Further steep cuts to home health care spending have been proposed by the Centers for Medicare & Medicaid Services (CMS) for 2025. For providers, this means expecting more resistance to the cuts both locally and in Washington, DC, but it also means preparing for a world in which Medicare fee-for-service payments are no longer a reliable foundation.
In June, CMS proposed permanently adjusting home health payment rates to -4.067% for fiscal year 2025. Overall, the agency proposed reducing total home health payments by 1.7% next year.
While providers have experienced cuts over the past two years, we have also seen CMS rescind some of the more severe cuts in the period between the 2022 and 2023 proposed and final payment rules.
“(CMS) is thinking, ‘How much are we willing to risk lowering current payment rates?’ That way, when they drop some breadcrumbs (in the final rule), providers will feel good that they’ve made some gains,” Pinnacle Home Care CEO Shane Donaldson said onstage at Home Health Care News’ FUTURE conference last month. “History tells us that the final rule will probably be a completely neutral event.”
Oldsmar, Fla.-based Pinnacle Home Care is one of the largest home health care providers operating in the state. New York-based HCS-Girling recently acquired Pinnacle Home Care and is planning significant expansion over the next few years.
Providers are hopeful they will find at least those clues in the final rule, but they’re not counting on it.
Instead, they are working to become a sustainable store despite the volatile payments environment.
“If you’re not very good at something, whether it’s AR collection, coding, OASIS review, it’s time to find someone who is really good at that and make a different decision,” Healthcare interim president and COO Lexan Domico also said onstage at FUTURE. “What I would really suggest to people at this stage is to think about efficiency everywhere.”
Based in Sunrise, Florida, Interim HealthCare is a home health and home care franchise with more than 330 locations across the United States.
Efficiency is a broad term, but Domico specifically mentioned outsourcing certain tasks, eliminating redundancies, and looking at AI that can be applied to home care.
AI was a big topic at FUTURE, and most providers were optimistic about the effect new technology will have on the industry in terms of efficiency, especially in light of recent price cuts.
Additionally, Domico mentioned utilization rates as an area for providers to focus on.
“I think a lot of times we don’t focus on utilization,” Domico continued, “and I think there’s a big opportunity there to look at, and if we do it the right way, that could be part of the increase.”
Donaldson added that clinicians should do their best within the scope of their qualifications, which will lead to efficiency.
“What we need to do is improve our profit margins, which means getting the assessing clinicians to do as many of the assessments and diagnoses as possible and getting the non-assessing clinicians to do the majority of the direct consultations,” he said.
Some home health providers are trying to do more to be better partners to payers and referral sources, but as Domico points out, sometimes “less is more.”
In general, providers agreed that they should focus on their strengths and find ways to outsource their weaknesses, or at least level up in those areas.
“If you can’t afford it, how do you get it?” Domico said. “I think you can get it by doing what you’re really good at, which is providing care. And if other things aren’t working, I think it’s time to think about doing something different.”
Collaboration with other payers
As these fee-for-service fees become less reliable than they once were, providers are having to spend much more time thinking about their Medicare Advantage (MA) strategies.
As growth in traditional Medicare payments slows, it is paramount to avoid MA payers that reimburse at substandard rates. In most cases, providers do not expect, but hope, that MA rates will be on par with traditional Medicare rates.
But a reduction of, say, 40% is unsustainable.
“There are 850 home care agencies in Florida, and Medicare Advantage plans still pretty much view us as a commodity,” Donaldson said. “They’re not going to pay us $130 when there’s an agency next door that will do a visit for $80, and they seem to do that regardless of how much we can prove that our quality is better than any of the agencies nearby.”
But Pinnacle has had success with one MA plan: The plan agrees to pay the company some opportunity for profit growth.
This occurred as the plan moved from in-house management to third-party management.
“We’ve had good relationships with third parties,” Donaldson said. “When we negotiated, we said, ‘This really has to be a temporary relationship, even if it’s a percentage of Medicare. Give us the opportunity to control our own destiny, give us the funding and let us run with it.'”
Although there have been some improvements recently in home health contracts between MA plans and providers, Domico still views providers primarily as “price takers” in this relationship.
“We are price takers and I think the negotiations are actually very one-sided,” she said.
But she believes there are still plenty of opportunities for health care providers to be compensated more fairly, and it starts with local planning partnerships.
Rebecca Higbee, chief operating officer of Well Care Health, who also took the stage at FUTURE, said her company has had the most success with community-level health insurance.
“Some of our best partners are regional partners,” she said, “local partners who can talk to the actual decision makers in planning.”
Well Care Health provides home health and hospice services throughout North Carolina and the upstate South Carolina area.
Higbee also stressed the need to nurture relationships with health insurance associations on a daily basis.
“We’re still years away from making progress,” she said. “There’s been progress recently. There are some payers that are finally starting to see the value, but at the same time, there are some payers that saw the value years ago and are now backtracking. It’s really complicated. I think this is something we have to wrestle with every day and think about every day.”
