Home Care Industry Will Continue to Grow, Despite Political Uncertainty

Despite the political bickering in Washington, D.C., the Obama Administration’s desire to keep care for older Americans in their homes as much as possible to lower the costs of care is good news for the home care industry according to the National Association for Home Care & Hospice.

Presenting in front of roughly 40 home care professionals at a Decision Health M&A conference this week in Chicago, William Dombi, vice president for law at the NAHC said that despite Medicare payment reductions, the outlook for the home care industry continues to be positive.

“Demand for the service of home care will continue to grow,” he said.

Companies involved in the space are seeing healthy profit margins, which reached 19.4% during 2010 according to the latest MedPac report to Congress. These types of margins have led to a surge in home health care agencies, reaching a record high of 11,654 in 2010. Despite the surge in companies entering the space, the industry could look very different in a few years.

“Predictability is a great thing and in home health care there hasn’t been much of it,” Dombi said.

Much of the industry relies on government funding from Medicare and Medicaid and both systems are under an extreme amount of stress. In 2011, about 3.4 million Medicare beneficiaries received home health services and preliminary MedPac data for 2010 indicates that Medicare spent about $19.4 billion paying for such services.

As part of the Affordable Care Act of 2010, several payment reductions made in order to bring costs in line and MedPac estimates the Medicare margin for home health agencies in 2012 will fall to 13.7%. While some of the changes have already been made, the rest could change depending on what happens in Washington D.C. over the next year.

A pending Supreme Court ruling on President Obama’s historic healthcare law could drastically shake up the industry, but its too hard to tell exactly how. In addition, the upcoming elections are another factor that could impact home care.

“Who controls the Presidency and Congress in 2013 will be huge [for the industry],” he said. “The good news is that home care is being viewed as a solution [by both Republicans and Democrats].”

Because of this, Dombi continues to be optimistic on the future of the industry and sees huge opportunity for the companies in the business.

“Some of the largest companies today either didn’t exist or were small businesses back in the ’90s,” he said. “One thing we find in this industry is that opportunity surfaces and people find ways to make the business work.”

Dombi did admit that the industry could see new co-payment requirements become implemented in the next couple of years. Recommendations from the President, both sides of the aisle in Congress, and MedPac have all suggested that Medicare adopt some kind of co-payment for certain home health care services.

“Even though pushes [to implement co-payments] have been stopped so far, the industry’s risks have increased in the last year because there has been bipartisan support for it,” he said.

MedPac recommended that Congress establish an episode co-payment for services not preceded by a hospitalization or other use of post-acute care. By requiring a co-pay of $150 per episode, Medicare spending would fall by $1 billion to $5 billion over five years, said the report.

NAHC believes such requirements would be bad for everyone and would force the patient to go without care until he or she is forced to go into a higher setting. As a result, the change would only drive up the costs for Medicare, said Dombi.

Even with so many changes and unknowns facing the industry, Dombi said that opportunities remain in areas like chronic care management, transitions in care, and post-acute bundling

“Right now, Washington is looking to change the Medicare program, in a big way,” he said. “It may present new opportunities in the traditional and non-traditional approach [to home care].”

Written by John Yedinak

John Yedinak

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