Home Health & Hospice Week

MA plans must ‘wake up to the fact that they can’t continue to pay these kinds of rates,’ exec insists.

If a legislative fix for sequestration cuts isn’t forthcoming soon, your bottom line will suffer. Plan now for the impact that’s looking more likely by the day.

Reminder: A 2 percent Medicare sequestration pay cut and a 4 percent Pay-As-You-Go sequestration cut were set to hit Medicare providers Jan. 1, but an eleventh-hour law delayed the cuts for just a little while. The 2 percent cut got bumped to a 1 percent cut starting April 1 and back to a 2 percent cut starting June 1. The 4 percent PAYGO cut was delayed until January 2023.

A number of publicly traded companies discussed the sequestration cuts in their recent earnings calls for 2021.

It’s clear the sequestration break is a nice bonus for home health and hospice providers. In 2021, “the suspension of seques­tration added $36 million to our revenue and gross margin for the year,” Amedisys Inc. CFO Scott Ginn noted in the Baton Rouge, Louisiana-based chain’s earnings call for 2021 on Feb. 24.

It’s also clear that the return of sequestration is going to take a toll. VITAS Healthcare Corp. has issued 2022 guidance, predicting its revenue prior to the Medicare cap will decline 1.5 percent to 2.5 percent when compared to 2021, said Dave Williams, CFO of VITAS parent Chemed Corp., in the company’s Feb. 25 earnings call. “A portion of the estimated revenue reduction of approxi­mately $15 million is the result of the phaseout of sequestration relief over the first half of 2022 compared to a full year of seques­tration relief in 2021,” Williams explained.

Likewise, Encompass Health Corp. CEO Mark Tarr predicted a similar trend for the Birmingham, Alabama-based chain. “We are benefiting from the continued suspension of the Medicare sequestration into 2022, but its planned phase-out will dilute our pricing increase at a time when costs remain elevated,” Tarr said in the company’s Feb. 2 earnings call. “The reimplementation of the sequester creates an approximately $50 million headwind to consolidated adjusted EBITDA growth in 2022.”

But if lawmakers fail to extend the sequestration holiday, it won’t be all bad news.

Silver lining: Reimposition of sequestration in the last half of 2022 is going to squeeze some providers hard. As those agencies close, downsize, sell, or cut costs by reducing wages, “that’ll open … things up here in the back half of the year as sequestration suspension goes to 0,” Amedisys’ Ginn predicts. Those “things” include staff and referrals.

And those staffing improvements could at least partially outweigh the sequestration impact, expected Encompass Health CFO Doug Coltharp. “Unfortunately, more of the EBITDA headwind related to the phasing of sequestration comes in the second half ” of 2022, Coltharp told an analyst in the call. “But in terms of just our expectations regarding the normalization in the staffing, which has been a very significant issue … we really expect to get most of that benefit in the second half of the year.”

Other topics publicly traded companies’ execs touched on in their earnings calls include:

• Vaccination mandate. Some things may be loosening up when it comes to COVID-19 protocols, but Medicare’s vaccination mandate for healthcare provider employees remains in place.

Reminder: Phase 2 compliance dates for the Centers for Medicare & Medicaid Services rule just passed on Feb. 28, March 15, and March 21, depending on the state in which you operate. Deadlines listed by state are at http://www.cms.gov/files/document/health-care-staff-vaccination-rule-implementation-timeline.pdf.

Laying the groundwork well ahead of time allowed VITAS Healthcare Corp. to have success with minimizing the mandate’s disruption, said VITAS CEO Nick Westfall in the Miami-based business’ earnings call. “We were prepared, ready to go with that,” Westfall reported. VITAS “had minimal disruption because of our preparation in advance,” he said. “That’s based upon 12 to 18 months of activity prior … getting everybody educated, prepared, comfortable in ensuring we were fully safe and available.”

In its Feb. 2 call, ahead of the Phase 2 deadlines, Encompass said it was “in the mid-90s” for compliance in both its home health and hospice and inpatient rehab segments, according to Tarr. “We’ve made significant progress there and make significant progress every week with getting our staff fully in compliance with the CMS guidelines,” he said.

“That number gets higher every week as compliance rates go up,” Tarr reiterated elsewhere in the call. “We are in good shape with regard to that,” he noted.

Having high rates of employee vaccination also helps with staffing during COVID surges, Encompass’ Coltharp pointed out in the call. “When we see vaccinated folks contract COVID, they tend to be either asymptomatic or mildly symptomatic,” he related. “We are really getting them back within that five-day period, and that’s helping.”

• Outlook. Multiple companies are expecting things to get closer to normal in the last half of this year.

“The surge in COVID cases experienced across the country due to the Omicron variant has once again disrupted the flow of patients throughout the entire health care system,” noted VITAS’ Westfall in its call. “Our estimate for 2022 contemplates continued disruption in the system during the first half of the year with improvement during the second half of the year,” he said.

Length of stay figures “should be completely normalized by the end of the year,” added Chemed Corp. CEO Kevin McNamara in the call.

Pennant’s 2022 revenue predictions include “some mild improvement in the second half,” said CEO Danny Walker in the Eagle, Idaho-based company’s March 1 earnings call.

LHC Group Inc. expects its contract staffing level to get back to its “normalized utilization pattern” in the last half of 2022, CFO Dale Mackel told an analyst in the call.

Encompass Health expects “increased productivity in the second half of 2022” as newly hired staff get completely up to speed, Tarr pointed out. And competition for staff “should begin to normalize, particularly in the second half of next year as we see less and less impacts from COVID,” he said.

• Medicare Advantage. Many home health and hospice companies continue to deal with further managed care penetration in their markets. And the MA landscape seems to always be in flux.

“We continue to see some Medicare Advantage plans moving away from PDGM reimbursement to per-visit arrangements through utilization of benefit managers,” reported Amedisys’ Ginn in its call. “When this happens, there is a short-term reimbursement impact. That said, our MA partners continue to recognize the value of Home Health for their members, and that is materializing itself and the openness to high quality to outcomes.”

Low MA rates are “an industry-wide problem,” noted Encompass' Coltharp in its call. COVID limits may actually help in that area too, he suspects. “At least for a period of time, the supply of available clinicians to conduct visits in the home is going to be somewhat limited. And those are going to get allocated to higher-paying sources,” Coltharp explained. “And so the managed care companies and Medicare managers are going to have to wake up to the fact that they can’t continue to pay these kinds of rates and expect to get quality care delivered in the home,” he predicted.

“This imbalance between the increased cost that home health providers are experiencing and not seeing that kind of price pass-through to the Medicare Advantage and managed care companies … cannot persist throughout the industry,” Coltharp insisted.

• Audits. More medical review is plaguing the industry, including publicly traded companies.

“We’ve seen it tick back up a little bit,” LHC Group COO Josh Proffitt said of audit activity in its call. “In both home health and hospice … you just see the activity picking back up.” The company is “just having to kind of manage through more volume,” Proffitt acknowledged.

Proffitt credited the chain’s compliance program and staff with making its audit results “stellar.” The team that handles audits has “some very experienced home health and hospice clinicians,” he added.

“While facing the unprecedented challenges of the COVID-19 pandemic, hospice and home health providers also continue to weather a deluge of audits and recoupments from CMS contractors,” observes attorney Jennifer Weaver with law firm Waller Lansden Dortch & Davis in Nashville.

“In particular, Unified Program Integrity Contractors (UPICs) target providers for alleged fraud and then charge those providers with multimillion-dollar overpayments extrapolated from data mining,” Weaver warns in online legal analysis.

Providers should “be on the lookout for audit requests from UPICs (CoventBridge, SafeGuard and Qlarant) and not confuse these with routine payor audits,” Weaver advises. “UPIC audits can lead to multimillion-dollar extrapolated overpayments and referrals to [HHS Office of Inspector General] or the Department of Justice for investigations of potential fraud,” she stresses.

“Any hospice or home health provider receiving an audit request from a UPIC should proceed with extreme care and make sure to provide complete and pristine medical records in response to the request,” she urges.