This article is a part of your HHCN+ Membership
Home health providers often pursue value-based care arrangements, with the goal of delivering quality care and achieving monetary success. But if they are not careful, these companies can also land in financial hot water.
“In a value-based arrangement, a financial disaster means I’m now losing money,” Joseph Furtado, administrator of MD Home Health, told Home Health Care News.
MD Home Health is a privately-owned Phoenix-based provider that offers traditional skilled services in the home, as well as specialty programs and non-medical personal care services through its MD Home Assist arm. The company is one of largest home health providers in Arizona.
Even for the providers highly focused on value-based arrangements, those arrangements tend to make up a smaller part of their revenue. But that may change in the near-term future.
In 2022, almost 42% of home-based care providers predicted that value-based contracts would make up more than half, or most, of their organization’s revenue in the next three to five years, according to a survey conducted by Home Health Care News and AlayaCare.
Additionally, 23% of providers projected that value-based contracts will make up about half of their revenue in the future.
Plus, Medicare-certified home health providers already operate under the Home Health Value-Based Purchasing (HHVBP) Model, which ties financial incentive to performance.
When entering a value-based arrangement, the problems can begin as early as the negotiation phase, if the home health provider enters the conversation without the correct data, according to Furtado.
“It’s typically a one-sided negotiation, because they have the data on what’s going on with your patients, they have the data on what’s going on with their patients, they have the data on what’s going on with everyone’s patients, and all you have is what’s going on with your patients, and it’s typically not very good data,” he said.
Furtado urges home health providers to not just trust their own data blindly. Instead, he advises providers to get their data validated.
“You have to get your data validated, and it can’t be validated by the local accountant, or the local bookkeeper,” Furtado said. “It has to be validated by experts in our field. You have to have consultants who are experts to help you because the financial disaster is not just the money you’re going to lose on those visits, it is the opportunity cost that you’re losing by not being able to take other arrangements that are going to be profitable for the agency.”
Chris Bradbury, CEO of Integrated Home Care Services, believes that one of the common reasons that value-based care arrangements end up in financial disaster for providers is structural issues around scale.
“If they’re asked to go from one territory to a whole state, to 10%, 20%, 30%, 40% of their business, and if scalability isn’t part of the initial design and agreement, there’s a real risk that problems could happen later on,” Bradbury told HHCN. “An agreement may be successful, and then a health plan may decide to throw gasoline on the fire. If the home health provider hasn’t thought through how to scale it, they could agree to scale rapidly, and not be in a position to consistently deliver the results that are in the pilot or the proof of concept.”
Integrated Home Care Services is a driver of value-based care in the home. The company partners with health plans, providers and other risk-bearing provider organizations.
Bradbury noted that agreeing to a value-based arrangement without figuring out how to scale could lead to significant financial risk, and also damage the relationship.
Another factor that can put providers in a bad position financially is underestimating their true cost of care.
“It’s like saying, ‘Oh, my monthly bills are $3,000 a month because that’s my mortgage,’” Furtado said. “Well, it costs a lot more to run your house, right?”
Furtado explained that there are many factors that add up to the cost of providing care.
“When you start adding everything together — what you’re paying your people for mileage, what you pay for bonuses, what you pay for recruitment, training, missed visits — there are so many variables,” he said. “When you add it all together, your true cost of providing every visit is so dramatically higher. When you go and sit in these negotiations, you have a number in your head. ‘As long as I’m making $110 a visit,’ for example. Then they come in, and they tell you what they’re willing to give you. It’s going to be less than that.”
One way to make value-based arrangements work is to keep things simple, according to Bradbury.
“It’s very easy to make the metrics, the definitions and the flow of incentives too complex,” he said. “The greater the complexity, the greater the chance for misunderstanding, which then can lead to back-end problems and back-end risks.”
Bradbury advises providers dipping their toe in value-based arrangements for the first time to start small.
“Start in a particular area, prove the concept out, and then expand from there,” he said. “You have to be very careful about implementing something across your entire book of business, right out of the gate.”
It’s also important for providers to thoroughly vet the organization that they want to partner with.
“There needs to be a culture on both sides of test and learn,” Bradbury said. “Of curiosity, of discovery and a willingness and openness to adjust the relationship as it goes, based upon the performance and the insights and the value that’s delivered from these things, because it’s very important that all parties succeed.”
Companies featured in this article:
