Emerging From the Fog: A Look Ahead at 2021

Each year, we reach out to experts in the field to get their take on the year behind us and the year to come.

But 2020 was unlike any other year. As we head to press, the number of cases of COVID-19 in the United States has topped 16 million, with close to 300,000 deaths. Earlier in the year, schools and businesses closed—some temporarily, others for good. Unemployment hit 14.7% at its peak, the highest rate since WWII.

The health care system reeled as hospitals were overwhelmed by cases and office-based medical practices saw business disappear. The stories from nursing homes were dire, with an estimated 40% of all U.S. deaths from coronavirus happening in congregant care in late summer. During just the week of Nov. 29, nearly 4,000 long-term care facility residents died of COVID-19-related causes.

As we print this issue, vaccine deliveries are beginning to roll out, and despite the despair of the past months, it seems the homecare industry is entering 2021 with a sense of cautious optimism. It’s been a roller coaster, one person said; another compared it to a foggy day that could burst into sunshine at any moment.

No one knows when the gloom will burn off—or exactly where we’ll find ourselves when it does. But the general sense is that the worst is likely behind us, and that the home medical equipment (HME) and home health providers that have survived the pandemic will emerge stronger and better equipped to serve the patients of the future.

Competitive Bidding & HME

Many of the issues HME providers faced in 2020 mirrored those of other retailers: shuttered stores, scarce customers, anxious employees and interrupted supply chains.

A midyear survey of more than 500 providers by the American Association of Homecare (AAHomecare) found that about 70% were delayed in getting supplies related to caring for COVID-19 and other respiratory illnesses. More than 80% struggled to find oxygen equipment and ventilators, and close to or more than half also reported issues getting hospital beds, CPAPs, nebulizers and other medical supplies as hospitals stocked up. Providers also had to navigate sanitizing delivery trucks, providing personal protective equipment (PPE) for employees, increasing technology for remote work and virtual visits, extending shipping times and managing staff exposure.

“Suppliers are being financially harmed due to circumstances well beyond their control,” the survey report summarized. “They are no longer able to project either their costs, or the level and stability of revenue streams associated with delivering product to patients.”

And all this came just as many stores had to close based on state pandemic regulations; those that remained open saw visits decline.

“The pandemic affected virtually every business that relies, at least to varying degrees, on foot traffic. We heard about small regional (durable medical equipment providers) laying off workers, particularly shops that had a lot of retail items that relied on in-person purchases,” said York Schwab, show director for Medtrade, which took its annual fall conference virtual.

On the upside, however, many owners received federal assistance that kept paychecks going or found a new revenue stream in the sale of PPE and cleaning materials to a new customer base. Relief also came when the Centers for Medicare & Medicaid (CMS) temporarily removed some regulatory burdens.

And then, in an unexpected move just before Halloween, CMS released bid rates for off-the-shelf back and knee braces—and announced that the other 13 categories of products in the program would be halted for three years.

“That’s just not what we were expecting,” said Cara Bachenheimer, chair of the government affairs practice at Brown & Fortunato. While advocates had requested a delay, and meeting bids proposed pre-pandemic might have been impossible, the abrupt halt raises new questions, especially with new a new administration headed to Washington. Bachenheimer said that if the three-year cycle holds to previous patterns, the bidding process would begin in 2022, but the latest proposed rule from the CMS indicates there may be other changes coming first.

“We’re going to have to find out what they have in mind,” she said.

She and others said that the focus on care at home—along with the dire news out of congregant senior care—did help many in government appreciate how important HME providers are in protecting seniors and the chronically ill. That’s after they had to initially fight to be included in the definition of health care workers as the public health emergency (PHE) began.

“Through the PHE, I believe that the payers actually started to see the value in the services HME providers deliver,” said Sarah Hanna, CEO of ECS North. That included relaxing some authorization requirements and loosening rules on certificates of medical necessity, face-to-face visit documentation and delivery ticket signatures, in addition to the changes to competitive bidding. “These were moves which exemplify that payers may finally be seeing the importance of what our industry does,” she continued. “I certainly don’t have the hubris to say that I know the future, but I’m encouraged by what I saw the payers do regarding durable medical equipment, prosthetics, orthotics and supplies (DMEPOS) during the pandemic.”

Medtrade’s March meeting in Las Vegas was held just as the country entered the pandemic. It was the last time many in the industry came together to share news
and ideas.

“When we refer to the homecare and HME industry, we at Medtrade are a part of that. Serving as the focal point of the industry for decades; we have not failed to put on an annual show during that time. We did stage Medtrade Spring, but if we look through the overall trade show prism, it was a brutal year compared to 2019,” said York Schwab, who took over the role of show director in November after time working with Pride Mobility and VGM.

Medtrade, like countless other trade shows hosted by its parent company, Emerald, and others, moved to virtual; many more were cancelled. Schwab said they are planning for 2021 and hoping that everyone can come together again.

“Coming out of COVID-19, face-to-face trade shows have never been more important,” he said. “You don’t know what you’ve got ’til it’s gone, and showing is always more powerful than telling. Ultimately, it’s difficult to compare 2020 to any year in my lifetime. Like everyone else in so many industries, we are hopeful for better times in 2021.”

PDGM & Home Health

In the home health sphere, the Patient Driven Groupings Model (PDGM) was expected to be the story of the year. The new payment model kicked in January 1 after months of planning—and everyone was still facing a 4+% behavioral adjustment—but less than 90 days later there was a new reality to face. Patients fearful of the spread of the virus stopped letting caregivers visit and post-acute care hit a wall when hospitals shut down elective procedures in order to keep beds free for an influx of COVID-19 cases.

“It’s been sort of a bit of a roller coaster for folks in the home health care space,” said Aaron Tripp, vice president for reimbursement and finance policy for LeadingAge. “At the beginning of things, the floor went out and referrals really dropped precipitously. But then, as people started to realize that receiving care in their own home might be an alternative to going to the hospital, things started to pick back up.”

In fact, the current volume of services may be higher than expected for 2019. But providers have been slammed with extra expenses connected to the need for additional PPE. A June survey from the National Association for Home Care & Hospice (NAHC) found that pandemic-related cost increases were expected to lead to an annual service cost increase of 9.69% for home health agencies (HHAs)—well beyond the provider relief offered by Washington.

And staffing, always a top source of anxiety, became even more complex given fears about the virus, schools being closed and boosted federal unemployment relief. In June, 42.6% of HHAs reported reductions in clinical staff; administrative staff took an even bigger hit. While some agencies re-hired in the intervening months, finding employees, especially caregivers, was as tricky as ever. In a survey of HHAs conducted by Axxess, 55% of respondents said they had experienced staffing challenges due to coronavirus.

In an effort to keep patients and staff safe, telehealth boomed. There was a 154% increase in visits noted in the last week of March 2020 vs. the same week in 2019, according to the Centers for Disease Control and Prevention.

“Telehealth should be here to stay,” said Axxess President and CEO John Olajide. “It’s convenient, it works and it’s going to be hard to argue that outcomes were not as good as all of the in-person care that was previously required. It is going to open up all kinds of new opportunities.”

But while telehealth was in some ways a bright spot—and certainly boosted business for software makers and platforms specializing in health care connectivity—in-home care providers couldn’t be reimbursed by Medicare for virtual visits under PDGM (legislation to change that is pending). And those visits led to additional low utilization payment adjustments (LUPA), digging the cashflow hole even deeper; LUPAs drop reimbursement 75% on average over a 30-day payment period.

According the NAHC study from June, close to half (47%) of HHAs responding reported that their LUPAS at least doubled—and that was an improvement from the two-thirds who reported that in an April survey.

“The high volume of LUPAs continues to contribute greatly to the reduced revenue outcome for HHAs,” the survey reported. “The June survey found that 57.5% of all HHAs had LUPA volume in excess of a pre-COVID national total of 8% of patient episodes as LUPAs.”

“It’s certainly been a difficult year financially,” Tripp said.

A study published online in JAMA Internal Medicine in August looked home health caregivers in hard-hit New York City and found that they were often on the front lines of the pandemic and, despite their own vulnerability, worked hard to keep their patients from contracting COVID-19.

“However, despite these efforts to keep their patients healthy and safe, many described feeling invisible to the health care community and society,” the report found. It quoted one respondent as saying: “‘We’re definitely a forgotten field.  … You hear people clapping, thanking doctors and nurses, even the hospital cleaning staff. … I’m not doing this because I want praise; I love what I do. But it would be nice for people to show us gratitude.’”

Consolidation Coming

One of the near-term results could be a continuation of the market consolidation already occurring on both sides of the industry.

In in-home care, mergers & acquisitions were active; we reported in these pages that purchases of lower- and middle-market home health and hospice companies, along with behavioral health and pharmacy, were as strong as ever.

“This real world test indicates that home care can and will survive through the worst of times,” said Andre Ulloa, principal at American Health Care Capital. “After the initial shutdown, homecare quickly gained back its momentum and has not stopped since. I would say that COVID-19 applied pressure that has made homecare stronger and positioned for exponential growth.”

In HME, more than a third of providers have already left the field or merged with or been aquired by others since competitive bidding took effect in 2011. And that continues:  At the end of 2020, AdaptHealth announced it had bought Aerocare in the largest deal in HME history; the same company has also bought dozens of others.

But while many companies may be contemplating opening themselves up to a sale, there are still plenty of opportunities for small- to mid-sized businesses to thrive, said Miriam Lieber, president of Lieber Consulting.

“Stay on your toes if you’re the smaller guy out there and recognize that there is merit to being the last standing local company,” Lieber said. “The local companies who get some contracts are gaining in stride. They’re making it, they’re expanding and I’m so proud of their tenacity.”

The businesses succeeding are the ones who have embraced automation and technology and also been ready to adapt to the current situation, she added. Those are the companies who will be able to reap the benefits of a quickly aging population that is more convinced than ever that they want to stay at home for as long as possible.

“The need for our services is only growing, and that continues to be a positive,” Schwab said. “Home medical equipment, along with the home modification/aging-in-place movement, can certainly help in that endeavor.”

One thing is certain: the pandemic shone a spotlight on the critical role HME and home health plays, especially when it comes to protecting seniors, the disabled and those with chronic illness and to lightening the load on hospitals.

“You hate to say there’s a glass half full aspect to the pandemic, that’s not a fair characterization, but it gave the providers a chance to shine. And the government recognized that,” Bachenheimer said. “What this industry has been able to do in terms of keeping people out of the hospital has been huge.”

The home accessibility market saw about a 3% to 5% bump in 2020—nothing to sneeze at during a pandemic, even if less than originally hoped, said Jim Greatorex, vice president for VGM Live at Home.

In fact, the pandemic may lead to more home modifications as the general public turns away from institutional options and toward aging in place.

“It did bring a bigger spotlight to the industry and a lot of awareness happened through the year from that,” Greatorex said.

“It’s been good,” Greatorex said. “I think things have slowed down in November and December because the upticks (in COVID-19 counts) are higher than ever and people are distracted with the holidays. But we expect that going through the Christmas holidays, even though people may not get together with their loved ones, they may be talking about, ‘Gee, grandma’s falling and we need to make sure she’s safe at home.’”

There were hurdles. With incomes uncertain, home access didn’t get the big boost it was looking for. State funding dried up, and in some areas workman’s compensation or Veterans Affairs projects were hit or miss.

“But the private pay market kind of rebounded and people plugged into that did very well, as long as they had their protocols in place,” Greatorex said. “It’s going to be an interesting 2021. There’s all kinds of opportunity.”