Columbia/HCA Healthcare Corp. is pursuing home-care agencies as aggressively as it is hospital deals, but without as much fanfare.
In just two years, Columbia has built the country's largest hospital-based home-care company. Among all home-care providers, Columbia ranks behind only Olsten Health Services and Apria Healthcare Group in total revenues.
Columbia Homecare Group, based in Dallas, now owns 235 agencies with 323 branch locations in 30 states that brought in more than $1 billion in revenues in 1996.
"It's no longer appropriate to think of Columbia as a hospital management company," said John Runningen, a senior healthcare analyst with Robinson-Humphrey Co. in Atlanta. "They're augmenting their acute-care business with other services."
Columbia's growth in home care has taken place less dramatically than its moves into other lines of business. Its efforts to enter the insurance business led to a bid to acquire Blue Cross and Blue Shield of Ohio and a story about the deal on "60 Minutes." And the $1.3 billion price tag of its recent acquisition of Value Health drew attention to its entrance into pharmacy benefits management
By contrast, Columbia's first significant home-care acquisition was overshadowed by the deal's effects on the hospital industry.
In April 1995, Columbia completed its $5.6 billion merger with Healthtrust. The deal created a buzz by forming the largest investor-owned hospital chain in history. But Columbia also netted Healthtrust's KeyStone Home Health Management subsidiary, which managed home-care agencies for 29 hospitals.
Through similar acquisitions of independent agencies and hospitals that own agencies, Columbia has gradually formed a comprehensive, national home-care network primed for receiving patient referrals from its nearly 350 acute-care hospitals.
"We're expanding the network where payers and patients need us and where we need to fill in gaps in the continuum," said Debra Wertzberger, chief executive officer of Columbia Homecare. "Home care attracts more payers because they want as many services as possible, and the obvious opportunity is that it increases the potential number of lives we can serve."
Runningen said Columbia also needs to secure other revenue sources and prepare for a capitated reimbursement system.
Pressure to control costs becomes greater under a capitated system, so it's not surprising that the nation's largest for-profit hospital operator would be interested in alternatives to inpatient care.
According to the National Association for Home Care, Medicare charges are projected to be $1,872 per day in the hospital, compared with $88 per home-care visit.
"If the hospitals are getting squeezed, then they better participate in the side of the business that's gaining patient volume," Runningen said. "Columbia will now be less dependent on inpatient revenues. They can shift patients from a more expensive inpatient setting to a less expensive setting."
Columbia faces considerable competition for a share of the $36 billion home-care market. Currently, more than 18,500 providers offer home-care and hospice services to some 7 million patients, according to the NAHC.
The association said independent, for-profit agencies and hospital-based agencies, like those owned by Columbia, have grown faster than any other type of Medicare-certified agency since Congress enacted changes to the reimbursement laws in the mid-1980s.
There are now 3,951 proprietary agencies, representing 43.3% of the Medicare-certified home-care market, and 2,470 hospital-based agencies, representing 27.1% of the market, according to the association.
Of these, Kevin P. O'Donnell, president and CEO of Dallas-based Healthcare Resources of America, said Columbia's main competition comes not from the home-care companies, such as Olsten, that are vying for national managed-care contracts, but from local agencies and regional hospital systems that are forming networks in Columbia's markets.
And competitors aren't taking Columbia's home-care ambitions lightly. In January 1996, two Texas home-care companies filed a federal antitrust lawsuit accusing Columbia and other providers in the area of trying to monopolize the industry (Feb. 5, 1996, p. 18).
"Columbia is experiencing the problems of other hospitals, but Columbia is more vulnerable to antitrust issues because it may own several hospitals in the same market," O'Donnell said.
In addition, he said, possible changes to hospitals' allocation rules could test all hospitals' commitment to home care. Although HCFA currently allows hospitals to shift some of their costs to their home-care agencies, regulators have continued to tighten the allocation rules over the past year (August 26, 1996, p. 32).
"Right now, it's not costing them anything to provide home-care services because Medicare pays for them and they're able to shift some hospital costs to the agencies," O'Donnell said. "If that incentive is eliminated, there won't be as much financial sizzle for home care and they will have to consider whether they're going to continue competing in the industry."