Tuesday, April 27, 2010

Home Care as Cash Cow aka The Peril of the Broad Brush

There’s nothing wrong with the profit incentive. In fact, it drives innovation, sparks economic growth and prosperity and improves the lives of many who benefit from the creation of jobs and opportunity.  Furthermore, profit margins allow for investment and invention and often dramatically improve quality and efficiency of processes and systems.

There’s nothing wrong with the profit incentive.


I attended the annual Visiting Nurse Associations of America meeting in Orlando last week and took serious note of the fact that home care is the only segment in the industry that experienced a funding cut as a result of the recently passed health care reform law. Glass-is-half-full types said that it could have been much worse, and very nearly was, but the rest of us wondered why an industry segment that has so compellingly and consistently demonstrated value in improving lives and cutting costs by keeping patients independent and at home (i.e., out of much more costly settings) could experience a fate such as this.

Well, the reason is simple and it involves public officials painting across the entire home care industry with one broad brush. For-profits and not-for-profits are all spilled into the same large bucket and marked with the "excessive profit" label.

Medicare pays reasonably. For the most part, nobody else does. If you are for-profit oriented and choose your patient/payer mix, then you choose wisely. If you are mission oriented and take care of everyone, regardless of their ability to pay or the reimbursement policies of their insurance company (government or otherwise), then you pay very close attention to things like the proposed $40b Medicare funding cuts.

In today’s Wall Street Journal, Barbara Martinez points out the significant profits of some of the large for-profit home care companies. One of the companies mentioned experienced a stock value increase from $1 to $60 over the past decade. The piece is full of similar “success stories”. Not bad if your goal is to drive profits. Concerning if your goal is to provide efficient, high quality care to those who need it the most.

Here’s the damning part:
Medicare reimbursements for the entire home health-care industry are coming under increased scrutiny. The federal agency that advises Congress on Medicare payment issues, the Medicare Payment Advisory Commission, or MedPAC, warned last month that home health "overpayments contribute to the insolvency" of the Medicare trust fund as well as premium increases that beneficiaries must pay.
There’s nothing wrong with the profit incentive. But if participating organizations are able to selectively choose which patients to serve, leaving only non- or under-paying patients to others, then the forecasted cuts to Medicare payments will prove difficult for the for-profits and fatal for the not-for-profits.

At the Visiting Nurse Association of Boston, we have believed (for 125 years in fact) that everyone deserves high quality home care services. That everyone deserves to be treated with dignity and respect and very skillfully delivered care. That compassion knows no profit margin.

Broad brushes will harm safety net providers and jeopardize the mission of responsible home care agencies. Broad brushes will defeat what organizations such as this one have fought hard to build. And broad brushes should be avoided at all costs…


  1. Excellent points raised and addressed, Rey. The challenges ahead for all home healthcare organizations who accept a broad range of payers will grow exponentially if managed care and Medicaid reduce their rates under intensifying cost pressure.

  2. We fail to look at the truth in this industry. Theho me health care industry is dominated by large for profit companies who have no expertise in healthcare. What they do understand is that by accepting the generous payments of Medicare and squeezing providers to take as little pay for the work they do, realize enormous profits. That is the simple truth about this industry. The profits are excessive. Most home care agencies expect a return on investment that exceeds 65%. While the taxpayers pay the agency generously, the actual providers are paid very little. In a typical visit the agency keeps as profit 2/3 of the payment from Medicare.