MOST AGREE that Massachusetts is on the precipice of a public health emergency. Workforce shortages combined with an uncertain future for eight hospitals in the Commonwealth threaten to push our capacity crisis over the edge.

Discussions about stretched and overcrowded hospitals tend to focus on limited availability in post-acute rehabilitative or skilled nursing facilities. This leads to logjams in emergency rooms and inpatient units. Home health providers play an equally important role in alleviating these pressures, yet our challenges too often go unnoticed.

Home health organizations have been fixtures of our communities across Massachusetts for well over a century. Visiting nurses and clinicians develop a deep understanding of their patients’ and families’ needs – beyond what is possible in a hospital or primary care setting. They are trained to evaluate patients’ homes for safety and special accommodations. Their care substantially reduces hospital readmissions, which creates better health outcomes, eases strain on hospitals, and reduces costs for the system as a whole.

It’s no surprise that referrals to home health organizations are skyrocketing as hospital capacities worsen. Yet we are struggling to keep up with demand. Like everyone in healthcare, home health providers contend with severe clinician shortages. But our problems are compounded by reimbursement issues that threaten our industry’s sustainability. Medicare Advantage in particular is driving this crisis.

Private insurers that offer Medicare Advantage are paid set rates by the federal government to cover healthcare services for beneficiaries who opt out of traditional Medicare. These insurance companies then negotiate with healthcare providers, like visiting nurse associations, over how much they reimburse the organizations caring for their members. More than half of eligible Medicare beneficiaries are enrolled in Medicare Advantage, and that figure is growing. 

Unfortunately, Medicare Advantage insurers reimburse home health providers at substantially lower rates than traditional Medicare for the same services. At VNA Care, the home health agency I run, the average reimbursement per traditional Medicare admission was about $3,700 last year. Medicare Advantage reimbursements, conversely, were an average of about $1,600. That is a 56 percent difference. As a result, we lost about $6.4 million serving a higher-than-average population of Medicare Advantage patients. This leads to an unsustainable loss of about 11 percent per year taking care of some of the region’s most frail and elderly residents.

These losses are not unique to us. According to BerryDunn, a regional professional services firm, the average operating margin for Massachusetts home health providers in 2022 was approximately negative 6.71 percent. While inadequate Medicare Advantage reimbursements send home care providers into financial crisis, these plans actually cost the government and taxpayers about 6 percent more than traditional Medicare.

These underpayments, combined with workforce shortages, rising labor costs, and rising Medicare Advantage enrollment, create a perfect storm for home health providers. As a matter of survival, agencies including VNA Care have begun to restrict Medicare Advantage patient admissions or terminate contracts with the worst-paying Medicare Advantage insurers.

While limiting Medicare Advantage admissions may help home health providers get by, it spells disaster for our healthcare system. More and more, Medicare Advantage patients who need home care won’t have anywhere to get it. All the reimbursement and staffing challenges facing home health agencies are already affecting patient access to care. Data from Home Care Home Base (HCHB), the most widely used electronic medical record in home health care, shows the percentage of home care referrals that were converted to admissions declined from 70 percent at the start of the COVID pandemic to 55 percent in 2023. This leaves hospitals trying to discharge patients in even more of a bind.

If the effects on patient care aren’t enough, there are financial incentives to increasing Medicare Advantage rates for home health. Home health clinicians prevent unnecessary hospitalizations and readmissions, which are far more costly for both patients and providers. In one study, the risk of rehospitalization or visit to the emergency department increased by 12 percent when patients did not begin home health services within two days of discharge. At VNA Care, the daily cost of providing care to Medicare Advantage patients is about $68 with an average of 36 days on our service, whereas the daily cost of providing hospital and facility based care in Massachusetts is more than $3,500.  If home health agencies can get back to accepting much more of the referrals coming their way, they will save money for patients, insurers, and the health system.

VNA Care has a proud and distinct tradition of being among the oldest continuously operating visiting nurse associations in the country. Now is the time for elected officials and public policy experts to craft solutions that will support VNAs and home health agencies. The health care capacity crisis in Massachusetts will only worsen as home health providers face such substantial losses and begin to fail. Paying home health agencies at fair and equitable rates for Medicare Advantage patients will allow us to better do our part in helping our communities, our hospital partners and – most importantly – the patients and families who rely upon us to keep them home, where they most want to be.

Todd Rose is CEO of VNA Care.