Payers Bet Big on Home Health Care

Recent years have seen several prominent health insurers making major deals in the home health care sector. In February, UnitedHealth Group completed its purchase of LHC Group—a deal initially announced¹ about a year prior. Last year, CVS Health entered an agreement² to acquire Signify Health. These moves followed Humana’s acquisition³ of Kindred at Home in 2021. But why all this action on the home health front? First Report Managed Care gathered insights on the underlying reasons for this interest, notable challenges involved with acquisition, and predictions on whether payer interest will continue throughout 2023 and beyond.

“I think the broad umbrella that you can put all these moves under is this whole huge trend toward value-based care,” said Joe Caruncho, JD, CEO of Genuine Health Group. He told First Report Managed Care that the main driving force behind payer acquisitions of home health providers has to do with moving away from volume and focusing instead on how to “marshal all these services and all these providers to actually come up with better outcomes for patients” and hopefully reduce costs in the process.

We are experiencing a significant hike in the number of older adults who require more supportive care as they continue to age, explained Arti Masturzo, MD, MBA, chief medical officer at CCS. As a result, insurers must consider how they will support the growing cost of care for this aging population. Because some of the steepest expenses are tied to the acute care hospital, she said that “finding innovative ways to care for members outside the walls of a hospital has become imperative.”

Payers are aware of the notion that traditional care within brick-and-mortar settings is both overutilized and expensive, Dr Masturzo told First Report Managed Care. The COVID-19 pandemic led to peaks in virtual and home care utilization. These alternatives can encourage patients to use less expensive care options while receiving help and support in the comfort of their home environments. 

From her perspective, insurer interest in the home health care sector involves a variety of cost-related factors, such as rising staffing costs; member turnover; and the realization of the significant investments of time, money, and resources involved with building home health from the ground up. Payers are also realizing the steep costs that can result when social determinants of health—what she referred to as a “massive driver of health care costs”—are not prioritized as an integral aspect of patient care.

Dr Masturzo called the ability to identify and influence social determinants of health, behavioral health, and other issues that might not be readily apparent or obvious “a huge reason for pushing more care into the home.” This form of care offers unique opportunities to make an impact.

“I can’t stress enough how important the ability to look inside a patient’s fridge or pantry is to the long-term health of that person—and to the ability for our entire health care system to drive down exorbitant costs,” she added.

“If you look at the total cost of care for a typical patient, being in a hospital is the most expensive part of the stay,” explained Hal Andrews, JD, president and CEO of Trilliant Health. Hospitals have an incentive to discharge patients as soon as they can be safely released, yet they have little incentive to select a home health agency based on factors like quality or cost.

“Group health plans and consumers, on the other hand, are interested in the quality and cost of the home health agency,” he said. And the best way for health plans to control costs and create predictable outcomes is to establish a system where members are discharged to an agency owned by or affiliated with the health plan, he told First Report Managed Care. 

Home health agencies traditionally had a fairly restrictive set of guidelines for when they could provide care at home, what types of services they could provide, and for how long, Mr Caruncho explained. But these dynamics are changing. For example, Genuine Health is the owner of its own home health care provider that is participating in the ACO Realizing Equity, Access, and Community Health (ACO REACH) Model.

“As it relates to home health, one of the enhancements that they put in that program is a waiver of almost all of those guidelines or restrictions,” he said. “So all of a sudden, we were able to decide which patients we provide these services for at home and for how long, et cetera because we’re the ones that are paying for it.”

For companies like Genuine Health Group and its payer partners, home health care aims to contain costs through measures like supporting medication adherence, identifying health deterioration early on, and helping patients access and make use of community resources. In addition to providing a more seamless continuum of care for patients dealing with chronic illnesses, this form of care can help reduce costly hospital readmissions for patients who have been discharged from an acute care stay. 

When a patient gets out of the hospital, for instance, Mr Caruncho said his organization executes a 30-day transitional care management program that involves regular phone contact and the ability to send home health nurses or other resources into the home in order to stabilize, screen, test, or decide if there is a need to see a physician. All of these efforts are geared toward avoiding a downturn in health that would put the patient back into a hospital.

According to Dr Masturzo, delivering acute-level care within home settings has seen success and high levels of patient satisfaction to date. “The missing pieces are the payment models and infrastructure to support it,” she pointed out. “The large insurers are well-equipped to drive the home care movement because they already have primary care practices and deep expertise in creating innovative payment models.” 

Insurers can potentially partner with a home health agency or acquire one. The advantage of acquisition is that it enables more freedom for innovation and integration with existing resources. Once acquired, the agency essentially becomes the chassis on which all capabilities—like a skilled nursing facility or hospital at home—can be built, she added.

But managed care leaders and decision-makers need to realize that this move to home care is not a quick flip of the switch type of scenario, cautioned Dr Masturzo, who previously served as the VP of Clinical Innovation, Home Care/Value Based Care at Humana. As part of the team who led the acquisition of Kindred at Home, she helped guide it through the transition from fee-for-service to a value-based home health business—and saw just how complicated the integration process can be. 

“While the move to invest in home care by insurers makes complete sense on paper and from a long-term financial standpoint, the cultural change required is not an easy lift, and having the right leadership in place is critical,” she said. Also, just because the capabilities are in place to provide care within the home, it doesn’t always mean that it is the best site of service from a cost perspective.

Only some health plans can acquire a home health agency, and only some plans ought to own an agency, added Mr Andrews. “There’s a certain amount of scale that you should have,” he said. “You have to have enough of a presence to take care of all of your membership, and sometimes the economics of that just aren’t going to make sense.” Even so, he pointed out that there is enough data available for health plans to evaluate home health agencies on a market-by-market basis and develop a value-based network of providers.

Mr Caruncho said he foresees continued payer interest in the home health sector for several reasons. In addition to the trend toward value-based care, new programs and policies are making it possible for this form of care to “finally be used as an integral part of treating patients at home and keeping them healthy,” he said. And the rise of remote patient monitoring tools and technologies, which accelerated in response to the COVID-19 pandemic, has made home-based care more viable.

Dr Masturzo doesn’t imagine this excitement in the home health sector dying down unless the companies that have already made acquisitions wind up revealing disappointing results, which would likely take several years. On the other hand, if impressive results emerge along the way, she believes the trend will continue until no more scaled agencies are available to purchase. “There are still a large number of ‘mom and pops’ out there,” she added, “but there is little value in buying a business that can only serve a small geographic need.”