Home Health & Hospice Week

PDGM to create a buyers’ market.

It’s still early days for the Patient-Driven Groupings Model, but for some home health agencies the drastic new payment system has already decided their fate.

The prediction: Industry experts have forecast that up to 40 percent of HHAs might go under due to PDGM, which would be more than closed their doors the last time the industry saw a dramatic pay system change under the Interim Payment System implemented in 1998.

“Undoubtedly, there will be agency failures, but I think it may be a bit early to accurately prognos­ticate what the fallout will be,” muses Sharon Harder, president of consulting firm C3Advisors in Wheaton, Illinois.

“I don’t think it will be that high,” Dave Macke with VonLehman & Co. in Fort Wright, Kentucky, says of the higher end of closure estimates. Then again, it’s “hard to say and nobody has a crystal ball,” Macke tells Eli.

Tom Boyd with Simione Healthcare Consultants agrees. “I think actual closures will be at the lower end,” perhaps around 15 percent, “and change of ownerships may account for another 10 to 15 percent,” Boyd says. Buyers will be “bargain hunting” as PDGM takes firm hold, he predicts.

“I am not convinced that agencies will drop like flies,” says Julianne Haydel with Haydel Consulting Services and The Coders in Baton Rouge, Louisiana. “Payment appears to be adequate,” Haydel points out. “But historically, it is after the first billing cycle that agencies begin to fully understand the implications of the new payment system. Frankly, nobody really understands until what’s on paper becomes a practice,” she adds.

“I personally don’t believe the industry is on track for IPS-level closures,” forecasts M. Aaron Little with BKD in Springfield, Missouri.

The combination of reduced Request for Anticipated Payment amounts, 30-day billing periods, and difficulty securing timely documen­tation from physicians has cut into cash flow, notes Joe Osentoski with Gateway Home Health Coding & Consulting in Madison Heights, Michigan.

While such difficulties are not a crisis yet, they may turn into one as cash flow gets tighter — particularly for agencies without backup financing already lined up, experts agree.

A crackdown on therapy utilization with heavier audits may also contribute to closures, some predict. “Many expect audits to occur if [agencies have] significant reductions in therapy,” notes physical therapist Cindy Krafft with Kornetti & Krafft Health Care Solutions. “Beneficiaries are already complaining to advocacy groups.”

At press time, more and more local news outlets were picking up the Feb. 4 Kaiser Health News story titled “What To Do If Your Home Health Care Agency Ditches You,” which profiles the case of a Connecticut patient with MS who was discharged by her HHA, allegedly because “Medicare was changing its payment system for home health” (see Eli’s HCW, Vol. XXIX, No. 6). A Forbes article also referenced the article and discussed the issue.

Some HHAs have decided the handwriting is already on the wall, and are taking action. Industry veterans relate stories of closures that are in the works.

“We have definitely seen some organi­zations that have chosen to close,” Little says. “PDGM wasn’t the only reason for those decisions, but it was definitely a significant factor.”

Who’s vulnerable? “Smaller agencies without access to external working capital will be hit hardest,” Harder predicts. “The question is whether they were able to secure any type of financing assistance.”

Agencies that had a patient census heavy on cases that were profitable under PPS, but not under PDGM, may also struggle, experts predict.

Ditto for agencies without the capital to invest in enhanced diagnosis coding, operational, IT, and other improvements.

Note: The Forbes article, “How Medicare’s New PDGM Home Care Payments May Be Making It Harder To Get Physical Therapy,” is at www.forbes.com/sites/howardgleckman/2020/02/14/how-medicares-new-pdgm-home-care-payments-may-be-making-it-harder-to-get-physical-therapy.