#1: While Medicare Advantage represents a significant opportunity for home care, that opportunity is much more available to larger, more established agencies for the time being.
There was general consensus that while this could change in the future, Medicare Advantage may be a difficult nut to crack for many agencies right now. There are several reasons for this, but three key reasons are the necessity of scale to maintain profitability, the caregiver turnover issues that arise from short shifts, and the advantage of size in making strategic partnerships.
The issue of scale comes down to profitability. Because the average Medicare Advantage reimbursement rate is around $16/hour, turning a steady profit with Medicare Advantage requires a large number of clients to compensate for the razor-thin margins. In addition, these shifts tend to be much shorter, requiring more caregiver travel time for fewer billable hours. The right Medicare Advantage partnerships could provide a continual pipeline of new clients, but without the advantages stemming from economy of scale, it’s unlikely that an agency could succeed with the low margins that accompany them.
Caregiver turnover risks with Medicare Advantage are not a new development, but they were underscored several times during the Growth Summit. It’s commonly accepted that one of the key drivers of retention is providing them with lots of steady hours. The short shifts with Medicare Advantage require careful steps by agencies (such as planning shifts with multiple clients in the same area) to prevent higher caregiver burnout.
Finally, the process of securing agreements with Medicare Advantage plans is typically a high-level partnership that favors larger, well-established agencies with a long track record of patient outcomes and clear resources to further build upon that track record. While it’s not out of the question for a well-run, newer agency, securing these partnerships is much easier with a history of success and a network of community partners.
Medicare Advantage remains an incredible future opportunity, but for many home care agencies, it could prove more of a distraction than anything for the near future.
Note: This is an opposing viewpoint from another article we recently published on the topic. While this appeared to be the general consensus of the presenters on the Summit, there’s still plenty of room for debate. We’ll continue to update our content on Medicare Advantage as more information becomes available.