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2023 Top Home Health Industry Forecasts

    2023 is looking like a double-edged sword for the home health industry as it is poised to bring challenges, as well as opportunities. Medicare payment cuts will still have an impact on home health, which, consequently, will have a major influence on how home health organizations and stakeholders will maneuver the landscape this year. We’ve rounded up the top trends in home health for 2023.

    A Continued Decline

    Unfortunately, it looks like the consistent decline in the number of home health agencies over the past few years is not going to change anytime soon due to staffing challenges and payment rate cuts. Let’s take a closer look at these two factors.

    1) Staffing Challenges

    The seemingly promising decline of the home health industry’s average turnover rate has not been enough to improve staffing conditions for providers. Despite the signs of improvement in the later quarter of 2022, the increasing demand from the country’s aging population was too much for the industry to keep up with.

    According to the most recent Home Care Salary & Benefits report from Hospital & Healthcare Compensation Service, these were the turnover rates for 2022 and 2021 side by side:

    Licensed practical nurses (LPNs)36.54%30.25%
    Registered nurses (RNs)32.35%31.19%

    Ultimately, not having enough labor has restrained business growth in home health. On an industry level, the home health referral decline rate was 58% last year, according to WellSky data. Worsening referral rejection rates in 2023 will likely have a significant impact on agencies’ bottom lines, forcing them to be strategic in sustaining their business in this environment. Otherwise, the other option is to shut down their operations.

    2) Payment Rate Cuts

    Home health rate cuts are also a large factor contributing to a decrease in the number of home health agencies.

    On top of the 7.85% permanent adjustment to the 30-day payment rate With the home health final payment rule, the U.S. Centers for Medicare & Medicaid Services (CMS) will usher in other cuts and permanent adjustments related to the rebalancing of the Patient-Driven Groupings Model.

    Industry leaders anticipate that the short-term phased-in approach to payment adjustments will have long-term consequences that can cripple the industry players, which might compromise access to home health.

    While CMS is likely to push for more permanent rate adjustments, industry advocates are also taking action to oppose it. As a result, home health providers may expect and prepare to adapt to a more difficult fee-for-service Medicare environment.

    Consequently, the Home Health Value-based Purchasing (HHVBP) model will likely trigger more value-based care arrangements outside fee-for-service Medicare. Leaders in the industry believe that value-based care has passed the tipping point and 2023 should be the year where it becomes a more mainstream approach to care in the home.

    Big Names Continue to Dominate the Home Health M&A Space

    Since home-based care has been proclaimed as the future of healthcare, retailers, insurers, and other large companies are playing the field to carve their own stake within the space. Payers, in particular, are in a great position to buy into home health. 

    The industry can anticipate more M&A activity from large healthcare companies trying to expand in the home-based care sector. This is because while the home health industry is still highly fragmented, with the largest companies only controlling single-digit market shares, executing massive deals will be challenging in 2023 due to high interest rates and limited borrowing abilities of buyers.

    Increased Investment in Training and Technology 

    In response to higher-acuity patients, an increase in investment in training and technology is expected.

    Studies show that patients being admitted into the hospital are sicker than usual, which means when they are referred out to home health agencies, they will still be sicker.

    According to WellSky, the average length of stay for patients inside the hospital was 11% longer in October 2022 than it was in October 2019. In addition, patients are more likely to be suffering from muscular disorders, alcohol or drug abuse, and weight loss than they were previously.

    Having sicker patients will require home health agencies to employ new ways of delivering care, whether through training or better technology. According to industry leaders, this includes investing in care coordination, analytics, and training the workforce to specifically service some of these higher-acuity patients.

    Thriving in the Current Environment

    In summary, agencies are predicted to struggle with dealing with higher-acuity post-acute patients in 2023 and exploring options to evolve because of this challenge.

    One approach is for agencies to focus on improving their patient care and keeping the business profitable by exploring new growth opportunities. Having an outsourcing partner can make a tremendous difference in providing support by taking charge of concurrently increasing back-office and documentation work. This will empower agencies to be on track with their envisioned direction of not just surviving in this environment, but also thriving.