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The COVID-19 Pandemic
9 Months Ended
Sep. 30, 2021
Unusual or Infrequent Items, or Both [Abstract]  
The COVID-19 Pandemic The COVID-19 PandemicOur operations in our Home & Community Services segment were significantly affected by the COVID-19 pandemic early in 2020 as we temporarily paused IHEs in March 2020 and shortly thereafter expanded our business model to perform virtual IHEs (“vIHEs”) in order to make up for some of the lost IHE volume. We resumed in-person IHE visits beginning in July 2020. Despite the availability of vIHEs, many of our customers had preferred to postpone in-person IHEs to the second half of 2020. Overall we saw significant incremental in-person IHE volume in the second half of 2020, particularly in the fourth quarter, related to this catch-up and additionally as certain customers increased the overall volumes they placed with us. In order to meet this volume growth, we onboarded additional providers into our network which resulted in proportionally higher expenses.
In 2021, the vast majority of our evaluations have been in-person IHEs, although we continue to perform vIHEs. Overall, IHE volume has been strong in the first nine months of 2021 indicating the direct impact of COVID-19 on the Home & Community Services segment has subsided considerably. During the remainder of 2021, we expect seasonality trends in our Home & Community Services segment to be more consistent with historical trends which have typically seen a lower number of IHEs performed in the fourth quarter.

Our Episodes of Care Services segment has also been negatively impacted by the pandemic. At certain times during the pandemic, governmental authorities recommended, and in certain cases required, that elective, specialty and other procedures and appointments, including certain acute and post-acute care services, be suspended or canceled to avoid non-essential patient exposure to medical environments and potential infection with the virus that causes COVID-19. In addition, the temporary suspension or cancellation of services was put in place to focus limited resources and personnel capacity toward the prevention of, and care for patients with, COVID-19. This resulted in fewer elective procedures and a general reduction in individuals seeking medical care starting at the end of the first quarter of 2020, which contributed to a substantially lower number of episodes being managed in 2020. Due to the nature of the BPCI-A program, however, there is a significant lag between when the episodes are initiated and when CMS reconciles those services and we recognize revenue over a 13 month period encompassing both of those points in time. As such, there was no immediate impact to our revenues in early 2020 as we were still recognizing revenue from pre-COVID 19 performance. However, the specific impact of those lower volumes on our program size and revenues was more evident later in 2020 as evidenced by our 2020 annual weighted average program size, and as described below, the impact of lower volumes carried forward into 2021.

In the third quarter of 2020 and in response to the COVID-19 pandemic, CMS announced that healthcare providers could either (i) continue in the BPCI-A program with no change or (ii) as an exception to the previous rules of the program, healthcare providers could choose between the following two options for 2020:

eliminate upside and downside risk by excluding all episodes from reconciliation; or
exclude from reconciliation those episodes with a COVID-19 diagnosis during the episode.

Healthcare providers made their elections by September 25, 2020. The results of those elections reduced the total number of episodes we managed during 2020 and also for 2021 and, therefore, reduced program size. While these provider elections temporarily reduced program size in the near term, this impact was at least initially partially offset by a higher savings rate achieved due to a combination of improved performance by some of our partners as well as certain partners that were underperforming choosing to exclude some or all of their episodes from reconciliation in 2020. Subsequently, CMS announced that all episodes in 2021 with a COVID-19 diagnosis would be automatically excluded from reconciliation, which further reduced program size for all of 2021.

The reconciliation results received from CMS during the second quarter of 2021 negatively impacted our savings rate as it provided incremental information on the impact of COVID-19. This was driven primarily by the following factors:

missing comorbidity diagnosis codes that did not properly reflect patient acuity, thereby impacting patient case mix adjustments and reducing episode pricing. There is a 90-day period prior to an acute episode being triggered that CMS incorporates for diagnoses coding which ultimately adjusts an episode’s target pricing. During the pandemic, Medicare patients were avoiding routine healthcare visits and, as a result, comorbidities were not being diagnosed and coded and
patients being discharged during the pandemic from an acute care facility to inpatient rehabilitation facilities and other high-cost next sites of care when lower-cost skilled nursing facilities were facing COVID-19 outbreaks and staffing shortages.

Due to the timing of revenue recognition between the time episodes are initiated and the confirmation and reconciliation of results by CMS, we would expect the above factors to have a continued impact in the near-term.

Due to the passage of time between when we perform our services and the confirmation of results and subsequent cash settlement by CMS, COVID-19 did not have an impact on the cash we received from CMS during 2020 as the payments we received in 2020 related to pre-COVID-19 performance. The cash received from CMS in the first
quarter of 2021 reflected the initial impact of COVID-19 as described more fully above with the cash receipt received in the third quarter of 2021 being further impacted by COVID-19. We continue to monitor trends related to COVID-19, including the Delta variants, the ongoing federal vaccine rollout, changes in CDC recommendations and their impact on results of operations and financial condition on both of our segments.