Home Care in 2018

Slightly bruised by regulations, home care agencies can use help from their distributors. And they’re getting it.

With an estimated 10,000 to 11,000 Baby Boomers turning 65 every day, it’s a safe bet that home care will play a growing role in the future of U.S healthcare.

For one thing, surveys indicate that aging Boomers prefer home care to institutional care. For another, the federal government can hardly ignore the potential cost-savings of home care. (Together, Medicare and Medicaid made up 77 percent of home health spending in 2016, according to the Centers for Medicare & Medicaid Services.) A recent study published in the American Journal of Medicine (Nov. 24, 2017) maintains that home health care can reduce 365-day post-discharge costs by more than $6,000 per patient, and reduce readmissions and deaths.

But home care providers face challenges as well, including reimbursement cuts (both real and threatened), competitive bidding, and fraud and abuse, to name a few.

Repertoire asked three distributors (and distributor groups) to share their perspectives on the market:

Cardinal Health.
Medline Industries.
IMCO Home Care.

Cardinal Health at-Home
“Post-acute is a critical part of Cardinal Health’s focus and mission,” says Luke Whitworth, vice president of Home Healthcare Solutions, a Cardinal Health company. “As care continues to shift to the home, we will continue to look at opportunities that enable us to best serve our customers (patients, caregivers, clinicians, and commercial) and our strategic growth initiatives.”

Cardinal Health at-Home supplies home care patients with more than 40,000 products from more than 700 manufacturers, says Whitworth. The company’s businesses ship disposable medical supplies and durable medical equipment from eight distribution centers in Ohio; New Jersey; Texas; California; Florida; Illinois; North Carolina; and Oregon. Together they comprise more than 800,000 square feet of inventory space, and enable one-to-two-business-day shipping to 99 percent of the U.S.

Cardinal Health at-Home operates through three channels: Home Healthcare Solutions (acquired by Cardinal Health in 2015), Edgepark Medical Supplies (acquired in 2013) and Independence Medical (acquired in 2013).

Home Healthcare Solutions serves home care and hospice agencies with utilization management tools and shipping supplies directly to consumers at home, says Whitworth. “Beyond products, Home Healthcare Solutions provides customers with scaled solutions and interactive dashboards, known as CAREessentials™,” he explains. “Our mission is to work with our customers as a true partner in managing medical supply spend to improve patient experience, staff productivity, clinical practice and business profitability.

Edgepark Medical Supplies works with more than 1,300 health plans, including Medicare and select state Medicaids, to support billing efficiencies, patient compliance, and shipping supplies directly to the home. Its products include diabetes testing/ insulin therapy, insulin pumps/CGM, ostomy, urological, incontinence, respiratory, wound care, and breast pumps.

Independence Medical provides more than 12,000 commercial customers (primarily suppliers of home medical equipment, durable medical equipment and pharmacy) a direct-to-consumer medical supply program. Independence Medical offers customers analytics through the Growth Essentials™ technology platform, a suite of interactive dashboards to help customers better understand their patient population.

“As a medical supply distributor to home health and hospice agencies, we’ve found that agencies are looking for partners and scaled solutions rather than a partner who simply distributes product,” says Whitworth. “Their world is becoming more complex with higher acuity patients, a changing reimbursement landscape, and increased regulatory requirements.”

CAREessentials can help, says Whitworth, as it “helps customers identify spend outliers, monitor clinical practices, and benchmark agency performance, which can truly help them identify opportunities to reduce spend, optimize product use, and improve patient outcomes.

“The home health and hospice agencies deploy a field-based staff. This can naturally result in inconsistencies from clinician to clinician. These inconsistencies drive up cost, and pose some risk to clinical outcomes. CAREessentials provides visibility to these inconsistencies, allowing them to act.”

Medline Industries
Medline Industries began shipping home-direct about 20 years ago, says Chris Nave, senior vice president of homecare sales. Today, the company delivers more than 5 million orders annually to home health, hospice and on behalf of dealers, he says. More than 300 post-acute reps – both inside and outside – call on the post-acute market, which includes agencies, dealers, pharmacy, long-term care, etc.

Home care will continue to grow for several reasons, he says:

Technology will continue to play a large role in home care due to its ability to reduce readmissions, increase patient engagement and outcomes, as well as reduce nursing labor costs.
The aging population continues to grow.
Shifts in Medicare Advantage, managed care organizations and other alternative payment models are driving reimbursement.

Despite the strong indicators of growth, home care agencies, dealers and pharmacies face their share of challenges, says Nave. Medicare reimbursement, such as alternative payment models through managed care organizations, is one. A second is the increased retail presence in the market, as well as significant market changes, such as CVS Health’s recently announced intention to acquire Aetna.

“Because Medline is a privately held company, we have the ability to be flexible and nimble when it comes to customers’ needs, allowing us to take on risk to ensure success for our customers,” says Nave. “Medline believes in the importance of bringing value beyond shipping supplies. Our value-add programs allow us to offer customers alternative programs to help reduce readmissions, increase star ratings, and improve patient and clinician satisfaction.”

IMCO Home Care
Daytona Beach, Florida-based IMCO made a decision to create IMCO Home Care about five years ago as a way to help its distributor members get better entrenched in that market, says IMCO Home Care Managing Partner Pam Wedow. Most IMCO Home Care members are retailers, such as home medical equipment stores and independent pharmacies. “We have upwards of 500 member locations, and we’re still a fledgling group,” she says

IMCO Home Care’s strategy is to recruit members, then introduce them to an IMCO distributor. In some cases, reps from IMCO distributors actively recruit new members themselves.

Home Care was a natural for IMCO, says Wedow.

Yes, there is a learning curve for physician or long-term-care distributors, she says. “If you’ve met one home care customer, you’ve met one.” The call point at one pharmacy, for example, might be a busy pharmacist/owner who fills scripts and talks to patients all day, she says. The next customer might fit a very different profile. “It’s a matter of getting to know the customers and helping them with delivery of products (perhaps home delivery), or expansion of their business into other cash sales or retail products that may fit with whatever patient modalities they deal with.”

Reimbursement reductions and competitive bidding – a system whereby Medicare selectively contracts with a limited number of homecare providers based on the lowest bid prices – have put a squeeze on margins, and have forced home care companies to change, says Wedow. “They may have to be more expansive and creative in their offerings, perhaps by generating more cash sales of items not necessarily reimbursed by Medicare.” (An example might be a basket or backpack to be used in conjunction with a rollator.)

For many IMCO members, making the move into home care comes naturally, she continues. “Many of the products are the same as those in the physician and long-term-care markets,” she says. “And we know the manufacturers.”

IMCO members understand the value of distribution, and they are skilled at communicating – and demonstrating – it to existing and prospective customers, including home care clients, says Wedow. Setting up drop ship programs for their customers’ patients is just one way they do so. What’s more, IMCO members have existing relationships with physicians and other providers in the area, and can help connect those providers with their home care customers to bolster their referral network.

Sidebar
Where’s the money going?

Home healthcare, while growing, still accounts for just about 3 percent of U.S. healthcare spending, according to the Centers for Medicare & Medicaid Services.

Spending for freestanding home healthcare agencies decelerated in 2016, increasing 4 percent to $92.4 billion (compared to 5.8 percent growth in 2015). Slower growth in Medicaid spending (4.6 percent in 2016 from 7.7 percent in 2015), out-of-pocket spending (0.5 percent in 2016 from 3.1 percent in 2015) and private health insurance spending (2.8 percent in 2016 from 6.6 percent in 2015) contributed to slower overall growth in 2016. Medicare and Medicaid together made up 77 percent of home health spending in 2016.

The bigger picture
Total U.S. healthcare spending increased 4.3 percent to reach $3.3 trillion, or $10,348 per person in 2016, according to CMS. Spending growth decelerated in 2016 after the initial impacts of Affordable Care Act coverage expansions and strong retail prescription drug spending growth in 2014 and 2015. The overall share of gross domestic product (GDP) related to healthcare spending was 17.9 percent in 2016, up from 17.7 percent in 2015.

Spending by type of service or product in 2016 looked like this:

Hospital care (32 percent share). Spending for hospital care increased 4.7 percent to $1.1 trillion in 2016, slower than the 5.7 percent growth in 2015. The slower growth in 2016 was driven by the slower growth in the use and intensity of services, reports CMS. Hospital care expenditures showed mixed trends across the major payers, with slower growth in Medicaid and private health insurance spending, stable growth in Medicare spending, and faster growth in out-of-pocket spending.
Physician and clinical services (20 percent share). Spending on physician and clinical services increased 5.4 percent to $664.9 billion in 2016. Although growth for physician and clinical services decelerated slightly in 2016 (from 5.9 percent in 2015), it outpaced the growth in all other goods and services categories. The growth in the use and intensity of physician and clinical services was a driving factor in the overall growth in physician and clinical services, accounting for nearly three-quarters of the 5.4 percent increase.
Prescription drugs (10 percent share). Growth in retail prescription drug spending slowed in 2016, increasing 1.3 percent to $328.6 billion. The slower growth in 2016 follows two years of strong growth in 2014 and 2015, – 12.4 percent and 8.9 percent, respectively. This strong growth reflected increased spending on new medicines and price growth for existing brand-name drugs, particularly for drugs used to treat hepatitis C, says CMS. Growth slowed in 2016 primarily due to fewer new drug approvals, slower growth in brand-name drug spending as spending for hepatitis C drugs declined, and a decline in spending for generic drugs as price growth slowed.
Other professional services (3 percent share) Spending for other professional services reached $92.0 billion in 2016, an increase of 4.7 percent. This was a deceleration from the 5.9 percent growth in 2015. Spending in this category includes establishments of independent health practitioners (except physicians and dentists) that primarily provide services such as physical therapy, optometry, podiatry, or chiropractic medicine.
Dental services (4 percent share). Spending for dental services increased 4.6 percent in 2016 to $124.4 billion, a slight acceleration from 4.4 percent growth in 2015. Private health insurance (which accounted for 46 percent of dental spending) increased 4.8 percent in 2016, the same rate of growth that occurred in 2015. Out-of-pocket spending for dental services (which accounted for 40 percent of dental spending) increased 4.3 percent in 2016, faster than the 3.4 percent increase in 2015.
Other health, residential, and personal care services (5 percent share). This category includes expenditures for medical services that are generally delivered by providers in non-traditional settings such as schools, community centers, and the workplace; as well as by ambulance providers and residential mental health and substance abuse facilities. Such spending grew 5.3 percent in 2016 to $173.5 billion after increasing 8.7 percent in 2015. The slowdown was driven by the slower growth in Medicaid spending, 57 percent of all spending in this category, which slowed to 5.7 percent in 2016 after 10.8 percent growth in 2015.
Nursing care facilities and continuing care retirement communities (5 percent share). Spending for freestanding nursing care facilities and continuing care retirement communities decelerated in 2016, growing 2.9 percent to $162.7 billion, compared to 3.7 percent growth in 2015. The slower growth in 2016 was largely attributed to slower spending growth in both Medicare (1.2 percent in 2016 from 4.0 percent in 2015) and private health insurance (5.9 percent in 2016 from 14.3 percent in 2015).
Durable medical equipment (2 percent share). Retail spending for durable medical equipment, which includes items such as contact lenses, eyeglasses and hearing aids, reached $51.0 billion in 2016 and increased 4.9 percent, which was faster than the 4.1 percent growth in 2015.
Other non-durable medical products (2 percent share). Retail spending for other non-durable medical products, such as over-the-counter medicines, medical instruments, and surgical dressings, grew 4.4 percent (about the rate of growth in 2015, 4.6 percent) to $62.2 billion in 2016.

Who’s paying?
Meanwhile, CMS reports 2016 spending by major sources of funds:

Medicare (20 percent share): Medicare spending grew 3.6 percent to $672.1 billion in 2016, which was lower than growth in the previous two years when spending increased 4.8 percent in 2015 and 4.9 percent in 2014. The slower growth in 2016 was due to slower growth in spending for both the Medicare fee-for-service (2.2 percent in 2015 to 1.8 percent in 2016) and Medicare Advantage (11.1 percent in 2015 to 7.4 percent in 2016) portions of Medicare.
Medicaid (17 percent share): Total Medicaid spending decelerated in 2016, increasing 3.9 percent to $565.5 billion. This was much slower growth than in the previous two years, when Medicaid spending grew 11.5 percent in 2014 and 9.5 percent in 2015. The stronger growth in 2014 and 2015 was due in part to the initial impacts of the ACA’s expansion of Medicaid enrollment during that period. State and local Medicaid expenditures grew 3.2 percent, while federal Medicaid expenditures increased 4.4 percent in 2016.
Private health insurance (34 percent share): Private health insurance spending increased 5.1 percent to $1.1 trillion in 2016, which was slower than the 6.9 percent growth in 2015. The deceleration was largely driven by slower enrollment growth in 2016 after two years of robust enrollment growth due in part to ACA coverage expansion.
Out-of-pocket (11 percent share): Out-of-pocket spending grew 3.9 percent in 2016 to $352.5 billion, faster than the growth of 2.8 percent in 2015. This was the fastest rate of growth since 2007 and exceeded the average annual of growth 2.0 percent from 2008-15.

Source: Centers for Medicare & Medicaid Services, https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/downloads/highlights.pdf