Percentage of Home Health Spending to Outpace Overall Growth
Posted On: March 13th, 2018
Senior Vice President, Extended Care and Care Operations, Change Healthcare
New home health spending projections bode well for the industry, a segment expected to see among the highest forecasted growth on a percentage basis.
Each year, the actuarial office at the Centers for Medicare & Medicaid Services (CMS) creates a forecast for overall health spending, taking into account current law. Overall, the office sees healthcare spending growing at a 5.5 percent annual rate, reaching $5.7 trillion by 2026. Over the next decade, that equates into a 71 percent increase.
More than $92 billion was spent on home health services during 2016. By 2026, that number is expected to grow to $172.6 billion, an increase of nearly 87%. Home health spending slowed between 2015 and 2016, from 5.8 percent to 4 percent. But the annual numbers are expected to pick up. Forecasters see a 5.1 percent rise in 2017, 5.9 percent in 2018 and 6.7 percent increases in 2020 and 2026.
More seniors, sicker seniors
The summaries of the actuarial tables don’t include underlying methodologies, but reasons for the projected spending increases for home health are fairly obvious. An estimated 10,000 Baby Boomers are turning 65 every day in the United States, and people between the ages of 65 and 74 are expected to hit 73 million by 2030. So the target population for home health services is increasing.
Despite the continued increases in spending, however, Americans are retiring sicker than ever. As reported earlier in Homecare Talk, a study from the University of Michigan showed an increase in those at the current retirement age of 66 having difficulties with activities of daily living (ADLs) by the time they were in their late 50s. Other increases were noted for those describing their health as “fair” or “poor” and those reporting cognitive decline by age 60. All this means that people will need more assistance in performing ADLs, recovering from major surgeries or managing chronic conditions in their homes.
Many home health organizations derive a majority of their revenues from Medicare and Medicaid, which account for 77 percent of spending for home health. CMS has looked closely at home health revenues, adjusting case mix weights and episodic reimbursement amounts in recent years to curb spending. This trend shows no signs of going away, so increased demand doesn’t necessarily equate into more home health revenues.
But the projections should provide a good reminder to home health executives about future challenges and opportunities. While most organizations rely on federal reimbursements, how does your payer mix compare with peer organizations of your size and those in your service area? Check with your software vendor to help ensure you’re capturing revenue correctly and that your accounts receivable days are in line with industry standards.
It’s also a good idea to examine the services your organization offers. In addition to home health and hospice services, think about palliative care, private duty or programs for people with specialized needs, such as those with chronic conditions or people recovering from hip or knee replacements.
Can you partner with companies to help seniors with other every day needs and chores like transportation, grocery shopping, dog walking or general handyman services?
Home health is ideally situated to care for seniors in the place they’d prefer to be and stay—at home.
Billie Whitehurst, MS, RN, is Senior Vice President of Extended Care Solutions for Change Healthcare, where she leads efforts to help home health and hospice providers achieve quality outcomes and sustainable operating improvements. Whitehurst has more than 15 years’ experience leading clinical IT teams. She has a master’s degree in healthcare administration and a bachelor’s degree in nursing from the University of Colorado. She is board certified in nursing informatics from the American Nurses Association.