January 19, 2004
No place like home | A merger of home care agencies sets the tone for a burgeoning, but troubled, industry
By Rebecca Zicarelli
Home health care is similar to child care in a couple of ways; we entrust our loved ones to the care of others, but all too often we're unwilling to pay the real market cost of that care.
Unlike child care, though, which most parents expect to pay for themselves, people expect the government to pay for their home health care. But while common sense suggests that caring for people in their homes is more cost-effective than hospitalization or residential care in a nursing home, federal budgeting decisions do not reflect that philosophy. The results are making it difficult for home care agencies across the country to survive.
The same goes for agencies in Maine, and some are beginning to take matters into their own hands. In a bid to control administrative costs, the independent Visiting Nurse Service of Saco, and Portland-based Community Health Service, a subsidiary of MaineHealth, the parent of Maine Medical Center, merged operations this month, forming one of the largest home health care agencies in the state, HomeHealth-Visiting Nurses of Southern Maine. The merger will become final pending state approval, which MaineHealth says should be sometime this month.
According to Maryanna Arsenault, former CEO of VNS and president and CEO of the new organization, the merger is in direct response to federal cuts in Medicaid reimbursements for home health care. By combining resources and eliminating redundancies in administration, Arsenault says HomeHealth-Visiting Nurses will be able to provide better care to patients throughout southern Maine despite leaner funding.
HomeHealth-Visiting Nurses is one of 31 agencies in Maine licensed to provide home care to Medicare-eligible patients (see "Maine's certified home care providers," page 18). According to Vicki Purgavie, executive director of the Home Care Alliance of Maine, each of those agencies receives about 80% of its revenues from Medicare, and all are struggling with the budget cuts. "We've seen a wave of closures," Purgavie says. "Surviving agencies are looking at alternatives to continue to survive. The merger is the first, but I suspect people are looking for ways to share services or be part of a larger service. More agencies are part of hospital systems than five years ago. These partnerships can have staffing benefits and reduce costs."
Merging management
According to MaineHealth, the new organization will operate as a licensed and accredited 501 3 (c) not-for-profit provider of home health care, with services provided to people of "all ages, regardless of income, including skilled nursing, rehabilitative therapies, social work, home health aides, telehealth, pediatrics and hospice. It will maintain its founding organizations' commitment to excellence, compassion and community."
Prior to the merger, VNS operated as an independent, stand-alone agency, while CHS worked with the MaineHealth network, including Maine Med and Southern Maine Med, managing patient care through a variety of settings, including homes, hospitals and nursing-home facilities. "CHS is more used to working around the continuum of care a patient may need," Arsenault says. Both she and Sue Squibb, former CEO of CHS and now vice-president of home care at MaineHealth, plan to expand the merged agency's role in providing wellness health services throughout southern Maine. "We have a lot of work to explore in wellness and in illness avoidance, and in providing good and appropriate continued care from one setting to the next, from pre-natal to palliative home care," says Arsenault.
According to Squibb and Arsenault, HomeHealth-Visiting Nurses will employ 350, care for an estimated 7,000 patients in Cumberland and York counties and will have operating revenues of approximately $20 million this year. The merged agency will be headquartered in Saco and will maintain offices in Portland, Sanford and York.
Like most businesses in Maine, both agencies faced rising costs for employee health insurance. One of their biggest challenges was also the combination of wage pressure and staffing shortages. Competition for nursing staff in southern Maine is intense; hospitals and home care agencies compete for workers in a region extending through southern New Hampshire to metropolitan Boston, where wages are higher and where Medicare reimburses at a higher rate than in most of Maine.
Trimming overhead through the merger wasn't without pain for employees of both CHS and VNS. Many of the management positions in the two agencies were duplicated, Arsenault says, and jobs were cut. "We've already laid off approximately 10 managerial positions, including top managers ˆ a CFO, vice president of clinical operations, a human resource director," she says. Both Arsenault and Squibb expect additional shrinkage in the new organization's administrative staff through attrition rather than layoffs. While Arsenault says she doesn't expect any overall savings in the first year due to the costs of the merger, in future years she expects the merger to offset the decline of Medicare reimbursements through savings in administration, staffing, vendor contracts, health insurance, computer costs and billing.
Arsenault and Squibb say the merger will help the combined organization capitalize on strengths each had developed independently. VNS, for example, used an automated record-keeping system. Nurses and therapists took a laptop computer, loaded with patient records, to home visits, and records were updated on the computer rather than entered in batches later on. Arsenault says such a system cuts down on trips into the office by nurses and clinicians, automates time-slip keeping and cuts down on record-keeping errors. Currently, CHS employees are being trained to use laptops. Arsenault says the training process is being shortened as a result of the VNS workers' experience with the system.
Balancing home care needs
There is no doubt that home care is a cost-effective way to deliver medical services to the elderly, disabled and chronically ill. The Visiting Nurses Association of America reports that in 2001, Medicare-eligible home care provided by a visiting nurse cost $103 per day, compared to $2,753 per day for hospital care and $421 per day for nursing home care. Until 1997, home health care was one of the fastest growing sectors in the health care industry.
But Bill Dombi, a health care law expert with the National Association for Home Care and Hospice in Washington D.C., says growth stalled with passage of the 1997 Balanced Budget Act. "Between 1997 and 1998, in a two year period, Medicare payments for home care dropped from $17 billion to between $8.5 billion and $9 billion, a direct response to spending limits," Dombi says. Nationally, Dombi says the number of agencies providing services declined from 10,400 in 1997 to 7,100 this year.
Purgavie says the Balanced Budget Act decimated the industry. "[Congress] went in with the notion to cut $16 billion. Those cuts now total more than $70 billion [according to estimates of the Congressional Budget Office]. In Maine, 30% of the agencies licensed to provide Medicare home care services closed." According to Dombi, a million fewer people nationally received services last year than in 1997; in Maine, Arsenault says the number of people receiving Medicare-approved services dropped by 5,000.
Christine Gianopoulous, the director of Maine's Bureau of Elder Affairs, is more sanguine about Maine's home health care industry, in part because she's looking at the wealth of state services offered through Medicaid and other state-funded programs. While the federal government reimbursed Maine's Medicare providers $33.9 million in 2002, the state spent twice as much on home health care, reimbursing more than 200 licensed or registered home health care providers $65.9 million that same year.
"It's really two different businesses," Gianopoulous says. "If you talk to providers in Maine, I'm sure they'll say that they're struggling [with] severe labor shortages and tremendous wage pressures. They'll tell you reimbursement rates haven't kept pace with the costs they face, particularly with health insurance costs. But the Maine Legislature has recognized the problem, and every year it has approved ˆ though at a modest rate ˆ increases in state and Medicaid funding. While there are a handful of [agency] closures each year, it may have more to do with business acumen [than with reimbursements]."
Brenda Gallant, director of the Maine Long Term Care Ombudsman program, a federally funded watch dog group, handles everything from consumers with questions about care options to patients with problems receiving reimbursements. "Until 1994, the bulk of long-term care was done in nursing homes ˆ there were few alternatives," Gallant says. "Consumers want to stay at home. There are fewer costs associated with home care. Maine is one of the leaders in the country, one of the states that moved rapidly to provide those options. But we need to pay workers more than we can afford."
Gallant says the bulk of home care complaints her office receives are from people whose benefits have been shrunk, denied or terminated. She says there are few complaints about the quality of the home care that residents actually receive, and those are generally about providers who don't show up as scheduled ˆ the result of persistent labor shortages, industry advocates say.
Despite the perception that home care results in more cost-effective delivery for health care services, there has been little research to determine the impact of effective home care on health care costs. As Arsenault puts it, "The federal government doesn't truly understand or analyze what it will cost to provide care in the home." Nobody in the home health care industry dares to predict the rate of growth over the next five to 10 years because growth is linked to the vagaries of federal and state budgeting instead of market demands.
But everyone agrees that as baby boomers age, demands for home care will increase. According to MaineHealth, southern Maine has the largest elderly population in the state, and Mainers, consistent with national demographic trends, are living longer. Over the next three decades, Maine's elderly population is projected to increase from 14% to 21% of the total population, and the corresponding increase in chronic disease and illness will result in greater demand for efficient and effective home health care services.
"We needed to grow substantially if we wanted to continue to offer strong home care services in southern Maine ˆ that was a driving force behind the merger," says Squibb. "Having VNS and CHS constantly in a fragile financial state was not in the best interest of patients or the community. We merged to be stronger, to be prepared for what we see as a growing need for home care with the aging of the population."
Unlike child care, though, which most parents expect to pay for themselves, people expect the government to pay for their home health care. But while common sense suggests that caring for people in their homes is more cost-effective than hospitalization or residential care in a nursing home, federal budgeting decisions do not reflect that philosophy. The results are making it difficult for home care agencies across the country to survive.
The same goes for agencies in Maine, and some are beginning to take matters into their own hands. In a bid to control administrative costs, the independent Visiting Nurse Service of Saco, and Portland-based Community Health Service, a subsidiary of MaineHealth, the parent of Maine Medical Center, merged operations this month, forming one of the largest home health care agencies in the state, HomeHealth-Visiting Nurses of Southern Maine. The merger will become final pending state approval, which MaineHealth says should be sometime this month.
According to Maryanna Arsenault, former CEO of VNS and president and CEO of the new organization, the merger is in direct response to federal cuts in Medicaid reimbursements for home health care. By combining resources and eliminating redundancies in administration, Arsenault says HomeHealth-Visiting Nurses will be able to provide better care to patients throughout southern Maine despite leaner funding.
HomeHealth-Visiting Nurses is one of 31 agencies in Maine licensed to provide home care to Medicare-eligible patients (see "Maine's certified home care providers," page 18). According to Vicki Purgavie, executive director of the Home Care Alliance of Maine, each of those agencies receives about 80% of its revenues from Medicare, and all are struggling with the budget cuts. "We've seen a wave of closures," Purgavie says. "Surviving agencies are looking at alternatives to continue to survive. The merger is the first, but I suspect people are looking for ways to share services or be part of a larger service. More agencies are part of hospital systems than five years ago. These partnerships can have staffing benefits and reduce costs."
Merging management
According to MaineHealth, the new organization will operate as a licensed and accredited 501 3 (c) not-for-profit provider of home health care, with services provided to people of "all ages, regardless of income, including skilled nursing, rehabilitative therapies, social work, home health aides, telehealth, pediatrics and hospice. It will maintain its founding organizations' commitment to excellence, compassion and community."
Prior to the merger, VNS operated as an independent, stand-alone agency, while CHS worked with the MaineHealth network, including Maine Med and Southern Maine Med, managing patient care through a variety of settings, including homes, hospitals and nursing-home facilities. "CHS is more used to working around the continuum of care a patient may need," Arsenault says. Both she and Sue Squibb, former CEO of CHS and now vice-president of home care at MaineHealth, plan to expand the merged agency's role in providing wellness health services throughout southern Maine. "We have a lot of work to explore in wellness and in illness avoidance, and in providing good and appropriate continued care from one setting to the next, from pre-natal to palliative home care," says Arsenault.
According to Squibb and Arsenault, HomeHealth-Visiting Nurses will employ 350, care for an estimated 7,000 patients in Cumberland and York counties and will have operating revenues of approximately $20 million this year. The merged agency will be headquartered in Saco and will maintain offices in Portland, Sanford and York.
Like most businesses in Maine, both agencies faced rising costs for employee health insurance. One of their biggest challenges was also the combination of wage pressure and staffing shortages. Competition for nursing staff in southern Maine is intense; hospitals and home care agencies compete for workers in a region extending through southern New Hampshire to metropolitan Boston, where wages are higher and where Medicare reimburses at a higher rate than in most of Maine.
Trimming overhead through the merger wasn't without pain for employees of both CHS and VNS. Many of the management positions in the two agencies were duplicated, Arsenault says, and jobs were cut. "We've already laid off approximately 10 managerial positions, including top managers ˆ a CFO, vice president of clinical operations, a human resource director," she says. Both Arsenault and Squibb expect additional shrinkage in the new organization's administrative staff through attrition rather than layoffs. While Arsenault says she doesn't expect any overall savings in the first year due to the costs of the merger, in future years she expects the merger to offset the decline of Medicare reimbursements through savings in administration, staffing, vendor contracts, health insurance, computer costs and billing.
Arsenault and Squibb say the merger will help the combined organization capitalize on strengths each had developed independently. VNS, for example, used an automated record-keeping system. Nurses and therapists took a laptop computer, loaded with patient records, to home visits, and records were updated on the computer rather than entered in batches later on. Arsenault says such a system cuts down on trips into the office by nurses and clinicians, automates time-slip keeping and cuts down on record-keeping errors. Currently, CHS employees are being trained to use laptops. Arsenault says the training process is being shortened as a result of the VNS workers' experience with the system.
Balancing home care needs
There is no doubt that home care is a cost-effective way to deliver medical services to the elderly, disabled and chronically ill. The Visiting Nurses Association of America reports that in 2001, Medicare-eligible home care provided by a visiting nurse cost $103 per day, compared to $2,753 per day for hospital care and $421 per day for nursing home care. Until 1997, home health care was one of the fastest growing sectors in the health care industry.
But Bill Dombi, a health care law expert with the National Association for Home Care and Hospice in Washington D.C., says growth stalled with passage of the 1997 Balanced Budget Act. "Between 1997 and 1998, in a two year period, Medicare payments for home care dropped from $17 billion to between $8.5 billion and $9 billion, a direct response to spending limits," Dombi says. Nationally, Dombi says the number of agencies providing services declined from 10,400 in 1997 to 7,100 this year.
Purgavie says the Balanced Budget Act decimated the industry. "[Congress] went in with the notion to cut $16 billion. Those cuts now total more than $70 billion [according to estimates of the Congressional Budget Office]. In Maine, 30% of the agencies licensed to provide Medicare home care services closed." According to Dombi, a million fewer people nationally received services last year than in 1997; in Maine, Arsenault says the number of people receiving Medicare-approved services dropped by 5,000.
Christine Gianopoulous, the director of Maine's Bureau of Elder Affairs, is more sanguine about Maine's home health care industry, in part because she's looking at the wealth of state services offered through Medicaid and other state-funded programs. While the federal government reimbursed Maine's Medicare providers $33.9 million in 2002, the state spent twice as much on home health care, reimbursing more than 200 licensed or registered home health care providers $65.9 million that same year.
"It's really two different businesses," Gianopoulous says. "If you talk to providers in Maine, I'm sure they'll say that they're struggling [with] severe labor shortages and tremendous wage pressures. They'll tell you reimbursement rates haven't kept pace with the costs they face, particularly with health insurance costs. But the Maine Legislature has recognized the problem, and every year it has approved ˆ though at a modest rate ˆ increases in state and Medicaid funding. While there are a handful of [agency] closures each year, it may have more to do with business acumen [than with reimbursements]."
Brenda Gallant, director of the Maine Long Term Care Ombudsman program, a federally funded watch dog group, handles everything from consumers with questions about care options to patients with problems receiving reimbursements. "Until 1994, the bulk of long-term care was done in nursing homes ˆ there were few alternatives," Gallant says. "Consumers want to stay at home. There are fewer costs associated with home care. Maine is one of the leaders in the country, one of the states that moved rapidly to provide those options. But we need to pay workers more than we can afford."
Gallant says the bulk of home care complaints her office receives are from people whose benefits have been shrunk, denied or terminated. She says there are few complaints about the quality of the home care that residents actually receive, and those are generally about providers who don't show up as scheduled ˆ the result of persistent labor shortages, industry advocates say.
Despite the perception that home care results in more cost-effective delivery for health care services, there has been little research to determine the impact of effective home care on health care costs. As Arsenault puts it, "The federal government doesn't truly understand or analyze what it will cost to provide care in the home." Nobody in the home health care industry dares to predict the rate of growth over the next five to 10 years because growth is linked to the vagaries of federal and state budgeting instead of market demands.
But everyone agrees that as baby boomers age, demands for home care will increase. According to MaineHealth, southern Maine has the largest elderly population in the state, and Mainers, consistent with national demographic trends, are living longer. Over the next three decades, Maine's elderly population is projected to increase from 14% to 21% of the total population, and the corresponding increase in chronic disease and illness will result in greater demand for efficient and effective home health care services.
"We needed to grow substantially if we wanted to continue to offer strong home care services in southern Maine ˆ that was a driving force behind the merger," says Squibb. "Having VNS and CHS constantly in a fragile financial state was not in the best interest of patients or the community. We merged to be stronger, to be prepared for what we see as a growing need for home care with the aging of the population."
Most Recent
Most Recent
Comments