Health

A proposed change in the way home health organizations would be paid sent Louisville-based Kindred’s stock tumbling last week. The stock was valued at $11.70 on July 3, and decreased to $8.90 on Monday — a nearly 24 percent drop.

Part of Kindred’s business is in-home health — a form of health care where a nurse or therapist visits a sick person at home, instead of the person going into a nursing home.

And last week, the Centers for Medicare and Medicaid announced that beginning next year, the federal government is proposing to change the way it reimburses these in-home health companies. As a result, if the rule is finalized, the industry is expected to lose $950 million in payments from Medicare in 2019, which takes us back to Kindred’s plummeting stock.

“Any time you see a billion dollars coming out of the health care market, it would be troubling for investors,” said Joy Cameron, the vice president of policy at the Visiting Nurses Association of America, a trade group that represents home health agencies.

Officials with Kindred did not immediately return a request for comment.

So, What Changed?

Under the proposal, Medicare — the federal health insurance program for people over 65 — would pay home health agencies based on the need of the patient in an effort to rein in costs. Payments would be made, for example, based on what condition or illness the patient has or how much help a patient needs to relearn a skill like bathing, for example.

Medicare currently pays these agencies based on a 60-day time frame. Under the proposal, that would be cut in half, so agencies would be paid based on a 30-day time frame. A second 30-day period would be paid for at a lower rate.

The reasoning for the change is money. The federal government cites data that show there are on average more nurse visits in the first 30-days, and a 2010 Senate Committee on Finance report found that three out of four companies investigated encouraged therapists to target the most profitable number of therapy visits, even when patient need alone may not have justified such patterns.

“Costs are much higher earlier in the episode and lesser later on, therefore we believe that dividing a single 60-day episode into two 30-day periods more accurately apportions payments,” the Centers for Medicare and Medicaid wrote in its proposed payment rule.

Too Much, Too Soon

The changes, as-is, would go into effect in late 2018. It’s a pretty big shift and Joy Cameron of the Visiting Nurses Association of America said that’s too soon.

“It’s untested and we’d like to see them consider the best way to apply a model like this to see how it actually works versus looking at something on a piece of paper,” Cameron said.

As far as the federal government is concerned, the steps are justified because of the large profits these home health companies — like Kindred — are making.

In a separate proposed payment rate change, CMS proposed decreasing payments to home health agencies by 0.4 percent. According to a report from the Medicare Payment Advisory Commission, the average profit margin of a home health agency is almost 14 percent.

But Cameron said that number is not accurate. The federal government does not take into account the overhead costs of home health agencies — like paying for electronic health systems, technology for electronic visits and the cost of driving to patients, which can be higher in more rural areas. And over the past four years, home health agencies have slowly had payments cut across the board.

In Kentucky, Cumberland County on the Tennessee border could be the most affected if these proposed payment reforms go through. There, 20 percent of traditional Medicare enrollees used home health care in 2015, with almost four episodes per patient. That was double the national average.

These proposed changes could be just the beginning for reforming the way home health companies are paid. The Medicare Payment Advisory Commission, which makes recommendations to Congress, has proposed paying home health companies based on quality measurements. That could include how often patients end up back in the emergency room or hospital after home health care.

Disclosure: Susan Moss, Senior Vice President of Marketing and Communications at Kindred Healthcare, is a member of LPM’s Board of Directors. 

Lisa Gillespie is WFPL's Health and Innovation Reporter.