Workforce.com

Health Care on the Home Front

March 1, 1998
Whether an employee seeks medical care because of a nasty roller-blading spill or needs an emergency quadruple bypass operation, any time an employee is admitted to a hospital is cause for employer concern. According to the Washington, D.C.-based American Hospital Association, one inpatient day of eight hours or less in the hospital costs an average of $1,968, and one 24-hour stay costs approximately $9,228. Add to that additional medical care, lost time, monitoring for return-to-work, replacement workers and the overall impact on health-insurance premiums, and employers are motivated to help employees recover from illness or injury as quickly as possible.

As human resources professionals struggle to control skyrocketing health-care costs, many are finding a key strategy is decreasing hospitalization with the use of home health-care services. Home health-care companies employ health-care professionals and other trained personnel who work with patients and their families at home to help patients achieve their maximum level of health. Although home health-care encompasses a broad range of services from skilled nursing care to home medical-equipment repair, its main advantage is bringing necessary hospital services home to the patient—rather than allowing the patient to linger in the hospital.

Home health-care is the fastest growing segment of the health-care industry, and for good reason. Patients are finding that home health-care helps them heal in their home environments, teaches them to manage their injuries or illnesses and educates family members on how to be caregivers.

According to the Congressional Budget Office, national expenditures for all home health-care services were estimated at $36 billion in 1996 and are expected to grow an average of 13 percent per year through the year 2005. The Washington, D.C.-based National Association for Home Care, the largest home health-care industry group, reports that the number of home-health agencies in the United States grew from 1,100 in 1963 to more than 17,500 in 1995. The U.S. Labor Department expects home health-care to grow at the fastest rate of any industry through 2002.

The benefits of home health-care aside, the rise in its utilization is largely due to the increased use of managed care. In 1996, 77 percent of employees who have health insurance through their work were covered by a managed-care plan, according to William M. Mercer, a health-care benefits consulting firm based in New York City. Managed care falls into the categories of health maintenance organizations (HMOs), preferred provider organizations (PPOs) and point-of-service (POS) plans.

Approximately 27 percent of employees in 1996 were covered by HMOs, which restrict services to health-care providers chosen by the HMO; 31 percent were covered by PPOs, which provide discounted health-care services if the employee chooses health-care providers from the PPO network; and 19 percent were covered by POS plans, which allow employees to choose out-of-network providers at a higher out-of-pocket cost.

Managed-care organizations restrain health-care costs by scrutinizing treatment through utilization review and case management, assuring employers that pay for health insurance that employees receive only those services that are medically necessary. In short, the rise in managed care has led to the rise in home health-care providers, who either provide services as subcontractors to managed-care companies or directly to employers who buy the services home health-care companies provide and offer them to their employees, retirees and other dependents. As the purchaser of health-care services, either directly or indirectly, HR managers should be savvy about the benefits of home health-care and incorporate such care into their health-care strategies through their insurance contracts where warranted.

Contracting with home health-care providers.
Managed-care organizations contract with home health-care providers to coordinate services delivered to patients in their homes. Contractual arrangements vary. Pacificare Health Systems Inc., a large HMO based in Cypress, California, contracts directly with individual home health-care agencies and home medical-equipment providers to deliver services to employees and dependents enrolled in the health plan.

Oakland, California-based Kaiser Permanente, the nation’s largest HMO, for example, contracts with Apria Healthcare, a large provider of home health-care products and services with 350 branches in 50 states, covering more than one million patients. Thirty-five percent of Apria’s business comes from managed-care organizations, 22 percent from patients covered either by traditional indemnity insurance or paying out-of-pocket, and 43 percent from Medicare and Medicaid.

Mario LaCute, president of CareLink and president of Seeley Medical of Andover, Ohio, a home health-care provider, says, "Home health-care is the most cost-effective component of health care today on a dollar-for-dollar basis when compared with hospital or skilled-nursing home health-care. Ultimately that translates to the employer as a lower cost per insured employee per month."

Representatives of home health-care companies work with physicians, discharge planners, nurses, social workers, therapists and other health-care professionals to select and provide the services patients need. They also set up and educate patients on equipment use. Generally, primary-care physicians who coordinate care for patients enrolled in an HMO file for the appropriate approvals for home health-care. Other managed-care plans follow a wide variety of procedures for authorizing payment for home health-care services, but the responsibility lies with the patient to verify coverage. Just because the patient’s doctor recommends certain services doesn’t necessarily mean the patient’s insurance covers those services. Many home health-care providers help patients and their families verify their insurance to be sure requested services are covered before they’re discharged from the hospital. They also may help patients monitor care usage if their insurance coverage has a dollar limit on home health-care services.

Some home health-care providers offer a broad spectrum of services. Others fall into the two categories of home-health agencies and home medical-equipment suppliers.

Home-health agencies provide nursing, occupational, speech and respiratory therapies, and personal services that include home-health aides who provide assistance with bathing, cooking and other daily living activities. Home medical-equipment suppliers provide equipment, services, education and caregiver training necessary for the successful use of home medical equipment. They also provide follow-up services and equipment repair and maintenance as part of the covered service.

Jim Liken, president of Liken Home Medical of Pittsburgh, a home medical-equipment provider, says, "Home health-care providers deal directly with the patient and the family at home. [Our staff] can make a significant impact by helping people understand what positive things they can do for their health and help them learn to manage their diseases."

Specific home health-care services may include oxygen and respiratory programs, home nursing care, physical therapy, infusion therapy, medical supplies, hospice care, home diagnostic and pediatric monitoring, and disease-management programs. Although these processes and therapies can be complicated to administer and maintain at home, many factors are pushing home-care benefits for the patients who need them and the employers that pay for them.

The use of home health-care services is growing.
The growth of home health-care services is being driven by a combination of demographic, technological, economic and consumer trends. Demographic considerations include the aging of the U.S. population, the increase in opportunities for Americans with disabilities and higher survival rates for premature and low birth-weight infants.

Advances in medical technology have reduced hospital lengths of stay and have enabled physicians to perform more surgery in outpatient settings. Manufacturers of home medical equipment continue to invest significant research and development resources to improve or develop devices and products to help those who have a condition that requires home health-care or special equipment. Many products once found only in hospitals and skilled nursing facilities are now miniaturized, portable and less expensive, allowing for equipment to be installed in the home. Among other devices, these include portable oxygen cylinders, home infusion therapy equipment and prosthetics.

A 1991 study by AARP says 71 percent of people over age 50 prefer to recuperate at home from a serious accident or illness.

Home health-care services are often more cost-effective than institutional care while providing a high level of satisfaction among employee patients. A 1991 study by Aetna Life & Casualty Co. found that home health-care resulted in a savings of approximately $20,000 per patient per month for AIDS patients and approximately $40,000 per patient per month for infants with breathing problems, over the same care provided in a hospital. A study conducted in 1991 and commissioned by the National Association of Medical Equipment Suppliers, an organization of home medical-equipment suppliers based in Alexandria, Virginia, compared home health-care with hospital care for three conditions responsive to home medical care. The potential cost savings of home health-care compared with institutional care for a hip fracture, for example, was $2,300 per episode. Multiplied by the 250,000 diagnoses of hip fractures in America each year, the annual potential savings amounts to $575 million a year.

Pat Alba, director of risk management for the City of Corpus Christi, Texas, is responsible for health plans that cover 3,200 employees and 8,000 insured lives, including dependents and retirees. Until March 1996, the city was self-insured and contracted home health-care agencies directly when an employee or dependent needed home health-care.

"That required hands-on management for us," Alba says. "We talked to the doctors and hired a case-management nurse to coordinate home health-care. Then we switched to Humana Health Plans, with the home health-care benefits rolled into the managed-care package. When we negotiated the health coverage, we told them we wanted to duplicate the plan we had because we cover our police force and firefighters as well as civilian workers. Now we leave it up to [Humana managers] if they feel that home health-care is more appropriate than staying longer in the hospital or going to a nursing home. We rarely get complaints that employees weren’t provided with what they need." Educating employees about their health-care options and coverage goes a long way toward improving their quality of life. It also helps HR manage the health-care delivery process.

Managing home health-care.
Quality of life is the driving force behind many Americans’ preference for home health-care. The purpose of home health-care is to bring a sense of independence to patients who would otherwise be challenged beyond their capacity. Most people prefer to remain in their homes, surrounded by their families, possessions and pets. A study conducted in 1991 by the American Association of Retired Persons, a Washington-based national organization of Americans over age 50, indicated that 72 percent of people prefer to recuperate at home from a serious accident or illness.

Home health-care offers a care plan that can be tailored to the patient’s needs and provides the ability to control health-care options. Along with educational programs through physicians and medical groups, home health-care helps patients self-manage and prevent or minimize potential health crises such as debilitating episodes requiring hospitalization for those managing diabetes or respiratory illnesses.

Stamford, Connecticut-based GTE provides health coverage for about 83,000 domestic employees and 58,000 retirees, totaling about 250,000 covered lives, including dependents. Mark Bush, a regional health-care manager based in Stamford who’s responsible for GTE’s northeast region says, "GTE spends a significant amount of time and corporate resources in selecting and evaluating the quality of the health coverage we offer our employees. We look at health plans that aren’t just managing costs, but managing care through appropriate case management."

Case managers employed by the managed-care organization look at each case separately to assess the nature of the illness or injury and what support the patient needs at home. Bush says, "Provided appropriate care can be delivered in the home, anyone who can get out of the hospital and go home to be with his or her family is definitely better for it. This, and the corresponding cost differential between treatment at home and treatment at the hospital, are the driving forces in the rise in our use of home health-care. When we select a managed-care company, we expect it to manage the delivery of care to our employees to provide the highest quality, [most] cost-effective care available. A component of that care-management strategy is home health-care."

Although home health-care services are far less expensive than hospitalization or nursing-home care, they still can be expensive, especially for chronic illnesses or in caring for the senior population. Through the increased use of managed care and case management, employers gain control over proper utilization of home health-care benefits. When appropriately managed, home health-care can effectively help employees return to work as quickly as possible while meeting the challenge of delivering high-quality, cost-effective health care.

Workforce, March 1998, Vol. 77, No. 3, pp. 30-35.