Discussing the Forecast for Home Health & Homecare Agencies in 2022

As we coast into the new year, let’s take a moment to glance in the rearview mirror, then adjust the steering wheel for where we are headed. Here’s a look back on the home health care industry in 2021 and our top forecast predictions for what lies ahead in 2022.

Looking Back on the Industry

Millions of Americans relied on home health care in 2021 for skilled services, custodial care, post-surgical rehabilitation, and long-term treatment related to chronic disabilities. A look back on the industry shows that providers faced major challenges with the ability to adapt. Many found that they could care for patients and continue “business as usual.”

Two of the biggest themes for this year were adjusting to payment model changes and navigating a global pandemic. Another trend the industry saw was increased consolidation. Here’s a quick recap of the events of 2021 and how they might affect 2022.

Patient-Driven Groupings Model (PDGM)

In its second year, the PDGM payment model still had some agencies working out billing kinks or training clinical staff. In some form or fashion, all agencies worked at evaluating, implementing, or strengthening internal processes to maximize their outcomes.

The radical shift in payment structure by the Centers for Medicare and Medicaid Services (CMS) caused more agencies to think about how admission sources, therapy services, and diagnosis groupings affect care. For most, the PDGM requires a balancing act. It calls for agencies to manage revenue streams with acute patients yielding higher reimbursement while not losing sight of less complex cases. Changes to the Low Utilization Payment Adjustment (LUPA) thresholds make it easier for agencies to lose reimbursement when workers miss visits, especially on more stable clients.

The 2022 Forecast indicates that home health agencies must continue monitoring and analyzing PDGM effects as CMS trends data and adjustments to the payment model.

COVID-19

Subsequent waves of the coronavirus demanded ongoing attention from home health agency leaders in 2021. While more patients and workers adjust to life with COVID-19 variant viruses on the loose, the industry is beginning to see the effects.

The 2021 Home Health Chartbook identified interesting statistics. This annual report, sponsored in part by the National Association for Home Care and Hospice (NAHC), summarizes patient, workforce, and organizational trends.

Here are a few of the more notable findings from their analysis:

• Fewer patients are opting to go to SNF. The data review saw a reduction of Medicare beneficiaries discharging to skilled nursing facilities (19% to 16%) and overall a significant reduction of inpatient hospital discharges to all post-acute care settings.
• Respiratory Infections and Inflammations with MCC In the Top 20 Most Common Diagnosis Related Groups (MS-DRGs) for Medicare beneficiaries discharged from the hospital, respiratory infections and inflammations with a major complication or comorbidity were ranked fourth.
• The number of home health episodes grew. Medicare Part B Home Health Episodes rose from 4.2 million in 2019 to 6.38 million in 2020.

These numbers all show that COVID-19 has increased the need for home care. Many are vaccinated now, and booster shots are widely available. Agencies are prepared to navigate the next wave of variants. Meanwhile, the debate over whether or not the government can mandate an injection will continue to be a controversial workplace issue.

The 2022 Forecast predicts that home health industry leaders will face ongoing debate about vaccine mandates and boosters. Strong clinical leadership is essential.

Homecare Industry Consolidation Activity

Billions of COVID-19 emergency federal relief dollars slowed consolidation in 2020, but the climate has changed. Home health care reimbursement is stable, and demand for services is growing. Private equity and non-traditional buyers demonstrate a renewed interest in the space, adding to an M&A surge.

Mergers and Acquisitions (M&A) are again on the rise. More agencies are considering buying, selling, or forming joint ventures. Industry speaker Rich Tinsley, president of Stoneridge Partners home health and hospice M&A advisory firm recently noted a disproportionate number of buyers to sellers. “I used to get four or five calls a month, … now I get two to three a day,” he noted.

The 2022 Forecast suggests a strong surge in M&A activity that will continue over the next 12 months.

Looking Forward to 2022

As we keep looking forward to the new year, here’s a look at the growing demands and opportunities expected to impact the market.

Rising Home Health Agency Operational Costs

Many home health agencies are feeling a strain from rising operational costs. Supplies for handling patients safely,  technology such as home health software, EVV systems, and field devices, salaries, and turnover have increased over the past twelve months. Caregiver turnover remains one of the highest expenses. At the same time, staffing shortages remain consistent in healthcare nationwide.

Supporting direct care workers and upskilling are the most recent trends in caregiver retention. Companies who interview their staff consistently hear two things that workers want. They want to feel appreciated, and they want the tools necessary to do their jobs. That can mean training, education or support, and dedicated efforts placed into caregiver appreciation. Forward-thinking agencies are making a sustainable habit of investing more into their workers to create environments where nurses and caregivers don’t experience burnout and can look forward to coming to work.

The bottom line – delivering high-quality care and retaining the staff is getting more expensive.

The 2022 Forecast shows operational costs continuing to rise with the demands of providing high-quality care amid ongoing staffing shortages.

Final Rule Changes

The 2022 Final Rule from CMS contained minor adjustments with a couple of major changes.

A change from the proposed rule showed a slight uptick in payment rate to 3.2%, or $570 million. One of the largest for home care in years, the rate increase is good. Yet many argue that it does little to mitigate the increased labor costs agencies face.

LUPA limits remain unchanged. And despite comments from providers, CMS did not eliminate its 4.36% cut for behavioral adjustment. Additionally, the rule finalized limited use of telehealth for virtual home health aide supervision.

There were two significant changes in the 2022 Final Rule for CMS-certified agencies. Firstly, the RAP is gone. Instead, a Notice Of Admission (NOA) claim will be submitted on bill 32A to open a care episode, establish the beneficiary’s primary home health agency, and trigger billing updates. Then bill 329 is used for subsequent billing periods after the NOA. The second major update in the 2022 rule is the confirmation that CMS plans to roll out Home Health Value-Based Purchasing (HHVBP) in all states.

The 2022 Forecast shows two big changes on the billing front. NOAs replace RAPs, and HHVBP is coming. Home health billers must be ready.

Focus on Quality Care

The goal for CMS is better care, lower cost. The HHVBP rollout is one example of how they plan to achieve it.

Analysts say HHVBP has saved the program an estimated $141 million per year since the demonstration started in 2016. At that time, Medicare-certified agencies in Massachusetts, Maryland, North Carolina, Florida, Washington, Arizona, Iowa, Nebraska, and Tennessee participated for a 3-5% incentive. Moreover, agencies in these states saw an average of 4.6% improvement in their quality scores. So now, CMS is taking their show on the road.

The first year for the collection of performance data will be 2023. And the first year for payment incentives will be 2025. Home health agencies will compete nationally based on metrics from OASIS items, claims data, and Home Health Consumer Assessment of Healthcare Providers and Systems (HHCAHPS) surveys.

The 2022 Forecast brings a short delay before HHVBP performance measurement, based on OASIS items, claims data, and HHCAHPS surveys, will begin in 2023.

Enforcement of Vaccine Mandates

For now, enforcement of the CMS “vaccine mandate” is halted nationwide. Temporarily, providers subject to the Conditions of Participation (COPs) are not required to have all workers vaccinated against coronavirus.

On November 29 and November 30, 2021, the United States District Court for the Eastern District of Missouri and the United States District Court for the Western District of Louisiana issued a preliminary injunction against the implementation and enforcement of the Interim Final Rule against Medicare and Medicaid-certified providers and suppliers. These injunctions cover all states, the District of Columbia, and the US Territories between them.

Additionally, the Occupational Health and Safety Administration (OHSA) suspended implementing the Emergency Temporary Standard (ETS) because of legal challenges.

Labor law experts from Littler Mendelson PC recommend that home health agencies continue to monitor developments affecting their staff. The firm discourages terminating employment for workers that do not comply while the cases are actively being heard. Frequently updated state and local orders can give conflicting information, and it is important to stay up to date about vaccine bans, limits, and mandates where the agency operates.

The 2022 Forecast indicates regulatory authorities will continue to debate the validity of vaccine mandates through the legal system. In the meantime, agency owners must monitor developments in the cases.

Summary

PDGM changes, COVID-19 waves, and increased consolidation activity were themes in the home care industry last year. And it looks like these topics will continue to trend as we move into 2022. Meanwhile, rising expenses, focus on care quality, and fast-changing regulations will drive operations as we set goals for the coming year.

What do you think the future will hold for home care in 2020? Which of our forecasted predictions will affect your organization most, and how will you prepare? Email us your thoughts, concerns, opinions, and predictions to homehealthsoftware@alorahealth.com

Helpful links & resources:

1. Stoneridge Partners homecare industry speaker sessions
2. 2021 Home Health Chartbook
3. 2022 Final Rule
4. Notice Of Admission (NOA) claim
5. Billing the Notice Of Admission information
6. Court injunctions on vaccine mandates against the implementation and enforcement of the Interim Final Rule
7. Osha suspends implementing the Emergency Temporary Standard
8. Littler Mendelson legal advisements for home health agencies on vaccination protocols
9. Preventing caregiver turnover
10. Caregiver retention strategies
11. Caregiver appreciation tips
12. Choosing the best home health software
13. Four things successful home health agency CEOs do daily