This industry consists of establishments primarily engaged in providing skilled nursing or medical care in the home under the supervision of a physician. It includes home healthcare services and visiting nurse associations that provide care to recovering, disabled, and chronically or terminally ill people.
621610 (Home Health Care Services)
Home healthcare services provide a wide array of short-term and ongoing services. Ongoing treatments include respiratory therapy programs, which provide complete air support for patients suffering from many respiratory ailments such as asthma, bronchitis, and cystic fibrosis. Other homecare services include delivery of nutrients intravenously or through feeding tubes; the intravenous infusion of antibiotics to treat infectious diseases; and infusion therapies for patients with fully or partially dysfunctional digestive tracts. Home healthcare services also provide short-term therapy and home care for post-operative and recovering patients.
In 2001 the National Association for Home Care (NAHC) counted more than 20,000 providers of homecare services to 7.6 million people suffering from acute illness, long-term health problems, disabilities, or terminal illness. This number represents a phenomenal increase since 1963, when only 1,100 homecare providers were in operation. Annual estimated expenditures for home health care in 2001 were $41.3 billion
The home healthcare industry blossomed after the 1965 enactment of the Medicare program, which provided federal funding for in-home care of the chronicallyill. According to the HCFA, of the $36.6 billion spent on home health care in 2000, out-of-pocket expenses accounted for 28.1 percent, or $10.9 billion of all homecare expenses. Medicare paid provided 26 percent, or $26 billion, of all payments. Private insurance paid 6.9 percent, or $18.9 billion, with Medicaid and state and local governments accounting for smaller contributions.
Home healthcare services are categorized by ownership: government, hospitals, privately owned companies, and nonprofit organization or visiting nurse associations, all of which provide these services. In 1998, nearly private companies owned 46 percent of all home healthcare agencies in the United States. In the same year, around 12 percent were owned by nonprofit organizations or visiting nurse associations, hospitals owned more than 27 percent, and the government owned 12 percent. Local healthcare providers owned roughly 75 percent of establishments not owned by the government as franchises.
While there continued to be a trend toward consolidation, the home healthcare industry was still somewhat fragmented in the late 1990s. The total number of home healthcare agencies operated by the 38 largest homecare chains increased from 3,649 offices in 1996 to 3,984 offices in 1997, an increase of 9.2 percent. These chains represented about 26 percent of the homecare industry in 1997.
The impact of The 1997 Balanced Budget Act (BBA) on home care cannot be underestimated. In addition to capping the amount of annual reimbursement that a homecare agency could receive per patient, the act required home healthcare agencies to obtain surety bonds. Regulated by the HCFA, only certain types of surety bonds qualified, complicating the process for many homecare agencies.
The first homecare agencies were established in the 1880s, and by 1963 more than 1,100 such agencies existed. The dramatic increase in home healthcare providers between 1965 and 1999 was propelled by the 1965 Medicare enactment making homecare services available to the elderly as long as the services were for "nursing and therapy of a curative or restorative nature," according to the NAHC. In 1973, these benefits were also made available to the younger population. Between 1967 and 1985 the number of Medicare-certified agencies participating in the Medicare program rose from 1,753 to 5,983. The industry leveled off temporarily in 1985 as Medicare paperwork and policies made regulatory compliance difficult and payments were not made reliably. In 1987, consumer groups, the NAHC, and members of Congress successfully sued the HCFA. Medicare homecare policies were rewritten, annual Medicare outlays were increased, and the number of Medicare-certified agencies again rose, this time to 10,000. That number later declined (9,655 at the end of 1998), this time as a result of the Balanced Budget Act's changes in Medicare home health reimbursement.
Home health care has increasingly been regarded as one of the essential components of comprehensive health care. The high costs of hospital and nursing home care have helped this industry to become one of the fastest growing sectors of the larger healthcare industry in the United States.
Home health care services provide a variety of services for patients in the home. The three most common services offered by home health agencies are skilled nursing, personal care for the elderly and disabled, and home infusion therapy. Of patients using home health services, 30 percent have diseases of the circulatory system, while 20 percent have some form of heart disease. Other services include administering antibiotics, providing rehabilitation services, and aiding chemotherapy. Generally, these services are provided by a team of healthcare professionals.
Home infusion therapy has been one of the fastest growing services offered by companies in this industry. Home infusion therapy provides initial patient evaluation; compounds and dispenses drugs, solutions, and nutrients; and provides ongoing clinical monitoring. According to the National Alliance for Infusion Therapy, in 1995, the most common treatment given through home infusion therapy was antibiotic therapy, relying mostly on pumps for drug delivery. This therapy was followed by enteral nutrition, chemotherapy, and pain management. In the same year, the most common diagnoses of patients using home infusion therapy were AIDS, Lyme disease, and colon cancer.
Medicare, the federally funded health insurance providing assistance to the elderly and disabled, has played an important role in the growth of this industry. It was the largest single payer of home care services, accounting for more than one-third of total home care expenditures in 1995.
In 1997, Medicare financed $214.6 billion in spending for 39 million aged and disabled enrollees, according to HCFA. By spending category, the largest one was hospital care (57.6 percent of total expenditures), as compared to home health care at 6 percent. In 1996, roughly 3.9 million of the 37 million Medicare enrollees received home healthcare services, about twice the number of people who received such services in 1990. However, annual growth in Medicare spending decreased from 12.2 percent in 1994 to 7.2 percent in 1997. Home healthcare growth has also decreased, mostly due to the public sector's desire to restrain the boom in home healthcare services in the middle and late 1990s.
During the 1990s, this industry was marked by mergers among industry leaders. In 1993, Abbey Health-care Group, which specialized in rehabilitation and respiratory therapy equipment, purchased Total Pharmaceutical, which dealt mainly in intravenous drug and nutritional therapy. In the same year, Olsten Corporation, which owned Olsten Health Care Services, purchased Lifetime Corp., along with its subsidiary, Kimberly Quality Care. This merger ended a highly publicized takeover battle between Abbey Healthcare and Olsten Corporation; Abbey offered to purchase Lifetime for $220 million, yet this offer was rejected for Olsen's offer of $449 million.
In 1995, Abbey and Homedco, two of the largest home healthcare providers in the United States, merged to form Apria Healthcare Group, Inc., making it the largest provider in this field.
Also in the early 1990s, the public's attention was drawn to the ethical practices of home infusion therapy services. One ethical issue arose when some home infusion agencies paid physicians a weekly stipend for each patient they referred to the agency. Concerns were raised over whether the payment of such stipends would influence physicians' judgments in using home infusion services. Another ethical controversy for home infusion therapy companies arose when these companies bought a practice from a physician and later hired the physician as an employee; this action suggested that the physician was bought to write prescriptions for the company. Both of these ethical issues were addressed by legislators at the state and national levels, and by the mid-1990s, a few states had already enacted legislation prohibiting physicians from being financially linked to clinics or certain types of home health services.
Home health care is at once a blossoming and struggling industry. As the population of the nation ages rapidly, there is an increasing demand for services provided by homecare agencies. New technologies that allow for on-site diagnostic testing and treatment allow more elderly or ill individuals to remain at home rather than enter a nursing home. At the same time, the industry had not yet recovered from the financial effects of the Balanced Budget Act of 1997, which, according to the NAHC, cut Medicare reimbursements for home health care by $69 billion—more than four times the amount intended by Congress. For example, Rhode Island alone, which provides homecare serves to approximately 2,000 residents, lost $56 million in Medicare reimbursements between 1997 and 2001.
Another chronic problem for the home healthcare industry was the shortage of registered nurses and home-health aides, as well as a high rate of turnover. According to the Visiting Nurse Associations of America, the nation turnover rate was 21 percent for registered nurses in home health and 28 percent for home-health aides. Once again, the industry pointed a finger at the federal government for its woes, noting that cumbersome paperwork was the result of too many federal regulations, adding stress and additional hours to nurses' workdays. Nurses were also under pressure to balance their commitment to providing quality care with the need to also provide cost-effective care.
The home health care industry was undergoing a development process during the early 2000s, in which industry experts believed that the growing demand coupled with financial instability would ultimately lead to a more streamlined industry that would sift out those who cannot cope with the increasing federal regulation and decreasing federal financial support. For example, according to the American Association for Homecare, in 2002 the percentage of home healthcare businesses owned by hospitals fell to 25 percent, down from 35 percent in 2001. Medicare and Medicaid accounted for 46 percent of home health revenues, and private-sector managed-care plans picked up an increasing portion of the bill.
In an ongoing effort to balance quality care with cost control, the home healthcare industry began to experiment with telehomecare. By using telephone-and Internet-based communication, medical care professionals could stay in touch with patients without travel. The Veterans' Affairs (VA) in Connecticut tested telehomecare over a six-month period and discovered that the program reduced emergency room, clinic, and home health visits by over 20 percent, resulting in a per-patient savings of $200. As the medical device industry continued to develop simple-to-use, at-home vital signs testing equipment, such as the oximeter, EKG, stethoscope, and fingerstick glucometer, the potential for providing a medically significant link between a case manager and patient via the Internet was expected to become an important development in the home healthcare industry.
Apria Healthcare Group, Inc. Apria Healthcare Group, Inc. was formed in 1995 when Homedco and Abbey Healthcare merged. These two companies showed a combined revenue of $1 billion in 1994. This merger created the largest home healthcare company in the United States. The bulk of its revenues (53 percent) came from its respiratory therapy. By 2002, Apria (headquartered in Costa Mesa, California) operated approximately 400 branches across the country. The company earned a net profit of $115.6 million on sales of $1.25 billion during 2002 and employed nearly 9,700 people.
Coram Healthcare Corporation. Based in Denver, Colorado, Coram Healthcare Corporation was formed in 1994 by a four-way merger of Curaflex Health Services, HealthInfusion, Medisys, and T2 Medical. Coram acquired HMSS in 1994 and Caremark International in 1995. (Note above that Caremark was sold in 1996 to MedPartners). In the early 2000s, Coram provided services ranging from infusion to anti-infective chemotherapy, clinical research, and medical informatics services. Coram filed for Chapter 11 bankruptcy in 2001 and underwent restructuring. It continued to operate 70 branches in 40 states.
Lincare. Lincare, with headquarters in Clearwater, Florida, was one of the nation's largest providers of oxygen and other respiratory therapy services. It reported more than 180,000 customers in 42 states. Lincare earned a net profit of $190.4 million in 2002 on sales of $960.9 million and employed 6,100.
American HomePatient, Inc. American HomePatient, Inc. of Brentwood, Tennessee, is one of the largest home care companies in the United States. In August 1997 it acquired five companies with combined annualized revenues of $10.3 million. Those companies were Central Home Medical Supply, located in Enid, Oklahoma; Ameriquipt Corporation Inc., in Leesburg, Florida; Homecare Medical Equipment, Inc., in Whitely City, Kentucky; Downeast Medical Shoppe, in Bangor, Maine; and the reparatory and medical equipment divisions of Headley Home Care Medical Services, based in Fransville, Wisconsin. The company provided healthcare services and medical equipment through its 300 branches in 40 states. In 2002, American HomePatient posted a net loss of $11.5 million on revenues of $352.6 million and employed 3,300, down from over 4,750 people in 1998.
In 2001, the U.S. Department of Labor, Bureau of Labor Statistics counted 658,110 employees in home healthcare agencies, excluding hospitals and public agencies. Healthcare practitioners and technical occupations accounted for nearly one-third of all jobs. Registered nurses, the largest in-category occupation, had a mean annual salary of $47,560; occupational therapists had a mean annual salary of $64,930; and licensed practical and licensed vocational nurses had a mean annual salary of $33,030.
Healthcare support occupations—primarily home health aides and nursing aides—accounted for 36 percent of the industry's jobs, with a mean annual salary of $17,880. Personal and homecare occupations held 18 percent of the industry's jobs. Homecare aides had a mean annual salary of $14,650.
New drugs, drug pumps, and home infusion equipment helped the home healthcare industry to expand by offering more at-home services, previously only available in hospitals or nursing homes. Future technological developments could only be expected to benefit this industry, which has grown in the wake of soaring healthcare costs in the beginning years of the twenty-first century.
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