Value-Based Care: What Hospices Can Learn from Home Health Companies

When it comes to value-based payment models, home health has a head start on hospice. But those providers’ experiences can lend some insights into how hospices can prepare themselves.

Hospices are only now taking their first steps into value-based reimbursement. To date, much of this has centered around diversified programs like palliative care, PACE and other services.

However, the ongoing value-based insurance design model (VBID) demonstration and some Accountable Care Organization (ACO) relationships are giving providers a taste of how at-risk reimbursement may affect their core hospice business.

As they move into this new sphere, hospices may be able to glean some important lessons from home health agencies. For one, they should start preparing now, according to National Association for Home Care & Hospice (NAHC) President Bill Dombi.

“One of the absolute takeaways that we saw from the [home health value-based purchasing (HHVBP)] demonstration program is to get enough lead time. Don’t wait for the day before it starts to get yourself ready for it,” Dombi told Hospice News. “Many of the companies did internal analyses of where their strengths and weaknesses were, and then looked at the measures that were being used for that particular year and asked where they stood on those measures.”

Home health value-based purchasing

Home health providers have two primary inroads to value-based care — HHVBP and Medicare Advantage.

The U.S. Centers for Medicare & Medicaid Services (CMS) kicked off the HHVBP demonstration on Jan. 1, 2016. Like other value-based models, the program’s objective was to improve quality and reduce health care costs. To achieve this, the program offered financial incentives — and imposed penalties — based on performance.

For its first few years, the demonstration was available only in nine states. But starting in 2022, CMS began rolling it out nationwide.

In a nutshell, participating providers compete with one another on a set of performance measures to gain a maximum bonus of 5%. If a home health company is on the lower end of the performance spectrum, it could see a penalty of up to 5%, which Dombi described as a “carrot-and-stick” approach.

“It was based upon the scoring of data that was reported from OASIS and patient satisfaction scores, and some claims analysis too,” Dombi said. “So there are several different inputs of data that were measures chosen at [the Center for Medicare & Medicaid Innovation (CMMI)] that they felt really exemplified higher quality versus lower quality. Some were objective measures, like rehospitalizations, where they could look at claims data as compared to self-reported data.”

Don’t wait for the day before it starts to get yourself ready for it.

– National Association for Home Care & Hospice (NAHC) President Bill Dombi

One cannot speak about value-based payment models without talking about data. Providers operating within these schemas ride or die based on their numbers.

And while HHVBP is specific to home health agencies, other payer entities like ACOs or health plans will also want to track any cost savings and outcomes generated by the hospices in their networks.

As hospices wade deeper into value-based payment models, they will need to develop tools and skill sets to conduct sophisticated data collection and analysis.

This has brought the hospice community to an “inflection point,” which means they may have to reassess the ways they do business, according to Brent Korte, CEO of Frontpoint Health.

Dallas-based Frontpoint is an emerging provider of home health, hospice, palliative and personal care with a focus on Medicare Advantage enrollees in Texas markets.

“I’m concerned that the hospice industry writ large is not looking at this. Hospice, like home health has already done, is permanently shifting to a more metrics-driven, data-driven industry, and I don’t think the industry is prepared,” Korte told Hospice News. “We’re looking at an inflection point. Leading a hospice is super difficult, and now, we have to add on running and looking at a business in a very different way.”

Health care becomes a numbers game

“Data” is a big word. It can refer to just about any kind of numerical information, and identifying which metrics to track can cause health care executives’ heads to spin.

Korte recommends hospices, as a starting point, hone in on a few key metrics — including some they should already be tracking.

A key example is the frequency of visits near the last days of life.

This should be at “the top of the list,” Korte said. Solid performance on this measure indicates that the provider understands and is responsive to what is happening with their patients.

Solid, validated data are crucial in models like Medicare Advantage and ACOs, where hospices are already making inroads.

In negotiations with Medicare Advantage plans, for instance, hospice and palliative care providers will need to demonstrate their performance in terms of star ratings, reportable quality metrics like the Hospice Item Set and reduced hospitalizations and emergency department visits. These are priorities for most payers and many referral partners.

Hospices should also be ready to track data associated with health equity. CMS and MA plans are increasingly interested in how hospices are addressing access issues within their service communities. CMMI has already integrated health equity data collection into some ACO models as well as the VBID program.

Operating in this environment could require a different mindset than the relative predictability of the traditional Medicare Hospice Benefit. For some providers, an emphasis on numbers may feel antithetical to their mission-driven work.

“Hospice is such sacred work, and to focus metrics and data for many hospice leaders almost feels like an immediate degradation of patient care,” Korte said. “But having a data orientation is survival, and they’ll need to get used to that.”

Prepare for smaller payouts

Another conundrum for hospices is the likely need to improve efficiency and cost control, without sacrificing quality, while also dealing with a labor shortage, Korte added.

Currently in the VBID program, for example, MA plans must pay hospices an amount equivalent to the per diems they receive through the traditional benefit. But this would likely change in the long run should the demo become a permanent model.

A number of home health providers are already reporting some revenue shortfalls as more of their payer mix shifts towards Medicare Advantage. Plans often pay less than traditional Medicare, with the expectation that providers will make up the difference with increased volume. 

“Hospice is such sacred work, and to focus metrics and data for many hospice leaders almost feels like an immediate degradation of patient care. But having a data orientation is survival.

– Brent Korte, CEO, Frontpoint Health

Time will tell if this pans out, but some home health providers are already feeling the pinch.

Case in point, Enhabit, Inc. (NYSE: EHAB) has listed a heavier lean towards Medicare Advantage among an estimated $40 million in headwinds they are working to overcome in 2023.

Other factors include labor pressures, the return of Medicare sequestration and costs associated with the company’s spinoff from Encompass Health (NYSE: EHC).

In Enhabit’s markets, MA enrollment is up 11% while fee-for-service membership is down 4%, the company reported earlier this year. And the provider is aggressively pursuing contracts with health plans, a key value for their referral partners.

The company reported 18 new MA contracts at the end of Q4 2022, with about 35 more in its pipeline.

The challenge is that these contracts have come with an average per-visit discount in the 35% to 40% range, Enhabit CEO Barbara Jacobsmeyer said at the Oppenheimer conference in March.

Negotiating for better rates has become a priority at Enhabit, which has created a payer innovation team to pursue that objective in addition to drumming up more MA business. Their goal is to secure rates from 0% to 10% lower than fee-for-service rates.

“We’d love today to just stop taking the payers that pay those large discounts,” Jacobsmeyer said at Oppenheimer. “Unfortunately, today, we know that we have to go to our referral sources and we have to be able to accept more than just traditional Medicare to be seen as a good provider for them.”