S&P Global: Home health agencies face default, consolidation

Small payments by the Centers for Medicare and Medicaid Services to home health care agencies in 2023 won’t keep up with rising costs for some providers, according to a new report. likely to result in default or credit consolidation.

In October, CMS authorized a 0.7% increase in Medicare-prorated wages under the Potential Home Health Payment System, to $125 million. The rule eventually reversed the proposed $810 million in cuts after family health industry groups threatened to sue and CMS decided to cut payments in phases over a two-year period. CMS considers the cuts necessary to fix the $2 billion in overpayments made in 2020 and 2021 under the Patient-Based Group Model, which was rolled out in January 2020.

S&P Global Ratings analysts said in a report Thursday that the nominal increase in Medicare reimbursement is significantly less than the rising labor and supply costs of providers. home health care service, profoundly influencing for-profit home health chains such as Amedisys and LHC Group which operate a large Medicare home healthcare business. . Margin pressures could worsen in 2024, potentially leading to defaults and/or consolidation for burdened family health agencies, said David Kaplan, director of corporate ratings. many of the liabilities on their balance sheets, including companies like AccentCare and Elara Caring, are backed by private equity. at the S&P Global Rankings.

“There may be a consolidation of a company that is insolvent. The question is, how much will the acquirer want to pay with that as headwind,” he said.

Amedisys, LHC Group and AccentCare did not immediately respond to a request for comment on the report.

An Elara spokesperson said in a statement that the company is well-positioned to weather financial cycles thanks to its combination of balanced payers and multi-state home health services. full tissue.

Elara restructured its debt in December. Rating agencies considered the restructuring a painful exchange, which they considered a default.

Kaplan said Elara and other similarly positioned providers may choose to invest more resources in their hospice business. Hospice providers received a 3.8% Medicare rate increase in 2023.

Some home health agencies will try to reduce costs by limiting wage increases, analysts said, although that scenario is unlikely given the current labor shortage. An increase in nominal return, combined with rising labor costs and inflation, will reduce profitability and cash flow.

“While this is technically a nominal increase, the reality is that our members are looking at the payout,” said Mollie Gurian, vice president of family and community policy. will decrease this year and is aiming for another decrease in calendar year 2024 if no change occurs. for LeadingAge, a trade group representing nonprofit aging service providers, said in an email. “Non-profit, mission-oriented vendors are most vulnerable.”

If home healthcare providers cut or close services, CMS could withdraw the reimbursement cut by 2024, Kaplan said. He noted that providers Larger home health care is more isolated from reimbursement changes.


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