Ideal Home Health Agency? No Template Exists for That

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Karen Utterback By Karen Utterback 
Former Vice President, Product Marketing and Strategy, McKesson (Retired)
Ideal Home Health Agency

No one formula exists for successfully running a home health agency — reinforcing the idiom that all healthcare is local.

A recent study in the Medicare & Medicaid Research Review underscored the important role that home health plays in helping patients manage chronic conditions and the increased use of home health as hospitals are penalized for certain readmissions. It’s definitely worth a read.

The Policy Implications of the Cost Structure of Home Health Agencies” shows that the industry is dominated by for-profit agencies that have higher average costs per patient but lower costs per visit. The authors suggest that efficiencies may be gained by promoting smaller nonprofit agencies that utilize employed nurses rather than contract nursing staff.

However, geographic considerations, patient mix, patient conditions, and the different operating models used by for-profit and nonprofit agencies vary widely, which makes generalizations difficult. What’s not in doubt is the increased use of outpatient services designed to deliver care in non-institutional settings, partially evidenced by the Money Follows the Person demonstration.

Government reimbursement policies have a powerful impact on the number of agencies that operated in the U.S.  Remember the Interim Payment System that CMS implemented in 1997? In its first year, the authors note, one in five agencies closed their doors, and expenditures for home health dropped by 60%. Declines continued until the Prospective Payment System was established.

Between 2001 and 2009, expenditures for home health more than doubled to $18.3 billion while the number of agencies increased by 67%. Given these numbers, it’s no wonder that the average age of for-profit agencies is considerably lower than nonprofit agencies.

Other interesting findings include:

  • The median nonprofit agency was three times the size of the median for-profit agency.
  • The average costs per unduplicated patient of the nonprofits were 40% lower than for-profits: $2,826 versus $4,674.
  • For-profit agencies served a higher proportion of Medicare patients and had a higher case-mix index.
  • Because for-profits serve patients with higher case-mix indices,  the costs per adjusted visit were about 15% lower than nonprofits.

At first, the aims of containing costs, operating efficiently and demonstrating quality outcomes may seem contradictory. But those agencies that are leveraging home health agency and clinical management software recognize that doing all three at the same time is possible. Is your agency?

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