Home health providers have lately been hamstrung by payment rate cuts, staffing woes and Medicare Advantage (MA) penetration. However, despite these obstacles, the industry still holds significant potential and numerous untapped opportunities.

Looking ahead to 2025, it is anticipated that M&A, updated payment models, and innovations in staffing and retention will be key themes. Additionally, home health providers are keenly interested in artificial intelligence (AI) and its potential impact on care.

Anticipating an uptick in transactions

Since 2023, there has been a significant decline in the volume of transactions in home health care. This decline has been primarily attributed to inflation, uncertainty surrounding Medicare payment changes, high interest rates, and sellers’ reluctance to accept valuations considerably lower than the unprecedented highs seen during the pandemic.

This decrease in transaction volume over the past couple of years has resulted in a backlog of home care agencies looking to sell in the coming year, according to The LTM Group CEO David Kerns.

The LTM Group, based in Dayton, Ohio, provides home health, personal care, hospice, and rehabilitation services through multiple locations. The organization collaborates with health care systems and payers to deliver care to patients in Indiana, Ohio, Michigan and Texas.

Another significant factor that could be creating acquisition opportunities is the retirement of home health operators. Every day, over 11,000 Americans are turning 65, according to the American Association of Retired Persons.

“It is estimated that over the next few years, we will see one of the most significant business shifts from one generation to the next as local home care agency owners retire after having spent their entire lives building companies,” Kerns told Home Health Care News. “They want to see their legacy continued and this often means a sale to a larger organization.”

Reimbursement changes could lead to a promising future

An increase in the number of Medicare Advantage (MA) participants could lead to significant changes in the upcoming year, according to William A. Dombi, president of the National Association for Home Care & Hospice (NAHC).

Currently, providers are experiencing financial losses due to reimbursement rates, as the number of patients enrolled in MA continues to rise.

“I believe we’re reaching a point where plans are starting to be more open-minded, intelligent and willing to do two things: Listen to data on value and consider trying more innovative [approaches],” Dombi told HHCN.

Dombi believes that to see more positives in home health care, there must be a shift to updated payment models, rather than the per-visit discounted rates providers have worked with for years.

“If we don’t see this opportunity materialize and be realized, we will have an incredibly challenging future,” he said. “You can’t survive when a growing portion of your patient census costs more money than you’re bringing in. However, signs indicate that companies are finally realizing that trying to cut costs leads to poor results.”

Dombi said that states are realizing that reimbursing providers at a discount isn’t effective for staff retention. As a result, some are increasing payment rates to enable care agencies to pay a more livable wage.

“An opportunity lies in the continued improvement of reimbursement rates from state Medicaid programs as well,” Dombi said. “This will, to some extent, address the workforce shortage crisis, especially in the personal care attendant and home care aide sectors.”

The rise of AI

As the population ages, people are seeking more home care, whether for healing, rehabilitation, or personal care. This calls for staff that is currently in short supply. Thus, many organizations are turning to artificial intelligence (AI) to provide efficiencies, allowing caregivers to spend more time with patients and less time with paperwork.

“When evaluating potential acquisitions, we employ the fax machine method,” Kerns said. “This involves identifying manual processes such as faxing, hand-entering orders and manual authorizations – areas where our organization can add significant value post-acquisition.”

Over the past five years, The LTM Group has focused on automating processes and enhancing technological capabilities, according to Kerns. These automations include everything from revenue cycle to documentation.

While AI can assist providers with documentation, it can also keep physicians updated on their patients.

“AI in home care elevates and enhances the level of care available to our clients as they seek to age in place,” Bruce McReynolds, the CEO of a Griswold home care location, told HHCN. “We can better implement preventative services to keep our clients at home longer and prevent significant events that negatively impact their quality of life. From a business perspective, AI helps us speak the language of our partners in acute care. We can better demonstrate value within the overall care continuum.”

Griswold Home Care is a large non-medical home care company. McReynolds operates a location in Greensboro, North Carolina.

“We must establish connections with primary care physicians and monitor patients more closely,” Bayada President and Chief Operating Officer Heather Helle told Home Health Care News. “Overall, [with using AI], we will see a greater integration and coordination of care within the home, which is crucial for providing the best care for clients.”

Bayada, headquartered in Moorestown, New Jersey, provides a full range of clinical care and support services in the home for children and adults including hospice, behavioral health, and rehabilitation.

Helle believes the home care industry will continue to see new services, some of which may not be hands-on care, but other tools and technologies that help people thrive and live comfortably, independently and with dignity in their homes.

“Home care is an exciting sector to be a part of,” she said. “I think there’s a lot of growth opportunity and I think we’ve got a lot of tailwinds. It’s a great place to be right now.”

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A name for the combined organizations is still to be determined. For now, it is being referred to as the NAHC-NHPCO Alliance.

“The NAHC-NHPCO Alliance will be the leading authority and unifying voice of the care at home community,” NAHC Board Chair and Chair-Elect of the Alliance Kenneth Albert said in a statement. “The leadership of both organizations have worked for 18 months to make this happen and the talented staff at NAHC and NHPCO are already hard at work integrating the two organizations. Together, we will make home the center of health care.”

NAHC and NHPCO are two of the largest home-based care advocacy organizations in the country.

“This alliance between NHPCO and NAHC will create the most powerful voice the care at home community has ever had,” NHPCO Board Chair and Vice Chair-Elect of the Alliance Melinda Gruber said in a statement. “For members, it means access to the best education and expert advice, as well as a strong advocate for sensible policies that help providers deliver the best possible care to the millions of Americans who need it the most.”

William A. Dombi, the president of NAHC and one of home-based care’s most prominent advocates, will remain active in his role until the end of the year.

After the merger is completed, he will be retiring.

“The affiliation of NAHC and NHPCO is a historic event,” Dombi said in a statement. “Unifying the voice of health care at home has been a longstanding goal of NAHC, as it is the essence of the original formation of NAHC in 1982. Combining our two organizations will significantly strengthen that voice for the benefit of our members and the patients they serve.”

The integration process is also expected to take until the end of the year, according to the organization.

A “robust” search for a CEO of the new organization is also underway, with “dozens” of candidates being considered. 

NAHC and NHPCO first began to explore a potential combination at the beginning of last year.

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The Medicaid Access Rule has been finalized, with six years until the implementation of the 80-20 provision. There’s no time to rest for home-based care providers and advocates on the regulation front, however. Summer is near, and that means so is the home health proposed payment rule from the Centers for Medicare & Medicaid Services (CMS).

In 2022, a significant proposed cut to home health payment mostly took providers by surprise. In 2023, it was expected. And, unfortunately, the home health industry is expecting more of the same in the next proposal.

The counter to CMS’ rate cuts and attempted clawbacks remains the same in 2024, and it is all-encompassing: grassroots action from providers locally; a lawsuit against CMS and the U.S. Department of Health and Human Services (HHS); a push for Congressional support and direct pleas to CMS to rethink its methodologies.

In 2024, there’s already been a few major developments on those fronts.

For one, at the end of April, the National Association for Home Care & Hospice’s (NAHC) lawsuit against CMS – first filed in July of last year – was dismissed by a federal judge. Though an unfortunate update to the situation, NAHC President William A. Dombi proclaimed the legal battle far from over.

“We are disappointed with the court’s ruling,” Dombi said. “However, it is a minor setback that we can readily overcome. Often justice delayed is justice denied. Here, we will have our day in court. This battle is far from over.”

Meanwhile, last week, Sens. Debbie Stabenow (D-Mich.) and Susan Collins (R-Maine) sent a letter to CMS Administrator Chiquita Brooks-LaSure strongly advocating against further cuts to home health payment.

“We appreciate CMS’ commitment to helping people get the care they need, where they need it,” the senators wrote. “This must include home health services for people with Medicare. As CMS proceeds to develop Medicare home health payment rates for 2025, we urge you to consider the value home health care provides to the Medicare program and its beneficiaries.”

There’s a lot going on in Washington, D.C., this year. Providers and advocates will have to find a way to cut through the noise to get the attention of lawmakers with the ability to prevent further cuts.

This week’s members-only, HHCN+ Update focuses on the next five months in home health payment policy, and what the industry expects is ahead of them.

More cuts ahead

There’s not a provider I’ve talked to this year that expects anything but further proposed cuts in June or early July. That’s because CMS made it clear in last year’s final rule that there would be more to come on the cutting front.

Partnership for Quality Home Healthcare (PQHH) CEO Joanne Cunningham forecasted another “doomy, gloomy” home health policy landscape for 2024 in January.

But Cunningham also believes that 2024 being an election year works in the industry’s favor.

“We know that Congress in an election year is very keenly tuned into the needs of their constituents,” she told me. “We are very hopeful. With some of our Congressional advocates, we’re looking for solutions that could make their way into a package that Congress will undoubtedly be moving, dealing with Medicare provisions. Our goal is to make sure that home health is part of that.”

Previously, lawmakers have introduced the Preserving Access to Home Health Act. Similar bills were introduced in 2022 and 2023, both in the Senate and the House. The latest version would have mitigated cuts, and also forced The Medicare Payment Advisory Commission (MedPAC) to take a more holistic view at home health reimbursement by including Medicare Advantage (MA) payments.

After two years of cuts – a 2.890% cut last year, and a 3.925% cut the year before – providers would likely take any respite, but respite is not the goal.

CMS has proposed more severe cuts than it has finalized of late, allowing the overall aggregate payment adjustments to come in as slightly positive. But those positive adjustments are just positive on the surface, which is a story PQHH, NAHC and the provider community are trying to tell.

Since 2020, CMS has either implemented or announced over $19 billion in cuts through 2029, according to PQHH. As laid out on the chart above, these cuts will have a compounding effect over time.

CMS has dismissed providers’ access-to-care concerns over the last few years, and it has not wavered on its strategy.

“In working with folks from CMS, I find I’m generally very impressed with smart people trying to do good work,” Michael Johnson, the president of home health and hospice at Bayada, told me last year. “I always try to make sure I don’t vilify these folks, because I think they really are trying to do good work. But the primary tool they have is payment. All they have is a hammer. So, if you need a screw adjusted, you’re still using a hammer, and we know what the outcomes of that look like.”

Clawbacks

Providers are up against that hammer, and the result of it is the chart shown above.

But CMS is also attempting to claw back “overpayments” it made to providers in 2020-2022: $873 million in 2020, $1.2 billion in 2021 and $1.4 billion in 2022.

At this point, every year that the home health industry does not fully win its fight against CMS, the potential impact of cuts and clawbacks for future years gets worse.

VitalCaring President Luke James and I had a conversation about those clawbacks on stage last month at Home Health Care News’ Capital + Strategy conference.

“I hate to beat a dead horse, but this temporary payment adjustment, the longer it just sits out there and doesn’t get enacted – it’s just growing in terms of size,” James said. “I know we’ve been talking about it for three years. And I think we’ve become maybe somewhat numb to that. But the numbers are very large, and they’re like problems; they only get worse if they fester.”

I then asked if James would rather have those clawback cuts implemented now.

“I’d rather have them not implemented at all,” he continued. “I’d rather them see the failed logic that they’re applying. … But if they’re going to implement them, I think I’d rather take a rip-the-Band-Aid-off approach. Because a lack of certainty is what creates a really hard dealmaking market. Certainty – rather than a perpetuity of uncertainty – is a better place, in my opinion.”

At this point in the game, morale is certainly a part of the equation, almost as much as the nuts and bolts relating to fighting cuts. Providers have fought tooth and nail to both survive and advocate for over two years now.

Stabenow and Collins’ letter to CMS is further evidence of the bipartisan support the industry has in Washington, D.C.

But if 2024 isn’t the year that things turn for the better for home health providers, it will be tough to convince smaller providers that the fight is still worth it – yet again.

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In March, the U.S. Centers for Medicare & Medicaid Services (CMS) approved a request from one state to allow more personal care service delivery within acute care facilities. Though not yet widespread, the amendment could open doors for providers and patients needing personal care in alternative settings in the future. 

One change to a Medicaid program may seem negligible, but with Medicaid program directors talking to each other as much as they do – and taking feedback while applying it to their own state programs – the change is worth paying attention to. 

Essentially, this option for additional personal care to be provided to patients in acute care settings was granted during the COVID-19 pandemic, with Rhode Island later on getting approval to make the amendment permanent through a 1115 demonstration.

“CMS has determined that Rhode Island’s demonstration amendment is likely to assist in promoting the objectives of the Medicaid statute by increasing access to high-quality medical assistance coverage for certain low-income individuals,” the agency wrote in a letter to the state’s Medicaid director.

Home- and community-based services (HCBS) providers can now step in and offer care that would otherwise not be a part of a hospital’s care plan. For instance, certain individuals may have needs that hospital staff are unequipped to address, such as dementia or other behavioral challenges, Damon Terzaghi, the director of Medicaid advocacy at the National Association for Home Care & Hospice (NAHC), told Home Health Care News.

That’s one reason that, in particular, the IDD provider and advocacy community was pushing for these types of amendments during the peak of the pandemic. Eventually, the option was included in the CARES Act.

The more care patients can receive in an acute setting, the better. More specifically, the more care they can receive tailored to their specific needs, the better.

Home-based care providers can now step in and elevate the level of care and comfort for patients in Rhode Island.

“The real impetus of this policy is to make things easier for the participant,” Terzaghi said.

He offered a few examples. Take an older adult with dementia who has broken his or her hip and been placed in the hospital. The cognitive issues may lead to challenges that hospital staff are unable to address, potentially leading to a worse health outcome for the patient. At that point, behavioral health care or personal care could be provided by an outside home-based care agency.

Providers wouldn’t be delivering care the hospital is already obligated to provide, but instead augmenting care plans for these types of individuals.

“Having a caregiver that may be a little bit more trusted – or that’s familiar with their own routines, nuances or the specifics of their behaviors – would be extremely valuable in alleviating potential adverse incidents,” Terzaghi said. “Helping the individual calm down, making sure that their needs are matched, and those sorts of things. And then also, just having that person in the hospital helps get them back into the community faster and smoother.”

Popularizing the concept

Rhode Island is a trailblazer in its adoption of Medicaid-funded personal care services in acute care settings, but it’s likely other states will adopt, if there’s positive outcome data driven by the change.

“When a state makes an innovation and has a good experience with it – meaning there’s good cost effectiveness attached to it – other states adopt it,” Darby Anderson, executive vice president and chief government relations officer at Addus HomeCare Corp. (Nasdaq: ADUS), told HHCN. “In this day and age, state Medicaid directors talk, and so do the more programmatic people involved with the programs.” 

Frisco, Texas-based Addus provides home care services that primarily include personal care services that assist with activities of daily living (ADLs). It also delivers hospice and home health services, with its overall footprint stretching across 217 locations in nearly two dozen states.

If more states did adopt the flexibility, it would be a major win for patients, for one. But it would also be a tailwind for providers and payers, though to what extent remains unclear.

Anderson believes the flexibility is already one worth advocating for, but doesn’t see a direct line yet to an upturn in business for HCBS providers.

But, symbolically, further adoption would be a win for the HCBS provider community. There would also be ancillary benefits to providers’ care plans, Terzaghi said.

“What this does do is it increases predictability, it increases the ability of the providers to schedule and assume that, even if this individual does ultimately get admitted to a hospital setting for whatever reason, we’re not going to have to scramble and reallocate hours,” he said. “It’s much more predictable for everyone across the board. I think it’s definitely beneficial to providers, I think that it will increase predictability, and also potentially lead to some revenue upside.”

With the flexibility implemented, the next step is to wait and see how things turn out for Rhode Island.

If HCBS providers, patients and hospitals all benefit – through better outcomes and perhaps some cost savings – it’s the sort of change that could bring on a ripple effect across the country.

“What were the outcomes we saw? Did the benefit to the individuals, providers and the state ultimately demonstrate through the provision of these services?” Terzaghi said. “And if so, will this be something that catches on nationwide and is made permanent? I think that those are really important questions to examine further.”

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Last week, a federal court in Washington D.C., dismissed NAHC’s lawsuit against CMS and HHS.

The lawsuit claimed that CMS and HHS utilized an “invalid” methodology to decide payment, and that recent home health payment cuts were unlawful.

“The primary claim in our lawsuit is that the methodology violated the plain language of the Medicare law,” NAHC wrote in its latest report.

CMS implemented a 3.925% rate reduction for 2023, and a 2.89% one for 2024.

On April 26, the U.S. District Court for the District of Columbia ruled that NAHC skipped an agency review process prior to suing.

“The Court ruling addresses a combination of the NAHC arguments and the defenses presented by the U.S. Department of Justice on behalf of CMS,” NAHC wrote. “DOJ argued that the Court did not have the power to hear any challenges to the PDGM budget neutrality adjustment methodology, that NAHC failed to exhaust all administrative appeal steps, and that the challenged methodology was in compliance with the law.”

Still, NAHC noted that the Court ruled in its favor on something it considers a crucial element of the case.

“[The court rejected] DOJ’s argument that all judicial review was precluded on anything related to the PDGM system,” NAHC wrote. “The Court specifically held that NAHC could challenge the budget neutrality adjustment methodology once administrative remedies are exhausted. Of further note, the Court did not rule on or evaluate the merits of the NAHC claim that the methodology violated Medicare law.”

Last year, the Biden administration asked a federal judge to throw out NAHC’s lawsuit against CMS and HHS.

Looking ahead, NAHC is considering its next move. One of the things the organization is thinking about is appealing the court’s ruling on exhaustion of administrative appeals.

Pursuing a request for expedited judicial review with CMS is also on the table. If a judicial review is expedited, NAHC plans to refine its lawsuit.

“The Court did not rule on the merits of NAHC’s claims that it had violated Medicare laws,” NAHC wrote. “As such, a lawsuit can be pursued once the administrative steps are completed.”

Ultimately, NAHC President William A. Dombi believes that the lawsuit dismissal is a stumbling block, but one that the organization will prevail over.

“We are disappointed with the court’s ruling. However, it is a minor setback that we can readily overcome,” Dombi said in the report. “Often justice delayed is justice denied. Here, we will have our day in court. This battle is far from over.”

In addition to his role as president, Dombi also served as legal counsel to NAHC.

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Since the adoption of the Patient-Driven Groupings Model (PDGM) in 2020, the Centers for Medicare & Medicaid Services (CMS) has cut home health payment by $19 billion through 2029, according to a new analysis conducted by the Partnership for Quality Home Healthcare (PQHH) and the National Association for Home Care & Hospice (NAHC).

Many of the cuts CMS has implemented are permanent, and multiple cuts on top of each other moving forward – plus unsatisfactory adjustments for inflation – are putting significant pressure on providers.

For instance, CMS finalized a 0.8% increase to aggregate payments for 2024 last fall. But in actuality, the agency implemented another permanent prospective adjustment of -2.890%. The year prior, a -3.925% cut was implemented.

Future cuts paint a bleak outlook for providers, which is what NAHC and PQHH are trying to educate lawmakers on.

“One of things we wanted to make sure that we could showcase to Congressional allies was how much home health really has been cut,” PQHH CEO Joanne Cunningham told Home Health Care News. “Providers are suffering and feeling such stress, and having difficulty maintaining their status to deliver care and fulfill their missions. We started off PDGM with a sizable cut. The cuts that have been implemented since then are permanent, they don’t go away. The chart illustrates the stacking effect of these cuts. Then, we projected what we know is coming with future cuts.”

Though this year will be a hectic one in Washington, D.C., due to it being an election year, Cunningham believes that will actually work in providers’ favor.

It will mean that lawmakers have their ears to the ground on the most pressing issues facing their constituents, she said.

“This is the causation,” Cunningham said. “And why we’re seeing the access-to-care issues that patients are experiencing.”

As Cunningham noted, CMS has stated that it will continue to phase in cuts moving forward.

Providers are set to get far less reimbursement for their services in the future.

All the while, more of their patients than ever are under Medicare Advantage (MA) plans. MA tends to already pay far less for home health services compared to fee-for-service Medicare.

“It’s concerning,” Cunningham said. “And it is something that is contrary to what most policymakers want, what most Americans want, what most Medicare beneficiaries want and families want. It is a disconnect. But the good news is that lawmakers seem to understand that.”

What’s more, CMS has also teased future payment clawbacks for perceived overpayments to providers in the past.

Specifically, CMS believes it overpaid by $873 million in 2020, $1.2 billion in 2021 and $1.4 billion in 2022.

Those clawbacks would throw gas onto an already uncontrollable fire for providers.

“The clawbacks are unconscionable,” Cunningham said. “These will be essentially clawbacks for payments that providers received for care that was delivered to patients in prior years. It is unthinkable that any policymaker would want to destabilize the Medicare home health program by instituting those clawback cuts.”

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On Tuesday, Centers for Medicare & Medicaid Services (CMS) officials vehemently backed the thought process behind the “80-20” wage mandate in home- and community-based services (HCBS). Providers and advocates, on the other hand, continued to argue that the policy could be disastrous.

During a press call Tuesday, CMS stuck with the theme that, in general, the status quo in Medicaid needed to be disrupted.

“[These rules] will change for the better how tens of millions of Americans receive care,” Daniel Tsai, the deputy administrator and director of Center for Medicaid and CHIP services at the CMS, said on the call. “I was just on [a call] with stakeholders earlier, and somebody described the set of rules here as ‘disrupting the complacency that too many of us have accepted for the Medicaid program for too long.’ And I think that is exactly what these rules are doing.”

After the White House first teased the impending changes to the Medicaid program Monday morning, CMS published the actual final rule later that afternoon.

Amid Medicaid changes, the most relevant news to home care providers is the aforementioned 80-20 provision, which will force HCBS providers to direct 80% of reimbursement to direct care workers.

“We know that the quality of care is directly a function of being able to attract and retain a high-quality workforce,” Tsai said of the 80-20 provision. “And that is an incredibly important piece for both quality of care and fiscal stewardship of the program as opposed to Medicaid dollars going to administrative overhead and profit. We heard many, many comments on this provision. We finalized it with a strong standard, [while also] taking into account the range of comments that really create some reasonable exceptions, and give providers a little bit more time to be able to comply.”

To that point, the likely provider response will be the oft-repeated saying, “no margin, no mission.”

In other words, while quality care may be tied to being able to recruit and retain workers, a mandate that will squeeze providers’ bottom lines is not the way to assure that connection, most providers believe.

There are unintended consequences, instead, that could be tied to the 80-20 rule’s finalization. For instance, though CMS has said that it will aim to make exceptions for smaller providers, this provision likely puts them in harm’s way.

National Association for Home Care & Hospice (NAHC) President William A. Dombi told Home Health Care News Monday that, essentially, states will need to considerably raise rates for HCBS or providers will be going out of business.

In that case, access to care will be directly and negatively impacted.

The other issues that are being addressed in the Medicaid Access Rule also have to do with the murky systems currently in place to track HCBS and HCBS beneficiaries. The 80-20 provision’s runway is longer than expected – providers have six years to comply – but it’s unclear whether states will be able to capture the correct data to ensure compliance.

CMS even said that, currently, it does “not have good insight into rates” across the country. There’s a long way to go, in essence.

Such a mandate is likely to affect the entire home-based care industry. Providers and investors will likely think twice before entering into – or expanding in – the space, and private-pay providers may be forced to raise their rates to compete with mandated HCBS wages.

“We are 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,” Addus HomeCare Corp. (Nasdaq: ADUS) CEO Dirk Allison said in a statement. “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.”

Allison did add, however, that Addus is pleased with the six-year implementation timeline, as opposed to the four-year implementation timeline that was originally proposed.

“We would expect to see the most significant negative impact from implementation of the rule on smaller providers and the beneficiaries they serve,” Allison continued. “These providers lack the scale and technological capabilities to operate under these requirements and implementation could lead to further industry consolidation. In light of the final rule, Addus is actively pursuing opportunities to address this new industry dynamic with greater scale and with an emphasis on states where we have the best opportunity to engage in meaningful, long-term value creation and partnership.”

Wait-and-see mode

The Medicaid Access Rule is finalized, but the runway to implementation is also longer than previously expected.

That raises the question: What does the industry do now?

Firstly, there will likely be resistance to the rule.

“We also anticipate legal challenges from multiple stakeholders, including states, to prevent implementation of this provision, although the potential outcome of such litigation is unknown,” Allison said.

Challenges will likely come from states themselves, as the 80-20 provision is creating a level of micromanaging between CMS and state Medicaid programs that hasn’t existed before.

“There have been multiple D.C. law firms that have done independent analyses of the proposed rule,” Damon Terzaghi, the director of Medicaid advocacy at NAHC, told HHCN. “And all of them found that the statutory justification was lacking. So, I do think you’ll have states that look at the final rule, that look at the legal analyses that were done, and think that there might be an ability to challenge it. We don’t know for sure. But we do believe this is something that has to be led by the states, and that there will likely be a few who are willing to take the plunge.”

There may be a bit of a political breakdown on the states that are for and against the rule, but there are also traditionally “blue” states that were wary of the provision in the first place.

Potential challenges leave providers in a precarious position, however.

A new administration could be in the White House by this time next year, or the same one could be in place. There could be state challenges, there could not be. There may be exemptions for certain providers, but that isn’t for certain.

Home care agencies don’t want to do an upheaval of their businesses for an unsure thing, but Dombi also doesn’t think they should sit on their hands.

“I would suspect that many of them will be in a wait-and-see mode for a period of time,” Dombi said. “I don’t see the home care providers doing Medicaid today immediately reacting and shutting down out of fear for where it may be in a [six]-year period of time. We would advise against that. Take a more careful, well thought-out pathway to this.”

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Firstly, the timeline of the rule is now clear. Specifically:

– In three years, states must “report on their readiness to collect data regarding the percentage of Medicaid payments for homemaker, home health aide, personal care and habilitation services spent on compensation to the direct care workers furnishing these services.”

– In four years, states must “report on the percentage of Medicaid payments for homemaker, home health aide, personal care and habilitation services spent on compensation to the direct care workers furnishing these services, subject to certain exceptions.”

– Then, in six years, states must “generally ensure a minimum of 80% of Medicaid payments for homemaker, home health aide and personal care services be spent on compensation for direct care workers furnishing these services, as opposed to administrative overhead or profit, subject to certain flexibilities and exceptions.”

The certain flexibility and exceptions are a part of the HCBS payment adequacy provision, which provides states the option to establish “hardship exemptions” and objective criteria for providers that may be facing “extraordinary circumstances.”

There also will be a separate performance level for small providers “meeting state-defined criteria based on a transparent state process and objective criteria.” The adequacy provision also exempts the Indian Health Service and Tribal Health program from complying with certain requirements, CMS said in its fact sheet.

Providers and advocates expressed displeasure with the 80-20 rule being finalized Monday, but there appears to be two parts of the finalized rule that could offer some grace to providers.

The first is a longer runway – six years as opposed to four – and the second is states’ ability to create their own criteria for exemptions, though it is unclear just how much wiggle room they will have under CMS’ watch.

Other provisions included in the rule include the requirement for states to report on Medicaid waiting lists and service timeliness for HCBS, as well as a “standardized set of HCBS quality measures,” which will likely be welcomed news for most providers.

“Ensuring beneficiaries can access covered services is a critical function of the Medicaid program and a top priority of the Department of Health and Human Services, Centers for Medicare & Medicaid Services,” CMS wrote. “The Ensuring Access to Medicaid Services (Access rule) final rule advances access to care and quality of care, and will improve health outcomes for Medicaid beneficiaries across fee-for-service (FFS) and managed care delivery systems, including home- and community-based services provided through those delivery systems.”

The fight to stay in business

After a public comment that drew major feedback – both in volume and in opposition – many top HCBS stakeholders believed that CMS would not go ahead with the Medicaid Access Rule as it was originally proposed in April of last year.

And, while there are certainly added elements and adjustments compared to the proposal, the finalized version is still a disappointing development for the HCBS community.

“Are we surprised? I think disappointed is probably a better word,” National Association for Home Care & Hospice (NAHC) President William A. Dombi told Home Health Care News Monday. “Surprise is probably not what we feel, because this administration has been pretty focused on making this happen from Day One. And when the president references home care in the State of the Union address twice in a row, a lot of signs indicated it was going to be pretty close to the proposed rule.”

Dombi, along with Damon Terzaghi – the director of Medicaid advocacy at NAHC – believed there are parts of the rule that could lead to positive HCBS progress, but that the 80-20 provision will likely overshadow those.

Ultimately, providers’ ability to operate is obviously paramount to greater access to HCBS. With blanket wage mandates, their ability to do so is hindered.

“The reality is, there are all sorts of requirements placed on providers to operate in the Medicaid home care space,” Terzaghi said. “And they are important requirements to protect the health and welfare of participants to ensure quality services are delivered, and to prevent fraud and abuse. All of those are administrative requirements that take money to implement. So, if you’re saying you have to do all of these things to participate in the program, but by the way, you don’t have enough money to perform those required functions, how do you – as a provider – justify continuing to deliver services?”

While the current administration has been supportive of the idea of enhanced home-based care services in the U.S., its strategies to get there haven’t always been backed by providers.

“At its core, the rule is a fundamental contradiction,” Dombi said. “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.’”

CMS could urge states to raise rates so that providers can keep their heads above water with the 80-20 provision in place.

Without that, there will undoubtedly be agency closures, a warning echoed by many industry advocates Monday.

“This goes to the heart of who decides what a Medicaid program looks like in a state, and how it’s operated,” Dombi said. “The broad parameters that are in the federal law clearly set a standard for the structure. But this goes to unprecedented depths of micromanaging that I think you’re going to find the states concerned that, alright, this is the first chapter of micromanaging. What’s the next chapter? What’s the next chapter after that?”

This is a developing story. Please check back later for more updates at homehealthcarenews.com.

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Most importantly, the bemoaned “80-20” provision has gone through as proposed, meaning providers will eventually be forced to direct 80% of reimbursement for home- and community-based services (HCBS) to caregiver wages. 

First proposed by the U.S. Centers for Medicare & Medicaid Services (CMS) in April 2023, the goal of the rule is to enhance access to HCBS for Medicaid beneficiaries. Allocating 80% of reimbursement for wages would help ensure better access, CMS believes, by raising wages for direct care workers.  

“The ‘Ensuring Access to Medicaid Services’ final rule, finalized today, will help improve access to home care services as well as improve the quality caregiving jobs through its new provisions for home care,” the White House wrote in a statement Monday. “Specifically, the rule will ensure adequate compensation for home care workers by requiring that at least 80% of Medicaid payments for home care services go to workers’ wages.”

During the public comment period and otherwise, providers have vehemently argued against the 80-20 provision.

A blanket rule that fails to take into account the different factors affecting HCBS in different markets across the country was – while well intended – a poor measure, according to some of the top home-based care leaders in the country.

Organizations like the National Association for Home Care & Hospice (NAHC) and LeadingAge immediately condemned the rule being finalized on Monday.

“We all agree that more needs to be done to support the direct care workforce; however, this policy will make things worse, not better,” NAHC President William A. Dombi said in a statement. “NAHC remains committed to overturning this devastating policy and instead advocating for more feasible and rational policies that address the root causes of low worker compensation.”

Prior to Monday, providers and advocates argued that small providers would be hurt most, but the White House claims that CMS will find ways around that. 

“This policy would also allow states to take into account the unique experiences that small home care providers and providers in rural areas face while ensuring their employees receive their fair share of Medicaid payments and continued training as well as the delivery of quality care,” the White House statement said.

Outside of the variance in Medicaid HCBS markets state by state, providers also believe the rule does not consider the other investments that they put into the workforce – such as training programs and assistive technology, among others.

“We know that CMS has good intentions and a desire to improve the lives of workers, but this policy is ill-advised and will have serious negative impacts on providers and their clients around the country,” Jennifer Sheets, co-chair of the NAHC Medicaid Advisory Council (MAC), also said in a statement.

Addus Homecare Corporation (Nasdaq: ADUS) – one of the largest providers of HCBS in the country – previously suggested that the 80-20 provision, if finalized as proposed, would force it to exit certain markets. 

NAHC echoed those sentiments on Monday, calling the 80-20 rule “misguided policy that will result in agency closures.” The policy will additionally “force providers to exit the Medicaid program” and “ultimately make access issues worse around the country,” NAHC warned.

HCBS providers have been preparing for the worst-case scenario since the rule was proposed last year, but were hoping for a percentage adjustment or a more holistic approach to the issue of caregiver wages.

“Access to care is a shared goal, and so is increasing compensation for our caregivers,” Care Advantage CEO Tim Hanold told Home Health Care News earlier this month. “I think we’re all aligned around that. The CMS rule started with good intentions, but certainly there’s going to be some unintended consequences if it comes out as written. Rate adequacy really continues to be the main driver for providing appropriate wages, and that is what I believe the administration should focus on to improve access to care.”

As of Monday afternoon, the final rule itself had not yet been released, though it is expected that providers will have four years to adjust to the new provision. 

LeadingAge President and CEO Katie Smith Sloan said that the 80-20 provision is not only ill-advised for providers’ sake, but also may not end up benefiting caregivers.

“On the Medicaid Access rule, the lack of infrastructure for collecting and reporting out accurate information, of financing to support added resource needs, and of data to ensure that the dollars are being distributed as intended, will decrease access to care,” she said. “What’s more, given these shortcomings, there is no guarantee that this rule will increase worker compensation.”

The 80-20 rule is just a part of the Medicaid Access rule. There are other provisions that would aim to help reduce HCBS waiting times for beneficiaries, add additional transparency around those waiting lists and enhance quality reporting.

But, for now, those provisions have taken a back seat.

“It is unfortunate that the final rule included a mandatory pass-through requirement,” David Totaro, the president and executive director of Bayada’s Hearts for Home Care and NAHC MAC’s co-chair, said in a statement. “There are so many positive and necessary changes in the regulation, so it is disappointing that this one provision will undermine all the good things about the rule.”

This is a developing story. Please revisit this homehealthcarenews.com later for additional updates and information.

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The Transforming Episode Accountability Model (TEAM), which would eventually be mandatory if finalized, would have selected acute care hospitals put under full responsibility for the cost – and quality – of care from surgery up until the first 30 days after hospital discharge.

CMS said that the model would build on the already existing Bundled Payments for Care Improvement Advanced (BPCI-A) and Comprehensive Care for Joint Replacement models.

The proposed model would launch on Jan. 1, 2026, and run for five years, ending at the end of 2030.

“TEAM would be a mandatory episode-based alternative payment model in which selected acute care hospitals would coordinate care for people with Traditional Medicare who undergo one of the surgical procedures included in the model (initiate an episode) and assume responsibility for the cost and quality of care from surgery through the first 30 days after the Medicare beneficiary leaves the hospital,” CMS wrote. “As part of taking responsibility for cost and quality during the episode, hospitals would connect patients to primary care services to help establish accountable care relationships and support optimal, long-term health outcomes.”

Given those all-important 30 days post discharge involved in the TEAM model, home health providers will naturally play a role in helping hospitals achieve high-quality outcomes.

The National Association for Home Care & Hospice (NAHC) is still awaiting further details, but sees home health agencies as squarely involved in the Innovation Center’s proposal.

“Much of the specifics are still to be decided,” NAHC President William A. Dombi told Home Health Care News. “Home health agencies can be expected to be significantly involved with the participating hospitals given the nature of the surgical patients that will be targeted, such as hip fractures and joint replacement patients.”

As part of its strategic direction, CMS wants all Medicare fee-for-service beneficiaries to be in a care relationship with accountability for quality and total cost of care by 2030.

TEAM would be yet another model furthering that goal, if enacted.

Dombi also noted that there could be both upsides and downsides to the incentives tied to the model.

“In many ways the integration of home health agencies will be essential to achieving the price targets that the hospitals will be operating under during an episode of care,” Dombi continued. “The upside is the likelihood that agencies will see increased patient referrals away from what might otherwise be a SNF referral. The downsides include the potential that the hospital will push patients towards the hospital’s outpatient services.”

Home health involvement

The BPCI-A model, which CMS referenced in its TEAM announcement, is a good comparison from the home health perspective.

“They can be involved in formal alignment agreements with participants that could take a variety of forms, and those could be financial, those could be participatory, those could be any number of things,” Michael Wolford, principal at the public accounting firm Forvis, previously told Home Health Care News regarding BPCI-A. “Home health tends to be a lower cost post-discharge setting for Medicare patients. Providers with financial incentives that exist in the BPCI-A model often look for a combination of clinical efficacy, successful patient outcomes and cost-effectiveness of care. Home health tends to rise to the top in those situations.”

Nick Seabrook, the managing principal at the home health consulting and executive search firm SimiTree, sees home health providers playing a similar role in the TEAM model.

“There’s a new CMMI initiative that just came out yesterday, the TEAM model,” Seabrook said at Home Health Care News’ Capital + Strategy event last week. “And basically, what it’s aimed at is better care coordination post-surgery. So, working with home care providers and other post-acute providers to make sure that [beneficiaries] are getting those adequate services that they need after those surgeries.”

CMS mentioned that care for post-surgery beneficiaries can often be fragmented, resulting in poor outcomes.

Health equity would also be a key measure under the TEAM model.

“People with Traditional Medicare undergoing a surgical procedure either in the hospital or as an outpatient may experience fragmented care that can lead to complications in recovery, avoidable hospitalization, and other high costs,” CMS wrote. “This is because in a fee-for-service (FFS) payment system, providers and suppliers are paid separately for each service and procedure, potentially resulting in fragmented care, duplicative use of resources, and avoidable utilization.”

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