Despite the pressure and turmoil going on in certain sectors of the health care continuum, both home health and hospice continue to shine as attractive investment and expansion opportunities for existing providers. Each category in the provider mix is at the nexus of both lowest cost delivery setting and the ever-demanding push to value-based care to minimize or eliminate expensive inpatient stays that both payers and consumers are looking to avoid.

Five trends will accelerate rapid change in home health and hospice as 2020 picks up steam:

1. The Big Get Bigger. Medicare’s new reimbursement model for home health, the Patient-Driven Groupings Model (PDGM), won’t crush home health as the initiation of home health’s prospective payment system(PPS) did, but it certainly will play to well-financed balanced sheets that can bridge Risk Adjustment Payment (RAP) changes and therapy reductions. Investments, both in human and machine capital, will be required to collect, assess, and deliver the outcomes data needed for value-based care modeling and successful competition.

2. Medicare Advantage (MA) becomes the player to drive change. No doubt CMS will continue to encourage MA growth, and with that, downstream sub-capitation to home health and personal care should accelerate. What metrics will be imposed to achieve upside, how will they be measured, and will each plan have its own model? These are big questions for providers trying to understand how, where, and when to take risk.

3. Non-Certified Care Comes Center Stage. With the advent of the hospice carve-in, and the expansion of MA into non-skilled care, contracting with MA plans will also entail an understanding of how to download sub-capitated risk to personal care and other nonskilled providers when care can be moved to a less clinically intense setting. Does one buy, partner, or build that capacity? What level of longitudinal and geographic concentration is needed to attract payers focused on network adequacy? What proof of outcomes is needed to achieve leverage? How can one align a one-year premium for MA with what is likely a longer-term outcome measurement tool for the social determinants of health (SDOH) impact of home care services?

4. Who Drove the Value? Despite all the dialogue about value-based care, a sore point amongst providers is which player in the value chain is directly responsible for what savings. Does a reduction in SNF or hospital admits derive from home health care, primary care, personal care, telemedicine, or some combination thereof?

5. M & A. Deeper capital requirements stemming from value-based payment models, the need for sophisticated actuarial and financial management, and the penetration of technology into all sectors healthcare, will drive further M&A activity as smaller, thinly capitalized operators will be challenged in an environment where operators become as much information and technology managers as delivery platforms. Payers will drive deeper directly into the provider side rather than via contracting which will be slower and more incremental over time than expected.

6. Partnerships and Technology. As technology investments become mandatory to survive and flourish, the large tech firms with deep balance sheets will be the logical partners for health care providers to finance, digest, and utilize the vast treasure trove of data sitting with providers, but still needing a “home” to plug into the various value based models.

Looking back on it, 2020 will be a pivot year when some key strategic decisions focused on the above steps will be needed for providers looking to succeed in a rapidly changing environment.

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