2024 Home Health Insights: Labor, Reimbursement, and Technology

  • Industry trends
  • 3/26/2024
Nurse supporting senior patient walking or moving up the stairs at home

Key insights

  • Home health agencies (HHAs) are at the forefront of a care shift, and the industry has the potential to grow significantly. With ongoing changes to care delivery, there are both headwinds and tailwinds to consider throughout 2024.
  • Industry considerations include labor pressures, reimbursements, technology, management support organizations, and the market outlook.
  • There are several market tailwinds that may provide exciting growth opportunities for HHAs. The year 2030 will be a turning point in U.S. demographics, with one in five adult Americans over retirement age as the last of the Baby Boomer generation turns 65.

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Shifting trends in health care in the wake of the COVID-19 pandemic mean more patients are receiving care at home than ever before. Programs like hospital-at-home showed they could provide patients sophisticated in-home care and intensified desires to age in place.

Home health agencies (HHAs) are at the forefront of that care shift, and the industry has the potential to grow significantly. With ongoing changes to care delivery, there are both headwinds and tailwinds to consider throughout 2024.

Labor pressures

Throughout the United States, labor shortages and worker burnout are taking their toll on health care and medical fields. HHAs are no exception.

These challenges are unlikely to abate in the coming years. The Bureau of Labor Statistics projects between 2022 and 2032, the number of nursing positions available will increase by 6%, with 193,100 nurse openings each year. While some of these openings will be due to the increased need for nursing as the American population ages, many will be attributable to current nurses retiring. While young nurses continue to enter the workforce, the impending loss of experience within the nursing profession is important to keep in mind for the future.

The impact of COVID-19 on the nursing workforce shouldn’t be ignored. Increased workloads during the pandemic and the years after have led to increasing levels of burn out in nurses.

Right-size your staffing needs

In part to help providers cope with the nursing shortage, some states and jurisdictions across the United States adopted aspects of nursing delegation, which can be powerful tools to help right-size staffing needs and address shortages of certain professionals. Each state’s and jurisdiction’s delegation laws are different, making it very important to research and seek legal counsel — if needed — to understand and follow applicable laws and regulations.

In areas where delegation may be an option, a delegatee can perform specific nursing activities, skills, or procedures traditionally beyond the delegatee’s role (after formal training) while the licensed delegating nurse retains accountability for the patient and services performed.

There are several areas an HHA should consider when determining whether delegation may be a useful tool:

  • Delegated tasks should be included either in the delegatee’s job description or the established, written policies and procedures of the setting. HHAs must verify required competency training is provided and expectations and limits for delegation are clearly documented. Activities involving nursing judgement or critical decision making cannot be delegated. These activities must be carried out by a licensed nurse.
  • Delegation may only be used when a patient’s health condition is stable. Changes to patient condition must be communicated to the licensed nurse delegating tasks and result in a reassessment of whether delegation is appropriate for that patient’s care requirements.
  • Both the licensed nurse and the HHA are responsible for determining whether a delegate has the required skills to perform delegated tasks.
  • When determining whether delegation may be appropriate, the patient’s condition, the licensed nurse, and the delegatee’s abilities should all be considered. The licensed nurse is responsible for communicating specific instructions to the delegatee, who is responsible for asking questions and informing the licensed nurse of any activity results or changes in patient condition. It’s key delegatees understand their limitations and don’t make decisions or modifications without consulting the licensed nurse.
  • The licensed nurse is responsible for monitoring the activity and patient outcomes, and for following up with the delegatee once the activity is completed. In addition, the licensed nurse must verify documentation of the delegated activity is completed.

If nursing delegation is allowed, when considering whether delegation could help address staffing needs, be aware of the need for open communication between nurses and assistive personnel.

Taking a realistic look at the HHA’s culture may be one of the most important steps to determining whether delegation can be a useful way to ease staffing needs. Both nurses and aides should be aware of and receptive to the degree of communication required for delegation. Also, creating the infrastructure to both train for and document the delegation process is key to successful implementation.

Reimbursement, margin pressures

In the 2024 Home Health payment rule, the Centers for Medicare & Medicaid Services (CMS) finalized a 3% increase in home health payment rates when compared to 2023 rates, and an additional 0.4% increase from updates to the fixed-dollar loss ratio used to determine outlier payments.

However, the rule also contained a behavioral adjustment resulting in a 2.89% decrease in the national standardized 30-day payment rate. CMS implemented this cut as a budget neutrality measure in response to differences in assumed and actual impacts of the patient-driven groupings model.

When taken together, the result is only an 0.8% increase in estimated payments compared to 2023. While this is a welcome change from the 2% aggregated cut CMS proposed in July, in a time of significant inflation and increased labor costs, many HHAs will feel strong impacts from such a slight increase.

Alternative payment models

One way agencies may bolster payments is by participating in alternative payment models. CMS has created and is running many value-based payment models. While many don’t specifically require home health participation, HHAs may be eligible to participate in conjunction with other providers. Partnering in this way creates strong referral relationships to help funnel patients into home health agencies.

While traditional Medicare makes up a sizable portion of overall payment in the industry, Medicare Advantage (MA) is perhaps more impactful. MA payments for home health are generally lower than traditional Medicare, but they are negotiable.

With more than 50% of Medicare beneficiaries enrolled in MA, these contracts are key to receiving adequate compensation for the value HHAs deliver to patients.

Contract negotiation considerations

When entering contract negotiations, two areas of data are incredibly important to understand — quality and cost. Tracking quality information allows HHAs to demonstrate positive patient outcomes, while understanding an agency’s true cost to provide care helps determine acceptable payment levels.

There will need to be intense focus on the fundamentals to drive efficiencies and quality. This can include use of artificial intelligence to automate certain functions or applications, staff training, service diversification (if possible), strong referral networks, and collaborations.

In addition, understanding the differences between payor reimbursements is key for success. While incorporating new technology or providing care in new ways may be exciting, various technologies and codes may not be covered by payors.

For example, remote patient monitoring (RPM) and remote therapeutic monitoring (RTM) are Medicare reimbursable for some providers but not for home health use. HHAs must understand how payors view emerging technologies when planning investments in care infrastructure.

Technology and cybersecurity

Home health care is defined by innovation and evolution, and increasingly the direction of innovation is toward connected, technology-enabled care. More technology provides opportunities to improve efficiency, supply more responsive care, and save costs. But it may also increase risks.

Internet network security is a concern that’s complicated in home health. HHAs play a specific role in coordinating patient care. Agencies must communicate and work with multiple providers when providing home care.

Additionally, devices used for home health may encounter dozens, if not hundreds, of different networks while providing care. Some networks may be well secured, but many may not adequately protect against sophisticated cyberattacks. There may also be connection issues in rural areas without broadband.

Internet of medical things

Cybersecurity professionals use the term “internet of medical things” (IoMT) to describe the ways devices, software systems, and health systems providing patient care are connected. Connected devices within the IoMT can take many forms. As RTM and RPM become standard practice when treating patients in the home, the IoMT will only grow.

While new RTM and RPM technologies provide exciting opportunities to improve both patient care and operational efficiency, be mindful of their increased security risks. Health care is one of the industries most often targeted by malicious actors, due largely to the volume of personal identifiable information (PII) available in health care organizations.

Cybersecurity concerns are here to stay

Having a cybersecurity plan is no longer optional. The FBI Internet Crime Complaint Center’s (IC3) 2022 Internet Crime Report identifies health care as the industry most targeted by ransomware attacks. Of the 870 ransomware attack complaints the IC3 received in 2022, health care accounted for 24% of the attacks.

Given the volume of attacks on health care providers, a cyberattack is no longer a question of if, but when. While creating a comprehensive cybersecurity plan is an ongoing project as risks and attack methods change, there are several short-term steps to help mitigate risk:

  • Routinely train staff, caregivers, and patients on cybersecurity risks and common attack methods.
  • Verify software programs are up to date and updated promptly when updates are available.
  • Use multi-factor authentication whenever possible.
  • Monitor recalls and cybersecurity bulletins from device and software vendors and respond appropriately.

In the longer term, HHA leaders should consider a cybersecurity audit, where an outside cybersecurity analyst takes inventory of the cyber landscape, identifies vulnerabilities, and creates a plan to help decrease risks and respond in the event of an attack. Penetration testing can evaluate the effectiveness of an agency’s cyber controls and response plan.

While these options involve additional costs, the costs of responding to a cyberattack can be significant, and the loss of patient trust in the wake of a cyberattack can be devastating.

Management support organizations

As the home health merger and acquisition market cools, independent agencies may feel pressure to think creatively about ways to improve both business and patient outcomes. Management support organizations (MSOs) may offer a way to work with other agencies while maintaining valued independence.

An MSO is an organization that establishes contracts with HHAs to provide support in non-clinical functions, such as:

  • Accounting
  • Human resources and recruiting
  • Training, compliance, and legal services
  • Patient and personnel scheduling
  • Billing and insurance relationships

MSOs provide significant flexibility in other organizational aspects. MSOs may choose to unite participating organizations under a single, recognizable brand name and seek out participant agencies nationwide. Others may keep a narrow geographic target or allow organizations to maintain their existing name and branding.

MSO benefits

Working with an MSO could be attractive for various reasons, including:

  • MSO support can provide administrative efficiency through business function support.
  • Affiliation with an MSO can create a stronger position when entering payment negotiations with payors.
  • Sharing fixed asset costs and dedicated training staff among MSO members may allow faster implementation of new technology that may be harder for a smaller agency to access.
  • MSOs may be able to offer more benefits and opportunities for employees, helping with recruitment in times when qualified staff are in short supply.

Given these potential benefits, creating or joining an MSO could be advantageous. However, each agency has its own goals and priorities, and it’s important to verify any potential strategic relationship would work with these goals and vision.

Market outlook

There are several market tailwinds that may provide exciting growth opportunities for HHAs.

The year 2030 will be a turning point in U.S. demographics, with one in five adult Americans over retirement age as the last of the Baby Boomer generation turns 65.

The U.S. Census Bureau predicts the number of Americans over 85 will double by 2035 and triple by 2065.

As Americans grow older, they generally experience an increase in chronic conditions requiring ongoing medical care and monitoring, such as diabetes or heart disease.

There is also an increasing appetite among seniors to age in place for a multitude of reasons — financial considerations, maintaining a connection to established community, and greater perceived independence and control are just a few.

Recent technological advancements make this desire increasingly possible for aging Americans. Increased use and capabilities of telehealth and virtual health, as well as RTM and RPM, allow patients to remain in home while receiving the ongoing support and monitoring provided in residential settings.

These dynamics provide significant growth potential for home health care services. However, pressure from payors and staffing challenges will be ongoing headwinds and may prove insurmountable for smaller HHAs. In addition, increased demand from aging Americans may prove too great for current home health providers if they continue business as usual.

HHA focus areas

An HHA successfully navigating these realities can capitalize on several competitive advantages:

  • Better payor contracting — A successful HHA focuses on fostering relationships with key payors to gain better rates and establish mutually fruitful relationships.
  • Labor management — In a successful HHA, all clinical staff work at the top of their license. The HHA uses emerging technologies to gain efficiencies and automate routine processes.
  • Creating economies of scale — Successful HHAs work to aggressively reduce cost per visit by spreading costs across more revenue. This may require HHAs to work in MSOs or join larger organizations providing increased ability to scale.
  • Data analysis — HHAs have access to a wealth of data. Successful HHAs leverage this data into practice improvements, including using up-to-date and accurate financial data to give a realistic picture of costs incurred when negotiating payor contracts or acquisitions. Also, quality and outcome information may be used to demonstrate value and provide insights into focus areas.

How we can help

Concerned about the impact reimbursement pressures could have on your agency? Feel overwhelmed when considering cybersecurity threats facing the health care industry today? Not sure how your financials stack up against others in the industry? Need assistance leveraging data to make strategic decisions?

Reach out to a CLA advisor today. CLA’s home health team can help with strategies across your agency, including providing transaction support services, IT infrastructure assessments, digital solutions, and outsourced accounting.

With nearly 130 offices nationwide, a deep commitment to industry specialization, and a collaborative team approach, we leverage our extensive experience serving thousands of senior living and care clients. Our ongoing commitment to this sector keeps us well informed and enables us to offer insightful perspectives.

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