Home Health Care Providers Under Scrutiny (LHCG, AMED, AFAM, GTIV)

Properly used, home health care can save billions of dollars annually in health care expenditures. Sending a patient home and then sending a professional nurse or therapist to visit them periodically is far cheaper than keeping someone in a hospital or other care facility. But there are holes in the system that may have been exploited by providers to boost their profits.  Four publicly traded home health care firms are all now being investigated for gaming the system. LHC Group Inc. (NASDAQ: LHCG), Amedisys Inc. (NASDAQ: AMED), Almost Family Inc. (NASDAQ: AFAM), and Gentiva Health Services Inc. (NASDAQ: GTIV) have all significantly reduced the number of visits to home health care patients since Medicare reimbursement rules changed in 2008.

Beginning in 2000, the Medicare Payment Advisory Committee, MedPAC, authorized payment of about $2,200 for up to nine visits from a home health care worker. In an effort to encourage that treatments ran their full course, MedPAC authorized an additional payment of $2,200 for 10 or more treatments.

In 2008, MedPAC changed the reimbursement rules, eliminating the $2,200 bonus payment for the tenth visit. Since the change, the number of patients getting 10 or more treatments has fallen significantly, according to reporting last April in The Wall Street Journal. The new reimbursement schedule paid an additional fee of a few hundred dollars at the sixth, fourteenth, and twentieth visits.

The pattern of home visits changed dramatically. For example, the number of Amedisys patients getting 10 visits dropped by 50% in 2008. At the same time, the percentage of patients getting six visits rose by 8%, those getting 14 visits rose by 33%, and those getting 20 visits rose by 41%.

The WSJ quotes a MedPAC commissioner as saying, “Looking at the great speed with which the volume of services adapts to payment changes, which are breathtaking, it does suggest that there may be a problem with certifying the appropriateness of these services.”

Share prices have fallen off a cliff for all four companies since the investigation was revealed. Amedisys is down more than 40% since the beginning of the year, Almost Family and LHC Group are down about 30%, and Gentiva is off almost 20%.

Amedisys warned today that second quarter earnings would be down and the company has suspended its full-year guidance. That has pulled the stock down more than 2% so far. Almost Family shares are down nearly 6%, LHC Group shares are down more than 5%, and Gentiva shares are down more than 3.5%. Trading volumes are higher than normal as well.

Paul Ausick