On Wednesday, the Addus leadership team shed more light on the factors that led to this decision during a discussion at Jefferies Global Healthcare Conference.

“About three years ago, the state decided they were going to make some changes with CDPAP, and eliminate some providers,” Addus CEO Dirk Allison said during the discussion. “We were not chosen to stay, so we started refusing to accept new business, waiting for that to occur. After about a two-year period, they decided they couldn’t do it, so everything went back to normal.”

Based in Frisco, Texas, Addus provides personal care, home health care and hospice care to over 49,000 consumers through 214 locations spanning 22 states.

Though things went back to normal, in terms of CDPAP, Addus began seeing minimum wage pressures, wage parity pressures and the state had difficulty reimbursing providers, Allison noted.

Additionally, New York has since passed a budget that will designate one statewide fiscal intermediary to oversee CDPAP.

For Addus, the math stopped making sense, so to speak.

“New York authorizes about four times as many hours, per month, as any other state in which we operate,” Allison said. “So normally where we’d get about 50 hours a month, we’re seeing 200 hours a month in New York. It was a program that’s very expensive to run. Their answer was to continue to reduce pricing. For us, while it’s $100 million in revenue, it’s really zero on the bottom line — we were making nothing.”

Brian Poff — CFO of Addus — added that New York was a market where the company saw gross margins in the mid-teens and EBITDA margins in the low- to mid-single digits.

“Run rate basis is running about 3 million in EBITDA, but after taxes, amortization, depreciation it really gets to a literally zero EPS impact, so very little financial impact to us,” he said.

Addus eventually came to the realization that New York wasn’t a stable environment for the company.

“It wasn’t a stable environment … we felt we could take our capital and move it to other states that were more appropriate for our programs,” Allison said. “When we were approached to look at selling it, we decided to make that move. While we hate to leave New York, from a standpoint of financial implication, and the time we’ve had to put in, it’s a good move for us.”

During the discussion, Allison also weighed in on HCS-Girling’s unique strengths that might allow them to see success with Addus’ personal care business, which is now under the former’s belt.

“[My understanding] is that they’re at about a half a billion in revenue,” he said. “They’ve been in New York. Their entire base is in New York, they have relationships in the city. I think they have different inroads than we do. I think we all [believe] there’s probably not just going to be a single [fiscal intermediary] by April next year. Honestly, that may never happen.”

Ultimately, Addus believes that the New York personal care segment that it has now offloaded is immaterial to its business.

The post Why Addus Decided To Leave The New York Market appeared first on Home Health Care News.

The company has established several value-based arrangements across the country, in places like New Mexico, Illinois and Arizona.

“There may be a little bit of difference between them, but I think fundamentally, we get paid for our services at the rate that we normally would,” Brad Bickham, executive vice president and chief operating officer at Addus, said Wednesday during a presentation at B of A Securities Healthcare Conference. “There can be a gain share component to it, so there is an upside component, depending on how we [perform on] certain metrics. Some of those may be related just to rehospitalizations, some may be a combination of hospitalizations and ED usage, and then also looking at quality metrics as well.”

Based in Frisco, Texas, Addus provides personal care, home health care and hospice care to over 49,000 consumers through 214 locations spanning 22 states.

The company has begun to heavily invest in its value-based care program.

One of the ways it’s doing so is through its rollout of a new case management software. The software was a key component in Addus’ effort to scale the program, according to Bickham.

“We’ve moved from having a team of individuals that have been getting changes in condition that our caregivers send to us to now [putting that] into the system,” he said. “The system is now doing risk scoring on clients, so that we can scale it to be able to target specific individuals who actually need to have some sort of intervention. We’re really positive about that development, and what that bodes for the future.”

The software also allows Addus to tweak the algorithm, and improve this risk scoring component, as the company receives more data. This will, in turn, help Addus better determine which interventions work best.

Bickham noted that the payers that Addus is currently partnering with are looking to expand these existing value-based arrangements. Plus, the company is seeing interest from other payers.

“There’s no lack of demand for that type of arrangement,” Bickham said. “It’s really getting with a payer that’s going to be a good partner with you to be able to make sure that, if we’ve got interventions that need to take place, we have an engaged case manager on the other side that can help us make those changes.”

Right now, value-based care is a smaller part of Addus’ overall business. However, the company is hoping to see substantial growth over the next five years.

“Does that mean it grows to three or four times the size it is today? As a billion dollar company, it’s going to be hard to become material for a while, but it is certainly something we’re very excited about,” Addus CEO Dirk Allison said during the discussion.

Looking ahead, Addus is excited about its latest contract.

Allison noted that if it works well, it will help the company form partnerships with more Medicare Advantage providers.

“It’s a small contract, and instead of gain-share we’re taking some risk,” he said. “Now, it’s very minimal. We’re only taking risk for our part, for our hours. We wanted to — I won’t say experiment — but we wanted to enter into a contract with a payer that we could partner together to determine if adding personal care hours can help reduce overall medical loss ratio for their patient base. We’re excited about that. We’ve only been in it less than a few months.”

The post Addus Leaders Believe More Personal Care Will Help Payers With Medical Loss Ratio appeared first on Home Health Care News.

Now that the Medicaid Access Rule has been finalized, home-based care’s company leaders have had time to digest it, and consider what it means for the future of the space. 

While some acknowledge the good in the Centers for Medicare & Medicaid Services’ (CMS) reform efforts, others are facing the grim realities tied to the 80-20 provision.

Home Health Care News recently caught up with these leaders to learn their in-depth thoughts about the Medicaid Access Rule. Here’s what six of them had to say.

***

The finalization of the Medicaid Access Rule presents significant challenges for family-owned and family-operated home care agencies like ours. The rule includes a six-year implementation window and requires that 80% of Medicaid payments be directed toward caregiver compensation. This restricts our ability to cover essential operational costs, as CMS excludes costs such as training, travel and personal protective equipment for direct care workers. Also excluded are all the other costs that come with running a home care agency.

For a small agency with a single location, these provisions are unsustainable. The lack of capacity to absorb these costs like larger agencies might pose a risk to our ability to continue providing care to this vulnerable population.

Moreover, the current fee-for-service model does not allow us to adopt innovative approaches such as value-based care, which could benefit our clients and align with the services provided by our home health partners. This outdated system fails to account for potential savings and quality improvements achievable through alternative care models.

While the Medicaid Access Rule aims to improve care quality, I believe it misses the mark, by leaving smaller home care agencies like ours struggling to survive. We urge policymakers to consider more flexible and sustainable approaches to enable us to continue serving this community and contribute to its well-being.

— Bob Roth, managing partner at Cypress HomeCare Solutions

***

It’s hard to imagine anything more overly prescriptive than the 80-20 provision. It’s as if there was no math taken into consideration in terms of considering what 80% of incredibly low reimbursement rates actually looks like. When you begin to consider the states and regions where minimum wage is the prevailing wage, where are small agencies supposed to source the additional financial resources to comply from a pay rate perspective?

The simple answer to that question is to stop delivering Medicaid-funded service immediately and either A) pivot to a private-pay focused strategy or B) exit the industry via dissolution or desperation acquisition activity. It’s difficult to understand how either of those scenarios yield the net positive return for the workforce or for the home care network at large.

The only bright spot I can potentially glean is that the private-pay market will experience a glut of new, or newly refocused, home care agencies competing for the “middle-class” dollar. As a result, an increased number of players in this space could potentially create a competitive scenario whereby billing rates and pricing are at least temporarily decreased in an effort to gain market share.

— Kevin Smith, CEO of Best of Care

***

As a provider of home care services, we support the stated goal of HHS to expand access to services like ours for Medicaid beneficiaries while providing for a stable ongoing workforce. We were disappointed that HHS elected to keep the 80% payment threshold in place, despite over 2,000 comment letters to HHS from our industry and trade groups over the past year, which pointed out the significant challenges implementing such a provision would create. We believe a nationwide “one size fits all” minimum threshold is contradictory to the goal of ensuring access to Medicaid services, given the wide variance in state waiver programs, which directly affects the administrative burden in individual states.

It is very difficult to project what, if any, impact this requirement would have on our business and even more so now that the implementation date has been pushed out another two years. We will continuously be evaluating the states in which we provide care to determine our ability to continue operations. Those evaluations are based on many factors including the rate of reimbursement, volume of business and programmatic requirements as well as the cost to meet those requirements. All of those factors will likely change over the course of six years. We will also be monitoring legislative action and legal challenges either of which could block implementation of the provision.

— Darby Anderson, executive vice president & chief government relations officer at Addus HomeCare Corp. (Nasdaq: ADUS)

***

I believe the Medicaid Access Rule is a step in the right direction for many of our beneficiaries, especially here in Michigan, where waiting lists for home and community-based services (HCBS) could be lengthy at times. With 13% of Michigan residents living at or below the poverty level, and Detroit facing a staggering 30% poverty rate and 43% child poverty rate, the need for accessible HCBS programs for disabled and senior populations is paramount.

However, I have concerns about the 80-20 rule, as it does not make direct concessions for much-needed increases in Medicaid reimbursements. Most home care agencies operate with 60%-75% overhead costs for payroll and wages, making it challenging to provide services sustainably under the current Medicaid rates. At AAHC, we plan to diversify our offerings into service lines with higher margins, such as hospice, palliative, and ancillary care, to help offset the impact of this ruling.

Despite these challenges, I firmly support our workforce and recognize the realities of the care worker shortage. Ensuring that our home health aides and CNAs earn a livable wage is not only a moral imperative, but also essential for attracting and retaining talented caregivers to meet the growing demand for HCBS in Michigan and the Detroit area.

While the Medicaid Access Rule may not be perfect, it is a positive development for beneficiaries. I hope that continued advocacy efforts will lead to further policy changes and Medicaid rate adjustments that better support HCBS providers and their dedicated workforce.

As a board member of Michigan Home Care and Hospice Association (MHHA), I know that it is one of our top priorities and pushes. By working together, with the states and CMS, I hope we can ensure that vulnerable populations in Michigan and across the country have access to the high-quality home care services they need and deserve.

— Cleamon Moorer Jr., president of American Advantage Home Care

***

Care Advantage shares CMS’ concern with the health of the HCBS workforce, and in particular the need for more sustainable approaches to DCW compensation, especially given the current inflationary environment and rate inadequacy in many state Medicaid programs. That said, we believe the Medicaid Access Rule’s 80% mandate is likely to create a number of unintended consequences, all of which will reduce access to care and quality of care for Medicaid beneficiaries, especially amongst smaller providers and rural communities. Disciplined resource allocation and ROI considerations will need to be an even more important part of an operator’s weekly calculus.

We will continue to significantly scale our business, partner with the payer community through innovative value-based care programs and advocate for increased reimbursement for HCBS. Care Advantage is committed to this public-private partnership, improving health outcomes, and maximizing the value of the HCBS model for the communities we serve.

— Tim Hanold, CEO of Care Advantage Inc.

***

Above all, Help at Home appreciates CMS’ efforts to professionalize Medicaid-funded home- and community-based care, particularly those services that allow elderly and physically disabled individuals to receive care in their homes, as well as the acknowledgement of states’ historic investment in home-based care. We particularly appreciate the allowance for more time for states to prepare for proper data collection, allowances for states to obtain hardship exemptions based on impacts on providers. Additionally, changes to threshold definitions were important to recognize the fact that good, quality home care includes additional direct worker supports such as training and clinical supervision and travel reimbursement to facilitate access to clients, particularly in non-urban settings.

While we acknowledge this is just the beginning of a complex effort to reform HCBS, we’re encouraged by many of the modifications made to the rule based on stakeholder input. Like CMS, we remain committed to our belief that home care workers must be treated as professionals, receive appropriate compensation, and receive care supports that add value to the client/caregiver relationship, helping to coordinate care and connect health care to home care. We will continue to advocate for higher quality, higher accountability and better support for clients and caregivers who provide essential home-based services for our population of Medicaid beneficiaries.

— Tim O’Rourke, president of home care at Help at Home

The post 6 Company Leaders On What The Medicaid Access Rule Means For The Future Of Home Care appeared first on Home Health Care News.

At the start of the week, the “Ensuring Access to Medicaid Services” rule was finalized. The 80-20 provision is, arguably, the most controversial component of the Medicaid rule. In summary, the provision calls for 80% of Medicaid payments for home- and community-based services (HCBS) to be earmarked for direct care workers’ compensation.

On Thursday, Congresswoman Kat Cammack (R-Fla.) introduced a bill to block the U.S. Department of Health and Human Services (HHS) from finalizing the 80-20 provision.

Additionally, the legislation would also block HHS from implementing any similar rules that place a minimum requirement for how much of Medicaid spending on HCBS goes towards direct workers’ wages.

Cammack’s reason for introducing this legislation is her belief that the 80-20 provision will severely limit access to care at a time when providers are already struggling to serve patients.

“The Biden administration’s proposed ’80/20′ rule would require states to spend billions in new unfunded mandates or force HCBS providers to reduce access to care for those who need it most,” Cammack said in a press statement. “Because of top-down demands from the Biden administration, home care agencies can’t keep up with staffing levels and overall care levels while complying with this rule. It’s putting millions of Americans at a sharp disadvantage and only exacerbating the challenging issues we already face.”

Cammack isn’t the only person that has expressed similar concern about providers’ ability to deliver services under the 80-20 rule.

Leaders at organizations like Home Assist Health, the National Association for Home Care & Hospice (NAHC) and Addus HomeCare Corp. (Nasdaq: ADUS) have spoken out against the rule for similar reasons.

“It compromises our network integrity for care at home,” Sara Wilson, president and CEO of Home Assist Health, previously told Home Health Care News. “It makes me nervous, because it could affect our ability to care for the people who we are here to serve.”

NAHC President William A. Dombi took aim at what he believed to be a contradictory rule.

“At its core, the rule is a fundamental contradiction,” Dombi previously told HHCN. “It’s saying, we have all of these things we need to do to improve the quality of care, to improve the lives and the health and safety of individuals. All of those things require administrative expenses to achieve. Yet at the same time, the rule is saying, ‘We’re cutting the available funding for you to implement those same activities we’re requiring.’”

Despite Addus’ pushback against the 80-20 provision, the company believes that it is well-positioned to push for rate increases to combat the rule’s impact. 

“The conclusion is that you have to be big,” Addus CEO Dirk Allison said at the Raymond James conference last month. “That’s not just big nationally, you have to be big in a state. If you look in the states where we are very large, we have a great deal of access to the state government, and can work with them on the reasons why we need increases in rates, which is what it will take for certain state programs to remain competitive, if this goes through. We’re working on that.”

The post Congresswoman Kat Cammack Introduces Legislation To Block 80-20 Rule appeared first on Home Health Care News.

“Today 2%, or so, of our business is what would be called private-pay,” Addus CEO Dirk Allison said during a discussion at the Raymond James conference on Tuesday. “We think that’s a good business, but the problem is that’s just more of a franchise business. To grow from scratch organically would be very difficult.”

What’s more, Allison explained that it is challenging to grow a private-pay business through acquisitions, and because of that, Addus is mainly focused on the Medicaid business.

Based in Frisco, Texas, Addus provides personal care, home health care and hospice to more than 49,000 consumers via its 217 locations across 22 states.

In general, Allison has noticed there’s been a change in the way the health care sector views Medicaid.

“Quite frankly, I’ve been in health care a long time,” he said. “When I started at Addus, nobody really appreciated Medicaid, it was kind of an afterthought. Medicare was the big payer. What we’ve seen in the last eight years is a greater appreciation by individuals, investors. I think the states have really come around, and understand and appreciate the value of personal care.”

For Addus, the pending “80-20” rule has also been top of mind.

Last year, the U.S. Centers for Medicare & Medicaid Services (CMS) proposed a rule that would require at least 80% of Medicaid payments be earmarked for compensation for direct care workers.

Addus has been vocal in its opposition to the proposal, but has lately been more bullish on what the final rule may look like.

“We have spent the last 10 months … telling CMS, and giving our comments, on why this won’t work,” Allison said.

Allison believes that CMS’ intention is to increase access to care, by increasing pay, thus allowing the home care industry to be able to compete with the food and hospitality industry for qualified workers.

However, he disagrees with the agency’s approach to accomplishing this. Allison’s main objection is the negative impact he believes this would have on smaller home care companies.

“Certainly, the big companies would be fine,” Allison said. “We may have a lot of pressure on our margin, but our growth would offset that. But the small mom and pops, of which about 80 to 90% of this industry is, would struggle. In our discussions with CMS, I think they understand that. I think we’ve opened their eyes a bit.”

Allison was also critical of how the rule would apply to all Medicaid-funded home care providers, despite each state having its own unique Medicaid program.

“You can’t put one rate for the entire country,” he said. “With Medicare, if you change the rule one time, it affects every state equally, because there’s just one Medicare program. But if you go into Medicaid, and especially in personal care, we can have one, two or three waiver programs per state, each with different costs, responsibility and requirements.”

The potential finalization of the 80-20 has forced Addus to strategize about how to remain an industry-leading company.

“The conclusion is that you have to be big,” Allison said. “That’s not just big nationally, you have to be big in a state. If you look in the states where we are very large, we have a great deal of access to the state government, and can work with them on the reasons why we need increases in rates, which is what it will take for certain state programs to remain competitive, if this goes through. We’re working on that.”

This might also mean avoiding or leaving certain markets entirely, according to Allison.

“If you got the more western states that are more rural in population, trying to spread regional costs on a smaller amount of business would be very difficult,” he said. “The easiest place to operate are the big states with large urban marketplaces. There might be a few states [we] would either avoid, or consider what to do going forward. Our focus is to take the states where we are today, and drive them to being the No. 1 or 2 market share leader in each of our states.”

The post Addus CEO: Individuals, Investors Have ‘Greater Appreciation’ For Medicaid Now appeared first on Home Health Care News.

That’s generally for good reason.

However, lost in the shuffle at times are the middle managers who are consistently leaned on to execute a CEO’s vision and create a winning and sustainable culture.

“We spend a lot of time, as an industry, talking about the direct care workforce and the CEOs, but there is this middle tier of folks that don’t get a lot of attention,” Darby Anderson, chief government officer at Addus HomeCare (Nasdaq: ADUS), told Home Health Care News. “Yet, they are critical pieces to the successful delivery of home care services.”

The Frisco, Texas-based Addus currently provides home-based care services to about 47,500 individuals through 203 locations across 22 states.

The role of middle management

Middle management positions include clinical managers who ensure compliance while training staff on medical procedures. They also include, for instance, client services managers who act as a point of contact for clients and coordinate care plans.

Those managers — all the way from the clinical side to the financial team — play a critical role in an agency’s operational success.

A recent analysis from McKinsey & Co. found that strong middle leadership is linked to improved financial performance and talent development.

“They’re the local business leaders,” Anderson said. “They are driving business development. They’re maintaining local-level referral sources. It’s their job to instill those cultures, beliefs, new programs and initiatives, while also problem solving.”

Business hierarchies are different at every company. A middle manager can mean several different things.

One of the most difficult positions in that area at Addus is a service coordinator, Anderson said.

“A lot of agencies call them supervisors,” Anderson said. “These are the folks that have to do the aide hiring, onboarding, training, scheduling and payroll processing. They are the customer service line to the referring case managers. They handle the problems with consumers, problems with families, problems with aides and all that kind of stuff. That’s really an unsung position.”

The success of – and support for – these middle management positions is also a key contributor to financial longevity.

“If you don’t have a good revenue cycle management team to fight with payers, with states and with Medicare to get paid, then you don’t have the cash flow to make payroll,” Anderson said. “Particularly within smaller agencies – where that might be a more local function – it’s critical. You have to get paid on time and you have to get paid fully. In a world of shrinking reimbursements, you have to minimize AR to have cash flow to pay your employees.”

Recruiting, retaining top talent

It’s important for agencies to not only hire the right middle managers but also to hold on to them.

The same McKinsey report revealed that 55% of managers are actively seeking a new role. At the same time, only 31% said they are being engaged at work.

“If you match up those cultural aspects, then you’re more likely to keep that retention at the middle manager level,” Griswold CEO Michael Slupecki said at Home Health Care News’ FUTURE conference. “Which I think also drives caregiver retention and recruitment. Everything flows from the top.”

The Blue Bell, Pennsylvania-based Griswold provides personal care services via more than 170 locations in 30 states.

Slupecki and his team take pride in their ability to have a good feel on this middle management team tier, he said.

“Our home office structure is only 30 people, and then we have eight company-owned locations that are operated by another 30 people,” he said. “For an organization our size, it’s really easy to keep the pulse on everything.”

When it comes to recruiting and finding good middle management people, Slupecki looks for two key qualities.

“I look for tolerant perfectionists,” he said. “There’s a lot of perfectionists out there that are very intolerant. Tolerance is something that comes with maturity. When we target those people at the mid-levels, we might have to coach them up on accepting the fact that not everybody is a perfectionist.”

Cultural tone setters

When John Kunysz says it out loud, he knows it sounds like corporate talk.

“What you absolutely have to do — as the C-level leader in your organization — is culture and vision orientations with your teams,” Kunysz told HHCN. “I know it sounds painful. I know it feels painful. But it’s worth it.”

Based in Dallas, Intrepid USA provides home health and hospice services, with over 80 locations spanning across 18 states.

Prior to the COVID-19 pandemic, Kunysz gathered all of Intrepid’s administrative staff, sales leadership, sales teams and clinical teams for three separate weekends.

During those meetings, team members were given an opportunity to get to know their colleagues. At the same time, those in middle management used that time to understand Kunysz’s vision and how to implement it.

“It was personalized,” Kunysz said. “It wasn’t a canned pitch. I did my research and knew who was an NCAA swimmer at Western Kentucky. Some of our people on those calls told me that they had never had that kind of connection with a CEO in their 30 or 40 years in health care. That kind of connection is what’s going to be required for us to succeed with these team members.”

Open communication also eliminates the space for gray areas in job performance and expectations.

“It’s really simple,” Kunysz said. “These types of strategies give absolute clarity of what’s expected.”

A lot of buzz terms that are talked about so often – innovation, growth, technology enablement – are only achievable with a healthy middle management team.

“The business graveyard is full of innovative companies that couldn’t execute,” Slupecki said. “To execute, you first have to have the right people on the bus. When you have the right team, you can supply them with the right tools and challenge them to be innovative. But always start with building the right team.”

The post Why Middle Management Is So Critical To Home-Based Care Providers’ Success appeared first on Home Health Care News.

Many of the comments included gratitude and appreciation for CMS regarding its efforts to enhance the HCBS workforce. But concerns persist over how the rule would affect HCBS providers across the country.

“While we understand and appreciate the linkage between caregiver wages and recruitment and retention, the non-uniformity of state program requirements and the disparity in reimbursement rates — both across and within states — preclude the implementation of a standard minimum percentage threshold for direct care workers’ compensation,” Darby Anderson, EVP and chief government relations officer for Addus HomeCare Corporation (Nasdaq: ADUS), wrote in a comment.

The Frisco, Texas-based Addus currently provides home-based care services to about 47,500 individuals through 203 locations across 22 states.

Like many of his colleagues across the industry, Anderson wrote and reiterated what others have told Home Health Care News when the proposed rule came out: that implementing a standard minimum percentage threshold without studying the potential impacts of the 80% rule will likely result in unintended consequences.

Those consequences could include smaller providers going out of business and larger providers leaving certain markets, thus reducing access to care.

One of the most consistent criticisms of the CMS rule is that it essentially puts blanket Medicaid regulations over the whole country, which could create issues because each state operates its Medicaid program differently.

In drafting the proposed rule, CMS used two states — Illinois and Minnesota — as examples of how a nationwide Medicaid rule would be rolled out. However, dozens of providers and advocates took issue with using those two states as examples.

To start, neither state requires an 80% threshold. And even within the thresholds — Illinois is set at 77% and Minnesota is at 72.5% — there is reasonable wiggle room for providers to spend money elsewhere.

“CMS has not proposed the 80/20 mandate consistent with either of the two states it references nor has it produced data which indicates whether these initiatives were successful in raising wages or expanding access,” Barbara Merrill, CEO of the American Network of Community Options and Resources (ANCOR), wrote in a comment.

ANCOR is a national organization that represents more than 2,000 private community-based care providers.

Commenters took issue with CMS not showing its work in terms of how it got to the 80% number. They similarly took issue with a lack of supporting evidence and data.

“CMS [does not] cite any data or evidence that the 80% threshold is likely to improve direct care workers’ wages in low reimbursement states,” Anderson wrote. “More pointedly, CMS does not state how requiring HCBS providers to pass through 80% of a very low reimbursement rate will materially raise direct care workers’ pay rates or address the current workforce crisis.”

Meanwhile, groups like the Partnership for Medicaid Home-Based Care (PMHC) provided data of their own from a survey that showed 54% of participating agencies would go into the red if the rule were implemented.

On top of that, an additional 35% of agencies would “narrow service offerings or geographies served.” Over 92% of providers said they would be challenged to take on new referrals.

Some advocates even believe that the proposed rule will have the opposite effect on wages for caregivers.

“We want to stress that this provision is not only unworkable, it’s likely to have the opposite impact as intended,” Harrison Collins, director of legislative affairs and public policy with the Home Care Alliance of Massachusetts, wrote in a comment. “The rule misses the mark because it does not address one of the most significant reasons that the current workforce crisis exists: the consistent, pervasive, underfunding of Medicaid HCBS payment rates.”

Requiring 80% of reimbursements to be passed through to direct care workers, Collins wrote, only redistributes the reimbursements that are “substantially underfunded” in the first place.

The success of a state’s HCBS program is dependent on providers’ participation in that program.

Their participation, at the same time, is dependent on a sufficient payment rate structure for the delivery of services.

“Unless state Medicaid reimbursement rates under HCBS programs increase to cover the federal wage passthrough requirement, the proposed rule will result in individuals going without essential community-based LTSS and eventually being forced into facilities,” Stacey Smith, VP of public affairs with AccentCare, wrote in a comment. “[That would result in] the institutionalization of individuals and greatly increase costs to the program.”

The Dallas-based Accentcare is a provider of home health, hospice, palliative care and care management services. It offers HCBS to over 14,000 Medicaid beneficiaries and employs over 15,000 direct care workers at 260 locations across 30 states and Washington, D.C.

What happens next

The public comment period for the Medicaid proposed rule closed at the beginning of July. Hundreds of respondents mentioned their recommendation would be to withdraw or remove the 80% rule entirely.

Some, like Care Advantage, offered other solutions. One of those solutions was for CMS to change the definition of compensation to include costs that come with training, technology investments, recruiting and onboarding costs.

“In addition to broadening the definition of compensation, states should also be given the flexibility to allow providers in their jurisdiction to include other costs as necessary,” CareAdvantage CEO Tim Hanold wrote in a comment. “This will help ensure that providers in states that are more heavily regulated are not punished — and clients are not harmed — by a compensation definition that is too narrow.”

The Richmond, Virginia-based Care Advantage is a home-based care company that has 51 locations throughout Virginia, Maryland, Delaware, Washington, D.C., and North Carolina. The company offers both personal care and home health care services.

Hanold also recommended CMS give providers more time to adjust to the new rule if it is implemented. As it’s written now, the proposed rule would give providers a four-year implementation timeline for the direct care worker mandate. Dozens of comments urged CMS to lengthen this timeline.

More clarity on what CMS ultimately plans to do should come in the third or fourth quarter of this year.

The post Home-Based Care Providers Break Down ‘Unintended Consequences’ Of CMS’ Proposed Medicaid Rule appeared first on Home Health Care News.

The Appendix K waiver allowed HCBS providers more wiggle room during emergencies, such as the COVID-19 pandemic. CMS introduced the waiver to support states in responding to the unique challenges brought on by the public health emergency.

Under the previous policy, these flexibilities were set to expire six months after the expiration of the PHE — Nov. 11.

However, the new guidance suggests that these flexibilities may remain in effect for a longer period of time beyond the six-month timeframe.

“In the name of minimizing disruption to beneficiaries, providers and states, CMS is issuing this extension of the Appendix K expiration date,” CMS wrote in its guidance. “States are nevertheless strongly encouraged to submit their section 1915(c) waiver actions and section 1115 demonstration amendments as quickly as possible to minimize Appendix/Attachment K extensions for unreasonably long periods of time.”

In its guidance, CMS also wrote that if a state has not submitted a waiver action or demonstration amendment to incorporate certain Appendix K flexibilities, the flexibility would expire on Nov. 11.

During the PHE, states utilized various flexibilities permitted under Appendix K — the use of telehealth or remote service provisions, increased payment rates and the expansion of self-directed service delivery models — to make changes to their HCBS programs.

Although it is likely good news for HCBS providers, Darby Anderson — EVP and chief government relations officer at Addus HomeCare Corporation (Nasdaq: ADUS) and the public policy committee chair for the Partnership for Medicaid Home-Based Care (PMHC) — said he was not surprised by the move.

“I don’t think lapsing of Appendix Ks alone is a daunting challenge for most states — but coupled with the redeterminations and other requirements of unwinding from the PHE — I think any additional responsibilities on states are taxing at this time,” Anderson wrote in an email to Home Health Care News. “We have seen states struggle of late with the timely submission and receiving approval from CMS of submitted waiver amendments, so this will add to the volume of amendments to draft and submit and for CMS to approve.”

Because of that, CMS recommends states still submit their waiver submission as soon as possible.

Some of the flexibilities provided through the Appendix K authority during PHE have proven to be sound policy, Anderson said.

“Although they change current policy requirements, they have not had any detrimental impact on beneficiaries, created benefits for direct care workers and/or efficiencies for providers,” Anderson wrote. “Online or other virtual in-service training capabilities creating flexibility for direct care workers and other telehealth capabilities are just a couple of examples.”

States will not need to amend existing and approved Appendix K applications to take advantage of the extended expiration date, CMS said.

Instead, the new guidance serves as the “necessary documentation for states’ approved Appendix K applications to expire on either Nov. 11 or the effective date of the section 1915(c) waiver amendment,” whichever comes later, the agency wrote.

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Home-based care dealmaking trends generally give a good idea of what’s going on in the space at large.

They show you where the money is headed, and where it’s not. They show you where the Centers for Medicare & Medicaid Services’ (CMS) stroke of the pen has impacted investment or transaction activity. The trends show you who’s hot in the home-based care space, and who’s not.

Therefore, close attention has been paid to the transaction dip in home care, home health and hospice this year. But, in the meantime, it’s possible that we’ve all been missing the forest for the trees.

While home-based care deals are down through the first half of 2023 (though slightly up in Q2), so are health care deals generally. In fact, transaction activity is down at a national level, across industries.

Interest rate increases, staffing shortages and even the Ukraine war have played a hand in a slower dealmaking year in home-based care. Those factors have also led to a 38% decrease in M&A activity globally, however, according to data from Refinitiv.

“It’s not even just health care,” Dexter Braff, the president of the M&A firm The Braff Group, told me. “If you look at different deal flows from the broader M&A market, you would see almost a mirror image of what we’re seeing in health care. This is being felt across the global mergers and acquisitions environment – in geography, and then across industries as well.”

If we can accept the premise that deal flow is largely being dictated by forces outside of home-based care companies’ control, we can enter a much more interesting conversation.

Of the deals that are getting done in home-based care, which are the most interesting – and why?

Finding the broader stories behind the most intriguing home-based care transactions thus far in 2023 is the goal of today’s exclusive, members-only HHCN+ Update.

Home-based care deal trends

The Federal Reserve announced this week that it would raise the interest rate by another quarter point, hiking it to 5.5%, the highest it has been in decades. It’s doing so to combat inflation, which has finally slowed of late.

For now, that still makes for a tough operating environment for potential buyers in the home-based care space, like private equity firms.

PE firms pulling back is due to the aforementioned factors impacting M&A as a whole. Therefore, health care services deal numbers mirror home health and hospice deal numbers.

“I think [those interest rates] are keeping buyers skittish, and they’re not quite ready to jump in feet first,” Braff said. “And the health care market is so tied in with private equity – we see that private equity across all of the health care services that we cover accounts for a little bit more than 50% of deal flow.”

But those PE firms eventually have to spend the cash they have on hand. That’s why Braff is bullish that dealmaking could tick up in the near-term future, despite any internal factors at play in home care, home health or hospice.

“They have to spend money; they can’t just sit on their cash for long periods of time,” Braff said. “They will come back, if for no other reason than that they have to deploy their money. That would suggest to us that, sometime in 2024 – maybe it’s not the first quarter, maybe it’s the second quarter – we will almost assuredly see a ramp up. We’ll also see, particularly in the home health arena, rates settled.”

The most intriguing deals

Addus HomeCare Corporation (Nasdaq: ADUS) is a self-proclaimed conservative buyer.

Its leaders have reiterated over the last couple of years, however, that it plans to increase its value-based capabilities by layering home health services on top of personal care services in its biggest markets.

It did just that in the second quarter with the acquisition of Tennessee Quality Care in a $106 million deal.

Addus already has eight locations of its own in Tennessee, and will now be adding Tennessee Quality Care’s 17 locations and 1,800 daily patients to its portfolio. While Tennessee appears to be a sizable, quality home health care provider – an increasingly rare find – it also operates in a certificate-of-need (CON) state.

Through the acquisition, Addus has accomplished its stated goal in another state.

While CMS proposals in both home health and personal care threaten to damage the company’s business, it is setting itself up to be a future-facing, value-based player.

Earlier in the year, another home health care provider – Amedisys Inc. (Nasdaq AMED) – honed in on its core service lines by offloading its personal care business to the Massachusetts-based HouseWorks.

Backed by InTandem Capital, HouseWorks is a mostly regional home care provider with optimistic growth plans for the future. In the Amedisys deal, it took over 13 care centers.

While the home care industry is incredibly fragmented, most of the largest providers are franchises. HouseWorks is not.

In Braff’s opinion, its deal with Amedisys is one of the most interesting of the year thus far.

“There has been a fair amount of private-duty transactions, but not of that scope,” he said. “That’s significant in terms of the confidence [InTandem] had in the private-duty market. But also, HouseWorks had more of a private-pay focus, but with the Amedisys acquisition, they’re now significantly in Medicaid as well.”

HouseWorks CEO Mike Trigilio also drew excitement from that payer diversification opportunity after the deal.

“Now there’s going to be data connectivity through such a large employee base that’s going to be consistent,” he told me in February. “In Massachusetts, there are roughly 35 different types of payer contracts that are signed between Associated Home Care (AHC) and HouseWorks. Imagine a world where you have 4,000 to 5,000 caregivers delivering the same care, on the same platform, to all of those payers. There’s a great value in that data that we’re able to give to them.”

Amedisys – unbeknownst to most at the time – was also on the verge of selling its entire business. Originally, Option Care Health (Nasdaq: OPCH) entered into an agreement to acquire the company. Then, UnitedHealth Group’s (NYSE: UNH) Optum swooped in and won out on the bidding process.

That deal has been covered extensively, as Optum also completed its acquisition of the home health giant LHC Group earlier this year.

What I was more curious about – which hasn’t been explored yet – is what effect Optum’s entrance could have on the broader home-based care M&A market.

“If one or two PE firms jumped into a market that nobody else has jumped into in any significant way, the follow-the-leader activity is typically extraordinary,” Braff said. “With UnitedHealth Group, they’re such a unique and strategic buyer that something that they do would not, in my mind, change behavior.”

The first half of 2023 also brought us CenterWell Home Health’s first major transaction since the dust settled on its rebranding. A part of Humana Inc. (NYSE: HUM), CenterWell Home Health is made up of the assets of what was formerly Kindred at Home.

Specifically, CenterWell Home Health bolstered its footprint in a very crowded and competitive Florida market through the acquisition of Trilogy Home Health. Based in West Palm Beach, Trilogy has 11 locations across Florida and offers home health, home care and care management services.

It had been unclear how aggressive Humana and CenterWell would be acquisitively. But the Trilogy deal was a sizable one, and a sign that if there’s a good target out there, they’re willing to strike.

The post The Most Intriguing Home-Based Care Deals of 2023 appeared first on Home Health Care News.

Addus Chairman and CEO Dirk Allison called CMS’s proposal the company’s “biggest challenge” over the past several weeks.

“They’re trying to expand coverage with personal care across the United States,” Allison said Wednesday at the Jefferies Healthcare Conference. “They’re also trying to make sure that our caregivers have a living wage, which we believe are two very valid goals.”

Similar to many of his peers in the home care space, Allison zeroed-in on a provision that would make it standard for at least 80% of Medicaid payments for personal care, homemaker and home health aide services to go toward caregiver compensation.

While Addus supports the proposal’s broader aim, the company doesn’t agree with its execution.

“We’ve been very vocal in our support of those goals, since the rule was announced,” Alison said. “I think the question comes around the way they’re attempting to accomplish this goal.”

The Frisco, Texas-based Addus currently provides home-based care services to approximately 47,500 consumers through 203 locations across 22 states.

One factor that makes the CMS proposal an issue is that providers are all operating in different home care environments. There aren’t consistent standardization requirements across the board.

“Every state has different rules, regulations, qualifications and, quite frankly, very different hourly rates,” Allison said.

The CEO pointed out that in a state such as Illinois, for example, the hourly rate is almost $28, but there are other states where the rate is closer to $15. Setting a compensation mandate with that degree of variation would be difficult, he explained.

Addus already passes 77% of reimbursements to caregivers in Illinois, and Washington and New York are already above 80%, according to the CEO.

During the investor presentation, Allison also called for more clarification around the proposal’s provisions.

“How do you define revenue,” he said. “In certain aspects, you don’t always collect 100% of what the state allows you to bill.”

Overall, Addus is critical of the idea that one rule could apply to many different types of providers working in vastly different operating landscapes.

“We don’t believe one-size-fits all is the way to go,” Allison said. “We believe that we need to continue to work to give [CMS] data, so that they can come up with a way to accomplish what they want, but at the same time, not hurt the industry.”

If the proposal is finalized as is, it will impact the types of companies making up the home care industry, Allison noted. In terms of timing, however, it could take upwards of four years for implementation.

“If it goes through at 80%, you’re going to see a vast majority of the small mom and pops go out of business,” he said. “In states like Illinois, they’ll probably do OK, and maybe New York and Washington because you’re already there. In these other states, mainly the Southwestern states where you’re paying $7.25 an hour minimum wage, that’s where you’re going to have difficulty.”

Addus has been working with home-based care advocacy organizations, including the Partnership for Medicaid Home-Based Care, to adjust the CMS proposal. Currently, PMHC, the National Association for Home Care & Hospice (NAHC) and the Home Care Association of America (HCAOA) are seeking an extension to the proposal’s comment period.

Beyond the CMS proposal, Allison also touched on Addus’ growth outlook for the year on Wednesday.

“In the personal care arena, there’s still a lot of room to grow,” he said. “I think one of the things that the Biden administration is trying to do, and it should be complimented [for this], is expand access to care. There’s a lot of waiting lists for people that would like to have this service that are not having that today.”

On the clinical side, Addus has seen some improvement in its ability to hire clinicians over the last six months, but this is still a growth roadblock for the company.

“We’re hoping it continues to get better, but that has been a challenge and we believe it will remain one for a bit,” Allison said.

Personal care is likewise still hindered somewhat by workforce challenges.

“In comparison to last year, their situation has improved considerably with the PC service fill rate rebounding to the high-80s after dipping to the low-70s in the midst of the pandemic,” an analyst note from Jefferies reads. “Mgmt reiterated their goal to hire an incremental 3-5% caregivers to their workforce and believe that the recruitment landscape is more favorable as gov’t supplemental funding programs … have ended.”

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