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Home Care Leaning Less on Private Pay, More on Government-Funded Programs - Home Health Care News

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The home care industry is rapidly changing. Perhaps nowhere is that change more evident than in the payer mix of home care operators.

Historically, “home care” has often been thought of as a private-pay offering, something separate from other senior care services that are covered by Medicare, Medicaid or private insurance. But agencies have clearly migrated away from an out-of-pocket mentality over the past few years.

“Only two-thirds of this industry is compensated through private pay,” Erik Madsen, CEO of Home Care Pulse, told Home Health Care News. “That’s a downward trend.”

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Idaho-based research and education firm Home Care Pulse analyzes changes in payer mix, marketing strategies and more as part of its annual Home Care Benchmarking Study. The organization released the 12th edition of its study on Wednesday.

Nearly 850 home care providers representing more than 1,920 locations across the U.S. participated in the latest Benchmarking Study. The group included small and large operators of independently owned agencies, franchised locations and hospital-affiliated organizations, among other types of home care businesses.

To dig into payer source, Home Care Pulse asked those participants to break down where their annual revenue came from.

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In 2020, the group collectively said that 65.3% of their revenue came from private pay. That’s slightly lower than 2019 and significantly lower than 2018, when 72.1% of participants’ annual revenue came from private pay.

“You see that private pay is going down, but government-funded programs are going up,” Madsen said. “I think it’s an indication of what’s to come in the industry.”

There isn’t one main payer source pulling home care agencies away from private pay. It’s more of a broader shift with incremental gains in a variety of areas, Madsen explained.

For example, in 2018, just 0.7% of home care revenue came from managed care organizations, according to Home Care Pulse. Last year, that increased to 2.1%.

Similarly, just 5.2% of home care revenue came from Medicaid waiver programs two years ago. In 2020, that figure jumped to 8.1%.

“Veterans assistance also went from 3.5% in 2018 up to 4.9% in 2020,” Madsen noted.

Likely surprising to some and not-so-shocking to others, Medicare Advantage (MA) has not been the boon that some home care leaders had hoped.

After the U.S. Centers for Medicare & Medicaid Services (CMS) gave MA plans more flexibility on what they can offer as supplemental benefits in 2018 and 2019, many believed that would translate to new business for in-home care providers. Several plans are, in fact, working with home care providers, but that has only made a dent in the industry’s overall payer mix.

In 2019, Medicare Advantage accounted for 0.3% of the home care industry’s payer mix. Despite more MA plans actually offering home-focused supplemental benefits, that then decreased to 0.1% in 2020, according to Home Care Pulse.

The Denver-based Homewatch CareGivers, a national home care franchiser that’s under the Authority Brands umbrella, is among those that have taken steps to land MA business.

Even so, the company didn’t expect to reap the rewards in 2020, COO Jennifer Tucker previously told HHCN.

“It has not been a huge windfall, and we never thought it would be in 2020,” Tucker said. “But I think a lot of the legwork we did to identify the plans for our network and help [franchisees] understand how to talk about it, even in their regular field sales efforts, has been a great message for us and something we can connect into the rest of the health care community with. That’s kind of the place we’re at right now — just getting our network educated about how it all works and how they can be positioned to help all of their clients that have Medicare Advantage policies.”

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