s
tudent
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From Acute Care to Home Care:
The Evolution of Hospital
Responsibility and Rationale for
Increased Vertical Integration
Prashant K. Dilwali, Johns Hopkins Bloomberg School of Public Health
E X E C U TI V E S U M M AR Y
The responsibility of hospitals is changing. Those activities that were once confined
within the walls of the medical facility have largely shifted outside them, yet the
requirements for hospitals have only grown in scope. With the passage of the Patient
Protection and Affordable Care Act (ACA) and the development of accountable care
organizations, financial incentives are focused on care coordination, and a hospital’s
responsibility now includes postdischarge outcomes. As a result, hospitals need to
adjust their business model to accommodate their increased need to impact post–
acute care settings.
A home care service line can fulfill this role for hospitals, serving as an effective
conduit to the postdischarge realm—serving as both a potential profit center and a
risk mitigation offering. An alliance between home care agencies and hospitals can
help improve clinical outcomes, provide the necessary care for communities, and
establish a potentially profitable product line.
For more information about the concepts in this essay, contact Mr. Dilwali at
[email protected]. Mr. Dilwali is the first-place winner of the graduate
division of the 2013 ACHE Richard J. Stull Student Essay Competition in Healthcare Management. For more information about this competition, contact Sheila
T. Brown at (312) 424-9316.
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I N TROD U C TIO N
For years, the issue of patient handoffs
has plagued hospitals. A search of the
literature highlights many issues regarding the difficulty involved in ensuring
high-quality care for patients when
transitioning between providers. Forster,
Murff, Peterson, Gandhi, & Bates (2003)
found that one in five patients experiences an adverse event (defined as an
injury resulting from medical management rather than from the underlying
disease) in the transition from hospital
to home. They also found that approximately 62% of adverse events could be
either prevented or ameliorated.
A 2008 Commonwealth Fund study
found that among eight industrialized nations, the United States had the
highest rate of readmissions within 2
years to the hospital or patients visiting an emergency department (ED) as a
result of complications that arose during
recovery (Table 1).
Despite all the data reporting high
postdischarge readmission rates, hospital discharge procedures have not been
standardized (Greenwald, Denham, &
Jack, 2007). This lack of consistency
represents a large problem because
systems to ensure that patient data are
transferred to subsequent caregivers in
an efficient and effective manner are
inappropriate or ineffective (Moore,
Wisnivesky, Williams, & McGinn, 2003;
Wachter, 2004). For example, discharge
summaries frequently lack critical data
and are not sent to the patient’s primary care physician in a timely fashion
(Kripalani et al., 2007; Van Walraven,
Seth, Austing, & Laupacis, 2002). Roy et
al. (2005) examined test results pending at the time of discharge and determined that posthospital providers were
frequently unaware that results were
pending, posing a potentially serious
clinical threat. Specifically, delays in
the reporting of test results are responsible for incomplete patient evaluations
(Moore, McGinn, & Halm, 2007; Roy et
al., 2005).
Furthermore, a meta-analysis
revealed that only 12–34% of discharge
summaries had reached aftercare providers by the time of the patient’s first posthospitalization appointment (Kripalani
et al., 2007). In addition, patients were
often left unprepared at discharge—
many of those questioned did not
understand their discharge medications
and could not recall their chief diagnoses (Makaryus & Friedman, 2005).
A poor transition often leads to a
poor understanding—on the part of
both the patient and the caregivers—
of health status, which can result in
TA B L E 1
Readmission Rates by Country
Australia
Canada
France
Germany
Netherlands
New
Zealand
United
Kingdom
United
States
11%
17%
7%
9%
17%
11%
10%
18%
Source: Commonwealth Fund (2008).
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negative consequences for the patient,
including the following (Williams,
Davis, Parker, & Weiss, 2002):
• Difficulties navigating the
healthcare system
• Nonadherence to prescription
medications and dosages
• Missed physician appointments
With more than 32 million adult
discharges in the United States each
year (Levit et al., 2007), these deficiencies in the transition of care can
increase the rates of illness among
them, lead to unnecessary hospital utilization, and incur unnecessarily high
costs of care.
However, major structural changes
are occurring within healthcare organizations to address the issues. These
changes are finance driven, and home
care is at the forefront of the shift.
In the 1990s, because home care
was well reimbursed, hospitals frequently provided postdischarge care in
the home. As costs were scrutinized and
payments reevaluated, many hospitals did not see the financial benefit
to providing these services and thus
divested, resulting in a precipitous drop
in home care services, which lasted into
the 2000s (Horwitz, 2005). However,
as the financial incentives are shifting
once again—this time to pay for performance—providing these postdischarge
services is reemerging as the industry
standard. With hospital management
focused on effective outcomes, entering the home care market is the logical
move to ensure that hospitals achieve
expected clinical results and maximize
revenue opportunities.
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H O M E C AR E ’ S R E E M E R G E N C E
The Joint Commission (2011) asserts
that the best place for care is at home.
Costs for care are lower, patients are
more satisfied, and the environment
is friendlier to the patient than in the
hospital setting. Home care is defined
by the Centers for Medicare & Medicaid
Services (2013) as prescribed services
delivered in the patient’s home, such
as nursing care; physical, occupational,
and speech–language therapy; and medical social services. The goals of home
health care services are to help individuals improve function and live with
greater independence; to promote the
client’s optimal level of well-being; and
to assist the patient to remain at home,
avoiding hospitalization or admission
to a long-term care institution (Shaughnessy et al. 2002).
In the late 1980s through the 1990s,
hospital administrators considered
integration with home care agencies
essential, as home care was viewed as
an important element of overall care. As
Rumberg and Girard (1994) stated:
The typical compartmentalized
approach, which divides service
delivery systems and creates blind
spots and inherent inefficiencies,
can no longer be afforded in today’s
cost-conscious health care market.
Strategically integrating previously
separate hospital and home care
delivery systems is a key to enhanced
service quality and economic efficiency.
Some of these blind spots were
addressed by encouraging stronger hospital control postdischarge. During that
time, home care was deemed a profitable endeavor—the effective delivery of
home care could increase a hospital’s
269
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Journal
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income by up to $1 million (Rumberg
& Girard, 1994).
However, as the reimbursement
scheme changed to a prospective payment system and the profitability of
home care decreased, numerous forprofit hospitals and health systems
dropped the service, and home care
became a cottage industry with many
small companies providing local care.
With the March 2010 enactment of the
ACA, the symptoms of a splintered
industry may be treated by encouraging
coordination and collaboration among
different groups of care providers.
Hospitals are responding to financial
incentives to ensure care continuity by
monitoring their 30-day readmission
rates. Because many patients are discharged home after hospitalization,
home care in the hands of hospitals is
a potential means by which to impose
more control over postdischarge care,
thereby controlling their quality-based
reimbursement rates.
Still, according to the American
Hospital Association (AHA, 2011), less
than half of current community hospitals, both rural and urban, provide some
sort of home care services (Figure 1).
Data show that of the different types of
patient care transitions, the hospital-tohome transition is associated with the
most ED visits and preventable rehospitalizations (Figure 2) (Arbaje, 2010).
Numerous initiatives have been
piloted to determine effective ways
to discharge patients, including
the patient-centered medical home
model, the 11-step Reengineered
Hospital Discharge method (Greenwald, Denham, & Jack, 2007), and the
National Transitions of Care Coalition
approach (NTOCC, 2008). Some of the
f i gu r e 1
Percentage of Hospitals Offering “Nonhospital” Services, by Location, 2009
41%
38%
27%
21%
24% 24%
Rural
Urban
8%
Home
health
Skilled
Hospice
nursing
3%
Assisted
living
Source: Data from AHA (2011).
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V ert ical I ntegration
Mean Number of Problems per 100 Transitions
f i gu r e 2
Transitions Associated With ED Visits and Preventable Hospitalizations
16
14
14.2
12
10.1
10
9.3
8.5
8
8.1
7.6
6
4
2
0
Hospital
Home to
Nursing
Rehab to
Hospital to
Home
t o home
nursing
home to
home
nursing
care to
home
home
home nursing
home
Source: Data from Arbaje (2010).
interventions from these methods have
been shown to reduce the rate of avoidable rehospitalization:
• Improved core discharge planning
and transition processes out of the
hospital
• Improved transitions and care
coordination at the interfaces
between care settings
• Enhanced coaching and education
for the patient to support and
encourage self-management
While educating the patient is
important, forging a strong link between
the hospital staff and the next set of
providers has emerged as a priority. The
Institute for Healthcare Improvement
considers the execution of an effective
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transition from the hospital to post–
acute care settings to be a high-leverage
initiative, or one likely to be associated
with significant improvement in outcomes, for reducing rehospitalizations
(Sevin et al., 2012).
H O S P ITAL S ’ F I N A N C IAL
RATIO N AL E TO R E E N T E R
H O M E C AR E
Home care agencies are growing at a
staggering rate. A report issued by the
Medicare Payment Advisory Commission (MedPAC, 2012) shows that as of
2010, more than 11,000 for-profit and
not-for-profit independent home care
agencies were in operation—up from
7,000 in 2000. The number of total
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beneficiaries using home health agencies has increased from 2.5 million in
2000 to 3.4 million in 2010. Home care
agencies averaged nearly 18% margins
during the period 2001–2009. Reimbursement rates are not going to stay
as high as they have been, and with the
ACA, organizations will feel downward
pressure to reduce the market basket of
payments to home care services. While
margins will likely decline, they are still
considerably higher than overall hospital margins, representing a significant
financial opportunity for hospitals and
independent agencies.
One home care chief financial
officer (CFO) interviewed for this
research noted that starting a home care
company does not require a significant
capital investment. Little physical infrastructure is needed, and the majority of
the fixed costs are personnel. Hospitals
are in a prime position to initiate or
build a home care product line because
they recruit healthcare professionals
routinely in the course of its operations. Furthermore, the learning curve to
achieve a functional system is relatively
flat.
Hospital agencies will not be
precluded from initiatives to prevent
fraud and will have to abide by the new
guidelines requiring specific interval
assessments by medical personnel to
ensure care is needed. Although abiding by the rules is important, this
regulation should not have a significant impact on or delay utilization of
services because the personnel are
connected to the hospital directly. The
prospective payment system that home
care companies use is fair and creates a
high-margin business with low startup
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and operating costs, thus presenting a
large opportunity for hospitals to reap
financial rewards.
OR G A N I Z ATIO N AL C H A N G E S
On the organizational level, poor
hospital discharge planning has been
identified as a primary factor contributing to poor outcomes for seniors
after hospitalizations (Graham, Ivey, &
Neuhauser, 2009). The disjointed nature
of postdischarge protocols results in
readmissions with providers from each
segment skirting responsibility. This
vacuum of responsibility represents a
major organizational issue, as the two
groups do not share the same vision.
However, with one group under an
umbrella organization, a patient can be
discharged to her home and use an inhome care service, and the hospital can
provide a team-based approach through
a controlled environment. Data show
that a sense of camaraderie and loyalty
indicates a significant positive relationship with quality of patient care (Khatri,
Halbesleben, Petroski, & Meyer, 2007).
If the two groups have a shared vision,
the likelihood of effective outcomes is
greater than without the shared vision.
Further, with greater management
oversight and a more centralized “command center,” doctors and home care
providers will have access to each other
and a strong need for effective communication. Such initiatives will prevent
the breakdowns that occur in a fractured
system of care. Encouraging a collaborative environment and a commitmentbased approach to patient care has the
potential to ensure enhanced outcomes
and satisfy staff. Finally, this approach
can help the team learn from mistakes
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and encourage motivation between the
different care providers.
Proposed Plan
A relationship with home care agencies
is critical to ensure successful patient
transitions. However, it is the opinion
of the author that hospital executives
should consider one of two approaches
to potentially accomplish this task: complete integration or joint venture.
Success will rest on the establishment of a new position to facilitate
the process: the chief transition officer
(CTO). The main role of the CTO is to
ensure effective discharge processes,
including medical record handoffs,
communication of discharge orders, and
maintenance of medication lists. Also
under the purview of the CTO will be
the hospital home care agencies. The
CTO will act as the facilitator, building
strategic and operational relationships
between the home care agencies and
hospitals.
Complete Integration
In a complete integration model, the
hospital buys the home care company
directly or builds the capabilities in
house, absorbing the initial costs and
integrating the staff culturally. It establishes a credible business unit, similar
to the radiology or surgical department.
This action has numerous advantages.
The hospital has complete control over
the operations of the agency, allowing
for an immediate assessment of any
nonconformity from initial plans laid
out by management. Information transfer and discussions between providers
at both levels will be unhindered and
transparent. Management oversight of
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V ert ical I ntegration
the organizations can ensure compliance and a quick line of communication to monitor progress and outcomes.
Because the objectives of the organization are aligned, the atmosphere encourages a team-based approach to caring
for the patient. Revenues derived from
application of the complete integration
model support the hospital’s bottom
line and increase potential market share
in the local community as the hospital
develops market power.
However, this course of action
includes costs and risks. Investing in a
home care company does not guarantee
patient utilization, and the integrated
company is not as scalable as an independent business. Staff will likely want
to stay close to the hospital, but home
care agencies may need to provide services to patients hundreds of miles away.
Although the trained personnel required
to staff home care companies are available within the hospital, this approach
may strain the already high fixed costs
that hospitals endure. This organizational structure provides the hospital
with the most control and greatest
financial benefit; however, few hospitals
are currently entering the home care
market in this manner.
Large organizations may be inclined,
instead, to consider this type of decision. With greater capital and a more
developed infrastructure, large systems
are able to absorb startup costs and
ensure that the revenue cycle management protocols are in place to properly
administer the program.
Joint Ventures
An alternative, potentially stepwise,
approach to entering the market is to
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establish a joint venture or an exclusive
agreement with a home care company.
A joint venture does not require the
capital start-up costs or the upkeep costs
of running the organization. Building
contracts revolving around utilization
and referrals may suffice. A joint venture
uses companies that are already established in the market and are potentially
providing services to several counties.
It provides flexibility for the hospital
in the event that the home care agency
relationship needs to be ended.
However, while effective, a joint
venture poses serious concerns. Primarily, the care is still disjointed from the
hospital. Hospital management and
medical staff do not have direct communication with the home care aides.
Financial incentives are not directly
aligned, and the hospital does not establish a larger footprint in the community.
The CTO, while an important liaison,
has limited ability to exert control and
influence over the home care organization. As indicated by the CFO interviewed for this research, however, this
model is currently being used in numerous Texas facilities and could be applied
nationally. Practically, joint ventures
could make sense for smaller institutions as they decide how to effectively
proceed and determine whether their
involvement is attractive enough to create their own program.
C O N C L U S IO N
Eventually, hospitals will be responsible
for the entire continuum of care in a
community. Engaging home care is one
step that can be taken in the short term
to reach that goal. Large health systems
may be more financially suited than
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independent hospitals or small
systems to embark on such initiatives
on their own and be ready to take on
the additional risk. However, it seems
that smaller, community facilities may
be able to implement home care initiatives at a local level more effectively
for the population they serve. Culturally,
they tend to be more agile than larger
institutions and more knowledgeable
about their specific community’s needs,
and in responding to those needs by
hiring personnel with understanding of
their patients and providing services that
are relevant. On the other hand, smaller
institutions need to be willing to take
the risk and recognize that their initiatives may not be suitably scalable.
Ideally, to hedge their risk, hospitals
should consider a joint venture as an
initial step to evaluate the effectiveness
of the combined organization. Should
the result be positive, executives may be
inclined to consider a greater degree of
collaboration and integration. Assessing
both financial results and patient outcomes is necessary before expanding the
relationship. A detailed management
strategy and successful implementation plan for a joint venture could serve
as the stepping-stone to a profitable
relationship, with the ultimate goals of
improved patient outcomes and solvency for the hospital.
Home care is a market with significant potential to positively affect care
delivery within a community, encourage a managed approach to discharge
procedures, and provide a high-margin
business for the organization. Hospital
leaders should recognize home care as
both a profit center and a risk mitigation
product that entails developing a strong
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relationship crucial to patient outcomes,
future market position, and financial
rewards.
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