Exploring Recent Home Health-Medicare Advantage Developments

The 2023 home health final payment rule was released Monday.

With a positive market-basket update for 2023 but also jarring long-term cuts, it will have ramifications for home health providers for years potentially, barring mitigating legislation or a complete change of course from the Centers for Medicare & Medicaid Services (CMS).

But there have been a few big new developments outside of fee-for-service Medicare and the final rule, too.

Amedisys Inc. (Nasdaq: AMED) announced a deal with CVS Health’s (NYSE: CVS) Aetna last week. The company characterized it as a case-rate system partially tied to quality metrics like rehospitalization rates and timely initiations of care.

“We are in active discussion with other plans for similar contracts or other value-based models,” Amedisys CEO Chris Gerard said during the company’s Q3 earnings call. “The remaining plans that have been unwilling to engage in models like this should take note. In a world where clinical capacity is at a premium, we will not work with payers who fail to see the value that we deliver and the quality outcomes we provide for their members.”

This week, Enhabit Inc. (NYSE: EHAB) unveiled its own progress with managed care plans.

“We are focused on short-term rate enhancements and longer-term innovation via case rates, episodic agreements and other value-based opportunities,” Enhabit CEO Barb Jacobsmeyer said on the company’s Q3 earnings call. “In the third quarter, we agreed to terms with nine Medicare Advantage and commercial plans.”

Three of those arrangements are in effect now, she said, while six are in credentialing, with estimated effective dates by the end of 2022. All of the contracts are regional or multi-state plans.

In this week’s exclusive, members-only HHCN+ Update, I offer thoughts on what these companies’ progress with managed care means for them, but also on what that progress means for the rest of the home health industry.

The haves and have nots

Gerard made Amedisys’ message to other health plans very clear: “Take note.” But other home health providers should be taking note, too.

Once the transaction clears regulatory review, LHC Group Inc. (Nasdaq: LHCG) will be part of a UnitedHealth Group (NYSE: UNH), which operates the large insurance company UnitedHealthcare and the care delivery business Optum. Amedisys and Enhabit are making significant, innovative inroads with MA plans.

Meanwhile, CenterWell Home Health – formerly Kindred at Home – is already under the Humana Inc. (NYSE: HUM) umbrella. Humana CFO Susan Diamond said Wednesday that the company will have 15% of its MA members under value-based home health models by the end of the year.

Humana will apply those value-based contracts in-house at first, then offer CenterWell’s services under those parameters to outside MA plans.

There are also new companies with PE backing – such as Frontpoint Health – that are exclusively going after MA business, making do with the rates MA plans are offering them right now.

Over time, Home Health Care News will set out to know even more about the inner workings of these contracts. But what’s clear now is that the companies that can contract with MA plans at scale have a clear advantage. Where they may be able to put their foot down, smaller providers cannot.

On their end, for example, publicly traded companies have the size and scale to leverage with health plans. If the small- to mid-sized providers don’t have that ability, a bifurcation of the industry into have and have nots seems inevitable.

And with Medicare enrollment trends, smaller agencies can no longer look at fee-for-service Medicare as their saving grace. In 2022, nearly half (48%) of eligible Medicare beneficiaries are enrolled in MA plans, with even more expected to migrate toward MA next year and beyond.

Some home health providers can still afford to take subpar rates from MA providers now. But if the behavioral adjustments and clawbacks from CMS materialize, that revenue source will wane over time as well.

The big picture

Providers can fight against the cuts from CMS and still call out MA plans for unfair rates.

But the payment environment in home health care is undoubtedly changing. If there’s not a willingness to adapt from agency leaders, there will be plenty of companies that get left behind.

The up-and-coming providers that are rapidly growing recognize this. Traditions Health – a College Station, Texas-based home health and hospice provider – is focusing on that realization even more than it is on growth.

“Our goal is to be able to meet the patient and their needs where they are, and be agnostic to which line of business services that they’ll probably need,” Traditions Health CEO David Klementz told me last week. “But also, to be agnostic to payer and be able to be a solution for systems, other referral sources and for patients by meeting their needs.”

Without that agnostic-to-payer view, providers are truly betting their existence on what PE folks have long called the “stroke-of-the-pen risk.”

And that’s a place no one wants to be.