This article is sponsored by Homecare Homebase. This article is based on a Home Health Care News discussion with Scott Pattillo, Chief Strategy Officer at Homecare Homebase. The discussion took place on March 30, 2023 during HHCN Capital + Strategy in Washington D.C.. The article below has been edited for length and clarity.

Home Health Care News: We are going to be using some of the insights that Homecare Homebase gleans to tell the story of home health, where it’s been, where it’s at right now, and more importantly, where the trendline is going. There have been a lot of changes that providers have had to deal with from PDGM to the pandemic, managed care and staffing challenges, the list goes on and on.

Last year, after the proposed rule, Homecare Homebase penned a letter to CMS that pointed out how patients are becoming more medically fragile. There are more critically needed patients. Why is it so important to look at all of this data in that context?

Scott Pattillo: Yes, I think that it’s easy for MedPAC, for example, this year to look at home health margins and forget some of the impacts on patients. At the end of the day, it’s about patients, it’s about outcomes, it’s about quality, it’s about access to care. I think it’s really important that we understand some of these policies and even the challenges around clinicians, how it’s affecting patients.

HHCN: What kinds of data are you gathering at Homecare Homebase, could you tell me a little bit about the insights we’ll be talking about?

Pattillo: Yes, so we think we’re in a really unique position to study this. Today we have 36 percent of all home health and hospice Medicare patients in our system. The difference is, CMS is looking at claims data, where you only see certain pieces of the operational data. We can look at a lot of things that even CMS doesn’t have access to. We have all of the information about the referrals that get sent in to begin with, how many of them convert, what those steps look like to convert, all the administrative tasks, the cost of those administrative tasks and the care steps in between.

We spent a lot of time with the very large cut that was proposed last year, working with our agencies to really study a 10-year trend on all these different data metrics to see what the norm was prior to the pandemic, how those behaviors actually adjusted, how much of that was driven by the PDGM, how much of that was just driven by the macro environment around the pandemic, and try to glean insights that were relevant towards a lot of the policy being put in place and help people understand the implications.

HHCN: I remember when I was going through that letter last year, I read about how access to care was really constrained, how clinicians were having to see more patients, yet they were doing fewer visits per patient. Have some of those trends persisted in the early part of this year?

Pattillo: They have. What we really saw, obviously in 2020, there was this major reduction in the amount of clinicians available. Some of that was directly related to clinicians on the bench with COVID. Some of that was clinicians having left the workforce, some of that was competition for clinicians, but you saw this major drop, and ADC just kept rising, and more and more patients kept coming on services. Very quickly, in 2020, we saw the ratio shift to where every home health clinician had on average, one and a half more patients that they were responsible for caring for.

Well, the only way to deal with that when the number of clinicians, overall, was largely flat was to reduce the amount of visits. We saw visits go down by two on average, so all of that happened in 2020 and stabilized in 2021. But we have not seen any shift or trend back down to pre-pandemic levels. It has really reached a new normal. Amazingly enough, we have not seen it in rehospitalization, overall, the agencies have done a great job in figuring out where to apply those two less visits per episode and largely keep that rate steady.

In looking at the access to care trend we found that 10 years ago about 20% of patients referred ultimately didn’t convert into home health, it reached about 30% before the pandemic and spiked up to 42% at the time of our letter. Now it’s at 44%. In terms of real numbers, that’s 6 million patients every year that are being turned away from home health services largely as a result of the clinician shortages.

HHCN: Just to underscore that again, over four out of every 10 patients that are referred to home health are being actually turned away.

Pattillo: Yes.

HHCN: I’m not sure if this is something that you have ready at the top of your head, but you mentioned some of those outcomes measures, maybe not suffering with clinicians taking more patients doing fewer visits per patient. What about patient satisfaction? What about clinician satisfaction? I imagine that increased workload in some ways could be a drain on them.

Pattillo: Yes. Those were really interesting questions as well. A lot of the quality measures were paused during the pandemic. There may be additional data that comes out that talks about the impact on patients. If you study rehospitalization rate it’s largely been flat. We theorized originally that we were going to see an increase in rehospitalization. We haven’t seen it.

Again, it speaks to the job the agencies have done. But we also started studying clinician satisfaction trends over the same period of time. It’s always been a high turnover industry, we all saw an increase in turnover in the pandemic and afterwards and really tried to study the factors that are leading to the clinician dissatisfaction.

Obviously, just additional burdens being overworked, more drive time, more windshield time, more documentation has all been a challenge. But it’s been interesting to see a lot that has restabilized. What’s been interesting is studying the types of clinicians that are most at risk. What we really see is clinicians in their first year have a far higher turnover rate than those who have been with it for a short period of time. But then turnover rates get high against longtime clinicians as well, which is kind of interesting.

In that first year, our agencies are discovering a lot of intervention and follow-up that needs to be done with clinicians to help them understand homecare and understand how to do their job in a way that will be more satisfying. If they can get them over that first year, the turnover tends to drop.

HHCN: The final payment rule did delay some of the planned cuts from CMS, up until 2024. But there is a possible 7% cut coming and providers are aware of that. What are providers doing right now? What are some of the things that they’re thinking about to mitigate those potential cuts?

Pattillo: Yes, and I think they were forced to think about it a lot last year. As we had such a big cut looming. We were thankful that there was some moderation and delay on that from CMS. Obviously, the MedPAC’s 7% recommendation got everybody thinking again, and we’re hoping to see more moderation on that.

Last year, we saw a lot of talk about, “we’re going to have to reduce the number of visits per patient even further, we’re going to have to lean out our agencies even further”. But we didn’t necessarily see that turn into strategies and actions that were implemented broadly. That has changed this year, as a lot of our large agencies are actually doing the centralization that they’ve been talking about for a long time.

HHCN: When you say implemented broadly, you mean taking things that are the branch location and centralizing?

Pattillo: Yes. There’s a lot of things that we have seen localized at the branch level for a longer time, like scheduling, for example, is a great example of that. Most agencies have a scheduler in every branch that deals with logistics that understands the patients, they know the patient preferences, they know the clinician preferences. They can manage the fact that I need a Spanish-speaking nurse for somebody that does not want to be seen on Thursday mornings, because their mom is there, and I need somebody that has this particular skill set to deal with this issue. I want to keep care continuity high, but I need to also use my full-time staff before my part-time staff, and I’m trying to reduce mileage.

Addressing all of these things, while holding care continuity are hard to decide. Largely, it’s been done at the local level where people can manage a smaller number of patients, and clinicians and try to make the best decisions they can. Well, largely, what we’re seeing is, if I’m forced by this type of cut to find savings and I’ve got 100 branches and 100 schedulers, there’s a savings opportunity there with automation and centralization.

It’s about using technology that can help automate a lot of those decisions. Human beings are always going to have to deal with the exceptions. They’re always going to have to deal with specific calls, specific logistical challenges but we want to apply schedulers time to those exceptions that require critical thinking. We want to be able to automate as many tasks as possible so agencies don’t have to have a scheduler in every branch.

We’re seeing a lot of centralization in the revenue cycle as well. Then certainly automation that goes with all of that in order to get those savings.

HHCN: What about some other mitigation strategies because I know that there are a few different tactics providers could take?

Pattillo: If rate cuts are truly 7% you can’t just get there by running a lean agency, you will probably also have to reduce another visit per patient. The question becomes, how do you do that in a way that still stays true to the mission and still provides great outcomes? A lot of it is about making sure you understand your patient mix, which patients could move to different modalities of care, could use a telehealth visit, could use a phone call in place or in lieu of what would’ve been an in-person visit before. A lot of that requires analytics to understand patient risk. We’ve seen a lot of programs try to get down to, “What are my higher acuity patients? What are my riskier patients? How can I make sure that in some cases we’re even doing more visits to get a great outcome.”

On the flip side, as importantly, “Which are my patients, that I could probably do with one less visit?” Really think about the precious clinical capacity that you currently have since everyone is running short on that. Then use other venues of care like telehealth or even other service lines to care for those patients.”

HHCN: I’m going to put you on the spot here a little bit because as you’re talking through this, I’m thinking providers have already reduced the number of visits per patient coming into this year. They might have to do it even more going into 2024. Seems like that’s going to make LUPA management really difficult. If you’re doing fewer and fewer visits, aren’t you putting yourself at risk for more LUPAs potentially?

Pattillo: Potentially. I think the average visit count is still pretty well ahead of the LUPA threshold. We’re not just right down against it where hey, one visit on average is going to throw a whole bunch into LUPA. I’m sure it could happen from time to time. The question is, at what point does it break? We’ve been able to see these agencies, cut two visits per patient or two visits per episode and still keep the rehospitalization rate flat. They’ve done an incredible job, but at what point are they stretched too thin and we start to see the patients ultimately pay the price of these cuts?

HHCN: When does that augmenting with technology and those other capabilities stop paying off?

Pattillo: Exactly.

HHCN: When we’re thinking about this concept of mitigating these cuts coming from CMS, I’m also wondering about the wage increases that we’re seeing, and not just for clinicians, but for back office workers. How does that factor into all of this? Is that something from what you’re seeing and hearing out there, that CMS is even aware of when they’re doing some of these cuts?

Pattillo: Yes. That’s a great question and some of the audience may even be able to speak better as to whether CMS is aware of it. It was a point that we tried to draw out that it’s really counterintuitive to think that at a time when agency management workers’ wages are increasing, clinicians’ wages are increasing and the cost of gas is increasing.

HHCN: I think you put a number on that too.

Pattillo: We did. Just keeping mileage steady looking at last year’s gas prices across the industry, agencies we’re paying 120 million more for gasoline. I don’t even think people always understand the logistics of the fact that you are driving to all these different houses, the cost either has to be born by the agency or by the clinicians. All of these costs are rising at the same time and yet reimbursement is falling and there’s more cuts coming.

It’s really creating a very, very difficult environment, as you all know, to compete for clinicians with all the upstream hospitals. Everybody’s pulling from the same pool of clinicians to solve those access to care challenges, which is why we’re seeing 44% of patients getting turned away.

HHCN: Some of the things that we’ve been talking about right now, are what the home health industry has dealt with last year and what it is currently dealing with. We’re going to talk about the future of home health in a second, because I know you have some great insights related to managed care. While we are on “the now”, are there any other insights that you’d really like to highlight that Homecare Homebase has been gleaning?

Pattillo: Yes, it’s a great question. I think that the most stark thing we’ve seen in terms of actual change is centralization. We haven’t put a number yet on necessarily how much efficiency has been gained by that, but that’s something that we’re studying pretty closely.

HHCN: There’s patient acuity levels too, right? It’s my understanding that we’re seeing patients coming out of the hospital faster, often sicker. We certainly saw that during the worst of COVID. I think some of those trends are still persistent.

Pattillo: They are, we’re still seeing higher acuity patients. We’re still seeing earlier discharges. I think hospice is where maybe you see some of that play out. We’ve seen a 13-day length of stay reduction in aggregate across hospice, which just speaks to the fact that patients are not getting on hospice when they should be.

HHCN: Well, looking ahead at the future of home health and managed care. While these cuts are coming in the fee-for-service environment, you’re also still seeing rate pressure from Medicare Advantage plans. What is Homecare Homebase seeing on that front?

Pattillo: Medicare Advantage had a 15% lower reimbursement. There was a 1.5% higher re-hospitalization on Medicare Advantage. It’s four times more costly to collect. Ultimately, that leads to very thin margins on Medicare Advantage. When you’ve got this perfect storm of Medicare rates going down, it’s going to force you to rethink Medicare Advantage.”

I know even HHCN had some great insights and articles this week about some of these bad contracts that we’ve agreed to in Medicare Advantage and unfortunately, seems to be a race to the bottom at times because that high-quality provider wants to be able to provide a great outcome for a patient and knows “I can’t do it for what you’re paying me”. Oftentimes there is somebody else that’s willing to pick up those patients at a low rate.

There really needs to be a shared ability to tell that value story to the industry, and be able to say, “It is better for you, it is better for everyone involved. If you pay me fairly for great quality care for this patient, this patient is going to have a better outcome. They’re going to cost you less in the long run. The mission is correct, it’s best for your business and best for the patient.” Ultimately, we’ve got to be able to flip those Medicare Advantage contracts and say no to bad contracts and really sell our value to accommodate these reductions in Medicare.

HHCN: “We’re not payer agnostic, we are payer selective.” Is that a philosophy that you’re seeing more and more providers take?

Pattillo: I think so. I think it’s always challenging to talk about because you don’t want to necessarily say, “Well, I’m going to turn this patient away because I’m not getting as high reimbursement.” The reality is that to be able to provide a great outcome, you are forced to select patients and payers that are going to allow you to do what you need to do for the patient and pay you for that outcome, for that care. Ultimately you have to focus on those types of patients and contracts.

HHCN: The Medicare Advantage landscape is already pretty difficult. There has been a lot of heat put on some of the biggest insurers in the country right now from OIG to Elizabeth Warren. Do you think that some of this pressure on Medicare Advantage plans is going to make it even harder to negotiate with them?

Pattillo: It’s a great question and I don’t know necessarily how the pressure plays out on that. I guess the encouraging flip side is seeing Humana buy Kindred, now CenterWell, seeing UHC with LHC and some of the other partnerships that you’re seeing between large payers and providers, that signals to us that there’s at least a recognition of the value of home-based care and home-based services. With that recognition, I hope that opportunity will drive these Medicare Advantage payers to realize, “I can partner with great agencies for great outcomes and everybody wins.” Ultimately, that’s what we’re hoping to see more of.

HHCN: Is there any potential for data science AI to analyze orders and proactively request added extended care services?

Pattillo: That’s a great question. I know everybody’s thinking about ChatGPT and all the advantages.

Pattillo: We’ve got about 12 really interesting use cases that we’re exploring on the home health side, and one of them is, if you’re looking for authorization or denial, could you use that to help summarize information and try to say, “Yes, there is a way to more efficiently tell this patient’s story.” Obviously, human beings are going to have to interpret and make sure that is correct and accurate before you’d ever send it on.

There may be ways as we’re all looking for efficiency and automation to leverage that. There’s a lot of other really interesting use cases that I would love to spend time talking about.. I think ultimately our thesis is, it’s going to be a slow adoption in actual clinical function. In supplemental clinical function or administrative, I think there’s a lot of really interesting uses for it.

HHCN: A fun thing I learned recently, a lot of the Twitter threads that you might really enjoy are being put together by AI right now. Very smart people out there have computers do the work for them.

HHCN: I want to circle back to what I opened up this conversation with. When we’re looking at access to home health services and patients being left out, I know that Homecare Homebase noted that it is the most medically fragile, really complex patients are being left out. Has that trend continued this year?

Pattillo: Yes, the higher acuity. Interestingly, it’s also patients with the lowest income. We took 10 years of referral conversion data and 10 years of economic data and matched it by zip code then looked at what patients are being left out the most. Unsurprisingly, the lowest income zip code has the lowest conversion rates in terms of referrals, which just speaks to the care access challenges.

Oftentimes, those are also the most complex patients, both in terms of social determinants and direct clinical acuity. We’ve seen the opposite of what I had originally hypothesized. Conversion rates have actually been better in rural than urban areas. We thought maybe, with all the challenges in getting to rural patients, that that would be really challenging. That has largely not suffered nearly as much as the urban settings.

HHCN: I would’ve expected the exact opposite. Do you have any insights as to why?

Pattillo: Perhaps the clinicians that are in the rural communities are part of that community as a clinician, that’s part of their identity. There may not be as many other opportunities to jump to. I think on the flip side for some of the very lowest income zip codes, there’s a lot of difficulty in keeping clinicians satisfied with some of the challenges of those jobs.

HHCN: I want to bring this conversation back to the theme of this conference, which is Capital Strategy Investment. If I’m putting myself in the shoes of a strategic buyer or more so even a private equity investor, perhaps exploring home health for the first time, if I hear stats like the home health industry, at least the providers that Homecare Homebase is working with, have to turn away over four out of every 10 patients. Is that a reason for me to buy into the home health industry or is it something that would scare me?

Pattillo: It’s a great question. There’s incredible opportunity for growth in this industry if we can staff it properly with clinicians, right? As we all know, there’s an aging population that is coming, which speaks to the growth, but also I think there is a broader recognition that a variety of services can be provided in the home to care for these patients.

We’ve had questions from managed care providers to home health agencies asking “Hey, if we sent all kinds of new patients your way, could you handle them?” Patients that would never have been traditionally Medicare, home health, or homebound patients, just patients that just need to be intervened in their home in any variety of ways.

We’re seeing growth in other programs like palliative care, pre-hospice, chronic care, behavioral, where there are indicators that somebody just needs some sort of home-based intervention. The unique logistical capabilities of these agencies are really, I think, underappreciated in terms of how hard it is to manage all the logistics of home-based care. There is going to be, I think, an increased awareness and amount of opportunity to really deploy these caregivers uniquely in the home that would make me incredibly bullish on the space.

HHCN: You mentioned palliative care and just another quick plug. Later in April, we will be launching a palliative care newsletter that comes out once a week with some exclusive content, so that’s something to keep an eye out. As we look ahead to the rest of 2023, anything beyond what we’ve already talked about that you think is important to hit on? Are there any under the radar issues maybe boiling just under the surface that you think are really going to come to a head this year?

Pattillo: I think when we start talking about reimbursement cuts and the challenges of Medicare Advantage, it sounds like a lot of doom and gloom but the flip side, the silver lining is, necessity is the mother of invention, right? We are seeing all kinds of innovation.

We are seeing a force towards more value-based arrangements, which is really exciting in many ways. This idea that I can now deploy a..