Home Health Care Services

SIC 8082

Companies in this industry

Industry report:

This industry consists of establishments primarily engaged in providing skilled nursing or medical care in the home under the supervision of a physician. It includes home health care services and visiting nurse associations that provide care to recovering, disabled, and chronically or terminally ill people.

Industry Snapshot

Home health care services provide a wide array of short-term and ongoing services. Ongoing treatments include respiratory therapy programs, which provide complete air support for patients suffering from many respiratory ailments, such as asthma, bronchitis, and cystic fibrosis. Other homecare services include delivery of nutrients intravenously or through feeding tubes, the intravenous infusion of antibiotics to treat infectious diseases, and infusion therapies for patients with fully or partially dysfunctional digestive tracts. Home health care services also provide short-term therapy and home care for post-operative and recovering patients, and for hospice patients.

According to the U.S. Census Bureau, there were 25,686 establishments in this industry in 2010, employing 1.1 million people. Medicaid paid for the largest share of home health care services. According to the National Association for Home Care & Hospice (NAHC), Medicaid home health spending was expected to grow an average of 10.2 percent annually through 2017. In 2011 IBISWorld estimated the home health care industry to be worth more than $69 million.

The home health care industry flourished after the 1965 enactment of Medicare, which provided federal funding for in-home care of the chronically ill. Subsequently, Medicare became the largest single payer of home health care services, according to the Centers for Medicare and Medicaid Services (CMS). The CMS reported that of the total spent on home health care at the end of the first decade of the 2000s, Medicare paid 37 percent. Projected out-of-pocket and private insurance payments were 22 percent each of total home health care expenses, with Medicaid accounting for 19 percent and state and local governments accounting for 20 percent and the remainder coming from other sources. Like home health services, hospice growth was widespread between the mid-1980s and the end of the first decade of the 2000s, increasing from 31 Medicare-certified facilities in 1984 to well over 3,000 by the end of the decade.

Organization and Structure

Home health care services are categorized by ownership: government, hospitals, privately-owned companies, and nonprofit organizations or visiting nurse associations, all of which provide these services. In the latter part of the first decade of the 2000s, more than 57 percent of all freestanding home health care agencies in the United States were for-profit agencies, up from just 6 percent in 1980 and 33 percent in 1990. Approximately 16 percent of home health agencies were operated in conjunction with a hospital system. The remainder were private nonprofit, government-run, or other specialized agencies, such as those attached to a skilled nursing center.

While the trend toward consolidation continued, the home health care industry continued to be fragmented at the end of the first decade of the 2000s. Although several large chains had established some control in certain markets, in 2009 there were approximately 26,300 home health agencies operating in the United States, employing about 900,000 people. Because home health agencies do not compete on price because cost to consumers is primarily set by Medicare, Medicaid, and private insurance, competition occurs primarily at a much more personal level of quality of service, referral service from physicians, and name recognition.

Background and Development

The first home care agencies were established in the 1880s, and by 1963 more than 1,100 such agencies existed. The dramatic increase in home health care providers between 1965 and 1999 was propelled by the 1965 Medicare enactment making home care services available to the elderly as long as the services were for "nursing and therapy of a curative or restorative nature" according to the NAHC. In 1973 these benefits were also made available to the younger population. Between 1967 and 1985, the number of Medicare-certified agencies participating in the Medicare program rose from 1,753 to 5,983. The industry leveled off temporarily in 1985 as Medicare paperwork and policies made regulatory compliance difficult and payments were not made reliably. In 1987 consumer groups, the NAHC, and members of Congress successfully sued the HCFA (which became the CMS). Medicare home care policies were rewritten, annual Medicare outlays were increased, and the number of Medicare-certified agencies rose to 10,000. That number later declined to 9,655 at the end of 1998 as a result of the Balanced Budget Act's changes in Medicare home health reimbursement.

Home health care has increasingly been regarded as one of the essential components of comprehensive health care. The high costs of hospital and nursing home care helped this industry become one of the fastest growing sectors of the health care industry in the United States.

Home health care services provide a variety of services for patients in the home. The three most common services offered by home health agencies are skilled nursing, personal care for the elderly and disabled, and home infusion therapy. Of patients using home health services, 30 percent have diseases of the circulatory system, while 20 percent have some form of heart disease. Other services include administering antibiotics, providing rehabilitation services, and aiding chemotherapy. Generally, these services are provided by a team of health care professionals.

Home infusion therapy has been one of the fastest growing services offered by companies in this industry. Home infusion therapy provides initial patient evaluation; compounds and dispenses drugs, solutions, and nutrients; and provides ongoing clinical monitoring. According to the National Alliance for Infusion Therapy, in 1995 the most common treatment given through home infusion therapy was antibiotic therapy, relying mostly on pumps for drug delivery. This therapy was followed by enteral nutrition, chemotherapy, and pain management. That same year, the most common diagnoses of patients using home infusion therapy were AIDS, Lyme disease, and colon cancer.

In 1997 Medicare financed $214.6 billion for 39 million aged and disabled enrollees, according to the HCFA (which became the CMS). In terms of spending categories, the largest was hospital care, with 57.6 percent of total expenditures, compared to home health care at 6 percent. In 1996 roughly 3.9 million of the 37 million Medicare enrollees received home health care services, about twice the number of people who received such services in 1990. However, annual growth in Medicare spending decreased from 12.2 percent in 1994 to 7.2 percent in 1997. Home health care growth also decreased, mostly due to the public sector's desire to restrain the boom in home health care services in the middle and late 1990s.

During the 1990s, the industry was marked by mergers among industry leaders. In 1993 Abbey Healthcare Group, which specialized in rehabilitation and respiratory therapy equipment, purchased Total Pharmaceutical, which dealt mainly in intravenous drug and nutritional therapy. The same year, Olsten Corporation, which owned Olsten Health Care Services, purchased Lifetime Corp., along with its subsidiary, Kimberly Quality Care. This merger ended a highly publicized takeover battle between Abbey Healthcare and Olsten Corporation. Abbey offered to purchase Lifetime for $220 million, but this offer was rejected for Olsen's offer of $449 million. In 1995 Abbey and Homedco, two of the largest home health care providers in the United States, merged to form Apria Healthcare Group, Inc., creating the largest provider in this industry.

Also in the early 1990s, the public's attention was drawn to the ethical practices of home infusion therapy services. One ethical issue arose when some home infusion agencies paid physicians a weekly stipend for each patient they referred to the agency. Concerns were raised over whether the payment of such stipends would influence physicians' judgments in using home infusion services. Another ethical controversy for home infusion therapy companies arose when these companies bought a practice from a physician and later hired the physician as an employee, which suggested that the physician was bought to write prescriptions for the company. These ethical issues were addressed by legislators at the state and national levels, and by the mid-1990s, a few states had enacted legislation prohibiting physicians from being financially linked to clinics or certain types of home health services.

In the early years of the first decade of the 2000s, the home health care industry struggled to recover from the financial effects of the Balanced Budget Act (BBA) of 1997, particularly the Home Health Prospective Payment System (PPS). One apparent result of the implementation of the new payment system was that it fostered more efficiency in the industry's operations and improved the delivery of its services. According to the CMS, the home health care agency sector of the industry, which in 2001 comprised more than 73 percent of the industry, remained "highly fragmented." Although there was a decline in the number of home health care agencies during the three years after the enactment of the BBA, by 2003 this number had stabilized. The CMS reported that there were approximately 7,000 agencies that year throughout the United States, down from 10,570 in 1997. These primarily consisted of small, local, and regional companies. This stabilization had been foreseen by industry experts who believed that growing demand, coupled with financial instability, would ultimately lead to a more streamlined industry where companies unable to cope with the increasing federal regulation and decreasing federal financial support would be filtered out of the industry. For example, according to the American Association for Homecare, in 2002 the percentage of home health care businesses owned by hospitals fell to 25 percent from 35 percent in 2001. The CMS also reported that the large, publicly traded respiratory companies did well financially, and along with their counterparts among the infusion therapy companies, had better access to investment capital than did the home health care agency section of the industry. The respiratory and infusion therapy sector also aggressively pursued consolidation and bought smaller companies.

In 2005 Medicaid spent $38 billion for nursing homes and only $8 billion for home health care. Home care costs about 34 percent less than institutional care. In 2004 CMS forecast that Medicare home health spending would account for nearly 32 percent of total home health spending by 2013. Medicare and Medicaid were the sources of more than half of total home health care agency funding, with private funds accounting for the remainder. By 2006 home health care services earned over $37 billion in revenue. With a projected 5.9 million people over age 85 by 2014, an increase from 4.2 million in that age group in 2007, long-term care in general and home health care specifically were expected to continue to report explosive growth in demand, exceeding skilled suppliers. By 2050 home care services were expected to be used by 27 million people.

A continuing chronic problem for the home health care industry was the shortage of registered nurses and home health aides, as well as a high turnover rate. Although the number of workers tripled between 1989 and 2004, growth in demand was faster. According to the Visiting Nurse Associations of America, the national turnover rate was 21 percent for registered nurses in home health care and 28 percent for home health aides. The industry cited the federal government as the cause of the turnover rates, noting that cumbersome paperwork was the result of too much federal regulation, adding stress and additional hours to nurses' workdays. Nurses were also under pressure to balance their commitment to providing quality care with the need to also provide cost-effective care. By 2007 many were turning to the so-called "gray market" lists of unlicensed caregivers in order to save significant amounts of money on bonded agencies and certified aides that insurance policies often did not cover.

In an ongoing effort to balance quality care with cost control, the home health care industry began to experiment with tele-homecare and tele-monitoring. By using telephone, satellite, and Internet-based communication, medical care professionals could stay in touch with patients without travel. The Veterans' Affairs (VA) was a leader in tele-monitoring, and in Connecticut tested tele-homecare over a six-month period, discovering that the program reduced emergency room, clinic, and home health visits more than 20 percent, resulting in a per-patient savings of $200. As the medical device industry continued to develop simple-to-use, at-home vital signs testing equipment, such as the oximeter, EKG, stethoscope, and fingerstick glucometer, the potential for providing a medically significant link between a case manager or nurse and patient via the Internet or satellite was an important development in the home health care industry. According to an article in the April 2005 edition of Healthcare Financial Management, "The use of tele-monitoring appears to be a win-win situation for patients, payer, hospitals and home health agencies." If used effectively, tele-monitoring equipment not only reduces home health care costs, but also increases revenues and facilitates collaboration between hospitals and home health care agencies to reduce the length of hospitals stays and repeat hospital stays. The use of this equipment also has been especially attractive to managed care organizations.

At the end of the first decade of the 2000s, the NAHC reported that more than 17,000 home care firms provided services to 7.6 million people suffering from acute illness, long-term health problems, disabilities, or terminal illness. This was a phenomenal increase since 1963, when only 1,100 home care providers were operating. According to the CMS, annual estimated expenditures for home health care from all sources, including Medicare and Medicaid, were $57.6 billion in 2007, up from $38.3 billion in 2003. Total health care expenses were estimated at $2.6 trillion in 2009, according to CMS, or $8,150 per U.S. resident (17.6 percent of the gross domestic product) compared to U.S. health care expenditures totaling approximately $75 billion, or $356 per citizen (7.2 percent of gross domestic product) in 1970.

Current Conditions

The future of the home health care industry was positive in the early 2010s. The first baby boomers were about to reach retirement age, and the country was shifting away from nursing home care to less expensive community-based care. The client base for home health services was poised for explosive growth. However, some old problems, such as worker retention, as well as some new problems, including cuts to Medicare reimbursements, were causing concern.

Home health workers must often function under difficult conditions when they enter a client's home. On-the-job stressors can include cigarette smoke, unsanitary conditions, air pollution, vermin, and even conflict or violence within the home. A study conducted by Columbia University Mailman School of Public Health that was reported in NewsRx Health showed that home health workers suffered needle stick accidents, placing them at risk for blood borne pathogens, such as HIV and hepatitis, at a rate of 7.6 per 100 nurses, which was more than three times the rate of nurses working in other venues. In addition, because hospitals are discharging patients sooner and sicker and patients are delaying entering a skilled nursing facility, a home health worker's clients have become, on average, older and more ill. Furthermore, home health nurses and aides in rural areas must travel long distances to reach isolated clients, so energy costs adversely affect home health agencies. According to the NAHC, home health nurses, therapists, and aides travel nearly 5 billion miles annually to conduct some 428 million visits to serve their clients.

In the early 2010s, the home health care industry was affected by budgetary cuts to Medicare enacted by the U.S. Congress. In January 2008, a regulatory cut of 2.75 percent on Medicare home health payments went into effect, basically negating a similar the market-based inflation increase for the same year. This was followed by more cuts, including one that slashed Medicare payments 11.1 percent in 2011. Mergers & Acquisitions projected that this would result in a loss of $79 billion over a 10-year period.

Industry Leaders

Apria Healthcare Group, Inc.
Apria Healthcare Group, Inc., headquartered in Lake Forest, California, operated approximately 540 branches and 30 infusion pharmacy locations across the country. Blackstone Group took Apria private in 2008 in a deal worth $1.7 billion. The company earned $2.3 billion in revenue during 2011 and employed over 11,000 people.

Gentiva Home Health.
Gentiva Home Health, headquartered in Atlanta, Georgia, was another one of the country's largest home health services providers in the early 2010s. In 2010 the firm expanded when it acquired Odyssey HealthCare Inc. for approximately $1 billion. Gentiva reported annual sales of $1.8 billion, of which about 59 percent came from home health care services.

American HomePatient, Inc.
American HomePatient, Inc., of Brentwood, Tennessee, was one of the largest homecare companies in the United States. The company provided health care services and medical equipment through its 240 centers in 30 states. In 2008 American HomePatient posted sales of $266 million and employed 2,400.

Lincare Holdings Inc.
Lincare Holdings Inc., headquartered in Clearwater, Florida, was one of the nation's largest providers of oxygen and other respiratory therapy services and had over 1,000 offices across the United States with more than 700,000 customers. Besides its respiratory related services, the company also provided infusion therapy and medical equipment rentals such as beds and wheelchairs. In 2010 Lincare posted sales of $1.8 billion and employed nearly 10,000 people.

Rotech Healthcare Inc.
Rotech Healthcare Inc., headquartered in Orlando, Florida, offered home medical equipment, such as hospital beds, wheelchairs, and walkers, and also offered respiratory equipment and services, respiratory (nebulizer) medications, disease management services, and sleep disorder therapy. The company had about 450 facilities in 48 states with more than 3,500 employees. In 2008 Rotech Healthcare had sales of $545 million.

Workforce

In 2010 the U.S. Bureau of Labor Statistics reported approximately 1.12 million employees in home health care agencies, excluding hospitals and public agencies. Health care practitioners and technical occupations accounted for about one-quarter of all jobs. Registered nurses, the largest in-category occupation, had a mean annual salary of $65,120; occupational therapists had a mean annual salary of $85,540; and licensed practical and licensed vocational nurses had a mean annual salary of $43,160.

Health care support occupations, which are primarily home health aides and nursing aides, accounted for 35 percent of the industry's jobs, with a mean annual salary of $22,410. Home health aides, which were responsible for 30 percent of this total, had a mean annual salary of $21,150.

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