In October, Juneau Hospice and Home Care closed after 20 years of operation.
A month earlier, Trinity Health At Home in Springfield, Illinois closed its doors and laid off 60 employees.
Early in the new year, Oahu Home Healthcare announced it was closing, leaving just eight home care agencies on the most populated island of Hawaii.
More and more small and medium-sized suppliers are closing permanently due to staffing constraints and margin pressures. Home health experts believe this trend is worrying not just for endangered providers, but for the industry as a whole.
“The industry has had a reprieve this year from CMS,” Mike Dordick, president of McBee Associates, told Home Health Care News. “If that doesn’t happen again, you’ll start to see not just the small agencies shut down, you’ll see some of the big players say, ‘There’s no point in serving these rural markets and some of these areas because we’re losing money.’”
McBee Associates is a healthcare services and consulting firm that works with providers in a variety of states. In 2019, before the pandemic, Dordick told HHCN that he believed there would be about a 30% reduction in the number of suppliers over the next few years.
Of course, the public health emergency has changed projections. It has given suppliers financial stability and “masked” some of the financial problems that were inevitable, Dordick said.
In the first quarter of 2019, according to data from McBee, there were 9,624 home health care workers who filed at least one grievance with CMS. In the first quarter of 2022, that number was 8,670, a 10% reduction.
This reduction is partly due to mergers and partly to closures.
“There are a lot of suppliers hanging in the balance right now,” Dordick said. “You’re seeing these one-off scenarios that exist where you get one vendor shut down in Hawaii and another vendor shut down in Pennsylvania. The concern I have is that in some markets you will start to see deserts where there will be no certified home health agencies, especially in rural areas.”
Staffing issues
Due to unique geographic and demographic circumstances, all health care organizations in Hawaii are represented by a single association. Hilton Raethel is the president and chief executive officer of the Hawaii Association of Healthcare (HAH).
Raethel oversees approximately 170 healthcare organizations, including the dwindling number of home health care agencies.
A few months ago, Oahu Home Healthcare leaders told Raethel and her team that they were closing, primarily due to low reimbursement rates and workforce shortages.
According to its statewide health care workforce report, the HAH found that home health care had the highest workforce vacancy rate of any health care segment at 39 percent.
“The overall health care vacancy rate in the state of Hawaii is 17%, up from 10% in 2019,” Raethel told HHCN. “When you have a relatively small agency, trying to care for around 100 patients, managing these shortages is very difficult. The workforce environment creates a very big challenge to continue.”
The Oahu case is an example of a larger issue at hand, Dordick said.
Before the pandemic, home health care workers were fighting over referrals. Today, more patients than ever are left unattended or untreated due to staff shortages.
“There simply aren’t enough caregivers for these patients,” Dordick said. “There is more need with an aging population and staff shortages are making matters worse. Salary hikes can force profitability issues and shutdowns. From my point of view, it hasn’t really hit yet, but that doesn’t help anything.
Refund challenges
Refund challenges, caused by value-based payment models, late payments, and CMS rate cuts are also causing closures.
For larger companies like Amedisys Inc. (Nasdaq:AMED) and LHC Group (Nasdaq:LHCG), the uncertain refund environment isn’t so much a headwind due to their size.
However, that may not always be the case, according to Dordick.
“When you think about Amedisys, LHC Group, Bayada, Enhabit, you haven’t seen these big groups do it yet, but eventually they’re going to have to sit back and look at their sidelines,” Dordick said. “If CMS does it again [and proposes another payment cut], you may see some of the big suppliers close their locations. That’s when these closures start to become a real problem.
In Hawaii, Blue Cross Blue Shield covers about 50 percent of the population, Raethel said. The second largest insurer is Kaiser. As Blue Cross transitioned to more value-based models, smaller vendors put resources, time and money into making that transition.
“When payments transition, people have to reconfigure systems and write policies. In the end it was more effort than [Oahu Home healthcare] anticipated,” Raethel said. “That change in payment methodology and payment delays, coupled with the workforce, pushed them to a point where they said, ‘Look, we’re just going to focus on our other two business segments and scale back our Home Health.”
Most of the employees have already found jobs elsewhere in Hawaii’s healthcare system, and patients will be treated by one of eight other agencies.
But the transitions of heals and closes are rarely so smooth.
Dordick said a key for smaller agencies is to understand their cost structure and take a close look at what their core mission is.
“You see that many of these agencies are also selling themselves instead of closing,” he said. “Every organization needs to look at what its core mission is and determine whether certain lines of business can be managed elsewhere or differently.”