home health agencies delivering services decreased from 8,838 to 8,280 – a market contraction of about 6%. During this same time, however, Los Angeles County’s number of home health agencies delivering services increased from 896 to 1,309 – a jump of about 46%.

With just LA County’s growth removed, the number of home health agencies delivering services in the U.S. fell 12% over that nearly five-year window.

LA County is muddying the waters when it comes to home health utilization as well. Controlling for LA County, there has been a 16% reduction in home health utilization since 2019, according to the data source who spoke with HHCN and Hospice News.

It’s important to note that the 8,838 figure is for home health agencies actually filing claims. There are more than 11,500 actively enrolled home health agencies, but some never provide services.

A timely discussion

LA County’s home health numbers could mean fraud, waste and abuse happening in that market, similar to what was happening with hospice throughout Arizona, California, Nevada and Texas.

More immediately, though, the data tells a less rosy narrative than the one coming from Medicare officials – and the timing around these two views couldn’t be more important.

As the health care landscape has stabilized coming out of the COVID-19 pandemic, CMS has sought to recalibrate the Patient-Driven Groupings Model (PDGM), the mechanism under which home health agencies are paid. Implemented at the start of 2020, PDGM is supposed to be budget neutral, meaning it can’t distribute more or less money to home health care than the previous payment model.

Broadly, CMS believes PDGM has overpaid home health agencies, so the agency has moved forward with adjustments and cuts in 2023 and 2024. The home health industry disagrees with that view, while also arguing that further cuts would jeopardize medicare beneficiaries’ ability to receive care.

Rejection rates for home health agencies reached a record high, averaging 76%, in December 2022, according to industry data. That’s an increase from the denial rate of about 54% seen in 2019.

CMS has pushed back on the notion that access to care is at risk.

“CMS looked closely at our data to ensure the payment rate adequately covers the costs reported by [home health agencies], without creating unnecessary hardship to providers and maintaining access to quality services for all beneficiaries,” CMS wrote in its 2024 final rule. “Maintaining access is one of CMS’s priorities when making policy decisions.”

For 2021, payments to home health agencies in LA County were $1.2 billion, which was 7% of the national fee-for-service spend, even though only 2% of the traditional-Medicare enrollees reside in LA County, according to the HHCN source.

Additionally, spend per traditional-Medicare enrollee in LA County was $1,577 compared to $449 nationally, when controlling for LA County. LA County increases traditional-Medicare enrollee spend per beneficiary by 5%.

If LA County is skewing how the collective home health market is evaluated, it could have profound effects for years to come.

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