Home Care Providers Plan to Seize New Medicare Advantage Opportunity

Investors were bullish on home care on Tuesday, following news that Medicare Advantage (MA) plans would officially be allowed to cover non-skilled home care services starting in 2019. Care providers were excited as well, making the case that they are well-positioned to seize this opportunity, even as they are trying to determine its scope.

The Centers for Medicare & Medicaid Services (CMS) finalized the policy in a call letter issued Monday evening. In early trading on Tuesday, shares surged for publicly traded companies that offer in-home personal care. Lafayette, Louisiana-based LHC Group (Nasdaq: LHCG) ended the day up 6.83%; Baton Rouge, Louisiana-based Amedisys (Nasdaq: AMED) ended the day up 4.90%; and Frisco, Texas-based Addus HomeCare (Nasdaq: ADUS) was up 1.92% at market close.

While they could not see their share price rise in the public markets on Tuesday, privately held providers were also celebrating, including ResCare. The Louisville, Kentucky-based company serves about 60,000 clients daily across 42 states, with personal care being its core offering.

“As a leading provider of home and community-based health services, we’re enthusiastic about this opportunity for the home care private duty industry,” ResCare President and CEO Jon Rousseau told Home Health Care News.

Franchise-based private duty companies and venture capital-backed startups added their voices.

“This is an historic and long-awaited move by CMS to recognize how important non-medical home care can be for maintaining the health of older adults,” Seth Sternberg, CEO and co-founder of San Francisco-based Honor, told HHCN. Honor is a tech-forward home care provider that has raised a large amount of capital since its 2015 launch.

Darby Anderson, chief development officer with Addus, also emphasized how the change could reposition the industry as a whole. Addus has 111 branches in 24 states, deriving most of its revenue from personal care.

“This is a positive move and important first step to better integrate personal care services within the health care delivery system,” Anderson told HHCN.

Interpreting the change

When it gets to the details, though, there’s less certainty about what the policy shift means.

In its call letter, CMS stated that it is relaxing a prohibition on Medicare Advantage coverage of “daily maintenance” services. This paves the way for the private insurance companies that administer Medicare Advantage—including heavyweights such as UnitedHealthcare and Humana—to cover private duty home care services through a supplemental benefit.

The call letter is also explicit on the purposes of the benefit expansion, including to “compensate for physical impairments” or “reduce avoidable emergency and health care utilization.” Personal care providers appear to be ideally positioned to deliver on these goals.

“The private duty/personal care services we provide, for example, like fall prevention, medication adherence, proper nutrition and grooming, mobility, et cetera, are all non-medical services that keep people healthy, at home and out of the hospital,” Rexanne Domico, president of ResCare HomeCare, told HHCN.

However, CMS also put parameters around the new benefit, including that it must address “specific illnesses and/or injuries.” This could mean that MA plans will limit the benefit to people with a particular diagnosis, perhaps starting with diabetes.

“It remains to be seen how plans may deploy this rule; however, because the rule makes reference to diabetes as a condition of focus, it’s reasonable to think this may be one of several conditions that could be managed effectively and first in the home with better outcomes and at lower cost,” LHC Group Vice President of Government Relations Denis Fleming told HHCN.

UnitedHealthcare, Humana and Aetna—three of the largest Medicare Advantage providers in the nation—had not responded to requests for comment from HHCN as of press time.

It’s likely that insurance actuaries are in a wait-and-see mode, pending further CMS guidance that will probably be released soon. Insurers have to submit MA plan designs and bids to CMS by early June.

“From our conversations with MA plans, finalizing the plan benefit design and pricing impact needs to be concluded by the end of April,” Addus’ Anderson said. For 2019, he anticipates the revenue and volume impacts of this policy shift will be conservative, and then grow in future years.

The call letter alludes to this as well, noting that provisions of the Bipartisan Budget Act of 2018, passed in February, further expand supplemental benefits in Medicare Advantage. Under this law, MA plans will be permitted to offer even more varied benefits packages to chronically ill people, starting in 2020.

Though she is excited by the changes coming in 2019, this law is going to have a more profound impact in bringing personal care services under the MA umbrella, Anne Tumlinson told HHCN. Tumlinson is the founder of consultancy Anne Tumlinson Innovations and previously led Medicaid oversight at the Office of Budget and Management, and she founded the post-acute and long-term care consulting practice at Avalere Health.

In light of the changes coming in 2020, it’s conceivable that insurers will wait until then to make notable updates to their plans, she said.

The conventional wisdom is that MA providers will be incentivized to control costs through this new benefit, but providing ongoing personal care services is not cheap, Tumlinson also noted, adding that the Medicare Advantage business model for most insurers is based more on enrollment volume than cost control.

Ready to roll

While there are reasons for Medicare Advantage providers to be cautious in rolling out this new benefit, doing so would fit into long-developing trends and build on relationships that the insurers have forged with providers.

For instance, Addus and ResCare are both adding home health and hospice to their long-standing personal care business. This should help them make inroads with Medicare Advantage, they argue, one reason being that it’s inefficient for insurance companies to work with many smaller providers, preferring one larger, sophisticated partner that can manage an aging patient population with shifting care needs.

Amedisys is following a similar strategy, building out its private duty portfolio in the past few years under the guidance of CEO Paul Kusserow, who was previously an executive with Humana. LHC Group, meanwhile, just closed on a mega-merger with Almost Family, adding that company’s large personal care business to LHC’s extensive home health and hospice network.

All these companies have relationships with private-sector insurance companies, as they receive personal care reimbursement from managed Medicaid payors or skilled home health payments from Medicare Advantage. But the most dramatic example of a provider-insurer relationship is Kindred Healthcare (NYSE: KND) and Humana; the insurance giant is in the process of acquiring a 40% stake in Kindred at Home.

Humana explicitly made the case for how tying up with Kindred can help manage costs and care for its Medicare Advantage population, in announcing the acquisition last December. The same strategy that motivated the Kindred acquisition could make the new personal care benefit an attractive option for Humana, Tumlinson noted.

Non-skilled personal care services are also delivered by private duty companies that have little exposure to either government or private-sector insurance, being primarily private pay.

Honor is one example; Homewatch CareGivers is another. The Greenwood Village, Colorado-based company provided about 6.4 million hours of non-medical care in 2016, through about 200 locations run by 106 franchise partners. It is now engaging with Medicare Advantage providers, CEO Julie Smith told HHCN. The company wants a voice in designing the MA home care benefit and aims to become a preferred provider within MA plans.

Medicare Advantage rates might not match private-pay rates, Smith acknowledged, but working with MA could drive client volume.

There will have to be an analysis of how much volume is needed to offset revenue reductions on MA clients, once rates are known; there will have to be consistent measurement and engagement to make sure the balance is right, she said. This might sound like a headache to companies that are used to the clean and easy math of private pay. These companies might also quail at investing in technology to capture data and demonstrate outcomes to MA partners—which Smith believes that Homewatch CareGivers has in place with its Care Plus tech platform.

Yet, Smith believes that working with Medicare Advantage is where the future lies, pointing to the numbers: More than 19 million people, or 33% of all Medicare beneficiaries, were enrolled in MA as of 2017, according to Kaiser Family Foundation data.

Consumer preferences could also drive MA plans to add personal care benefits. Insurers are sensitive to their customers, not wanting to lose enrollees, and there’s no doubt about where seniors prefer to live and receive health care services as they grow older: in the home.