A few years ago, Greg Taylor said he and a pediatrician friend noticed that while most adults could leave the hospital and finish their treatments at home, children often didn't have that option.
So in 1994 they founded Building Blocks Pediatric Home Health Services, a for-profit, privately held company devoted solely to providing home care to children.
Now, Building Blocks, based in Newport Beach, Calif., boasts that it's the only statewide pediatric home-care provider in California and that it's the largest exclusive provider of home-care pediatric services in Southern California.
Other home-care providers also are tailoring more services to the needs of children, slowly changing the typical home-care patient profile from that of an elderly Medicare beneficiary suffering from circulatory disease, stroke, diabetes or hypertension to include premature babies and children with cancer.
Just as more and more adult healthcare services have shifted to the outpatient setting, so have those for children.
In 1995, for the third year in a row, the average number of inpatient days at children's hospitals decreased, according to the National Association of Children's Hospitals and Related Institutions. Inpatient days dropped 0.1% in 1995, following declines of nearly 4% in each of the prior two years. Meanwhile, the total number of outpatient visits for children's hospitals has increased 27.7% since 1991.
The exodus of children from the hospital as a result of new technology and pressure from third-party payers to reduce costs has created an opportunity for providers to tap an estimated $5 billion pediatric home-care market, of which about $800 million comes from equipment sales, $1.2 billion from pharmacy services and the remaining $3 billion from nursing visits. The total home-care market represents more than $30 billion in revenues.
Currently, 6,623 home-care agencies out of a total of 20,300 provide pediatric services, according to the National Association for Home Care. Their specialized pediatric services and programs include those for jaundice, premature babies, organ transplants, respiratory infections, cancer, wound care, asthma and diabetes.
By using specialized pediatric home-care services, providers say payers can benefit from reduced costs. For example, caring for a low-birth-weight baby at home can save $25,860 per patient per month, according to the home-care association. Likewise, the association said home care can save $6,840 per patient per month for oxygen-dependent children and $13,920 for chemotherapy care for children with cancer.
In addition, providers say children benefit from specialized services because they often need different equipment, medications and treatment plans than adults. They note that a child might use smaller IV tubes, take smaller dosages of medication or use slower infusion pumps.
While some home-care companies may choose to specialize in pediatrics, as Building Blocks did, others that serve a more general population, such as Olsten Health Services in Melville, N.Y., are partnering with specialty providers or developing their own pediatric programs. And specialty children's hospitals, like Voorhees (N.J.) Pediatric Facility, are expanding their range of services to include home care.
Building Blocks now has four sites in California and plans to expand into neighboring states. The company currently has 20 managed-care contracts and expects to be taking in more than $20 million in revenues by the end of 1998. It's adding about 70 patients a month and visiting an average of 300 at any given time. Although half the company's referrals are for uncomplicated conditions, such as the treatment of jaundice, those cases represent only 5% of the company's revenues, Taylor said. He said Building Blocks is making most of its money from the fewer cases that involve more medically complex conditions, such as premature babies who need intensive 24-hour monitoring.
Among other companies grabbing for a share of the pediatric home-care market, the largest specialty provider is Norcross, Ga.-based Pediatric Services of America. President and Chief Executive Officer Joe Sansone founded the company in 1989 as a spinoff of then-Charter Medical Corp. and took it public in June 1994 with an initial public offering worth $17 million. "Home care was taking off, but people were doing it with the geriatric patients in mind," said Sansone. "That left it fairly open for us, and the strategy has paid off so far."
PSA now has 101 locations in 27 states and reported a 46% rise in revenues to $164 million in 1996 from $112 million in 1995. Sansone said the company plans to further consolidate local pediatric home-care providers, particularly in the Midwest and West. He said the company has lured hundreds of managed-care contracts from national, regional and local insurers looking to carve out the pediatric piece of their home-care services rather than giving it to a company focused more on adults. "They don't want expensive readmissions," he said. "The cost of failure is expensive."
Although in some cases general-service home-care companies are competing with companies like Building Blocks and PSA for business, in others they are joining forces.
Over the past five years, Olsten, the nation's largest home-care provider, has begun to build up its pediatric services and programs. The company found that its home-taught pediatric asthma-management program, for example, could lead to cost savings of more than $11,500 per patient. The company's pediatric programs took in more than $120 million in revenues in 1995.
"We're very interested in the development of pediatric programs because we're working more and more with managed care, and their members tend to be young, healthy families with children," said Ann Reissiger, Olsten's assistant vice president of clinical business development.
But the pediatric services offered by Olsten vary according to the specific needs of its 55 different markets, she noted. To fill in the gaps, she said, Olsten has subcontracted in various markets with smaller home-care agencies that specialize in pediatrics.
Advocate Home Health Services, based in Oak Brook, Ill., has similarly expanded its range of services through deals with pediatric specialty companies. Advocate, a regional provider of general home-care services, partnered in November 1996 with Melmedica Children's Healthcare in Country Club Hills, Ill., to supplement its existing pediatric services. Advocate had been providing pediatric home-care services for only very sick children who required hours of nursing care.
Working with Melmedica, Advocate now can offer more children's services, such as infusion therapy, that require shorter visits from nurses. Under their agreement, Advocate handles the referral and billing processes and the patient's equipment, pharmaceutical and case management needs. Melmedica supplies the specially trained pediatric nurses. The program generated 251 visits in January.
Gale Meinecke, Advocate's pediatric product line manager, said the agreement helps Advocate offer its affiliated acute-care and children's hospitals a fuller continuum of care. "The hospitals are looking for a full-service Advocate program," she said. "That's what the customer is looking for and that's what the payers are looking for. We want to be user-friendly for both families and payers."
Some specialty hospitals have opened their own home-care programs. The Kennedy Krieger Institute, a Baltimore-based facility for children with disabilities, has created a care continuum for its neurorehabilitation patients that includes providing therapy services in the home. The institute said the program can cut costs by 30% to 60%.
In September 1996, Voorhees Pediatric Facility, a 105-bed subacute center, launched its own home-care program after growing frustrated with seeing its patients discharged into the hands of other agencies and then having to order the proper equipment and provide training for the agencies' staffs. "We can provide services in an environment familiar to the child and can do it more cheaply at home," said De Etta Hayes, director of the Voorhees program. "Home care seemed to be the next logical step for the growth of this facility."