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Health Works Collective > Wellness > Home Health > An Economic Primer on Care Delivery at Home
Home Health

An Economic Primer on Care Delivery at Home

Travis Haynes
Last updated: December 7, 2012 5:43 am
Travis Haynes
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Patient’s homes are becoming an increasingly important aspect of the continuum of care.  It is not difficult to understand this trend when analyzing the benefits of home care delivery to payers and patients.  Some of the key elements driving the increased focus on care delivery at home include the following:

Patient’s homes are becoming an increasingly important aspect of the continuum of care.  It is not difficult to understand this trend when analyzing the benefits of home care delivery to payers and patients.  Some of the key elements driving the increased focus on care delivery at home include the following:

  • Earlier patient discharges that transition the recuperation period outside of an institutional setting;
  • Increased focus on lower readmission rates;
  • Increased demand for lower cost delivery models that deliver superior patient outcomes; and
  • The need for payers and providers to enhance patient and caregiver satisfaction.

The potential cost savings to payers from care provided at home compared to an institutional setting has been well documented.  According to CMS, it costs $50 per day to create an in-home hospital room compared to $1,500 per day for in-patient hospital care.  In June of 2012, Health Affairs magazine reported on cost savings realized from a program at Presbyterian Healthcare Services in New Mexico that allowed its acutely ill patients to be treated at home.  Since its inception, this program decreased patients’ costs by 19% when compared to patients with similar illnesses who were admitted to the hospital.  Furthermore, it has been estimated that over 70% of non-surgical and non-emergent treatment and care can be offered in the home setting.  While the savings opportunities to payers are large, there are also many benefits that can accrue to the patient.

Several studies show that patients have experienced better outcomes and a shorter healing period as a result of receiving care in the home where patient comfort and independence are optimized.  It is no surprise that 89% of individuals over the age of 50 want to receive medical services in their home.

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Despite the benefits, home care is still underutilized.  Health systems are incentivized to maximize reimbursement via acute and specialty utilization.  While they want to optimize the profitability of an in-patient visit, they are now beginning to realize that today’s model of care is unsustainable.  As Medicare begins to lower reimbursement to hospitals with high readmission rates, home health providers are uniquely positioned to add value by maintaining a high quality of care post-discharge.

As a result of the growing need, merger and acquisition activity around firms offering medical and non-medical home health, hospice care, home infusion therapy, and remote monitoring technology, should increase in the near future.  This is evidenced by a few recent transactions:

  • On November 16th, Emeritus Corporation closed its announced transaction with Nurse On Call, Inc., the largest Medicare-licensed home health care provider in Florida and one of the largest such providers in the nation.  Emeritus paid $102.5 million for 91% of the equity of Nurse on Call’s parent company.
  • In October, Levine Leichtman Capital Partners announced that it had partnered with management to complete an investment in Maryland based SH Franchising, LLC, (“Senior Helpers”).  Senior Helpers is a leading franchisor of private pay, professional in-home care for elderly individuals.  It operates in 39 states and has over 270 franchised locations.
  • In September, Gentiva Health Services announced it purchased the home health and hospice operations of Washington-based Family Home Care Corporation.  Family Home Care is one of the market leaders in home health and hospice services in Washington and Idaho.  Financial terms of the deal were not disclosed.

We’re predicting that as accountable care approaches broaden in popularity and providers are incentivized to reduce readmissions, home health care will grow too.

Let us know what you think.

Travis Haynes

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