By Stephen Tweed
What will be the impact of consolidation in post acute care for home health, hospice, and private duty home care?
Yesterday, I was reading an article about Health South acquiring Reliant Hospital Partners for a reported $740 million. This follows on the heals of Health South acquiring Encompass Home Health for $750 million. That makes Health South one of the larger players in post acute care with home health, hospice, and rehab facilities in 33 states and Puerto Rico. The article made me think about what I see happening across the country, beginning right here in my home town.
Louisville KY is the Mecca of Long Term Care
Downtown Louisville based, Kindred Healthcare has become the largest post acute provider with the acquisition of Gentiva Health Services, one of the four large publicly traded home health and hospice companies. Kindred has completed 17 acquisitions since 2010 and at March 31, 2015, Kindred had approximately 102,600 employees providing healthcare services in 2,787 locations in 47 states, including 97 transitional care hospitals, 16 inpatient rehabilitation hospitals, 90 nursing centers, 21 sub-acute units, 664 Kindred home health, hospice and non-medical home care sites of service, 100 inpatient rehabilitation units (hospital-based) and a contract rehabilitation services business, RehabCare, which served 1,799 non-affiliated sites of service.
Across town, Signature Healthcare, a nursing home and rehabilitation company has also moved into the home health and private duty business. The company has 126 locations in 10 states, including Signature Home Now, a home health agency with 11 branches in Florida, and Silver Angels, a private duty business focusing on Medicaid, with 8 locations in Tennessee.
Around the corner from our office, Almost Family, Inc. has grown to become a leading provider of home health and private duty services. One of the Big Four publicly traded home health companies, Almost Family has 250 locations in 15 states.
Long Term Care Companies Acquiring Home Health and Private Duty
Not just in Louisville, but across the country long term care companies are acquiring home health and private duty home care companies. In Mission Viejo, CA, Ensign Group has recently acquired Hospice of the South Plains in Lubbock, TX and Alarys Home Health in Scottsdale, AZ. Ensign group has facilities and branches in 11 states.
Pruitt Health, based in Norcross, GA, has 170 locations in NC, SC, GA, and FL, as well as home health and hospice services.
In a reverse of the trend, Golden Living, once one of the country’s largest nursing home companies, sold their home health business Assera Care to LHC Group. LHC Group now has over 300 locations in 26 states making it one of the big four publicly traded home health companies.
Hospitals Affiliating with Post Acute Care
One of the outcomes of the Affordable Care Act is that hospitals are focusing on reducing preventable readmissions. The new law penalizes hospitals for excessive readmission of Medicare patients. As a result, hospitals are partnering with skilled nursing facilities, rehab hospitals, and home health agencies to find new ways to help keep patients from going back into the hospital. According to CMS data, more than 20% of hospital patients discharged to a SNF are readmitted to the hospital within 30 days.
Leaders at North Shore-Long Island Jewish Health System in New York assessed potential post-acute partners using several quality metrics, such as nurse staffing ratios and star ratings on Medicare’s Nursing Home Compare. They also reviewed geographic proximity to system hospitals, referral patterns, and other criteria. From a list of 266 potential facilities, the health system selected 19 for its SNF affiliate network. Parker Jewish Institute for Health Care and Rehabilitation, New Hyde Park, N.Y., was the first SNF to join North Shore-LIJ’s affiliate network.
In Pittsburgh, PA, University of Pittsburgh Medical Center recently acquired Family Hospice and Palliative care in Mt. Lebanon. UPMC now has 16 hospitals, 19 outpatient centers, 6 SNFs, 4 ALFs, 4 CCRCs, and 3 home health agencies. Cross town rival Allegheny Health Network just entered a joint venture with Celtic HealthCare to provide home health services to patients from Allegheny’s 7 hospitals in western Pennsylvania.
Home Health Agencies Moving to Private Pay
One of the biggest trends we are seeing in the industry is home health agencies moving into private pay home care. This trend plays out in three ways; agencies starting private duty, agencies acquiring private duty, or agencies refocusing on private duty businesses that have struggled for years. The cut in Medicare home health payments has caused agency leaders to look for ways to reduce their dependence on Medicare and Medicaid. Private pay is one answer. As we have studied private pay services that are affiliated with home health agencies, we see that the affiliated companies are larger, have easier access to referrals, and are less profitable as compared to independent and franchise private duty businesses. As these home health agencies work to refocus on private duty, they need to improve gross margins and control overhead expenses in order to be profitable and grow.
Perhaps the biggest area of growth for private duty home care are the not-for-profit Visiting Nurse Associations across the country. The VNAs really started private pay home care back in the late 60’s. However, with the growth of Medicare Home Health many agencies lost their focus on private pay as they grew their Medicare businesses. Over the past decade, we’ve worked with dozens of VNAs from New York to California, and from Boston to Atlanta to grow their private pay businesses. The key has been finding an entrepreneurial leader to run the business, and then giving them as much autonomy as possible to perform all of the functions of a successful private duty company.
What is Your Strategy for Growth in a Dynamic Post Acute Care Environment?
With all of this change going on in post acute care, what is your long term strategy for growth? What are you and your leadership team doing to get ready for the future? What are you going to do to differentiate your agency from your competitors.
Need some help? Leading Home Care can help by providing a facilitator to guide you through the strategic thinking and planning process. We will help you evaluate where your agency is today, develop a clear vision for the future, measure the gap between now and the future, and help you developed focused action steps to bridge the gap. For assistance with Strategic Planning, Board Strategy Retreats, and Executive Team building, call us today at 502-339-0653