Home health CEO backs merger as a way to help hospitals tackle readmissions, lower costs

A blue hospital sign on the side of a building
Mergers and acquisitions are being seen in every sector of the healthcare industry. (Getty/Manuel-F-O)

Mergers within the healthcare industry have been scrutinized for limiting competition, but one home health CEO says consolidation can reduce costs, improve care and help grow popular services. 

Keith Myers, CEO of LHC Group, said his company's recent merger with Almost Family, finalized on April 1, created the second largest in-home healthcare provider in the country, behind Kindred Healthcare. The deal expands LHC's geographic presence to 36 states and 781 locations, including joint venture partnerships with 336 different hospitals.

Hospitals are increasingly focused on tapping into home health services to reduce readmission rates and streamline post-acute care to avoid financial penalties under the federal government's Readmissions Reduction Program, Myers said. A bigger footprint will help LHC advance those partnerships and lower costs.

FREE WEBINAR | DECEMBER 13, 2018

Employer-Based Insurance: Top Priorities for 2019

Join Blue Health Intelligence (BHI) and Midwest Business Group on Health (MBGH) to hear how key descriptive, predictive and prescriptive analytics capabilities can drive new cost and quality insights for health plans, employers and benefit consultants.

"If our patients go to the emergency room for something that does not require a stay, our nurses can accompany those patients home and prevent a costly admission," he told FierceHealthcare. "We can now leverage this even better because of this merger."

Some of the most vulnerable providers may benefit from acquisitions and mergers. Some argue that in order to survive, free-standing rural hospitals will need to be acquired, although Myers did not say his company's merger would lead to more coverage in rural areas. 

Home health services continue to grow in popularity as an alternative to nursing care where patients can receive services in their home, which typically costs less.

RELATED: Hospital merger mania continues throughout the country

Myers said that payers are taking notice of the lower costs of home health as well. 

"Payers are putting their emphases on overall cost to lower cost, so it’s clear that home health is going to grow at a much faster rate because of the value that its generating," he said. "We are reducing hospitalizations, moving patients to lowest possible care setting and reducing skilled nursing utilization."

The impact of healthcare mergers has become a divisive issue, and not everyone agrees consolidation will pay off for patients. Last month during a House subcommittee hearing, several healthcare economists warned lawmakers that broad consolidation across the healthcare industry could ultimately drive up costs. Some regulators are taking action. Last week, California Attorney General Xavier Becerra filed a lawsuit against Sutter Health for anticompetitive practices that inflated costs for patients. 

The healthcare industry continues to shift and consolidate, and providers are no exception. According to a report by Kaufman Hall, there were a total of 115 hospital mergers in 2017, with 11 of them involving sellers with net revenues of $1 billion or more. 2017's totals were also up 13% over 2016. 

There is also some interest in the post-acute care industry. In December, Humana announced its plans to purchase Kindred Healthcare along with two private equity firms. 

RELATED: Kaufman Hall: Number of hospital mergers jumped 13% in 2017; M&A momentum shows no signs of slowing down

The rush to merge has expanded to other sectors of the industry as retail giant CVS is in the final stretch of purchasing insurer Aetna, and rumors whirl that big-box store Walmart is interested in acquiring Humana.  

Hospital groups have stood behind mergers as a way to generate significant cost savings and quality improvement and extend the scope of services available to patients.  

"For health care to flourish in today’s environment the type of efficiencies that mergers create are often the only means to obtain meaningful cost and quality benefits," the American Hospital Association said in a blog last year. "Tighter working relationships, much more readily accomplished by full integration through a merger, are the essential building blocks that enable hospitals to cut supply and other costs, gain access to capital and build a lasting culture of teamwork that leads to more efficient delivery of higher quality care."

The group added that on average, acquired hospitals have been able to cut annual operating costs by about 2.5%, or $5.8 million, crediting a study by Charles River Associates.