3 Threats Facing the Home Health Care Industry

As the elderly population grows in the coming years, so too will the home care industry — but not without facing significant threats, industry experts say.

The baby boom population will push the demand for home health care, with more than 10,000 boomers turning 65 every day.

In addition to the sheer demographics, home health care is largely preferred over other types of care, such as that provided in institutional settings or senior housing, as 78% of 65-plus homeowners intend to age in place in their own homes.

So this aging cohort will increase the need for home health aides to provide assistance and companionship. From 2012 to 2022, employment of home health aides is projected to grow 48%, according to data from the Bureau of Labor Statistics.

Though the population and its preferences present clear opportunities for home health care, there are steep challenges the industry must first face, including health care reform, Department of Labor regulations and worker misclassification.

1. Health Care Reform

The home health care industry is feeling the pressure of the Affordable Care Act (ACA), commonly known as “Obamacare,” which has already negatively impacted the industry, some say.

More than 60% of surveyed home care providers say the act is a threat to the home care industry and to their business, says Phil Bongiorno, executive director of the Home Care Association of America.

Bongiorno cites the results of the latest Private Duty Benchmarking Study, the focal point of a Home Care Pulse online conference last month. The survey, now in its fifth edition, gauges the national and regional benchmarks on finance, sales, marketing and operations of hundreds of private duty home care agencies across North America.

“Responses to the survey showed that predictably there was a very high negative impact as a result of [the ACA],” Bongiorno says. “Thirty-five percent told us that it would have a negative impact on their business in the next three years, and 27% said this would have a highly negative impact on their business.”

The ACA’s first 3.5% cut to the Medicare home health care benefit took effect in January 2014, and reimbursements are scheduled to be cut by the same amount each year through 2017 — totaling a 14% reduction.

The Centers for Medicare & Medicaid Services (CMS) has previously stated that the cuts will leave “approximately 40%” of home health providers operating at a net loss by 2017, putting at risk 1.3 million seniors and nearly 465,000 home health care jobs.

2. The Companion Care Exemption Rule

Last year, the U.S. Department of Labor (DoL) issued a final rule setting out changes to the longstanding regulations on the companionship services exemption from minimum wage and overtime compensation under the Fair Labor Standards Act (FLSA).

“Twenty-five percent [of survey respondents] saw this rule as having a negative impact on their businesses, with 28% saying it will have a highly negative impact on their businesses,” Bongiorno says.

Under the new companionship rule, set to take effect Jan. 1, 2015, “companionship services” has been redefined to be limited to “fellowship,” “protection” and limited direct personal care. Personal care-related services are limited to no more than 20% of the hours worked.

Critics, including many home care associations and agencies, say the changes will reduce consumers’ care options, increase their costs and limit the availability of caregivers.

“The rule undermines the intent of Congress to encourage the institutionalization of care, control cost of care and maintain continuity of care,” Bongiorno says.

The National Association for Home Care & Hospice, which filed a lawsuit in June aiming to overturn the DoL’s final rule, says workers will be harmed, being relegated to part-time work even when they prefer full-time employment.

“The threat of government regulation looms over the industry with all of the issues that are happening in two key areas: the ACA and the Department of Labor’s companion care exemption rule,” Bongiorno says.

3. Worker Misclassification

Companies, including those in the home health care industry, are increasingly hiring workers as “independent contractors” instead of “employees” to avoid paying benefits and payroll taxes, reports indicate.

This misclassification of employees “presents a serious problem” for affected employees, employers and to the entire economy, the DoL says, noting that misclassified employees are often denied access to benefits and protections, such as family and medical leave, overtime, minimum wage and unemployment insurance.

“This is something that we’ve taken on as a priority issue,” says Bongiorno, who heads the Home Care Association of America. “There are a number of providers that are operating under an independent contractor model but appearing to the public as more of an employer-employee model with all of the requirements of an employer model.”

In addition to harm caused to the employee and employer, misclassification also generates losses to the Treasury and the Social Security and Medicare funds, as well as to state unemployment insurance and workers compensation funds, according to the DoL.

So to discourage this, the government launched the DOL Misclassification Initiative in 2011, under which the DoL and the Internal Revenue Service (IRS) are working together to reduce the incidence of misclassification of employees, to help reduce the tax gap and to improve compliance with federal labor laws.

Agency leaders representing 14 states have signed agreements with the Department of Labor to help coordinate enforcement efforts in order to level the playing field for law-abiding employers and to ensure that employees receive the protections they are entitled to under federal and state laws.

Two bills were also introduced in Congress last year to further these efforts: The Payroll Fraud Prevention Act and The Fair Playing Field Act.

“These would give the DoL and the IRS more tools to address this issue and we’re supporting those efforts in Congress,” Bongiorno says.

Written by Emily Study

Emily Study