The diversion of post-acute patients from skilled nursing facilities to the home was an established trend prior to the start of the coronavirus pandemic, which only accelerated the siphoning — and a top home health player had the numbers to prove it.
Encompass Health Corporation (NYSE: EHC) finished 2020 with 2.2% growth in new episode starts, a rate that chief financial officer Doug Coltharp described as constrained by COVID on the company’s fourth-quarter earnings call Wednesday; the Birmingham, Ala.-based company had started the year with an 8.5% boost in total new admissions in January and February, prior to the onset of the pandemic.
But the top-line figure belies a serious shift underneath, with referrals from skilled nursing facilities falling 36% in the fourth quarter as compared to the same span in 2019.
Referrals from senior living facilities were down 27%, while post-surgical referrals from hospitals fell 12%.
CEO Mark Tarr struck an upbeat note about the continuation of the trend away from SNFs in the future, touting the company’s combination of home health and more intensive inpatient rehabilitation facilities (IRFs) as well equipped to pick up the slack.
“We believe COVID-19 has created an even stronger awareness of the high level of care we provide in our inpatient rehabilitation hospitals, and further reinforced home as a preferred care setting,” Tarr said Wednesday. “We expect stakeholders will increasingly divert admissions away from SNFs to higher-value IRFs and home care providers, and as the population ages, the demand for our high-quality services will increase.”
Even before the novel coronavirus brought a crushing wave of sickness and death to institutional post-acute and long-term care facilities across the United States, home care providers had set their sights on capturing a greater percentage of the people who could go either way after a hospital stay — a group that Amedisys Inc. (Nasdaq: AMED) CEO Paul Kusserow described as “jump-ball business.”
But fears of contracting COVID in a facility — as well as the inability to see loved ones for extended periods due to federal and state visitation restrictions — has jump-started the home health sector’s concerted push to replace SNFs whenever possible.
By October of last year, referrals to home health agencies were running at 109% of their 2019 levels, according to a recent analysis from care coordination software provider CarePort, while nursing homes were at 83% of 2019 volume.
“It looks like it’s plateaued, and I suspect we’re going to continue, over the next few months, to see that creep up,” CarePort director of post-acute analytics Tom Martin told SNN earlier this month. “But we’re still down 15% to 20% from what we saw in 2019 — and so it’s probably not surprising to anyone, but we are seeing that a lot of these patients that have typically gone to skilled nursing are now going to home health.”
The macro-level trend spells trouble for a skilled nursing sector roiled by sharp declines in admissions — the primary source of income for any nursing facility — and elevated expenses related to personal protective equipment (PPE) and staffing. The CARES Act granted billions in relief to operators, but such largesse was designed to keep the space afloat during a once-in-a-century disaster, not provide an indefinite financial backstop.
The new year began with occupancy at 80% or below in all 48 of the continental United States, according to an analysis from professional services firm CliftonLarsonAllen, with numbers as low as 56% in Texas.
Given these ongoing trends, Marc Zimmet, president of consulting firm Zimmet Healthcare Services Group, earlier this month encouraged operators to consider voluntarily giving up licensed beds — something of a heretical strategy in a space where everything from cash flow to building valuations are based on bed counts — in order to reap certain savings and efficiencies.
“It’s all about a new way of thinking,” Zimmet told SNN earlier this month. “Nobody’s giving up a bed — but when you’re 50% occupied, there are a lot of reasons to give up that bed.”
Encompass also plans to vet its skilled nursing partnerships more closely in the future.
“We deployed a home health agency quality reporting tool and began development of a SNF quality reporting tool to ensure we are accessing the highest-quality clinical partners, and for building preferred provider networks in all of our markets,” Tarr said.
Executives on Wednesday did note that the vision of a true “SNF-at-home” still faces logistical hurdles; while companies have invested in services like telemedicine and dialysis to make higher-acuity home services a reality, the payment mechanisms for the care hasn’t caught up with the wider trends in post-acute referral flows.
“We are hopeful that there will be a version of SNF-at-home that actually makes it into legislation, and that there becomes a payer source for those private-duty services, acknowledging that we can likely provide that care to the certain cohort of patients at home less expensively than they would be cared for in a SNF facility,” April Anthony, CEO of Encompass’s home health and hospice business lines, said. “But it’ll take more than the average $50-ish we get today out of Medicare to do that.”