The Facilities for Medicare and Medicaid Companies’ small pay bump for house well being companies in 2023 won’t sustain with the rising bills for some suppliers, probably resulting in credit score defaults or consolidation, in keeping with a brand new report.
In October, CMS licensed a 0.7% pay enhance within the Medicare charge beneath the House Well being Potential Cost System, amounting to $125 million. The ultimate rule reversed a proposal to chop pay by $810 million after house well being trade teams threatened to sue, and CMS determined to section in fee reductions over a two-year interval. CMS contends the cuts are essential to right $2 billion of overpayments made in 2020 and 2021 beneath the Affected person-Pushed Groupings Mannequin, which was carried out in January 2020.
The nominal enhance in Medicare reimbursement is considerably under house well being suppliers’ rising labor and provide prices, acutely impacting for-profit house well being chains like Amedisys and LHC Group that function a big Medicare house well being enterprise, S&P International Scores analysts stated in a report Thursday. Margin strain might worsen in 2024, probably resulting in defaults and/or consolidation for house well being companies carrying a whole lot of debt on their steadiness sheets, together with corporations corresponding to personal equity-backed AccentCare and Elara Caring, stated David Kaplan, director of company scores at S&P International Scores.
“There could possibly be consolidation of an organization that’s beneath misery of default. The query is, how a lot will an acquirer wish to pay with that as a headwind,” he stated.
Amedisys, LHC Group and AccentCare didn’t instantly reply to a request for touch upon the report.
An Elara spokesperson stated in an announcement that the corporate is nicely positioned to climate monetary cycles given its balanced payer combine and full-scale, multi-state house well being choices.
Elara restructured its debt in December. Scores companies thought-about the restructuring to be a distressed change, which they outlined as a default.
Elara and different equally located suppliers could select to take a position extra assets of their hospice enterprise, Kaplan stated. Hospice suppliers obtained a 3.8% Medicare charge enhance in 2023.
Some house well being companies will attempt to cut back prices by limiting wage will increase, though that situation is unlikely given present labor shortages, analysts stated. The nominal reimbursement enhance, mixed with rising labor prices and inflation, will dent profitability and money stream.
“Whereas technically a nominal enhance, the truth is that our members are a fee lower this yr and are staring down one other discount in calendar yr 2024 if no change happens,” Mollie Gurian, vp of home- and community-based coverage for LeadingAge, a commerce group that represents nonprofit ageing companies suppliers, stated in an e mail. “Nonprofit, mission pushed suppliers are most weak.”
If house well being suppliers in the reduction of companies or shut, CMS could withdraw its 2024 reimbursement lower, Kaplan stated. Bigger home-health suppliers are extra insulated from the reimbursement adjustments, he famous.