For better or worse, the growing presence of large insurance companies in the hospice and home health provider space could be transformative for the industry.
Two transactions demonstrate rising interest among payers in owning the home-based care assets that serve their beneficiaries. Humana Inc. (NYSE: HUM) in 2021 acquired 100% ownership of Kindred at Home from its former private equity partners Welsh, Carson, Anderson & Stowe and TPG Capital.
But UnitedHealth Group’s (NYSE: UHG) subsidiary Optum was hot on Humana’s heels with an agreement to purchase LHC Group (NASDAQ: LHCG) for $5.5 billion.
While these deals were not the first foray of either company into the provider arena, the size, timing and scale of these transactions signal that payers are among the stakeholders that seek to capitalize on the shift of more care into the lower-cost home setting.
Control of these assets also allows payer organizations to better manage the financial risks that come with the value-based payment models that many expect will overtake traditional Medicare in coming years.
The full impact of these deals will take shape over the next few years. In Humana’s case, it’s focusing in on home health for the time being. The company has signed a definitive agreement to sell a 60% stake in Kindred at Home’s (KAH) hospice and personal care business to the private equity firm Clayton, Dubilier & Rice (CDR) for $2.8 billion. Humana will retain the remaining 40%.
Hospice News spoke with three hospice leaders about the disruption they expect to see in the industry as payers expand their roles as providers, including the CEO of a California nonprofit, the top executive from the largest U.S. hospice company by market share and the leader of a growing for-profit provider based in the Midwest.
Despite the differences in their organizations’ size and business models, each of these CEOs raised concerns about the ways these transactions and their aftermath could change the way hospice care is delivered. Some also saw potential new opportunities for collaboration and innovation, as well as an underscored need for greater investment in palliative care.
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There is no question that the changing landscape will create some disruption for other providers — especially independent providers in highly competitive markets. The real question is, to what extent?
For providers and patients alike, some of the disruption will be good; some will be bad. It depends on what organizations choose to do with a changed and disrupted future. Ideally, those in the nonprofit space would be best positioned to flex, pivot and plan for these changes if their institutional ego doesn’t become a barrier.
I also expect the larger payers to have greater influence nationally. They will impact policy at a federal level. That could mean a less friendly environment for smaller legacy hospices that want to fight for their independence. Many stand-alone hospices will no longer be able to stand alone.
It is absolutely a game changer. The large networks will be setting the rules. If providers want to be in the game, they may be expected to cover larger geographic footprints with smaller reimbursements — and still deliver on quality. That could necessitate a scaling back of the programs and services that have historically made nonprofit care more robust and more responsive to individual community needs.
Although, how all of this will play out is still somewhat unknown. As it pushes providers to do more with less, it will foster even more collaborations, mergers and affiliations. It is likely that more organizations will come together to consolidate the work and functions that are invisible to patients and families (i.e. finance, IT, human resources, education, quality, purchasing).
Plan now! Be open-minded. Be more willing to collaborate, affiliate and work together with other like-minded organizations. It is one of the reasons why the California Hospice Network was formed — to plan for this future and ever-evolving environment.
Hospice leaders have to remember why we are here. We must stay connected to the reason we exist. We are here for patient care. We are not an insurer looking only at numbers. End-of-life care grew out of a great American crusade for social change. It was birthed from a force that intended to challenge and reshape the national culture.
What began as a struggle for social justice in the 1950s and 60s evolved into a fight for the rights of people who were living with a life-limiting illness. The voices and wishes of the dying, and of those who were caring for them, needed to be heard. Hospice became an organized effort to gain equal access to care and to infuse end-of-life care with the power of choice, quality of life, respect, compassion and dignity.
At the time, health systems from coast to coast were failing in their attempts to properly care for patients who were dying — imposing ineffective and often unwanted treatments that robbed patients of precious time and any say about how or where they would spend their final days.
In brief, people’s values were not aligned with their care. The things that were most important to this population of patients were not taken into consideration in the delivery of care at the end of their lives. The hospice movement changed all of that. We have to stay connected to the spirit that gave birth to this model of care.
— Craig Dresang, CEO, YoloCares
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When observing transactions, hospice leaders need to keep an eye on their market density and sizing.
Should there be opportunities for value-based or alternative payment joint ventures with payers who are beginning to operate in the post-acute space, hospice leaders need to remain vigilant in ensuring that they are capturing the fair value of the resources they commit to high-quality end-of-life care.
At Transitions, we feel that adding a large group such as UnitedHealth Group or Humana could provide additional resources and opportunities to both patients and providers across the space.
However, these organizations must make the quality of care a priority in these transactions in order to be beneficial to both the patient and the organizations which they contract with.
— Jim Palazzo, CEO, Transitions Care, a portfolio company of Transitions Group
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For more than 40 years, hospice providers have played a vital role as a partner to all health care partners throughout the continuum of care by seamlessly transitioning and caring for hospice-eligible patients across the country.
This approach both honors the patient’s wishes and relieves the associated expensive, burdensome transitions of care (re-hospitalizations, etc.) for patients, which are often unnecessary.
With large payer organizations continuing to enter the space through direct ownership, only time will tell the impact and disruption this may have toward hospice. It’s important to note this is not the first time some of these large payers are entering the space (i.e. UnitedHealth Group).
Ultimately, every hospice provider needs to have an understanding of the goals their health care partners in the communities are hoping to achieve through referring appropriate patients to their organization.
Additionally, many of the sub-delegated organizations taking risk are also owned by these large payer organizations. This needs to be taken into consideration when establishing appropriate expectations for specific patient populations for whom they’ve taken on risk in their community.
While the goal of achieving lower-cost, higher-quality care can be achieved through transparent and aligned partnerships, an independent hospice provider really needs to ensure they can deliver the disease-specific care that population will need to co-manage that patient through the rest of their journey.
Additionally, independent providers need to understand if the referring entities have ownership interest in their market, which could lead to patient steerage over time.
We still continue to have concerns based upon design flaws within the Value-Based Insurance Design (VBID) model, which hasn’t published any positive outcome information since its inception and whose participating payers also own/operate a hospice company.
We continue to advocate for a halt to the VBID model until community-based palliative care is defined, an all-in approach is implemented, proper quality measures are developed, and operational concerns are addressed.
One could argue the hospice benefit was the first, value-based reimbursement model, which has been independently proven to reduce cost for more than 40 years. To that end, we are optimistic there will be a path over time where appropriate partnerships with aligned incentives can lead towards greater and earlier identification of hospice-appropriate patients through a complementary, community-based palliative and hospice care offering, resulting in high-quality, cost-effective care across the entire footprint of our country.
— Nick Westfall, CEO, VITAS Healthcare, a subsidiary of Chemed Corp. (NYSE: CHE)
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