13 Jul Home Health and Hospice Care: Reflections on the Varied Impact of the COVID-19 Pandemic
By John Patterson, Managing Director and Healthcare Industry Team Leader and Marc Gondek, Director, Investment Banking
The onset of the COVID-19 pandemic in March 2020 impacted all aspects of the U.S. health care system to varying degrees. Some providers, including physician and dental offices, experienced practice closures (with the exception of emergency procedures) for several months, and, to the extent they were unable to pivot to virtual care, saw revenues decline precipitously (e.g., by as much as 80% in April, according to one account). Others, such as acute care hospitals, saw elective procedures, which typically generate a large portion of hospital profits, cancelled entirely to prepare the hospitals for the expected wave of COVID-19 admissions through their ERs. It was feared, and in some cases the fear was borne out by experience, that patients experiencing COVID-19 symptoms severe enough to warrant visits to emergency rooms and subsequent inpatient admissions would outstrip available hospital beds and other resources.
On the other hand, the home health and hospice experience has been, in general, quite different. All things considered, home based care and care “brought in” to senior care communities (independent living, assisted living) has proven to be very resilient in the COVID-19 environment.
Home Health Care, Hospice and Personal Care Services
In addition to the introduction of CMS’s Patient Driven Groupings Model (“PDGM”, effective January 1, 2020), the COVID-19 pandemic presented significant challenges to home health and hospice operators, though the impact on operational and financial performance has varied depending on size and scale of the company, service line, geography, site of care, and the preventative actions taken.
Home health care (i.e., skilled care) experienced, in general, a significant decline in patient admissions (as much as a 33%, according to some estimates) as many referral sources, such as acute care hospitals, were locked down or limited as to the procedures they could perform, thus reducing or eliminating the patients that would otherwise have been discharged to home with physician orders for home care services. Broadly speaking, hospice care experienced only a modest decline in volumes (estimated 10% reduction in weekly admissions) but has, for the most part, recovered to pre-COVID-19 levels.
Personal care services also experienced a modest decline in volumes based on anecdotal evidence of (i) visit cancellations by patients due to fears over COVID-19 exposure from caregivers, (ii) decline in available caregivers due to, among other things, schools being closed down and caregivers having to take care of their children, and (iii) senior care communities preventing visits due to COVID-19 lockdown. Even well-resourced strategics saw a dip, with Addus Homecare witnessing a 5% to 10% decline in admissions.
In general, providers with access to adequate supplies of personal protective equipment, good controls in place with respect to their clinical and non-clinical staff, and well-developed contingency plans, seem to have rebounded quickly from any softness in their businesses. Additionally, to the extent that they were already utilizing, or able to quickly adopt, technology (e.g., remote patient monitoring and telemedicine) as part of patient care, health care interventions occurred sooner. As a result, patients were able to stay in place through medical episodes as opposed to having to transfer to the emergency room.
It is no surprise that, like PDGM, the impact of COVID-19 on home care services providers was most acutely felt by the smaller, less sophisticated industry participants.
Amherst Home Health Client
In terms of providing specific evidence of the performance of some home health care companies through COVID-19, we can look anecdotally at a current Amherst client, a multi-state, geographically diverse, Medicare provider of home health and hospice care, as well as personal care services, which Amherst expects to bring to market in the coming months.
As it relates to the home health and hospice business, the overall patient volumes remained relatively steady. Some the Company’s agencies saw slight declines in patient volumes, primarily due to the inability to visit patients in certain senior communities whose operators did not allow outside care providers to enter their facilities during COVID-19, and the reduction of referrals related to elective surgical rehabilitation. However, other agencies experienced an uptick in patient volumes. Management attributes the Company’s overall steady performance during the COVID-19 pandemic to the strength of its referral relationships, the confidence those referral sources have in its clinical outcomes, and the commitment of the front-line workers to care for its patients. With respect to the personal care services, the Company experienced a modest decline in volume in March and April but has seen patient volume return to pre-COVID levels in May and June.
The Company’s performance under the new PDGM reimbursement model has been net positive, as the Company was well prepared to operate profitably within the new therapy guidelines of PDGM, while still providing high quality of care for its patients to ensure positive clinical outcomes.
The Company has a strong, experienced management team, robust clinical and administrative systems, and an extensive referral network across all agencies. As a result, it was well prepared for the commencement of PDGM and was able to address the issues created by COVID-19 rapidly and with good effect.
While parts of home health and hospice have been negatively impacted by COVID-19, overall performance has been good, and, to the extent that volumes took a hit in the March to May timeframe, they have shown signs of a strong rebound.
Home based services, including those brought into senior living communities, continue to grow because of their cost advantage relative to traditional institutional facility-based care, such as skilled nursing facilities. Technology, such as telemedicine and remote patient monitoring, as well as advances in bio-pharmaceuticals and medical devices, enable seniors to live at home for much longer than was previously possible.
Importantly, consumer preferences on the part of both seniors and their families are to have patient care, including skilled care and hospice, as well as assistance with activities of daily living, provided in the home, assuming that is the most appropriate site of care. This trend to keep patients and residents out of facilities and in the home will only grow stronger as the younger Baby Boomers, Gen X and Millennials reach the ages where the need for medical and personal care assistance makes delivery of services in the home an important option.
Like other areas of health care, the future appears to favor providers with scale, geographic diversification, service line/revenue diversification, consistently strong clinical outcomes, sophisticated administrative operating systems, and multi-pronged growth strategies. Fueled by the strong industry tailwinds that have been further amplified by COVID-19 (i.e., preference for aging in place combined with providing care in a lower cost setting), Amherst expects to continue to see significant consolidation within the home health and hospice industry for the foreseeable future.