Long Beach (Calif.) Memorial Medical Center began to offer patients hospital-based home-care services in October 1982-long before home care was considered a critical element of hospital services.
At that time, home care was a niche service offered by a little more than 10% of hospitals nationwide. In Southern California, only a handful of hospitals had ventured into home care, along with a small for-profit home-care company called Home Healthcare of America-which would later change its name to Caremark International.
"We did everything by ourselves back then," said Dale Adams, Long Beach Memorial's administrator of ambulatory services and director of the home-care program. "We offered home antibiotics, home infusion, (durable medical equipment,) the works."
Hospitals like 729-bed Long Beach Memorial initially ventured into home care because they saw it as a relatively low-cost, high-revenue market that effectively could treat patients at home rather than in an expensive hospital setting. Others saw home care as part of the "one-stop-shop" concept that had been so prevalent among hospitals in the late 1970s and early 1980s.
Most important was the notion that home care could ease the financial blow from the Medicare Prospective Payment System, which took effect in October 1983. That concern is reflected in the fact that the percentage of U.S. hospitals offering home-care services grew to 35% by 1986 from approximately 15% in 1983, according to data compiled by the American Hospital Association.
However, by the mid-1980s, the interest in home care had noticeably subsided, as hospitals realized that home care wasn't going to be the revenue machine some experts had predicted it would be.
A myriad of regulations, limited reimbursement and the rise of for-profit home-care companies entering the market cooled off the rapid growth of hospital-based home-care programs by 1990. That year, the growth curve in hospital home-care programs went flat, rising less than one percentage point from the 35% offering the service in 1986, according to AHA statistics.
While that same 35% figure remains today, home health expenditures from Medicare-the largest single payer for home care-tripled from $3.9 billion in 1990 to an estimated $11.7 billion in 1993.
Despite recent stagnant hospital growth, home care-specifically, hospital-based home care-is once again making a comeback. The advent of healthcare reform and a movement toward cost-containment and managed care has transformed home care into a much more desirable service, experts say.
Interestingly, the re-emergence of home care seems like deja vu for hospital officials, many of whom must decide whether it's worth their effort to add home care to the growing list of services they're offering.
Running solo.Some hospitals are designing their home-care programs without relying on outside contracts with independent home-care companies. While this effort isn't the easiest or most popular route, it can be done successfully, experts say.
Since originating its home-care program more than 11 years ago, Long Beach Memorial watched revenues from its home-care pharmacy/infusion division grow to $4.8 million in 1994 from $100,000 in 1984, Mr. Adams said.
The hospital's combined home-care services are expected to generate total revenues of around $20 million in the fiscal year ending June 30, and Mr. Adams expects to see that figure increase by 10% in fiscal 1995, he said.
The home infusion unit, which treated 14 patients per month in 1982, now treats approximately 96 infusion patients and 300 parenteral patients monthly. Roughly 30% of the home infusion unit's patient base is pediatrics, 30% AIDS, and the remaining 40% is composed of post-trauma adult and geriatric patients, Mr. Adams said. Nursing visits also have increased to 200 per month from 84 in 1984.
The hospital was solicited by various for-profit providers prior to deciding to develop in-house home-care services. "We thought we could do it better than any other company," Mr. Adams said.
Overall, home-care services-including home-care staffing-is a break-even operation, he said. "It's not a cash cow on its own, but it substantially contributes to the hospital's (revenue base)."
Not all hospital-based home-care programs have remained in the same ownership form over the past 10 years.
Baltimore-based Johns Hopkins Home Care Group, a joint venture of Johns Hopkins University and Johns Hopkins Health System, was developed in 1991 after years of operating as a department within the hospital, said Mary Hill, its president and chief executive officer.
The home-care service acts as a not-for-profit holding group for three separate not-for-profit home-care companies: Johns Hopkins Pharmequip, Johns Hopkins Home Health Services and Johns Hopkins Pediatrics at Home.
"Home care was never a major factor in the strategic growth of Johns Hopkins. It was more of an afterthought," Ms. Hill said.
While the hospital operated its home-care division as a hospital department, it contracted out certain home-care functions-such as home infusion-to Northbrook, Ill.-based Caremark International during the late 1980s.
But in 1991, Ms. Hill said Johns Hopkins executives decided to try to develop a comprehensive home-care unit that could be used to generate new business and complement the hospital's inpatient side. But first, it had to find a new way to attract HMO customers.
"The only thing worse than losing business is losing money," Ms. Hill said. "And HMOs can discount you to death."
To capture managed-care business, the hospital-based home-care group embarked on a strategy to develop a line of services specifically for the managed-care business.
Instead of going out and marketing itself as a quality provider that was reasonably priced, the group created a business strategy specifically for HMOs that would decrease inpatient stays for several procedures, meet patient concerns and maintain the hospital's quality of care.
Most important, it would establish an atmosphere that was friendly and cooperative for managed-care payers, a move that was difficult for an institution that for years had developed a reputation as a high-quality, high-cost hospital.
This strategy resulted in a 50% cut in inpatient days for certain hospital procedures-such as decreasing inpatient stays for hip and knee replacements to 4 days from 8 days-without adversely affecting patient outcomes, she said.
Johns Hopkins Home Care Group-which employs about 300 people and has an average patient census of 1,200-has since tripled the number of managed-care contracts it has with employers, and it generates annual revenues in excess of $20 million. Ms. Hill couldn't release more specific financial data or the total number of managed-care contracts, citing hospital policy.
"On a per-case basis, we're significantly less expensive than our competition and our mortality rates are lower, which HMOs love," Ms. Hill said. "We have a healthy balance that we can plug right back into our program. We're not a (financial) loser."
The real benefit.More hospitals are discovering that an in-house home-care program is important not so much as a revenue-generating entity but as a key component to help grab managed-care contracts, said Kevin O'Donnell, president and CEO of Healthcare Resources of America, a Lewisville, Texas-based healthcare consulting firm.
"The importance of home care in the eyes of a hospital CEO is even more critical when the hospital moves into a cost-management mode," Mr. O'Donnell said. "Not surprisingly, hospital-based home care is most aggressive in managed-care markets."
Mr. O'Donnell, who disagrees with AHA's estimates of the total number of hospital-based home-care programs, believes that as many as 60% of hospitals are involved in some aspect of home care, primarily through Medicaid and Medicare-certified agencies. But more hospitals are moving into home infusion, pediatric home care and other high-tech areas that can reap high profit margins.
A growing number of hospitals also are coordinating various divisions of home care so that the entire scope of services falls under one corporate umbrella, he said.
"Under the old way, hospitals would have one person to head the home-care department, another to run the home-care agency and someone else to run the DME program. It never came together under one person," Mr. O'Donnell said.
"Today, hospitals are tying together all home-care activities under one executive. In fact, we're seeing a few hospitals establish positions of vice president for home care."
Recent consolidations among for-profit home-care companies have provided hospitals with a surplus of experienced, qualified home-care executives who can come in and oversee a hospital-based program, he said.
HCFA steps in.In January, HCFA leveled the reimbursement playing field between hospitals and freestanding home-care companies by making Medicare cost limits the same for hospital and freestanding home-care agencies. The change, which no longer allows hospitals to include general overhead and administrative costs on Medicare home-care cost reports, was retroactive to Oct. 1, 1993, and is expected to save Medicare nearly $200 million by 1996.
While some hospital officials say the cost cap will discourage future hospital-based home-care development, others think the cap will merely eliminate poorly managed hospital home-care programs.
"The days of constantly raising (overhead) costs to get Medicare to pay more are gone," said Cathy Frasca, executive director of South Hills Health System Home Health Agency in Pittsburgh. "Those hospitals that are under the cap will survive."
Nonetheless, for home care to be a part of a successful continuum of care in future healthcare delivery, hospitals must have a direct link to home-care programs, Ms. Frasca said. Hospitals that take an active role in home-care delivery can help ensure quality patient care, protect their physicians from liability and keep their costs down.
