PESP supports CMS home health Medicaid spending rule
July 25, 2023
On April 27, 2023, the Centers for Medicare & Medicaid Services (CMS) issued a notice of proposed rulemaking entitled Ensuring Access to Medicaid Services (CMS 2442-P). The proposed changes would advance CMS’ efforts to improve access to care, quality, and health outcomes, and better promote health equity for Medicaid beneficiaries across fee-for-service (FFS) and managed care delivery systems, including for home and community-based services (HCBS) provided through those delivery systems.[1]
Among other changes, this rule would require that “at least 80% of Medicaid payments for personal care, homemaker, and home health aide services be spent on compensation for the direct care workforce (as opposed to administrative overhead or profit).”[2] The Private Equity Stakeholder Project (PESP) supported this move in its July 3, 2023 comment letter to the agencies, as this rule would do much to curb exploitative practices in the home health industry, particularly by private equity firms.
As watchdogs of the financial industry, PESP believes that this rule will be especially important considering the increasing acquisitions by private equity firms in the home health industry. Home health is one of the top targets for private equity healthcare investment, and private equity increasingly makes up a significant portion of deal activity in the industry; in 2021, private equity accounted for 63% of the 171 of the home care, home health and hospice deals.[3] The proliferation of private equity, and its documented practice of cost-cutting, poses significant risks to an industry plagued by low wages. Therefore, it is important to guarantee that federal money is spent on care workers rather than shareholders.
Home health employment is among the lowest paying professions in the country, with median compensation of $29,430 per year, or $14.15 per hour according to the U.S. Bureau of Labor Statistics.[4] Wage theft is also an issue that pervades the home healthcare industry.[5] For example, the U.S. Department of Labor filed five lawsuits against home healthcare providers in 2018 for violations of wage and hour laws, including unpaid overtime. Two of those lawsuits resulted in judgments in favor of the employees ($1.2 million against Access Home Care Inc. and $130,000 against At Home Personal Care Services LLC).[6]
In addition to low wages, home healthcare workers overwhelmingly lack benefits. About 88% of domestic workers do not get paid time off, sick time, or employer-sponsored health insurance.[7] More than half of home care workers qualify for public benefits, and about 26 percent of home care workers are uninsured.[8]
Higher wages for care workers would have clear benefits to improving quality and access to care. For example, a 2020 study by the LeadingAge LTSS Center found that increasing the pay of caregivers greatly enhances their financial security, thereby improving productivity and increasing the quality of care afforded to patients.[9] A 2020 study by the Washington Center for Equitable Growth showed that increased pay for caregivers prevented deaths, reduced health violations, and lowered the cost of preventative care.[10] Additionally, higher wages can alleviate staffing shortages by attracting more people into direct care work, improving consistency of care, and leading to workers working more hours.[11]
Private equity firms invested in the home health industry have sought to downplay the positive effect this rule would have on wages for care workers. During the comment period, private equity-owned home care companies submitted letters opposed to the 80% direct care rule, including but not limited to Aveanna Healthcare,[12] BrightSpring Health Services,[13] and Interim Healthcare.[14] The private equity-owned companies claim that the rule would negatively impact workers and threaten access to care.[15] The companies’ opposition to the proposed rule seems to prioritize company profits over wages for home care providers, who are among the lowest paid workers in the U.S.[16] They claim that the 80/20 rule would take away from other areas of spending, including enhanced employee benefits,[17] bonuses,[18] and health insurance.[19]
In addition to these comments, there are several past examples where private equity-owned home care companies have taken actions to demonstrate that they prioritize profits at the expense of workers:
- Aveanna Healthcare is majority-owned by private equity firms Bain Capital and J. H. Whitney.[20] Bloomberg reported in 2019 that Aveanna’s “internal company documents reveal financial incentives that favor corporate growth and cost-cutting over clinical care.” For example, one institute plan tied 90% of bonuses to earnings growth, patient care hours, and cash collection, respectively. Meanwhile, customer satisfaction and clinical outcomes each made up only 5% of the bonus incentive.[21]
- BrightSpring Health Services (formerly ResCare) is a home healthcare company owned by private equity firm Kohlberg Kravis Roberts (KKR). It has over 37,000 full time employees and operates in all 50 states, Puerto Rico and Canada.[22] Before KKR, BrightSpring had been owned by Canadian private equity firm Onex Corporation since 2010.[23] The company has faced a number of lawsuits involving employees since it has been owned by private equity. In 2015, the U.S. Department of Labor found that a subsidiary of BrightSpring operating in West Virginia failed to pay overtime to 55 employees and ordered the company to pay $279,919 in back wages and damages.[24] In a 2013 case for alleged violations of the Fair Labor Standards Act for nonpayment of overtime, BrightSpring settled with an aggrieved Georgia employee for $20,000 (she was paid $8.00/hr.). In 2018, BrightSpring paid $7.7 million to settle a class action lawsuit with employees that had not been paid for the time it took to drive between patients’ homes.[25]
- Interim Healthcare is a home care company with over 43,000 healthcare employees across 41 states, and provides nurses, therapists, aides, and other healthcare personnel to an estimated 173,000 people annually.[26] Interim was acquired by private equity firm Wellspring Capital Management in October 2021 and was owned by Levine Leichtman Capital Partners (LLCP) from 2015-2021.[27] In 2018, Interim took on $161.4 million in new debt in part to pay a dividend to Levine Leichtman.[28] In 2019 the U.S. Equal Employment Opportunity Commission (EEOC) announced that Interim Healthcare of Wyoming would pay $50,000 and furnish other relief to settle a pay discrimination lawsuit brought by the agency. The EEOC’s lawsuit charged that the company underpaid female nurses despite their performing substantially equal work under similar working conditions. Further, according to the EEOC, despite several complaints from female nurses and their male counterpart about the pay disparity, Interim failed to take any corrective action.[29]
Further, PESP supported the proposed rule changes that strengthen transparency and consumer engagement, including changes to the Medical Care Advisory Committee (MCAC) to ensure more participation from actual beneficiaries of services; replacing Access, Monitoring, and Review Plans (AMRP) in fee-for-service plans with publicly available rate postings; and improving transparency and reporting around collecting and tracking data on critical incidents.
Finally, PESP applauded the proposed changes to increase oversight and accountability, including requiring states to establish and manage a grievance process for people receiving HCBS in fee-for-service plans, conduct independent secret shopper surveys to verify compliance, and, if found to be falling short, submit a remedy to CMS that details how a managed care plan will work to remove the barriers to access.
For any questions about CMS’ proposed rule, please contact Senior Policy Coordinator, Chris Noble, at [email protected].
[1]https://www.cms.gov/newsroom/fact-sheets/ensuring-access-medicaid-services-cms-2442-p-notice-proposed-rulemaking
[2]Id.
[3] Diane Eastbrook, “Watchdog sounds alarm over private equity investment in home health, hospice,” McKnights Home Care, March 22, 2022. https://www.mcknightshomecare.com/watchdog-sounds-alarm-over-private-equity-investment-in-home-health-hospice/
[4] Bureau of Labor Statistics, U.S. Department of Labor, Occupational Outlook Handbook, Home Health and Personal Care Aides, 19 July 2023, https://www.bls.gov/ooh/healthcare/home-health-aides-and-personal-care-aides.htm
[5] Bittle, Jake. “Overworked, Underpaid, and Cutting Corners: The Crisis in Home Health Care.” The New Republic, 9 Feb. 2021, https://newrepublic.com/article/161087/home-health-care-crisis-lhc-group-overtime-wage-fraud.
[6] Opfer, Chris. “Obama Playbook Still Governs Policing of Home Care Pay (1).” Bloomberg Law, 24 Apr. 2019, https://news.bloomberglaw.com/daily-labor-report/obama-playbook-still-governs-policing-of-home-care-labor-actions.
[7] Fernández Campbell, Alexia. “Home Health Aides Care for the Elderly. Who Will Care for Them?” Vox, 21 Aug. 2019, https://www.vox.com/
the-highlight/2019/8/21/20694768/home-health-aides-elder-care.
[8] Paraprofessional Healthcare Institute, 2019, U.S. Home Care Workers: Key Facts, pg. 2-6, https://phinational.org/wp-content/uploads/legacy/
phi-home-care-workers-key-facts.pdf
[9] Christian Weller, Beth Almeida, Marc Cohen, and Robyn Stone, “Making Care Work Pay,” LeadingAge LTSS Center, September 2020. https://www.ltsscenter.org/wp-content/uploads/2020/09/Making-Care-Work-Pay-Report-FINAL.pdf
[10] Krista Ruffini, “Worker earnings, service quality, and firm profitability: Evidence from nursing homes and minimum wage reforms,” Washington Center for Equitable Growth, June 2020. https://equitablegrowth.org/wp-content/uploads/2020/06/060420-WP-Worker-earnings-service-quality-and-firm-profitability-Ruffini.pdf.
[11] Cassandra Robertson, Marokey Sawo, and David Cooper, “All states must set higher wage benchmarks for home health care workers,” Economic Policy Institute, June 2, 2022. https://www.epi.org/publication/state-home-health-care-wages/.
[12] Aveanna Healthcare. “Comment on CMS-2023-0070-0001.” Regulations.gov, June 27, 2023. https://www.regulations.gov/comment/CMS-2023-0070-1962.
[13] BrightSpring Health Services. “Comment on CMS-2023-0070-0001.” Regulations.gov, July 2, 2023. https://www.regulations.gov/comment/CMS-2023-0070-1990.
[14] Cynthia Lavoie. “Comment on CMS-2023-0070-0001.” Regulations.gov, June 27, 2023. https://www.regulations.gov/comment/CMS-2023-0070-0904.
[15] Aveanna Healthcare. “Comment on CMS-2023-0070-0001,” p. 2 Regulations.gov, June 27, 2023. https://www.regulations.gov/comment/CMS-2023-0070-1962; BrightSpring Health Services. “Comment on CMS-2023-0070-0001,” p. 4. Regulations.gov, July 2, 2023. https://www.regulations.gov/comment/CMS-2023-0070-1990; Cynthia Lavoie. “Comment on CMS-2023-0070-0001.” Regulations.gov, June 27, 2023. https://www.regulations.gov/comment/CMS-2023-0070-0904.
[16] Bureau of Labor Statistics, U.S. Department of Labor, Occupational Outlook Handbook, Home Health and Personal Care Aides, 19 July 2023, https://www.bls.gov/ooh/healthcare/home-health-aides-and-personal-care-aides.htm.
[17] Aveanna Healthcare. “Comment on CMS-2023-0070-0001,” p. 4. Regulations.gov, June 27, 2023. https://www.regulations.gov/comment/CMS-2023-0070-1962
[18] BrightSpring Health Services. “Comment on CMS-2023-0070-0001,” p. 5. Regulations.gov, July 2, 2023. https://www.regulations.gov/comment/CMS-2023-0070-1990.
[19] Cynthia Lavoie. “Comment on CMS-2023-0070-0001.” Regulations.gov, June 27, 2023. https://www.regulations.gov/comment/CMS-2023-0070-0904.
[20] Aveanna Healthcare Holdings Inc. (2021). Form S-1, pg. 16. https://www.sec.gov/Archives/edgar/data/0001832332/000119312521135512/d63831ds1a.htm.
[21] Willmer, Sabrina. “When Wall Street Took Over This Nursing Company, Profits Grew and Patients Suffered.” Bloomberg, Oct. 22, 2019, https://www.bloomberg.com/news/features/2019-10-22/death-and-deals-sick-children-suffer-private-equity-profits.
[22] BrightSpring Health Services, Inc. Form S-1 Registration Statement, Securities and Exchange Commission, filed October 2021,. Pg. 6. https://www.sec.gov/Archives/edgar/data/1865782/000119312521301155/d181009ds1.htm
[23] “Onex Completes Sale of Brightspring Health Services.” GlobeNewswire News Room, ONEX Corporation, Mar. 5, 2019, https://www.globe-newswire.com/en/news-release/2019/03/05/1748473/0/en/Onex-Completes-Sale-of-BrightSpring-Health-Services.html.
[24]WHD News Brief: ResCare Inc. Subsidiary in West Virginia Ordered to Pay Nearly $280k in Back Wages and Damages after US Labor Department Investigation [09/09/2015]. United States Department of Labor, 9 Sept. 2015, https://www.dol.gov/newsroom/releases/whd/whd20150909-1.
[25] Noble, Chris. “Private Equity at Home: Wall Street’s Incursion into the Home Healthcare and Hospice Industries.” Private Equity Stakeholder Project, March 2022. https://pestakeholder.org/wp-content/uploads/2022/03/Home-Healthcare-and-Hospice-report.pdf.
[26] About Interim Home Care Services. Interim Healthcare, https://www.interimhealthcare.com/about-interim-healthcare/.
[27] “Levine Leichtman Capital Partners Sells Caring Brands International.” Business Wire, 25 Oct. 2021, https://www.businesswire.com/news/home/20211025005527/en/Levine-Leichtman-Capital-Partners-Sells-Caring-Brands-International.
[28] Chris Noble. “Private Equity at Home: Wall Street’s Incursion into the Home Healthcare and Hospice Industries.” Private Equity Stakeholder Project, March 2022. https://pestakeholder.org/wp-content/uploads/2022/03/Home-Healthcare-and-Hospice-report.pdf.
[29] “Interim Healthcare to Pay $50,000 to Settle EEOC Equal Pay Lawsuit.” U.S. Equal Employment Opportunity Commission, 22 Oct. 2019,
https://www.eeoc.gov/newsroom/interim-healthcare-pay-50000-settle-eeoc-equal-pay-lawsuit.
