Home home health companies are increasingly willing to sacrifice short-term profits as they try to squeeze more favorable Medicare Advantage contracts from private insurers.
Addus HomeCare, Interim Healthcare and other home health companies are refusing to accept some patients enrolled in Medicare Advantage plans they say pay them unfavorable rates or require lengthy prior authorizations. The pushback comes as insurers also look to rein in costs in the face of a possible Medicare Advantage rate cut next year. A strong demand for post-acute care and staff shortages at home health companies also continue to create bottlenecks for hospital discharges.
Related: Medicare Advantage rates stressing out home health providers
Growth in Medicare Advantage, which accounts for more than half of the Medicare market, is driving home health providers to pressure plans on their reimbursement rates. The Centers for Medicare and Medicaid Services pays private insurers a monthly capitated rate per Medicare Advantage beneficiary to cover all services, incentivizing payers to keep provider reimbursements low.
Those plans are now paying home health companies between 60% and 70% of what fee-for-service Medicare pays, according to home care consulting firm Transcend Strategy Group. Providers also complain that traditional Medicare rates barely cover their costs.
Some insurers are competing with independent home health companies for business, as well. Humana owns CenterWell Home Health, while UnitedHealth Group owns LHC Group and is waiting to close a deal to buy Amedisys.
The competing market dynamics are putting private insurers and home health companies on a collision course, with some home health companies willing to forgo short-term profitability to gain better reimbursements down the road.
Addus HomeCare is one such company. Last week, Addus reported revenue from its home health business declined more than 9% in the fourth quarter of 2023 because the company intentionally limited admission of patients covered by certain Medicare Advantage plans that offered “less favorable reimbursements.” Those patients were mostly covered under plans that paid Addus on a per-visit basis, rather than a more lucrative 30-day episode of care.
The Frisco, Texas-based company operates in 22 states and said its personal care and hospice businesses offset the loss in home health, enabling Addus to turn a $19.6 million profit for the quarter. Addus CEO Dirk Allison said the company is still negotiating for better contracts with Medicare Advantage payers.
Smaller home health operators are also choosing which patients to serve with limited staff. Omaha, Nebraska-based Hillcrest Health Services provides home health services across eight Nebraska counties. Last year, the nonprofit turned away more than 1,600 Medicare Advantage patients partly due to their plans' low reimbursements rates, according to Reggie Ripple, home and community services vice president.
“When I bump up against capacity issues, I have to be really selective about making sure I’m taking the right payers to keep the lights on,” Ripple said.
Some Interim HealthCare franchisees are also rejecting some Medicare Advantage contracts due to low rates, said president and CEO Paul Mastrapa. But Rick Petersen, a Manchester, New Hampshire-based franchisee, said lengthy prior authorizations are the primary reason he most often refuses referrals for some Medicare Advantage beneficiaries.
“Some [payers] will keep you on hold for an extended period of time and it’s just too expensive,” Petersen said.
Rejecting referrals is one of the few available strategies home health companies have if they think Medicare Advantage reimbursements are too low, said Bill Dombi, president of the National Association for Home Care and Hospice, which represents the home health industry.
But angling for higher rates could become increasingly difficult for providers. UnitedHealthcare, Humana and Aetna have warned that higher Medicare Advantage costs could impact profitability this year as enrollment increases and they face a potential 0.16% cut to their base payment in 2025 from CMS.
“These companies really need to focus on their own costs, which includes their contracting with providers,” said Scott Fidel, managing director at Stephens.
Humana would not discuss its rate negotiations with providers, but said in an email it works “closely and collaboratively with a wide range of home health agencies to arrive at mutually beneficial agreements to provide home-based care for Medicare Advantage members."
Insurance industry trade group AHIP would not comment on individual plans' reimbursement rates, but said in an email that CMS regulations require Medicare Advantage plans have contracts with home health companies to provide sufficient access to covered services for beneficiaries.
Aetna declined to comment on rates it negotiates with home health providers. UnitedHealthcare and Cigna did not respond to requests for comment.
