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Industry Trends Shaping Home Health in 2024

    The demand for home and community-based care will grow due to aging baby boomers, elderly preference to age at home, and healthcare cost reduction pressures. Despite growth opportunities, home healthcare providers will face headwinds in 2024, including a persistent labor shortage, heightened competition, reimbursement cuts, and regulatory requirements. Diversifying services and payers will help agencies gain more business, mitigate costs, and enhance patient satisfaction.

    We have outlined the trends that are shaping the home health industry and revolutionizing patient care delivery and agency operations.

    Demand for Home-Based Care

    Driven by retiring baby boomers who prefer at-home care, the demand for home-based services is set to continue growing. By 2050, the elderly population is projected to surpass 80 million, with adults over 65 outnumbering those under 18. U.S. Home Health Care is expected to increase from $94.17 billion in 2022 to $153.19 billion by 2029.

    Diversification of Services and Payers

    The growing aging population’s preference for home-based care offers significant growth opportunities for home health agencies. Large Managed Care Organizations and Medicare Advantage (MA) plans, aligning with the shift to value-based care, drive agencies to diversify services. Physicians now feel more comfortable prescribing advanced services like mental health, respiratory care, wound care, cardiological conditions, and orthopedics for patients in their homes.

    Emerging care delivery models like SNF at Home and Hospital at Home are gaining traction, prompting partnerships with acute care and skilled nursing facilities. This diversification of services will also help agencies maintain continuity of patient care and improve patient satisfaction.

    Exploring the diversification of payers also helps agencies navigate regulatory and reimbursement challenges. As Medicare Advantage enrollment continues to rise, home health operators must prepare to capture more managed care business opportunities in 2024. In 2023, around 30.8 million people, or about 51% of eligible Medicare beneficiaries, were enrolled in an MA plan, reflecting a nearly 1 million increase from the previous year (Kaiser Family Foundation).

    Other payment incentive models home health providers need to know in 2024:

    • States Advancing All-Payer Health Equity Approaches and Development Model (AHEAD)
    • Accountable Care Organization Realizing Equity, Access and Community Health (ACO REACH)
    • Guiding an Improved Dementia Experience (GUIDE)

    Staffing Shortage

    The ongoing healthcare staffing shortage will be an enduring challenge, exacerbated by the sharp increase in the elderly population from 35 million in 2000 to over 80 million in 2050. If current work and retirement patterns persist, there could be a significant drop in caregivers per elderly.

    In addition to bolstering recruitment efforts, home health agencies should prioritize staff retention. One effective approach is to invest in technology and support solutions that can improve clinicians’ efficiency and overall work experience. For instance, implementing tech automation and documentation solutions can ease documentation burdens, fostering improved productivity, satisfaction, and care quality. At the same time, agencies must implement training programs for staff, focusing on technological proficiency and adapting to process changes. 

    Consolidation and M&A Activity

    Consolidation in the home health industry is an ongoing trend expected to persist in 2024, resulting in a reduction in the number of agencies. This trend intensifies competition within the sector. The primary drivers of this consolidation include the continual compliance and cost pressures on operators, increased private equity investment, and payers expanding their healthcare services by adding home health capabilities.

    A notable example of payer interest in home health care is UnitedHealth Group (NYSE: UNH), which acquired one of the largest home health providers, LHC Group, for $5.4 billion in February 2023. The company is now pursuing another transaction to acquire Amedisys Inc.

    Regulatory and Reimbursement Challenges

    Home Health Care agencies will confront rising regulatory demands and reimbursement challenges. Decreased Medicare, Medicaid, and Managed Care reimbursements will compel agencies to navigate regulatory changes with limited labor resources. State and Federal labor and wage regulations will further strain costs and the agency’s bottom line. The implementation of Electronic Visit Verification (EVV) requirements for skilled home care services in 2024 will also introduce additional operational challenges for home health agencies.

    Higher-acuity Patients

    In 2024, the trend of caring for increasingly sicker, frailer, and medically complex patients is set to continue as more care moves to the home. Home-based higher-acuity care models, proven safe and effective during the pandemic, contribute to this shift.

    According to the latest Home Health Chartbook from the Research Institute for Home Care, over 76% of home health users have three or more chronic conditions, nearly a quarter require assistance with two or more activities of daily living (ADLs), and over 37% have a serious mental illness (SMI).

    Despite challenges, home healthcare agencies have numerous opportunities and will persist in growing as a crucial players in delivering care at home. To stay ahead, providers, regardless of size, must grasp effective approaches to navigate industry dynamics. Strategizing to maximize efficiency while upholding high-quality care is essential, especially amidst the transition to value-based care.