Transcript High Level Overview of Initial Financial Impact

PANPHA
Financial Implications of Your
Home Health,
Hospice and Home Care
Strategies
November 18, 2010
1
With You Today
Pamela Richmond
Director
Parente Randolph, LLC
phone: (419) 517-4230
[email protected]
Denise Harris
Director
Parente Randolph, LLC
phone: (717) 790-0473
[email protected]
2
Learning Objectives
1. Gain a greater understanding of the initial
financial impact of starting, home health,
hospice or home care services in the current
environment.
2. Be able to discuss the key changes to
reimbursement and expenses that will
affect your home and community based
service programs over the next five years.
3. Learn how to utilize this knowledge to
strengthen your organization’s services.
3
Current Economic Reality
New Normal
or
Tip of the Iceberg?
4
Medicaid Enrollment Has Increased by Nearly 6 Million
Since the Start of the Recession
Monthly Enrollment in Millions
40.4
41.9
42.6
Dec-03
Dec-04
Dec-05
42.3
42.8
Dec-06
Dec-07
SOURCE: Analysis for KCMU by Health Management Associates, using compiled state
Medicaid enrollment reports
44.8
Dec-08
48.6
Dec-09
5
Funding – Total Medicaid
6
Medicaid Funding – Nursing Home
• Medicaid costs are higher than Medicaid reimbursement.
• State Budget deficits and increased Medicaid beneficiaries are adding
further pressure to reduce Medicaid spending.
7
Health Care Reform & Skilled Nursing
Facility PPS Cuts
PPD – Pennsylvania FY10 to FY19
8
Public Company Performance
Long Term Care vs. Hospice and Home Health
Source: The Braff Group: Index of Public Companies
•Gray (top line) is Home Health and Hospice
•Blue (bottom line) is Long Term Care
9
10
Economy Slows % of Seniors Moving:
Seniors Staying At Home Longer
Percentage of Each Age Group Who Moved That Year for 65+
Source: U.S.Census Bureau, Current Population Survey for Each Year
6.0%
5.0%
4.0%
1999 -2000
3.0%
2002-2003
2005-2006
2.0%
2008-2009
1.0%
0.0%
65 to 69 years
70 to 74 years
75 to 79 years
80 to 84 years
85+ years
11
What are Home and
Community-Based Services (HCBS)?
• Home Health
– Patient criteria: skilled need, home-bound, intermittent care
– Services: Nursing, OT, PT, SLP, Social work, Aide
• Hospice
– All-inclusive care for the terminally ill
– 95% care at home; 5% facility-based
– 24-hour/day available, interdisciplinary team
• Home Care
–
–
–
–
Non-skilled personal care and support—predominately ADL’s
Homemaker/Companion Services
Transportation, chore services
Private pay
HCBS Licensure/Certification Elements
• All program types are licensed and surveyed by the
PA Department of Health division of Home Health
• Each component has a unique set of standards
• Home health and Hospice are subject to survey
under state and federal (Medicare) standards
• Policies & procedures are unique to each program
• Some insurers require accreditation (ACHC, JCAHO,
or CHAP) beyond licensure and certification for
participation
13
Successful Diversification:
Does Your Organization Have What It Takes?
Approximately 70% of All Change Initiatives Fail
Approximately 70% of all M&A’s fail to > share holder value
Photographer: Renjith Krishnan http://www.freedigitalphotos.net
14
Definition of Financial Stability
• What is Your Organization’s Definition?
• Indicators of Financial Stability:
Occupancy / Patients served
Net Operating Margin
Annual Cash Flow
Debt Service Coverage Ratio (hospice IPU, leveraged
purchase)
Days Cash on Hand
• Compare indicators to budget and benchmarks
• Develop financial metrics
15
Key Considerations
• What is your core business / ministry?
• How do such services enhance or
threaten existing service lines?
• As a campus based provider, are you
ready to turn your focus toward the
community at large?
• What time line, talent, and resources
are we willing to commit to this
transformation?
16
Options for Adding HCBS Services
1. Partner with Existing Provider/Joint Venture
• Provide care on campus & in community
2. New Agency Start-up
• Provide care on campus
• Evaluate/expand care in community
3. Purchase Existing Provider/License
• Merger/acquisition
• Provide care to existing patient population
• Expand care to campus
17
Are Home and Community Based
Services the Answer?
CAUTION
•Consolidation of providers: national mergers
and acquisitions
•Increased regulation (States: Licensure / CON;
Federal Health Care Reform; RAC Audits)
•Falling reimbursement from 3rd party sources
•The need for cost control and for streamlining
18
operations
Mergers and Acquisitions
2009 Top Home Health and Hospice
– LHC Group
– SeniorBridge*
– Amedisys, Inc.
– Gentiva Health Services
– Sun Healthcare Group
* Home Health only; hospice services not offered.
Source: The Senior Care Acquisition Report, 2010.
19
One Merger and Acquisition Strategy
Odyssey / Gentiva Health Services
• Consist of 350 offices in 39 states
• Gentiva acquired Odyssey in August 2010
• Became largest home health & hospice
provider in U.S.
• Strategic Priorities for Growth:
• Employer of choice
• Put a new clinical management system into
practice
• Grow Medicare
• Expand specialty programs
• Grow hospice
• Improve commercial pricing
20
Evaluating Purchase, Joint Venture or
Start-Up
Photographer: Renjith Krishnan http://www.freedigitalphotos.net/images/Other_Objects_g271-Magnifying_Glass__p2159.html
21
Partnering/Joint Venture Considerations
1. Start-up immediate
2. May/may not require equity position with
bottom line effect
3. No initial Medicare/DOH survey issues
4. Potential lease income for CCRC
5. Mutual understanding by both partners of
each other’s business
6. Shared risk, loss and control
7. Greater risk of conflict with your mission
22
New Agency Start-up Considerations
1. Lengthy lead time due to licensure, certification
and accreditation
2. Start-up capital required
• Infusion of cash
• Medicare certified business requires lead time
with unreimbursed care
3. Probable failure if business is campus only
4. Marketing for home care & CCRC’s different
5. Design program in harmony with mission
23
Start-up Considerations Continued
6. Full control of organization possible
7. Billing process, accounting and IT system
differs greatly from CCRC
8. Initial time must be spent developing
policies, procedures and processes
9. Difficult to find staff to work for new
company
10.Additional per diem staff needed
11.WC and liability rates higher than in CCRC
24
Purchase Considerations
1. Possible significant financial outlay
2. “Buy” license and Medicare provider
number
3. Immediate availability of market share and
revenue stream
4. Inherit the provider’s “good and bad”
5. Eliminate a competitor
6. Risk conflict with your mission
25
Purchase Considerations Continued
7. Work with someone experienced in
sales/HCBS agency operations and
purchases
8. Due diligence key—leave no stone
unturned
9. Sale must be well-structured—make certain
you’re covered for liability purposes
10.Be willing to walk away from a “bad” deal
11.Conversion for employees can be difficult
26
Purchase or Start-up Costs
Valuation is .50 to 1.50 x Annual Revenue
For Home Health and Hospice
.3 to .5 for Home Care
Cannot sell for 36 months after purchase
Start-Up Costs
• $250,000 to $800,000 per service line to develop business plan
• Out of pocket working capital as you pay staff, wait for licensure
and build the business
• First 10 Home Health or First 5 Hospice Medicare Cases are Free
• Difficult to obtain line of credit
• Cannot sell for 36 months after start-up
27
Diversification Strategies
– Madlyn and Leonard Abramson Center
for Jewish Life (Single Site CCRC)
• Hospice - Start-up
• Adult Day - Start-up
• Caregiver Support - Start-up
• Geriatric Care Management - Start-up
• Home Care – Start-up
– Advanced Living Communities 202/Tax
Credit (Multi-site Subsidized Housing)
• Adult Day Services – JV North Penn
Visiting Nurse Association
• Home Care – Start-up
28
More Diversification Strategies
• Start-Up
– Ohio Masonic (Multi-site CCRC) Home Care
agency serving 3 CCRCs and community at
large
• Purchase
– Ohio Masonic (Multi-site CCRC) purchased
small provider: hospice, home health and
home care; expanded to purchase second
location
– Otterbein (Multi-site CCRC) purchased home
health care agency now serving 8 counties
• Joint Venture
– Senior Independence OPRS Affiliate
– Kendal at Oberlin, Northern OH
• Home care, home health
29
Will HCBS Increase Your Prosperity
and Growth?
Photographer: Renjith Krishnan http://www.freedigitalphotos.net/images/Fowl_g318-Egg_And_Nest_p19726.html
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Largest Strategic Pitfall Related to
Adding HCBS?
• Treating HCBS as if it were a nursing
home or assisted living facility without
walls.
• Regulations, administrative processes,
policies, procedures, compensation of
staff, assessment, coding and billing are
significantly different from nursing
home and assisted living operations.
31
Reasons NOT to Provide HCBS
• To fund a losing operation
• To “save” a flailing system
• To breathe life into a dying operation
Home and Community Based Services
must be part of your strategic plan;
they take significant resources and time to
prove a ROI: They will not save your other
programs!
32
Costs of Maintaining and Growing
Market Share
Photographer: Renjith Krishnan http://www.freedigitalphotos.net
33
Is My Local Market a Mature Market?
34
Is it a growing Market or do I need to take market share?
Is My Local Market a Mature Market?
35
Is it a growing Market or do I need to take market share?
36
What Affects Utilization Rates?
County by County
•
•
•
•
•
•
HOME HEALTH
Geography
Topography
Cultural and ethnic beliefs
Physician philosophy of
care
Both competition from and
referrals to rehab hospitals
and nursing homes
Hospital discharge planners
current practices
•
•
•
•
•
•
HOSPICE
Geography
Topography
Cultural, religious and
ethnic beliefs
Physician philosophy of
care
Referrals from hospitals
and nursing homes
Hospital discharge planners
current practices
37
Is My Local Market a Competitive Market?
• Do the top three agencies
in my market area have
60% to 70% of market
share?
– Market is likely difficult to
capture – exercise
considerable caution.
– Look at M&A or JV
opportunities but be
happy with their current
market share plus the
relationships and
opportunities your
organization brings.
http://www.amazon.com/Rule-Three-Surviving-Thriving-Competitive/dp/product-description/074320560X
38
Key to Success: Relationships
Photographer: Renjith Krishnan http://www.freedigitalphotos.net
39
PACE
Geriatric
Care
Mgrs
Hospitals
Home Care
Gov’t
AAA
County
Physicians
My
Services
Senior
Centers
Adult
Daycare
Assisted
and
Independent
Living
Religious
or Cultural
Orgs
Home
Health
Nursing
Home
40
41
Short Run and Long Run Cost/Benefit to
Other Service Lines
Photographer: Renjith Krishnan http://www.freedigitalphotos.net
42
How Will HCBS Affect My Existing
Operations Short Term?
• Fix current independent living
occupancy issues as people “age in
place”
• Satisfy residents’ desire to stay in their
“home”
• If delivering services in the community
you expand your potential market
43
How Will HCBS Affect My Existing
Operations Long Term?
• Do you have the governing and managerial
expertise to achieve success?
• Likely to affect turnover entrance fee revenues if
you are a CCRC
• Is cash flow sufficient to meet any debt financial
covenants?
• Harder to fill IL as potential IL residents are likely
to be younger and more active than the current
population
• Likely to turn your IL to AL and your AL to NF and
NF to Hospice
How Will HCBS Affect My Existing
Operations Long Term?
• Synergy: Real or Imagined?
– Business office
– Human resources
– Group purchasing: economies of scale?
• Do you really have administrative staff that has
extra time on their hands?
• Even if they have time do they have education
and skill to understand a new service line?
• Do you have space in your current facilities and
even if you do, is it in the right location?
45
How Will HCBS Affect Existing Operations?
• Operating Expertise matters: Do it right the FIRST
time
• Do CCRC and HCBS wage scales line up?
– Pay by visit
– Pay by hour
• Do CCRC and HCBS benefit packages compare?
• Each HCBS has its “own language”, policies and
procedures that are usually significantly different
from each other and from institutional based care
• DME, Pharmacy and Supply relationships may not
cross over
46
Further Financial Considerations for HCBS
• Managed Care’s Effect on Home Health
•
•
•
•
Authorization process
Fewer visits authorized per patient
Lower reimbursement
HCBS must be lithe and lean
• Realize that many CCRC’s not large enough to
support skilled home health or hospice
operation alone
• To be financially viable, program must grow
beyond the facility
47
The Cost of Shifting Your Paradigm
Central Campus Location to Multi-Site
Consumer Locations that Shifts on a Daily
Basis
http://www.freedigitalphotos.net/images/view_photog.php?photogid=1152
48
Multi-Site Considerations
• Mostly a Matter of Logistics
–
–
–
–
–
–
–
–
–
Right People
Right Discipline
Right Time
Right Location (people and
supplies)
Efficient Travel Patterns
Proper Oversight
Strategic Office Locations
Communications
Information Exchange
49
Current and Future
Revenue Issues
50
Institutional Care Vs. HCBS
What Should the Balance Be?
51
Percentage of Medicaid Long-Term Care
Spending
60
50
40
PA 2007
US 2007
30
20
10
0
HCBS
Nursing Home
http://www.statehealthfacts.org/ on October 28, 2010
52
What is the Real Cost of HCBS?
•
•
•
•
•
•
Medicaid Waiver
Supplemental Security Income (SSI)
Food Stamps
Meals on Wheels
202 or Tax Credit Housing Subsidies
Medicare and Medicaid Acute Care Services
Is there really savings??
53
Impact of Health Care Reform?
54
55
http://www.house.gov/apps/list/press/tx08_brady/71509_hc_chart.html Fall 2009
Negative Key Components
• Hospice:
• Home Health Care:
– Market basket
reductions 2014 – 2019
– Productivity adjustments
begin 2013
– Quality reporting
required begin 2014
– Reduction of payments
begin 2013
– Face to Face
recertification 2011
– HHS Secretary to
medically review
agencies with long-stay
residents
– Market basket reductions
yield 39.7 billion in savings
over 10 years
– New Independent Medicare
Advisory board to make
recommendations to
Congress on issues
– Transparency requirements
– Elder Justice Act-reporting of
crimes changes
– Health Insurance
requirements for providers
– Bundled payment initiatives
– Penalty for Medicare
Advantage Plans
56
Home Care Reimbursement
PA Medicaid Waivers
• Reimbursement has remained essentially flat
over the past 3 years from the state—dollars
are federally matched
• Waiver programs are overseen by the
counties
– Methods vary in terms of applications to
participate and claims processing
57
Home Care Reimbursement
Private Duty – LTC Insurance
Source: Genworth Cost of Care Study 2010 www.genworth.com/costofcare search by MSA
58
HCBS
Key Areas of Cost Control
59
Direct Care Aides
Median Hourly Wages
60
Wage Rate Inflation Ahead?
Current Unemployment Rate is Likely Masking this Issue.
61
2014
Employer Mandated Health Care
• Healthcare premiums are already increasing
• 2014 an FTE calculation will be used to determine
employees for insurance
– Total employee hours divided by 2080 hrs = FTEs
vs.
– FT vs. PT status of your employees
• This will become a significant issue for home health
agencies in particular as Medicare reimbursement is
slated to decrease.
62
Costs of Travel
• Length of travel time can have a dramatic
effect on productivity
• Overlay direct care workers addresses with
patient/customer addresses
– Do you have the right staff in the right locations?
– Do you have staff in a location that you could be
serving but are not?
– To the extent possible eliminate satellite offices
63
Costs of Travel
What happens to home
based services when
gasoline costs $3.50 or
$4.00/ gallon and
public transportation is
not readily available?
Light Crude Oil (CL, NYMEX)
Does your service model
make sense?
Will your customers be
able to cover the
increased cost?
64
Putting Your Strategy Together
Photographer: Renjith Krishnan http://www.freedigitalphotos.net
65
Diversify Your Revenue Stream
• Commit Resources
• Eyes wide open
– Plan
– Surround yourself with
Experienced, Wise
Advisors
– Hire Experienced Staff
– Make it work on a stand
alone basis
– Synergies may be small
or non-existent
– Impact on
Administration can be
Photographer: Renjith Krishnan
substantial.
http://www.freedigitalphotos.net/images/Charts_and_Graphs_g197_Man_And_Arrows_p22496.html
66
Maintain or Increase Margins
• Build in M&A or
start-up costs
• Costs of Growth
• Ensure communication
between service lines
for seamless transfer
• Use standard operating
practices for each HCBS
instead of applying
institutional standards
– Policies and procedures
– Wage scales and benefit
packages
Photographer: Renjith Krishnan http://www.freedigitalphotos.net/images/Charts_and_Graphs_g197-Business_Graph__p22491.html
67
HCBS Issues
Possibility of Flat or
Decreased Medicare
Medicaid Payments
Changing
Regulatory
Compliance
Requirements
Growing Age
Qualified
Population
with High
Expectations
Economy Impacting
Private Duty, and
Shrinking the Pool of
Income Qualified
Residents
Increasing Emphasis
on Resident and
Family Satisfaction
MISSION
MARGIN
Slowing
Contributions and
Investment
Earnings Leave
Us Unable to
Cover Expenses
Market Share –
Competition
Growth of Large
Chains
Employee and
Resident Safety and
Confidentiality
Cost of Care
Inflating Faster
than General
Inflation
Increased
Travel
Costs
Slow Third Party
Payors Increase
Working Capital
Needs
68
HCBS Objectives to Solve Issues
Operations
Improvement
Training and
Spot Checks
Update
Services and
Products
Fine Tune Marketing
Plan and Form
Strategic Alliances
Administer Staff,
Resident and Family
Surveys
MISSION
MARGIN
Separate Needs
from Wants for
Operations
Delay Expansion
Alliances,
Merger,
Acquisition,
Reliance on State
and National
Associations
Training and Mock
Surveys
Operations
Improvement
Workers Comp
Claim Management
Control Costs
through
Performance
Improvement
GPOs
Fleet
Management
and Leasing
Alternatives
Step Up
Collection Policy
and Procedures,
Clear Suspended
Claims
69
Keys to Operational Success
• Consumer focus
– You are really are in their home
• Focus on staff
– appropriate training, compensation, and technology
• Process, process, process
• Infuse viable technology
• Focus driving best of class quality outcomes
70
Keys to Financial Success
•
•
•
•
•
Build and sustain census and referrals
Build a diversified payor mix
Produce accurate assessments for certified services
Determine appropriate mix of services
Use specialists and build a mix in staff
– both contract and paid staff are needed in the labor pool
•
•
•
•
Measure, report and incentivize productivity
Master the revenue cycle (billing & collection)
Control expenditures but allow room for growth
Mine financial and operational data for insight
71
QUESTIONS?
Appendix A
Pennsylvania Medicaid Waivers for
HCBS
73
Appendix B
Health Care Reform
Implications for HCBS
74
Health Care Reform
• Health Care Bill
– Patient Protection
(PPACA) H.R. 3590
and
Affordability
Act
• Effective March 23, 2010
• Majority of provisions underlying Health Care
Reform
– Health Care and Education Affordability Act
(HCEAA) H.R. 4872
» Effective March 30, 2010
» Enacted several changes to PPACA
75
HealthCare Reform and Long-Term Care 2010
Medicaid Community-Based Services
Provides states with new options for offering home and community-based
services through a Medicaid state plan amendment to certain individuals.
Permits states to extend full Medicaid benefits to individuals receiving home
and community-based services under a state plan.
Implementation: October 1, 2010
© 2010 THE HENRY J. KAISER FAMILY FOUNDATION
76
HealthCare Reform and Long-Term Care 2011
Medicare Advantage Payment Changes
Restructures payments to private Medicare Advantage plans by phasing-in
payments set at increasingly smaller percentages of Medicare fee-forservice rates; freezes 2011 payments at 2010 levels; and prohibits
Medicare Advantage plans from imposing higher cost-sharing
requirements for some Medicare covered benefits than is required under
the traditional fee-for-service program.
Implementation: January 1, 2011
Chronic Disease Prevention in Medicaid
Provides 3-year grants to states to develop programs to provide Medicaid
enrollees with incentives to participate in comprehensive health lifestyle
programs and meet certain health behavior targets.
Implementation: January 1, 2011
© 2010 THE HENRY J. KAISER FAMILY FOUNDATION
77
HealthCare Reform and Long-Term Care 2011
Medicaid Health Homes
Creates a new Medicaid state option to permit certain
Medicaid enrollees to designate a provider as a health home
and provides states taking up the option with 90% federal
matching payments for two years for health home-related
services.
Implementation: January 1, 2011
CLASS Program
Establishes a national, voluntary insurance program for
purchasing community living assistance services and supports
(CLASS program).
Implementation: January 1, 2011
© 2010 THE HENRY J. KAISER FAMILY FOUNDATION
78
HealthCare Reform and Long-Term Care 2011
Medicaid Long-Term Care Services
Creates the State Balancing Incentive Program in Medicaid to
provide enhanced federal matching payments to increase noninstitutionally based long-term care services and establishes
the Community First Choice Option in Medicaid to provide
community-based attendant support services to certain
people with disabilities.
Implementation: October 1, 2011
© 2010 THE HENRY J. KAISER FAMILY FOUNDATION
79
HealthCare Reform and Long-Term Care 2012
Accountable Care Organizations in Medicare
Allows providers organized as accountable care
organizations (ACOs) that voluntarily meet quality
thresholds to share in the cost savings they achieve for the
Medicare program.
Implementation: January 1, 2012
Medicare Advantage Plan Payments
Reduces rebates paid to Medicare
Advantage plans and provides bonus
payments to high–quality plans.
Implementation: January 1, 2012
© 2010 THE HENRY J. KAISER FAMILY FOUNDATION
FTC and Department of
Justice on Antitrust issues:
“The Affordable Care Act’s
development of ACO’s is a
good example of how
providers might work
together (clinical and or
financial integration) to
deliver more efficient, highquality care without inhibiting
competition, so long as their
collaborations are properly
constructed.”
“Market Power” = Antitrust
80
HealthCare Reform and Long-Term Care 2012
Medicare Independence at Home Demonstration
Creates the Independence at Home demonstration program
to provide high-need Medicare beneficiaries with primary
care services in their home.
Implementation: January 1, 2012
Medicare Provider Payment Changes
Adds a productivity adjustment to the market basket update
for certain providers, resulting in lower rates than otherwise
would have been paid.
Implementation: Begins calendar, fiscal, or rate year 2012, as
appropriate
© 2010 THE HENRY J. KAISER FAMILY FOUNDATION
81
HealthCare Reform and Long-Term Care 2012
Fraud and Abuse Prevention
Establishes procedures for screening, oversight, and reporting for
providers and suppliers that participate in Medicare, Medicaid, and
CHIP; requires additional entities to register under Medicare.
Implementation: January 1, 2012
Medicaid Payment Demonstration Projects
Creates new demonstration projects in Medicaid for up to eight
states to pay bundled payments for episodes of care that include
hospitalizations and to allow pediatric medical providers organized
as accountable care organizations to share in cost-savings.
Implementation: January 1, 2012 through December 31, 2016
© 2010 THE HENRY J. KAISER FAMILY FOUNDATION
82
HealthCare Reform and Long-Term Care 2012
Medicare Value-Based Purchasing
Establishes a hospital value-based purchasing program in
Medicare to pay hospitals based on performance on
quality measures and requires plans to be developed to
implement value-based purchasing programs for skilled
nursing facilities, home health agencies, and ambulatory
surgical centers.
Implementation: October 1, 2012
Reduced Medicare Payments for Hospital Readmissions
Reduces Medicare payments that would otherwise be
made to hospitals to account for excess (preventable)
hospital readmissions.
Implementation: October 1, 2012
© 2010 THE HENRY J. KAISER FAMILY FOUNDATION
83