A man sitting in a room with a chair and lamp with papers in his hand
How agencies can win at a new game
by Lindsay Doak

Over the past decade, a major shift has occurred in the Medicare market that many of us didn’t see coming: the takeover of Medicare Advantage (MA). This alarm rang particularly loudly in 2023 as we saw Medicare Advantage enrollment reach 52% of the Medicare-eligible population, driven largely by the two biggest players: Humana and UnitedHealthcare. And, while we saw an average 8% year-over-year growth in enrollment nationally, states like Arkansas, Delaware and Maryland saw upwards of an astonishing 15%-17% growth. The Congressional Budget Office projects that the share of all Medicare beneficiaries enrolled in Medicare Advantage plans will rise to 62% by 2024; however, if the trajectory remains consistent, that number could actually exceed 75%.

This is a true game changer for the home health and hospice industry. With the saturation of MA plans, many home health and hospice agencies have little choice but to contract with at least some of these plans.   

How does this impact the home health industry? For this, we can look at the Home Health Cost Report Data. In 2022, the “other payers” category made up 49.6% of total home health patients, which aligns with the Medicare Advantage saturation rates for that year (traditional Medicare made up 46.4% and Medicaid made up 4.1%). Yet those 49.6% of patients made up only 33.4% of total home health payments. Based on these numbers, MA plans paid 51.1% of what Medicare paid per census in 2022 (a net revenue per patient of $6,147 vs. $3,139). While more analysis is needed to determine the specificity of this payment discrepancy, the data shows that a misalignment of reimbursement is occurring.

So, how can agencies successfully contract with MA plans, while ensuring their costs are covered? This is where I like to refer to the wise words of Kenny Rogers’ “The Gambler,” who said, “If you’re gonna play the game…You gotta learn to play it right.”

Know Your Value

The first step is to know your value. Results from the National Healthcare at Home Best Practices study show that those agencies who have formed successful partnerships list being able to provide care at a reduced cost, the ability to manage a mobile health care workforce and reducing hospitalizations as their largest negotiating points. But it doesn’t end there. Are you fully staffed, what is your service area and do you have any specialty programs? Pull your organization’s data to make a specific case. For example, based on 2022 the Centers for Medicare & Medicaid Services (CMS) claims data, the average national hospital length of stay for patients referred to home health is 5.7 days with a 30-day re-hospitalization rate of 17.4%. If your agency receives a high percentage of referrals from an in-network hospital and you can demonstrate how you can reduce either of these numbers, there’s your value.       

Know Your Bank

The second step is knowing your bank. How much money do you have, what are your expenses and how much are you willing to risk? With regards to expenses, how lean and efficient is your organization? The national average cost per nursing visit (direct and indirect) based on 2022 Cost Report Files was $180.79 (agencies can also find the average costs for state and county). If you are running at a significantly higher rate than these averages, you can’t expect MA payers to pay for these inefficiencies. At the same time, if you’ve built these efficiencies into your processes and have good control of your expenses, you need them covered. But you won’t be able to properly negotiate if you don’t have this information before walking to the table.

And, speaking of tables, choose the right table for your organization. Much of your success in the game is in choosing who you want to partner with. What is your agency’s strategy? A single service area could have more than 60 insurance providers. It’s impossible to partner with every one of them. Agencies need to do their research, look to see who the major providers in their service area are, and be strategic about which contract they choose to initiate/take. And in doing the research, fully read the contracts. How cumbersome are their claims processes? What is their denial rate? These are all things you want to know before accepting a partnership with any payer.

Know Your Risk Models

Finally, once you’ve mastered the game, it’s time to start looking into risk models that work off your agency’s strengths and are the best chance at getting adequate reimbursement. Often risk models are daunting for home health organizations. But the reality is that most agencies are already in them and just don’t know it. There are low-risk models such as value-based incentives, where higher outcomes return higher dollars. There are high-risk models such as fully capitated risk agreements, where an agency manages the patient’s health along the continuum. Before you enter any risk model, know your data. Taking on some risk is truly the only way home health providers are going to have full negotiating power at the table, but, as the name implies, there is risk involved.

We don’t know what the future of Medicare Advantage is, but slides recently released from the Medicare Payment Advisory Commission (MedPAC) show increased spending to MA plans above what Medicare paid for care to fee-for-service (upwards of $82 billion in 2023 alone) tells us that a shift might be happening. Until then, going back to the Kenny Rogers analogy, agencies need to know when to walk away. If you’ve done everything to create and show your value and aren’t able to get fair reimbursement from a payer, then it is time to fold your cards and move to another table.

Lindsay Doak, MBA, is the director of research and education for the home health and hospice team at BerryDunn. With 20 collective years of experience leading strategic direction and growth initiatives for the health care education, business intelligence and patient satisfaction markets, Doak’s role with BerryDunn includes spearheading the 2021 National Healthcare at Home Best Practices and Future Insights Study as well as the Patient and Family Satisfaction Quality Improvement Project. She also serves as a member of the Innovation Council on the National Association for Home Care and Hospice’s (NAHC) Home Health Financial Manager’s Association and a member of the NAHC Medicaid Workgroup. BerryDunn partners with clients on a variety of financial, outsourced and consulting services. Visit berrydunn.com/industries/healthcare-at-home.