Some small home health agencies will likely close or be acquired by larger providers as they cope with new reimbursement policies, according to a new report.
The CMS rolled out the Patient-Driven Groupings Model this year, which bases pay on patient characteristics rather than therapy hours. The agency is also phasing out requests for anticipated payments by 2021, which are essentially down payments for expected treatment.
Terminating these requests may be related to trying to weed out fraud that is often perpetrated by smaller home health organizations, the ratings agency S&P Global said in its home health outlook. That combined with the PDGM provision changing payments from a 60-day episode to a 30-day period will likely require more robust IT infrastructure and more staff over the short term. Small home health providers might be forced to close or seek acquirers, analysts said.
"Some forecast as many as 30% of home-health providers to close over the next year or two due to the RAP elimination," the report reads, noting that about a quarter of home health agencies closed or were acquired after the rollout of the old Prospective Payment System model. "This provides an opportunity for market share expansion and increasing economies of scale for the larger, more capable players."
Agencies that promote high utilization of speech, occupational and physical therapy will also take a hit, experts said.
Therapists have reached out to Modern Healthcare saying they have been laid off or experienced significant pay cuts. Many are concerned that patient care will suffer as a result. A similar trend played out in the skilled-nursing space related to a similar model that was implemented in October.
Some of the changes are likely related to reducing unnecessary therapy hours, but the cuts may reduce valuable care, said David Kaplan, a co-author of the report and director of corporate ratings at S&P.
"I think the majority of the impact should occur, or has occurred, very early in 2020, so hopefully the employment prospects for therapists stabilize from this new level," he said. "That said, it's not certain whether demand will stabilize at current levels, see a further step down if employers find profitability lower than expected, or perhaps even an increase if home health agencies, or regulators, conclude they have reduced therapy sessions too far."
While the skilled-nursing sector shed about 8,400 jobs in November and December, it rebounded in January when it added 2,400 jobs, according to the Bureau of Labor and Statistics. Hiring has recently remained steady in home health, adding about 4,000 jobs a month in December as well as January.
But it isn't likely that those jobs are related to therapy, a recent survey shows. Zero home health agencies out of 159 polled in October said they would be expanding their occupational, physical and speech therapy, which more than 85% of the organizations currently provide.
"We have a fair number of members who have been impacted by both the (Patient Driven Payment Model) and PDGM who have not just been laid off but have had employment contract changes," said Monica Sampson, the director of healthcare services at the American Speech-Language-Hearing Association. "Some members are telling us there are arbitrary limits on the number of visits or concurrent group versus individual therapy sessions."
ASHA understood that the previous system was flawed and PDGM represents a positive shift from volume to value, but the nature of PDGM and the impact on patient care is worrisome, Sampson added.
As PDGM tries to steer providers away from unnecessary therapy services, the CMS expects agencies to shift their focus to patients with conditions that yield more attractive reimbursement levels. In response, regulators made an overarching negative rate adjustment of 4.36% to keep PDGM revenue neutral.
"There was pushback from the industry who said PDGM was almost incentivizing them to move to higher-acuity patients," said Viral Patel, a co-author of the report and credit analyst at S&P. "So if industry providers don't change their case mix favorably, they will just take a rate hit."
Home health providers are also expected to work around new low utilization payment adjustment thresholds by keeping visits high, Patel added. Meanwhile, care coordination and referral partners will be key, analysts said, noting that PDGM will aim to reduce readmissions by offering higher reimbursement for referrals sourced from the more acute and expensive setting such as SNFs and long-term providers. Referrals from community settings will yield lower reimbursement.
"One of the biggest concerns with PDGM is that people who live in the community may have limited access to home healthcare because reimbursement is lower," Sampson said. "Some of the most chronically ill patients could have limited access."
