While home health operators brace for the impact of the meager 2023 reimbursement rates, hospices likewise must prepare for a ripple effect.
The U.S. Centers for Medicare & Medicaid Services (CMS) recently established a 0.7% base rate payment increase for home health care in 2023. While this is an improvement from the 4.2% aggregate cuts the agency first proposed in August, the small increase still means that home health companies have to tighten their belts.
In addition, the 2023 increase is only a temporary abatement. The agency plans to phase in additional reductions in the coming years, as Enhabit Home Health & Hospice (NYSE: EHAB) CEO Barbara Jacobsmeyer noted in a third-quarter earnings all.
“The temporary adjustments still loom,” Jacobsmeyer said. “CMS has not changed their methodology at all, which is very problematic for the industry. 2023 now has a slight reprieve with provisions in its final rule, resulting in an estimated net increase in home health payments of 0.7%. The industry does not view this as a win and we will work with our industry partners to determine next steps.”
These payment concerns come at a time when both home health and hospice providers are continuing to feel the effects of COVID-19 headwinds, including disruption of referral streams.
One key consideration is that many companies provide both of those services, and cuts in reimbursement to either will affect their overall financial performance.
“When you look at who provides home health and hospice, you have a lot of providers that do both. There are home health agencies today that have hospices that keep their heads above water financially. They profit under hospice,” National Association for Home Health & Hospice President Bill Dombi told Hospice News. “And there may be some that profit under home health, propping up the hospice side of it. I can’t imagine that one would not affect the other.”
The widespread workforce pressures also have had a tremendous impact. During 2022, providers continue to hemorrhage dollars to boost hiring while adjusting wages and purchasing for skyrocketing inflation. In addition, they still have to buy higher-than-historical amounts of supplies like personal protective equipment
The labor shortages have reduced clinical capacity for both home health and hospice, which has contributed to drops in patient census and length of stay. Referral rejection rates reached all-time highs in 2021, a trend that continued into 2022, according to data from CarePort, a WellSky company.
In January, rejection rates reached 41% among hospice providers and 58% for home health agencies, CarePort reported.
Given the small reimbursement increase for home health — with further cuts on the horizon — one potential consequence is that capacity could diminish even more. This in turn could mean a downturn in the number hospice referrals coming in from home health agencies.
“The lack of increase in payment to keep pace with overall inflation and competitive marketplace dynamics is going to, in certain markets — if not across many markets — continue to constrain the capacity of home health providers to take on all of the referrals that are being sent their way,” WellSky’s Chief Clinical Officer Timothy Ashe told Hospice News. “So if you just follow that logic, if fewer patients are enrolling into home health agencies, I think the downstream impact to palliative and hospice providers may in fact be lightly constrained referrals coming from those home health organizations.”
In light of the workforce shortage and rising costs, both hospices and home health providers have been leaning on technology to boost efficiency and streamline processes. This includes systems like telehealth, predictive analytics, robotic process automation and remote patient monitoring.
These technologies have shown promise in terms of streamlining administrative work, earlier identification of changes in patients’ conditions and needs, and reducing travel costs and unnecessary home visits.
Some operators have also begun applying some of these technologies to their recruitment and retention strategies.
But the reimbursement concerns could mean that some providers will have to think twice about making these kinds of investments.
“We need a margin to be able to reinvest in the infrastructure within our own organizations, and then within the health care delivery in our digital economy,” Ken Albert, president and CEO of Androscoggin Home Healthcare + Hospice told Hospice News. “The more than the margins decrease, the infrastructure, including the human resource component of what we do, is going to be challenged.”