Alternative Payment Models Are Here. Is Your Home Health Agency Ready?

"The times, they are a-changing" in the health care industry. A volatile combination of unpredictable reimbursement levels and increased compliance requirements has many hospice and home health agencies feeling caught in a pincer. All you have to do to meet CMS requirements is provide higher quality care at a lower cost. Is your agency ready for the challenge?

APMs Prove to be Both Popular & Effective

CMS is experimenting with new payment systems that create incentives for providers to increase their efficiency, communication, and quality of care. Alternative Payment Models (APM) promote outcomes-based care and use specific metrics to measure quality of care, patient satisfaction, and health outcomes. Care organizations are scored, with top-rated providers rewarded with higher payment rates. This is one of the top goals of CMS' Home Health Value Based Purchasing initiative.

The rationale is that health care providers know better than anyone else how to improve care, and understand where the bottlenecks occur. The financial incentive inherent in the model encourages them to be proactive, work in partnership with other providers, and address the needs and concerns of patients. Outside the rigid fee-for-service payment models, caregivers are able to treat patients as individuals and design appropriate care plans.

Health care providers hope that this individualized approach will lead to better patient outcomes because it provides a more holistic view of the patient.

The APM Market Share is Growing Steadily

The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) passed with overwhelming support of both parties and directed a transition away from fee-for-service payments to a pay-for-performance model. Even though the bill isn't set to affect all reimbursement rates until 2019, many providers have already embraced the new model.

A HCP-LAN study estimated that 25% of CMS reimbursements in 2016 would be to providers using some form of APM. Other industry experts predict that the majority of insurers (not just CMS) will move quickly to adopt value-based health care payment models. A separate 2016 study found that 58% of payers are "along the continuum towards full value-based reimbursement, a 10% leap since 2014."

Meanwhile, CMS announced three mandatory APMs in December 2016. The model projects are to run until 2021, but if they're successful, CMS could accelerate implementation:

  • AMI (Acute Myocardial Infarction) model - launches July 2017
  • CABG (Coronary Arterial Bypass Graft) model - launches July 2017
  • CJR (Comprehensive Care for Joint Replacement) model - launched in April 2016, and coverage updated in the December announcement.

A Successful Vehicle for Cost Control

While quality of care, is of course, a primary concern, the need to control spiraling health care costs as the US population ages, is also quite important. These alternate models appear to be successful at both. CMS touted the results of one project in 2016:

According to the results, over 400 Medicare ACOs generated more than $466 million in total program savings in 2015, accounting for all ACOs’ experiences.
[…]
The mean quality score among Pioneer ACOs increased to 92.26 percent in PY4 from 87.2 percent in PY3. The mean quality score has increased in every year of the model, with a total increase of over 21 percentage points since the first year.


That same CMS report indicated that many providers qualified for "shared savings," meaning higher reimbursement rates. However, those shared savings are allocated based on quality measurements, so lower-performing providers may find their reimbursement rates cut.

The trend towards risk-sharing is changing both the operational and competitive landscape of the home health care industry.

The Home Health Care Industry Is Changing

In theory, this should be the very best time to operate a home health agency (HHA). Payers are demanding cost reductions, and home-based care costs far less than hospitalization and other options. HHAs however, struggle to find and retain qualified staff, comply with reporting requirements, and improve quality of care. Many have the added challenge of working with non-Medicare providers, who have their own sets of expectations.

It's the classic doing more with less conundrum that's increasingly being addressed through industry consolidation.

In a 2013 report, Harris Williams, a middle-market investment bank, anticipated the trend's increasing popularity, noting:

  • The need for greater scale, operational efficiency, and comprehensive care delivery capabilities is driving market consolidation. 
  • Over 50% of HHAs generate less than $3 million in revenue. 
  • Reimbursement pressures will reinforce the consolidation trend driven by the need for scale and better operating leverage to maintain and increase profits.

While some of the consolidations are larger HHAs buying smaller agencies, hospitals and rehabilitation centers are buying into home health services as a way to manage services. Particularly in the APM or ACO payment environment, it makes sense to have relationships with reliable care providers. That relationship can be good for HHAs as well, since "margins are always thin, and absent a full merger, stronger alliances with hospitals mean more referrals."

APMs Are Here: Is Your Agency Ready?

During the past decade, change has been the only constant feature of the health care market. Workflow management and reporting rely on technology; outcomes-based initiatives make proper reporting even more important. A single paperwork discrepancy can cause care delays and denials, requiring extra staff time to sort out the issue. For instance:

Agencies are reporting increasing denials related to a mismatch in beneficiary’s Medicare number, some of which is out of the agency’s control. For example, the suffix in the Medicare number changes from a “B’ to a “D” because the beneficiary’s status has changed from married to widowed.


Working with other stakeholders isn't always easy in. As we saw with the Pre-Claim Review rollout, lack of training and guidance so frustrated doctors that some temporarily stopped referring patients for home health care. HHAs had to step in and physicians and hospitals understand the new documentation requirements.

Great performance can lead to more referrals, but lower-quality performance can send referrers packing. A hospital executive in Tennessee was blunt about the issue in an interview with Becker Hospital Review:

The behavior of other partner facilities and providers is managed through data review to make sure our expectations are being met. If a facility is not meeting the originally established expectations, the facility is notified and Campbell Clinic patients are shifted to other partner facilities. Campbell Clinic has found this method to be an extremely valuable tool to keep external partners accountable for their decisions and their actions regarding BPCI patients.


Your agency's success is increasingly connected to the success of other stakeholders in the care continuum - from primary care physicians to hospitals to the patients and their families. Data must be shared with other caregivers across platforms and comply with payer requirements. Managing this process requires IT expertise that many agencies lack, so talk to our experts at Homecare Homebase. We constantly monitor payer requirements and regulatory changes; you can be sure that your software tools reflect the most up-to-date requirements, and our team is always ready to help.

Homecare Homebase solutions free you and your staff from the constant data worries, so you can focus on what you do best: providing the highest possible level of patient care.