ARCHIVED  March 1, 1996

Home-health agencies balloon with demand

Insurance companies encourage patients to spend less time in hospitals and more time recovering — and even receiving treatments — at home.
This cost-cutting trend has been a shot in the arm for home health-care agencies, which specialize in providing patients with a range of services in the home, from housekeeping to specialized therapies.
Home health-care agencies have multiplied at a feverish pace since 1991. But are there now too many home health-care agencies in Northern Colorado? What will the rapid growth in home health-care mean for home-health agencies – and for patients?
“Growth [in the home-health field] has been phenomenal in the last five years,´ said Sally Henze, director of home-health services for Columbine Management Services. In 1995, the pace of growth accelerated still more.
In a December 1995 letter to home-health agencies, the Colorado Department of Public Health stated it couldn’t keep up with the demand for certifying surveys for new home health-care agencies. The department has halted the surveys indefinitely.
New home health-care agencies receiving Medicare and Medicaid certification in Colorado numbered 33 in 1995, as many as had been certified in the previous three years.Controlling health-care costsDriving this growth is pressure on Medicare, Medicaid and insurance companies to control the cost of health insurance.
Their response to the pressure has been to institute “managed care,” increasing the insurance providers’ control over health-care decisions — the type of care, the length of care and the amount of reimbursement for that care.
Home health care has become an important money-saving component of managed care.
“It’s driven by the insurance companies’ need to get patients out of the hospital sooner,” explained Wayne Potter, care coordinator at Greeley’s North Colorado Medical Center. “So, [patients] are sicker when they leave the hospital ` so, many more need home health care.”Competing and conglomeratingProliferating home-health agencies have created hot competition for exclusive contracts with insurance carriers.
“With managed care, home-health agencies often get exclusive contracts with one (insurance) provider. The provider sends all their business to that agency, and the agency will give (the provider) a better rate,” NCMC’s Potter said. Agency managers struggle to offer the lowest bids for these contracts without compromising care.
Growth in the industry is manifesting itself in another way.
Health-care conglomerates increasingly seek to control a full range of health facilities, including home-health agencies, hospitals, nursing homes, clinics, congregate-care centers (where residents live in apartments but share dining and activities areas), assisted-living centers [such as congregate care with added personal-care services such as bathing] and even pharmacies.
These health facilities then feed each other.
Take Lutheran Health Systems, for example. The corporation, headquartered in Fargo, N.D., specializes in providing health care to rural communities in the West and Midwest. Its division, Western Plains Health Network, operates North Colorado Medical Center in Greeley. It also operates LHS Home and Community Care, an affiliate of NCMC.
Lutheran Health Systems owns and operates McKee Medical Center in Loveland and its affiliate, McKee Home Care. LHS Home and Community Care operates home-health agencies in Greeley and Sterling, which are affiliated with the hospitals in those towns.
The hospitals are also operated by LHS through Western Plains Health Network, according to Gene Haffner, director of community relations for NCMC.
“It’s a real hazy road map in terms of what’s with what and who’s with who,” Haffner said.
Lutheran Health Systems also owns and/or manages clinics and long-term care facilities, said M.J. Olinger, director of LHS Home and Community Care in Fort Collins.
On a smaller scale, Fort Collins’ home-grown Columbine Management Services now manages a home-health agency (Columbine Health Services), two skilled-nursing facilities (Columbine Care Centers East and West), a congregate-care center (the Worthington), an assisted-living center (New Mercer Commons), a nurse staffing service (Care on Call), and a pharmacy, CMS director Sally Henze said.
Another congregate-care facility is under construction in Loveland.
“The conglomerates know home health care is going to be one big-buck operation,” Chuck Layman said. “This is one up-and-coming business. I tell my customers, if you believe in stock, buy it in home health care.”
Columbine Management’s Henze can testify to the ferment in this market.
“I get letters every day saying, if you’re interested in selling your company `” Henze said. “A lot of postage goes into that now.”
Looking ahead
What conglomeration will mean for the home-health industry is not entirely clear. Will the vertically integrated health systems drive independent home health-care agencies from the market? Henze doesn’t see an immediate threat.
“[A system that can] block out competition is good for established agencies,” Henze points out. “We watch our expenses, and we are very busy. I don’t know how other agencies are doing, but there are probably enough clients to go around.”
But smaller agencies may face more difficulty competing with hospital-based home-health agencies.
“It’s very tough,´ said Larry Lillo, of Alexander’s Home Health, an independent agency in Greeley. “(The conglomerates) have got a captive audience.”
Lillo said Alexander’s responds by establishing good relationships with physicians, who are, after all, the ones who prescribe home health care. Alexander’s emphasizes good quality care, patient-doctor follow-up and offering the full range of services.
He adds, “Every home-health agency wants to work in a managed-care situation. You want to align yourself with the insurance programs, the third-party payers.”
What about the patient?
Some managers worry about the effect of industry competition on the quality of care.
“Health care historically was viewed as a place where there was a lot of stability,” Wall said. “In a competitive marketplace, there is little stability ` I think it’s yet to be determined if it will work. An intensely competitive marketplace is still a new environment for health care. It will be a while before we know whether it’s going to be a good one for health care.”
“The managed-care situation is good for big national agencies, bad for the patient,´ said Chris McNay of Loveland’s Front Range Home Care. “The amount of care is going to be strictly regulated.”
M.J. Olinger explained that Medicare and insurance reimbursements (which are generally keyed to Medicare allowances) for inhome care are still liberal compared with those for hospital care. But increasing pressure on Medicare, Medicaid and insurance companies will likely force home-health agencies to work harder to hold costs down.
How will this affect care? Lillo said large health-maintenance organizations will be the first to respond to pressures for cost effectiveness.
“A patient may be seen less frequently,” Lillo said. “Where you used to be allowed 20 visits a year on Medicaid, with an HMO, we’ll see them cut that in half. Certainly that does compromise patient care.”
Some observers think market forces will work to maintain the quality of home health-care services. As Layman put it, “The good ones will prevail, and the bad ones will get weeded out.” Colorado Hospital Association president Larry Wall concurred.
“The bottom line is you make profit by being attuned to your customers,” Wall said. “Customers are calling for a competitive
marketplace.”

Insurance companies encourage patients to spend less time in hospitals and more time recovering — and even receiving treatments — at home.
This cost-cutting trend has been a shot in the arm for home health-care agencies, which specialize in providing patients with a range of services in the home, from housekeeping to specialized therapies.
Home health-care agencies have multiplied at a feverish pace since 1991. But are there now too many home health-care agencies in Northern Colorado? What will the rapid growth in home health-care mean for home-health agencies – and for patients?
“Growth [in the home-health field] has been…

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