state of the industry – home health & hospice...2/14/2020 1 state of the industry – home...

2/14/2020

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State of the Industry –Home Health & HospiceFebruary 19, 2020

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2/14/2020

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Presenters

bkd.com/HCPE

Mark Sharp, CPA Partner

[email protected]

Aaron Little, CPA Managing [email protected]

› Describe the current environment for home health & hospice providers

› Identify key opportunities & challenges for home health & hospice providers

› List significant payment changes, compliance issues & operating trends for home health & hospice providers

Objectives

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MarketOpportunities

Aging Population

Health Care

Reform

Opportunities in Home-

Based Care

Optimal Market Forces

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Historical Options in Home-Based Care

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MedicareHome Health Telehealth Pediatrics Rehabilitation Therapy

Hospice Palliative Care Mental Health Adult Day Care

Durable Medical Equipment Transitions in Care Population Health Management AIDS Care

Infusion Skilled Nursing Companionship Respite Care

Medication Management Bathing, Dressing, etc. Financial Assistance

Geriatric Care Management Housekeeping Live-in Assistance

Wound Management Shopping Incontinence Assistance

Post-Surgery Recovery Transportation Management Services

Chronic Disease Management Meals Education

Other Programs and Private Duty

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Financial Environment

Home Health & Hospice Environment

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Revenue challenges• Reliance on federal & state funding sources• Tightening of Medicare/Medicaid payment rates• Medicare managed care penetration• Health care reform

Increased costs of doing business• Increased regulatory requirements• Increased compliance scrutiny

Pressure on profit margins

Highly competitive market

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Medicare Home Health Environment

‐6.00%

‐5.00%

‐4.00%

‐3.00%

‐2.00%

‐1.00%

0.00%

1.00%

2.00%

3.00%

4.00%

2008 2010 2012 2014 2016 2018 2020

Inflation

Rate Changes

?

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Medicare Margins (Freestanding)

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

15.3% 15.8% 12.2% 12.0% 12.2% 9.0% 13.9% 13.9% 13.7% 13.9%

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Overall Margins (Freestanding)

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

5.3% 4.8% 2.8% 2.7% 2.6% 2.6% 2.9% 2.3% 2.5% 2.8%

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PPS

• 2001 through 2019• 60-day episode payment• Patient characteristics drive

payment• Therapy utilization drives

payment• One LUPA threshold

PDGM

• Began January 1, 2020• Two 30-day payment periods• Referral source, admission

timing & diagnoses key drivers to payment

• Therapy utilization a nonfactor• Multiple LUPA thresholds

Payment Model Transition

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Advanced Payment Models

› Medicare & other payors• Go to https://innovation.cms.gov/

› Value-based purchasing

› Affordable care organizations

› Bundled payments for care improvement (BPCI)

› Other

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Agency Success

Lower Cost

Quality Outcomes

Compliant Operations

Success Today & Tomorrow

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Overall Profitability (Freestanding Only)

Benchmark Leaders All OthersMedian Best 25% Median Best 25%

Gross Margin 49% 54% 45% 57%Net Margin 11% 16% 2% 10%

Revenues Costs

AllPayors

AllPrograms

bkd.com/HCPE

Scale Matters – Affiliations

64%

36%

Affiliated No Affiliation

0 5 10 15 20

Chain

Hospital

Payor

Physician Group

Senior Living

Affiliation Types

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Scale Matters – Service Lines

68%

32%

Multiple Service Lines Home Health Only

0 5 10 15 20 25 30

Private Duty

Outpatient Rehab

Infusion

DME

Inpatient Hospice

Hospice

Other Service Lines

bkd.com/HCPE

Home Health Medicare Payments

Consists of


Per Episode $2,602 $2,955 $2,763 $3,202Per Patient $4,609 $3,892 $4,572 $3,425

bkd.com/HCPE

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Medicare Payments – PDGM

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Medicare Payments – PDGM

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Direct Cost per Episode

Consists of


Direct Labor Costs $1,166 $1,008 $1,230 $944Total Direct Costs 1,264 1,095 1,348 1,071

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Visits per Episode


Nursing 7.7 6.8 8.0 6.4Therapies 8.0 6.5 6.6 4.5Total 17.0 15.0 16.4 14.0

• Team collaboration• Patient participation• Manage care by the episode• Effective use of technology

Episode Management

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Visits per PDGM Period

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Direct Cost per Visit

Salaries & Benefits Contract Labor Travel


Nursing $66 $54 $71 $52PT 82 76 85 72OT 85 78 83 67

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Administrative Costs as a % of Revenue


Admin Labor Costs 15% 12% 27% 17%Total Admin Costs 33% 24% 38% 28%

Salaries & Benefits

Contract Services

Office Expenses

Efficient Use of Resources

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‐1.50%

‐1.00%

‐0.50%

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

2012 2014 2016 2018 2020

Inflation

Rate Changes

Medicare Hospice Environment

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Continuous Home Care (CHC)Inpatient Respite (Respite)General Inpatient (GIP)

Routine – Days 1–60 (High RHC)Routine – Days 61+ (Low RHC)

2020 Rebasing (or Rebalancing)

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FY 2019 Payment

Rate

$41.56/hr.

$176.01

$758.07

FY 2019 Rebased

Cost

$56.80/hr.

$437.86

$992.99

% Increase to Align

with Costs

37%

149%

31%

Rebased Rates – CHC, Respite & GIP

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FY 2019 Payment

Rate

$196.25

$154.21

FY 2019 Rebalanced

Rate

$190.91

$150.02

% Decrease for Budget Neutrality

-2.7%

-2.7%

Rebalanced Rates – RHC High & Low

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Level of CareFY 2020

RateFY 2019

RateNet $

ChangeNet %

Change

CHC $58.15/hr. $41.56/hr. $16.59/hr. 39.9%Respite $450.10 $176.01 $274.09 155.7%GIP $1,021.25 $758.07 $263.18 34.7%RHC High $194.50 $196.25 -$1.75 -0.9%RHC Low $153.72 $154.21 -$0.49 -0.3%

Note: Above rates are federal rates prior to wage index adjustment &consideration of service intensity add-on (SIA)

FY 2020 Payment Rates

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Potential Liability

Transfers

Live Discharges

LOS

Hospice Cap Management

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Profitability

Small Large All U.S.Median Best 25% Median Best 25% Median Best 25%

Gross Profit 47% 60% 43% 50% 45% 55%Overall Profit 4% 16% 11% 20% 7% 18%

Revenues Costs

All

PayorsLength of

Stay

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Length of Stay

2018Median Average

Per Stay 17 75Lifetime 19 97

› Admission practices

• Not too soon, not too late• Educate referral sources• Beware of compliance & annual payment cap

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Total Cost per Day

› Consists of

• Direct & indirect costs• Labor & nonlabor costs


Overall $156 $129 $141 $118 $150 $123

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Cost per Day by Level of Care


Routine $138 $114 $121 $104 $130 $108Continuous $976 $651 $803 $552 $893 $587I/P Respite $268 $201 $270 $224 $268 $216General I/P $861 $646 $888 $677 $881 $661

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ComplianceLandscape

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Conditions of

Participation

Conditions of Payment

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bkd.com/HCPE

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Note: RACs & SMRCs have not been significant to home health & hospice providers

Program Integrity

ContractorsCERT

MACs UPICs

Per Medicare Fee-for-Service Supplemental Improper Payment Data for the years 2019, 2018, 2017, 2016 & 2015

CERT

AdvanceMed• Monitors accuracy of claim payments across Medicare programs• Conducts postpay medical review• Publishes results annually

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Service Type

ImproperPayment

Rate

ProjectedImproperPayments Primary Type of Error

DMEPOS 31% $2.4 billion Insufficient documentation

Hospital, other Part B 30% $183.4 million Insufficient documentationHospital, inpatient (Part A) 25% $2.6 billion Medical necessityHospital, outpatient 4% $2.5 billion Insufficient documentationHospital, inpatient (Part B) 1% $5.5 million Insufficient documentation

Hospice, hospital based 19% $288 million Insufficient documentation

Hospice, nonhospital based 9% $1.5 billion Insufficient documentation

SNF, outpatient 14% $40 million Insufficient documentationSNF, inpatient 9% $2.6 billion Insufficient documentationSNF, inpatient Part B 7% $194 million Insufficient documentation

Home health 12% $2.3 billion Insufficient documentation

Source: 2019 Medicare Fee-for-Service Supplemental Improper Payment Data

MACs

CGS, NGS & PGBA• Adjudicate claims• Process cost reports• Facilitate provider enrollment

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TPE RCD

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Provider selected for TPE

Letter issued by MAC informing provider of TPE

One round of 20 to 40 claims selected for prepay medical

review

Letter issued by MAC informing provider of TPE

results

Depending on TPE results two

additional rounds could occur

MAC offers provider education after each round of

TPE

TPE

Good Outcome

TPE discontinued for at least 12

months

Good Outcome

TPE discontinued for at least 12

months

Bad Outcome

MAC refers provider to CMS for

additional action

Bad Outcome

MAC refers provider to CMS for

additional action

bkd.com/HCPE

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Source: TPE data per CGS & PGBA as of October 2019. Comparable data unavailable from NGS

Home Health

CGSRound 1 = 87% noncompliant (405 providers)Round 2 = 57% noncompliant (102 providers)Round 3 = 100% noncompliant (1 provider)

PGBARound 1 = 55% noncompliant (913 providers)Round 2 = 26% noncompliant (32 providers)Round 3 = No data available

Hospice

CGSRound 1 = 68% noncompliant (28 providers)Round 2 = 40% noncompliant (2 providers)Round 3 = No data available

PGBARound 1 = 21% noncompliant (15 providers)Round 2 = No data availableRound 3 = No data available

TPE• Increased administrative burden• Delayed cash flow• High rate of claim denials• Exposed compliance risks• Created transactional risks

Impact

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RCD

10%*$339M*05/04/20

18%*$660M*03/02/20

14%*$268M*06/01/19

12%*$163M*09/30/19

15%*$178M*05/04/20

*Improper payment rate & projected improper payment for home health & hospice services combined per 2019 Medicare Fee-for-Service Supplemental Improper Payment Data

› Five-year Medicare home health demonstration project

› Includes all home health providers in selected states assigned to PGBA

› Requires intensive scrutiny through prepay or postpay medical review

Source: CMS RCD Demonstration Process Flowchart

› Basic intensity level options• Pre-claim review

› Requires medical review on a pre-claim basis for 100% of Medicare claims

• Postpayment review› Requires medical review on a

postpay basis for 100% of Medicare claims

• Reduced payment› Requires 25% reduction in

payment for all Medicare claims

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RCD• Increased administrative burden• Delayed cash flow• Exposed compliance risks• Created significant provider anxiety in

states pending implementation (Florida, North Carolina & Texas)

• Heightened transactional uncertainties

Impact

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UPICs

AdvanceMed, Qlarant, SafeGuard Services, etc.• Targets fraud, waste & abuse detection & prevention• Relies heavily on data analysis• Conducts postpay review, probe audits, extrapolations, withholdings, etc.

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Typical Home Health Risks

• High therapy utilization (pre-PDGM)• High payments per episode/patient• Long lengths of service• Volume/location of service

Typical Home Health Denial Reasons

• Physician FTF encounter documentation• Lack of response to contractor• Missing documentation• Insufficient documentation to support

medical necessity/skilled need/homebound status

Typical Hospice Risks

• High payments per patient• Long lengths of service• High utilization of GIP• Volume/location of service

Typical Hospice Denial Reasons

• Insufficient documentation to support terminal prognosis

• Physician FTF encounter documentation• Lack of response to contractor• Missing documentation• Insufficient documentation in POC

bkd.com/HCPE

› Available electronically to all Medicare home health & hospice providers

› Reports data patterns based on paid claims

› Targets CMS-defined risk areas

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PEPPER Target Areas – Home Health

• Average case-mix weight • Non-LUPA payments

• Average number of episodes • High therapy utilization episodes

• Episodes with five or six visits • Outlier payments

• 29% download rate as of January 2020

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PEPPER Target Areas – Hospice

• Live discharges no longer terminally ill • Routine home care provided in a nursing facility

• Live discharges, revocations • Routine home care provided in a skilled SNF

• Live discharges with length of stay 61–179 days

• Claims with single diagnosis coded

• Long length of stay (greater than 180 days)

• No GIP or continuous home care

• Continuous home care provided in an assisted living facility

• Long GIP stays (greater than fiveconsecutive days)

• Routine home care provided in an assisted living facility

• 52% download rate as of January 2020

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Assess risks Select sample of paid claims

Compare to supporting

documentation

Document & quantify findings

Analyze findings & assess risk

level

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Compliance Opportunities

Enhance automation• Optimize use of EHR

Optimize processes• Assess & address potential compliance risks

Promote accountability• Utilize PEPPER & other available resources• Implement periodic risk assessments

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Cash FlowLandscape

Deliver Care Bill Get Paid

People Process Technology Revenue Cycle

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Home Health &RevenueCycle

Home health = 53 days*

*2018 data per BKD national cost report benchmarking database

Admission

Initial document-

ation

Initial billing transaction

Ongoing document-

ation

Claim submission

Collections & reporting


80%

20%

Revenues Under $5 Million

Medicare Patients Other Patients

59%41%

Revenues More Than $5 Million


49 days*55 days*

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Home Health Revenue Cycle KPIs

Metric Below Average Average Above Average

Medicare days in AR 45 days or more 35 days 25 days or lessNon-Medicare days in AR 75 days or more 60 to 75 days 60 days or lessTotal days in AR 60 days or more 50 days 40 days or lessMedicare AR older than 120 days

10% or more 7% 3% or less

Total AR older than 120 days


Collections Less than 100% 100% More than 100%Medicare write-offs 2% or more 1% 0%Total write-offs 3% or more 2% 1% or less

Days to bill RAPs More than 10 days 7 to 10 days Less than 7 days

Days to bill claims More than 10 days 7 to 10 days Less than 7 days

Payment error rate More than 5% 5% Less than 5%

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Admission

Initial document-

ation


Ongoing document-

ation

Claim submission


7 to 10 days ideal

• Coding• OASIS• POC

7 to 10 days ideal

• Physician FTF documentation & orders

• Medicare = 14 days• Other = 30+ days

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Admission

Initial document-

ation


Ongoing document-

ation

Claim submission


TPE• Delayed payment• Compliance scrutiny• Increased administrative burden

RCD

• Increased administrative burden• Change in workflows• Potential delayed payment• Potential claim recoupments

(depending on RCD option)

PDGM

• Significant decrease in RAP payments

• Increased billing transactions• Potential decrease in payments• Change in workflows• Change in revenue recognition

Payor mix • Increasing trend of Medicare Advantage & other payors

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*Potential estimated impact on cash flow in first quarter due to PDGM

1 | | | 5 | | | | 10 | | | | 15 | | | | 20 | | | | 25 | | | | 30 | | | | 35 | | | | 40 | | | | 45 | | | | 50 | | | | 55 | | | | 60

$2,500 total PPS episode claim amount$1,250 RAP $1,250 claim

1 | | | 5 | | | | 10 | | | | 15 | | | | 20 | | | | 25 | | | | 30 1 | | | 5 | | | | 10 | | | | 15 | | | | 20 | | | | 25 | | | | 30

$1700 total PDGM period claim amount$340 RAP $1,360 claim

$1,050 total PDGM period claim amount$210 RAP $840 claim

PPS Medicare Cash Flow

PDGM Medicare Cash Flow

January • 15% decrease (est.)*

February • 30% decrease (est.)*

March• Rebound (est.)*

April• New normal (est.)*

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Admission

Initial document-

ation


Ongoing document-

ation

Claim submission


HospiceRevenueCycle

Hospice = 55 days*


94%

6%

Hospice


2018 data per BKD national cost report benchmarking database

May not separately reflect Medicaid nursing facility room & board

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Hospice Revenue Cycle KPIs

Metric Below Average Average Above Average

Medicare days in AR 45 days or more 40 days 35 days or lessTotal days in AR More than 55 55 days 45 days or lessMedicare AR older than 120 days


Total AR older than 120 days


Collections Less than 100% 100% More than 100%Medicare write-offs 1% or more 0% 0%Total write-offs 3% or more 2% 1% or less

Days to bill claims More than 10 days 7 days Less than 5 days

Days to bill NOEs More than 5 days 5 days Less than 5 days

Payment error rate More than 5% 5% Less than 5%

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Admission

Initial document-

ation


Ongoing document-

ation

Claim submission


5-day requirement

• Terminal diagnosis• Election statement• Verbal physician

certification(s)

• Medicare = 14 days• Other = 30+ days

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Admission

Initial document-

ation


Ongoing document-

ation

Claim submission


NOE • Payment penalty for untimely billing

TPE• Delayed payment• Compliance scrutiny• Increased administrative burden

Payor mix• Increasing trend of Medicaid managed care• Nursing facility room & board• Increasing threat of Medicare Advantage

Rates • Increase in GIP, IRC & CHC payment rates

bkd.com/HCPE

Senior financial leader

Medicare billing

specialist(s)

Medicaid billing

specialist(s)

Insurance billing

specialist(s)

Collection specialist(s)

Insurance authorization specialist(s)

Payment posting

specialist(s)

Accounts payable

specialist(s)

Accountability void

Typical threats• Turnover• Software• Change

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Cash Flow Opportunities

Enhance automation• Optimize use of EHR• Clearinghouse, web portal or other supplemental software

Optimize processes• Intake & insurance authorization• Physician order management

Promote accountability• Apply metrics• Utilize dashboards

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Continuing Professional Education (CPE) Credit

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› CPE credit may be awarded upon verification of participant attendance

› For questions, concerns or comments regarding CPE credit, please email the BKD Learning & Development Department at [email protected]

CPE Credit

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bkd.com/hc | @BKDHC

The information contained in these slides is presented by professionals for your information only & is not to be considered as legal advice. Applying specific information to your situation requires careful consideration of facts & circumstances. Consult your BKD advisor or legal counsel before acting on any matters covered

state of the industry – home health & hospice...2/14/2020 1 state of the industry – home...

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