An Overview of the Home Care Industry

The U.S. home care industry is best characterized as “diverse” and “dynamic.” With more than 20,000 providers delivering a wide spectrum of services to more than 8 million individuals, the industry is difficult to categorize. This article provides a basic overview of the industry and Bayada Nurses’ place in it.

What Is Home Care?
Caring for the sick in their homes has a long tradition in America. The first home care agencies were established in the 1880s, and families have long cared for aging and sick relatives at home rather than placing them in institutions. With more than 25 years of home care experience, Bayada Nurses has successfully weathered the crises that have caused many home care agencies to close their doors.

Broadly defined, home care is any type of assistance provided to the sick, disabled, or elderly in their homes—from skilled nursing to companionship. Thanks to recent technological advances, many medical procedures that once would have required hospitalization are now safe to carry out in a home setting. This is particularly important in a climate where managed care is increasingly mandating earlier hospital discharges for patients who still require skilled nursing services.

More than 8 million Americans require home care because of acute illness, long-term health conditions, permanent disability, or terminal illness. Bayada Nurses offers a full complement of home care services—employing more than 5,000 home care professionals, including registered nurses (RNs), licensed practical nurses (LPNs), home health aides, homemakers/companions, physical/speech/occupational therapists, and social workers. Bayada Nurses offers several programs focused on the specialized needs of its clients.

• Pediatric Home Care Program—fulfills the special needs of technology-dependent and at-risk children through age 18, also provides family-centered care in general pediatrics, rehabilitation, and well baby care
• Rehabilitation Services Program—blends the skills of rehabilitation nurses, therapists, and aides to help disabled clients of all ages regain maximum functioning and independence at home
• Geriatric Services—addresses both the chronic and episodic challenges to the daily health and welfare of elderly clients—providing them with personal care and supportive services for independent living
• Contract Services—provides prompt turnaround of referrals with appropriate coordination of communications and full range of home care services
• Special Programs—provides services in the areas of ventilator care and hospice care.

Who Provides Home Care Services?
From freestanding proprietary agencies like Bayada Nurses to hospital-based agencies to voluntary, nonprofit organizations like the Visiting Nurse Associations, home care providers are a diverse lot—currently numbering more than 20,000. This figure includes home health agencies, home care aide organizations, and hospices. In 1999, private home care organizations employed an estimated 659,000 employees.

The industry is further categorized into Medicare-certified agencies, Medicare-certified hospices, and non-Medicare-certified agencies. In many of its locations, Bayada Nurses falls into the first category. Medicare is the largest single payer of home care services—determining reimbursement rates and benefits for the bulk of home care recipients. The number of Medicare-certified agencies fluctuated wildly in the past few decades in response to revisions of Medicare payment policies. In the late 1980s—when Medicare’s annual home care benefit increased—the number of Medicare-certified home care agencies grew to more than 10,000. However, subsequent changes enacted as part of the Balanced Budget Act of 1997 reduced this number to 7,747.

Of Medicare-certified agencies, freestanding proprietary agencies and hospital-based agencies have experienced the most growth—accounting for 30% and 41% of the industry, respectively. This results in a much different industry than the early 1980s—when public health agencies dominated and proprietary and hospital-based agencies together accounted for only 25% of the market.

However, none of these figures account for informal (i.e., unpaid, nonprofessional) caregivers. According to a 1989 survey, almost 75% of elderly people with severe disabilities relied solely on family members or other unpaid help for home care. This informal care averages four hours a day, seven days a week. Approximately 75% of informal caregivers are female, and nearly one-third is over age 65. A 1996 telephone survey revealed that an estimated 22 million U.S. households have at least one member providing some level of unpaid assistance to a spouse, relative, or other elderly person.

Who Pays for Home Care Services?
Since 1993, the rate of growth for health spending has pretty much matched the growth in the economy—with health spending accounting for a relatively stable 13.5% share of the gross domestic product. However, health spending is expected to increase at a faster rate than the economy during the coming years due to slower growth in managed care and increased federal and state regulation of health plans. In 1993, home care accounted for approximately 3% of personal health-care expenditures. (This figure accounts only for freestanding home care; hospital-based home care was included in hospital care figures.) Although difficult to quantify, the best industry estimates put total spending for home care at $36 billion in 1999—down from an estimated $41 billion in 1997. This decrease is attributed primarily to dramatic decreases in Medicare home health reimbursements.

As mentioned previously, Medicare is the largest single payer of home health services—accounting for approximately 40% of home care expenditures. As such, Medicare home health reimbursement policies drive the industry. One of the biggest factors in the recent downturn in Medicare home health reimbursements was the Balanced Budget Act of 1997 (BBA), which reduced home health reimbursements by 32.1%. This dramatic decrease led to per client visits and per client reimbursement rates that are below 1994 averages. No other Medicare benefit experienced reductions anywhere near the magnitude imposed on home health. In 1998, the Lewin Group estimated that 90% of agencies would have costs that exceeded BBA limits by an average of 32%. Although recent actions have attempted to adjust these steeper than anticipated cuts, the decreased reimbursement levels have radically affected the financial health of many home care agencies. To help counteract these negative effects, Bayada Nurses has begun advocating for more realistic reimbursement rates.

Another major factor affecting the home care industry is the recent changeover to a Medicare Home Health Prospective Payment System (PPS). A staple in other areas of health care, PPS gives providers a single lump sum payment to cover all costs associated with an “episode of care.” (The PPS system is in contrast to the current “fee-for-service” system. Under fee-for-service, providers are reimbursed for each service performed.) The Home Health PPS system went into effect October 1, 2000 and is being phased in throughout the industry. As proposed, the reimbursement rate for home health PPS will rely on completion of the Outcome and Assessment Information Set (OASIS), which will determine a patient's case-mix placement, which will then be used to adjust payment. Because home health PPS is so new, the long-term effects on the industry are still unclear.

After Medicare, out-of-pocket expenditures are the next largest source of payment for home care—accounting for 21.7%. Medicaid ranks third—accounting for 14.7% of home care benefit payments (approximately $12.2 billion in 1997). Private insurance accounted for 11.4% of payments, and approximately 12.2% of home care payments were classified as “other.”

Bayada Nurses is a Medicare-certified agency in many locations and also accepts reimbursement from private health insurance, auto insurance, HMOs, Medicaid (in many locations), and other governmental programs. To ease the process of arranging and paying for service, Bayada Nurses contacts insurance carriers to determine the maximum level of home health coverage and then bills that carrier directly.

Who Receives Home Care Services?
According to a 1996 Medical Expenditure Panel Survey, roughly 2.7% of the U.S. population received formal home care services in 1996. Of these recipients, 63% were over age 65 and 65% of recipients were women.

According to a recent survey conducted by the National Center for Health Statistics, the largest percentage of patients receiving home care suffered from diseases of the circulatory system (22.4%). People suffering from heart disease (including congestive heart failure) accounted for approximately half of this group. Cancer, diabetes, and hypertension were other frequent admission diagnoses for home health.

Continued rehabilitative care is also accounting for an increasing number of home care recipients as shortened hospital stays result in more patients discharged to home care. The percentage of Medicare patients discharged to home care increased from 9.1% in 1981 to 17.9% in 1985. This percentage is now estimated to be 16%—with patients undergoing coronary bypasses accounting for the highest percentage of Medicare beneficiaries using home health care after hospital discharge.

Bayada Nurses provides services without regard to race, sex, age, religion, disability, or national origin. As mentioned previously, Bayada Nurses offers a full range of home care services—from geriatrics to pediatrics, from rehabilitation to contract services, from highly skilled nursing to companionship.

Why Home Care?
Perhaps the greatest argument for home care is summed up in the mission statement of Bayada Nurses: to help people have a safe home life with comfort, independence, and dignity despite illness or disability. Many families choose to cope with illness or disability in their own homes—preferring the privacy, freedom, familiar surroundings, and closeness of friends and family. Bayada Nurses’ goal is to give the finest home care service available to families in need—providing skilled, caring, and reliable service 24 hours a day, 7 days a week on any schedule.

In addition to preserving a patient’s dignity and independence, home care is also proven to be cost-effective—not only for individuals recuperating from hospital stays but also for patients with functional or cognitive disabilities. Besides costing significantly less than services provided in hospitals or skilled nursing facilities, home care also leads to reduced use of inpatient hospital care—suggesting that increased use of home care could help to reduce overall health-care costs. Several studies have demonstrated the cost-effectiveness of home care in psychiatric care, terminally ill veterans, patients with chronic obstructive pulmonary disease (COPD), and patients with congestive heart failure. Bayada Nurses knows first-hand the benefits of home care, which is why we strive to make this option available to everyone who needs it.

Much of the data from this article was derived from “Basic Statistics About Home Care,” an article posted on the National Association for Home Care (NAHC) web site.