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Hospitals Mull Home Care Strategies as Market Heats Up

Analysis  |  By Christopher Cheney  
   March 21, 2016

With payment reform, technology advances, and other market forces shifting medical service delivery away from the hospital setting, home care presents both business opportunity and risk.

As hospitals reach outside their walls to be more closely involved in the entire care continuum of patients, home care presents some tantalizing opportunities.

With Medicare reimbursement changes providing a financial foundation for change, home care is increasingly becoming a critical component of integrated health systems, says Sheila Schubert, administrator of home health for Hollywood, FL-based Memorial Healthcare System.

“For a very long time, people have known this is the way medical care should be delivered. This has been predicted for more than 20 years, and now it’s really happening. We’re doing IV drips at home. We’re monitoring patients at home. Services that used to be done in the ICU are now being done in the home,” she says.

Schubert joined the staff at Memorial Healthcare five years ago and has worked in home care for two decades. “People are so much more comfortable if they can receive good care and be in their home.”

Memorial Healthcare, which has offered home-care services to patients since 1992 and operates five acute-care hospitals in southern Florida, is well-positioned for growth. “All of the components of a home health agency to serve the community were in place, including a staff trained in home health,” she says.

Recent changes in Medicare reimbursement rules such as the Hospital Readmissions Reduction Program and new payment models such as pricing services based on episodes of care are major drivers of change in home health.

In response, Memorial Healthcare has shifted away from its per-visit payment model for home care toward bundled payment models that are designed to promote quality and good clinical outcomes.  Schubert anticipates “bundled payments based on diagnosis for acute care and post-acute care across the care continuum. We will be paid based on the quality of care and outcomes.”

The biggest bang for the home-care buck is in the area of cost avoidance, such as reductions in avoidable hospital readmissions. “Home care has taken the lead to make sure there are smooth transitions,” she says.

While cost avoidance may not be as exciting in the C-Suite as revenue growth, limiting unnecessary medical expenses is one of the keys to delivering value-based care. “It’s not that home care has to be a money-maker. It’s that home care improves health in the community and supports the health system,” she says.

Entering the Home-Health Market Through Acquisitions

Home care has followed a different, but no less significant evolutionary path at Pittsburgh-based Allegheny Health Network, which entered the home health market in 2014 through the acquisition of four companies. Each of the acquired companies had experience in a prime home-health specialty: home nursing, infusion therapy, medical equipment, and hospice.

“We own and operate all the home-health segments,” says Brian Holzer, senior vice president for diversified services at AHN, which runs seven acute-care hospitals in western Pennsylvania. “Once we acquired all the companies, we built a new care coordinator model.”

Care coordinators are a crucial component of Healthcare @ Home, the business unit that manages AHN’s home-health services, he says. Instead of having a handful of care coordinators at each home-health subsidiary, there are about 40 care coordinators on the Healthcare @ Home staff who help the subsidiaries coordinate all home-health services for each patient. “We have four home-health companies, but a single point of contact for the patient,” Holzer says.

Offering the full suite of home-health services gives AHN competitive advantages over standalone home-health companies, he says.

“High patient volumes driven out of the health system give us the volume we need to run home health. As a standalone agency, you’re not going to be able to quarterback the process. And health systems have the resources to make investments. We have sustainable volumes that our home-health companies can count on, and that allows us to invest.”

Healthcare @ Home is already showing signs of generating value for AHN. In 2015, the annual rate for all-cause 30-day hospital readmissions fell 5%, and the readmissions rate for high-risk patients such as those with congestive heart failure dropped 8%, Holzer says.

As a fully integrated health system with a strong Blue Cross Blue Shield corporate partner, Highmark Inc., AHN has financial advantages over standalone home-health organizations. Holzer explains: “There are two ways to generate value from home health, fee-for-service profits from your home-health companies and the value that comes from reducing unnecessary medical expenses. We’re in a position to do both—operate at a profit and drive down unnecessary medical expenses.”

Home Care Key Player in Shift Away from Hospital-Based Services

In a potentially existential irony for hospitals, reaching outside the campus walls is threatening to become a claustrophobic experience as the healthcare “space” in the community grows and the healthcare “space” in the hospital shrinks.

“The awareness of other people who can support health has expanded beyond the doctor in the hospital to nursing facilities and home health now. It will continue to expand to all other providers in the community as time goes on and technology improves,” says Marybeth McCaffrey, JD, a principal at the University of Massachusetts School of Medicine’s Center for Health Law and Economics.

“The advances are just beginning and are related to transitions of care, documentation, and transfers between facilities. Then there’s mobile health improvements, where providers are working to leverage information people are collecting in the home.”

As more and more medical services are moved from the hospital setting to settings dotted across the community, the operational and financial stakes for hospitals are reaching epic proportions, says David Friend, MD, MBA, managing director and chief transformation officer at New York-based consultancy BDO’s Center for Health Care Excellence & Innovation.

“The hospital,” he says, “is taking care outside the four walls into the community, which addresses the care continuum issue. It begs the question: What happens in the four walls of the hospital? It begs the question: What are hospitals going to do in the future?”

From a financial perspective, home care presents both an opportunity and a challenge. “We want to make sure the patient does not bounce back to the hospital, but there are significant investments for effective home care,” he says. “For a hospital, it makes a lot of sense to have home care. Either you own it, or you have a partner. A lot of folks don’t have the capital to play in the space anymore.”

Bundled payments that encourage providers to deliver services with high quality and low costs are going to revolutionize the healthcare industry, particularly in the post-acute care sector, Friend contends. “Hospitals are looking for skilled-nursing partners and home-health partners who have these capabilities, and the mom-and-pop home-health agencies don’t have these capabilities.”

Shifting away from per-visit payment models is a huge step forward for home care, he says. “There’s going to be a lot more creativity. No more, ‘Paying for 10 visits.’ [Providers] will be paid for making patients better.”

Christopher Cheney is the CMO editor at HealthLeaders.

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