More health systems enter joint ventures with home health agencies

More health systems are partnering with home health agencies after internal ventures sputtered and regulations have evolved, industry experts said.

Chicago-based NorthShore – Edward-Elmhurst Health is the latest health system to pursue a joint venture with a home health and hospice agency, announcing an affiliation Thursday with Residential Healthcare Group. It is one of dozens of similar joint ventures that have formed over the past 18 months.

"Joint venture arrangements have grown consistently over the past three years," said Nathan Ray, a partner at West Monroe. "A lot of hospitals and health systems have operated their own home health and hospice divisions as a loss leader, so these JVs are a way to improve the business model and do it at scale."

While Residential Group has managed home health and hospice services for Edward-Elmhurst over the past 10 years, other health systems have tried to develop internal home health divisions, with mixed success.

Tenet Healthcare Corp., for instance, sold its home health and hospice business to Amedisys in 2017, which provided a financial boost. Baylor, Scott & White also offloaded its home health segment into a joint venture with AccentCare and Christus Health tapped LHC Group to manage its home health, hospice and long-term hospitals via a joint venture. Beaumont Health sold most of its home health and hospice business in 2019 to Alternate Solutions Health Network and formed a joint venture.

It has been hard for some health systems to compete with home health agencies given their cost structure, experts said. Managing a large remote-based workforce isn't typically a health system's core competency—integrating home health into their broader organization also proved difficult. As a result, they've turned to companies like LHC Group to help them smoothly transition patients from hospitals to their homes without taking on too much risk, industry observers said.

Download Modern Healthcare’s app to stay informed when industry news breaks.

HCA Healthcare purchased a majority stake in Brookdale Health Care Services last year. It has since divested 23 home health locations, 11 hospice and 13 therapy agencies across 22 states to LHC Group.

"The volume growth is not in inpatient, it's in outpatient," said Eb LeMaster, managing director at Ponder Co. "HCA, for instance, has ventured into some areas and retracted like home health, but I think you have to continue to look for different sources of income—some of which are more profitable than others."

Jefferson Health and Bayada Home Health Care formed a joint venture last year to expand care throughout New Jersey and Pennsylvania. In January, Saint Alphonsus Health System in Boise, Idaho entered into a joint venture with Encompass Health, which also expanded another JV with Baptist Health in South Florida. LHC Group announced a home health joint venture last year with Texas Health Resources and Methodist Health System. Delaware-based ChristianaCare formed a hospice specific-JV with AccentCare last year.

Over the past five years, Alternate Solutions Health Network has inked partnerships with numerous health systems across Ohio, Florida, Michigan and Virginia to jointly own and operate home health and hospice agencies.

"Health systems are increasingly partnering with home health agencies and organizations across the care continuum to improve patient outcomes and quality," Terry Fulmer, president of the John A. Hartford Foundation, wrote in an email to Modern Healthcare. "This is driven in part by value-based payment arrangements and the opportunities for savings when post-acute care is integrated for people with complex conditions."

The regulatory framework for home health agencies changed in 2020 with the Patient-Driven Groupings Model. Broadly, it bases pay on patient characteristics rather than therapy hours and has eliminated requests for anticipated payments, which are essentially down payments for expected treatment.

One provision in PDGM changed payments from a 60-day episode to a 30-day period, which required more a more detailed accounting of patient conditions and more control over hospital to home health referral patterns, experts said.

This, in part, will likely lead to more consolidation and joint ventures across healthcare sectors, industry observers said, noting that staffing will be the main barrier.

"Mom-and-pop home health agencies are needing to consolidate and scale to keep up with administrative burden," West Monroe's Ray said. "Now that more health systems are venturing into home health, it will be interesting to see whether there is going to be a reawakening of doing it right internally, or if the JV model will progress."