Medicare Advantage Penetration Plateau Provides Home Health Tailwind - Latest Global News

Medicare Advantage Penetration Plateau Provides Home Health Tailwind

This article is part of your HHCN+ membership

If there was ever a time for problems associated with Medicare Advantage in the home health care space to subside, it would be now. And as summer begins, some of the nation’s largest home health providers are making demonstrable gains that could lead to future success.

Virtually no one has fully understood the MA game, and it is hard to imagine a day when this will even be possible. But there are certainly signs that the worst is behind providers, at least in much of U.S. counties.

On the one hand, the MA plans are not in a strong financial position right now, at least for the most part. Providers are in a better position than they were three to five years ago to convince plans to pay more fairly for their services, even if the plans are doing less well.

In value-based care and working with managed care companies in general, success breeds success. Home health care providers can now demonstrate their work one plan at a time.

Instead of a woe-is-me approach, the biggest providers — like The Pennant Group (Nasdaq: PNTG), Enhabit Inc. (NYSE: EHAB) and Aveanna Inc. (Nasdaq: AVAH) — are taking a tougher approach.

This is certainly not possible with every provider. But public companies are contributing to a new tone: pay fairly, or else.

“I think payers are recognizing that this is not a commodity business, but that there is a real need to partner with high-quality providers in communities,” Pennant CEO Brent Guerisoli said Wednesday. “That’s also why these discussions have been positive for us, because they recognize the value of [partnering with] a quality provider.”

The recent earnings calls and investor presentations from publicly traded home care providers brought some key takeaways, mostly focused on MA.

These insights are the subject of the exclusive HHCN+ update available to members only this week.

MA penetration

A better MA landscape may not be driven just by providers taking a tougher approach in negotiations.

In fact, Addus HomeCare Corp. CEO Dirk Allison said. (Nasdaq: ADUS) said there could be a “flattening” in MA penetration during the company’s first-quarter earnings release earlier this month.

In 2023, for the first time ever, there were more Medicare beneficiaries in an MA plan than in the traditional Medicare plan.

According to the Kaiser Family Foundation, this penetration occurred quickly. For example, in 2023, approximately 51% of beneficiaries were enrolled in the MA. Just five years earlier, only 37% of beneficiaries were enrolled in the MA.

“We continue to be impacted by the shift of Medicare beneficiaries from Medicare beneficiaries to Medicare Advantage, but we feel this shift may be moderating in the markets we currently serve,” Allison said. “We continue to work with our Medicare Advantage payers to obtain higher rates.”

The rapid penetration from 2013 to 2023 suggested that MA plans would continue to rapidly gain market share. But that no longer seems to be a sure thing.

After the Centers for Medicare & Medicaid Services (CMS) cut MA rates, plans have fewer opportunities to expand and offer additional benefits that differentiate them from traditional Medicare.

For two years in a row, CMS has completed unsatisfactory payment rates from the perspective of the MA plan. In 2025, core payments are scheduled to decline by 0.16%.

“As we consider decisions for 25-year bids, we intend to abandon some districts,” Humana Inc. (NYSE: HUM) CFO Susan Diamond said earlier this week. “As we thought about the framework within which we make these decisions, the viability of the plan was an important factor.”

Bruce Broussard, CEO of Humana, also added that additional benefits will be “offered less and less” in the future.

In addition to exiting some markets, Humana – along with other insurers – is choosing profitability over growth. This could mean less market penetration for MA in the coming years.

This would be a positive trend for home health care providers. Even though traditional Medicare payments are being cut, the profitability is still far higher compared to MA plans.

MA is not going away and will become a larger part of the home healthcare business in the foreseeable future. But providers are still making adjustments to accommodate this. If the use of fire hoses is rejected – even for just a year or two – that would be an advantage.

Positive steps with plans

Particularly in recent years, providers have developed strategies to deal with MA penetration.

These strategies are finally being implemented, and even if they are still in their infancy, they are certainly better than settling for the remnants of the fee-for-service Medicare business.

Outside of home health care, Addus is also toying with a values-based care strategy that includes more personalized care for MA beneficiaries.

“[We have] “A small contract, and instead of sharing the profits, we take some risk,” Allison said Wednesday. “Now it’s very minimal. We only take risks for our part, for our hours. We wanted to – I’m not saying experiment – but we wanted to contract with a payer that we could work with to see if adding personal care hours could help increase the overall medical loss rate for their patient base reduce. We are happy about that. We’ve only been here for a few months.”

Data does not always convince lawmakers. Instead, stories do. That’s not so much the case with MA plans, where data continues to be king.

Here too, providers have caught up.

As Enhabit shifts its home health mix to include more – and better – MA contracts, it is committed to its 30-day rehospitalization rate, which the company says is 20.5% below the industry average.

The new face of the public market, BrightSpring Health Services (Nasdaq: BTSG), said in its first-quarter earnings release that its home health services are also helping to significantly reduce hospitalizations.

“Our medication management program … has demonstrated a 73% reduction in hospitalizations when used in conjunction with our home health care,” BrightSpring President and CEO Jon Rousseau said during the company’s first quarter earnings call earlier this month.

Pennant was ahead in MA because he recognized the need to accommodate MA beneficiaries long before a crisis began.

Now it is able to ask the plans to pay. John J. Gochnour, Pennant’s president and COO, said Wednesday that the company has achieved per-visit salary increases through MA plans over the past two years that exceed any increases it has seen in the previous decade.

According to Gochnour, these rates have specifically increased by 10 to 15 percent.

It’s hard to say that the tide is turning in the relationship between MA and the home healthcare provider. Providers are still finding it difficult to cope with the changing landscape.

But in a generational war like this, all battle victories are worth taking stock of.

“Because they still save money in the end, right?” Gochnour said. “Because we have the most cost-effective setting. And they make the right investment, we reduce hospital stays, we reduce the overall cost of care, and it’s a win-win for both.”

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