Low barriers let large firms, small players crowd home-care industry | The Columbus Dis... Page 1 of 2
Low barriers let large firms, small players crowd home-care
industry
By Ben Sutherly
The Columbus Dispatch • Tuesday December 16, 2014 6:41 AM
With revenue hovering around $100 billion annually, the U.S. home-care system is anything but a cottage
industry.
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The nurses and aides who enter millions of homes as caregivers each day work for employers who run the
gamut, from publicly traded companies that generate millions in profits to immigrant-run mom-and-pop
operations.
The home-care industry is widely regarded as one of the more profitable options for franchising. But one
industry watcher, IBIS World, predicts that new reductions in Medicare payments threaten to upend much of
the industry. Profits are expected to decline by a third over the next five years, from 6.9 to 4.6 percent of
revenue, according to IBIS.
Estimates of the industry’s size vary, but the National Association for Home Care & Hospice estimates that
Medicaid and Medicare pay for about $90 billion in home health and personal care each year.
Home-Care Crisis: Read all the stories from the Dispatch investigation
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Medicare accounts for the bulk of public spending on home health care, and Medicaid pays for most personal
care, according to William Dombi, the association’s vice president for law. The private sector pays for an
additional $10 billion to $20 billion in care, either directly from consumers or through long-term-care
insurance.
The industry is the fastest-growing in Ohio. In Franklin County, the home health-care and in-home hospice
industries have grown more than twice as quickly as in the state as a whole.
The county accounted for just over 10 percent of Ohio’s population last year, and just 11 percent of its
residents are 65 or older, compared with 15 percent statewide. Yet the county accounts for 22 percent of the
state’s home health workforce.
The industry is highly fragmented, with no single company dominating the business. That’s in part because
the barriers to entry are fairly low, with little money required to start a small agency. For Medicare
certification, the investment often is at least $100,000, below that needed for a fast-food franchise.
In states such as Ohio that don’t license home health agencies, IBIS World noted, “An individual with a
personal vehicle may be enough to constitute a business.”
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“This is an industry where scale has not always been rewarded,” said Michael Wiederhorn, a managing
director for health-care facilities and services at Oppenheimer & Co.He anticipates a wave of consolidations,
mergers and acquisitions in the industry as managed-care payers — Humana and Aetna, for example — and
providers such as hospitals get into the business. Their goal: to try to keep patients out of hospitals and dodge
penalties for excessive readmissions.
Aetna sees value in home health aides and is outfitting some in Illinois with smartphones so they can
immediately report changing conditions of patients to supervisors and primary-care doctors.
Locally, hospital systems run some of the largest home health-care businesses, with OhioHealth and Mount
Carmel Health System providing 133,780 visits and 95,913 visits, respectively, in their most-recent fiscal
years.
OhioHealth said it had revenue of about $27 million from home health-care services alone; Mount Carmel
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declined to disclose revenue.
Nationwide Children’s Hospital’s pediatric home health agency notched more than 12,000 home nursing and
skilled-therapy visits in 2013. Ohio State University does not have a home health-care division and said that it
does not have one in the works.
“The readmission piece is a huge component,” said Chad Evans, Mount Carmel’s director of geriatrics and
home-based services. The hospital system now places a greater emphasis on handoffs in care than it did three
years ago. “We’re focused on taking care of that patient, regardless of what setting they’re in,” Evans said.
OhioHealth, meanwhile, is working on offering more-specialized care than it had in the past. Such
specialization has become more common across the industry.
“We’re focused on helping these patients become independent in their care,” said Jim Newbrough, president
of OhioHealth Home Care, which includes services for hospice, home medical equipment and home infusion
pharmacy.
Fraud has had a significant impact on the bottom line of some home health-care companies. Amedisys Home
Health and Hospice Care, a Louisiana-based for-profit company that’s one of the nation’s largest home
health-care providers, agreed in April to pay $150 million to the federal government to settle allegations that
it fraudulently billed for home services between 2008 and 2010 and had improper financial relationships with
referring physicians.
Amedisys did not return a call seeking comment.
Some publicly traded home health-care companies have taken a drubbing from investors recently after
growing “hand over fist” for years, Wiederhorn said. But they are beginning to recover some of their value, in
part because of the aging baby boomers, the growth of Medicare Advantage plans, and “a realization that
home health is part of the solution of keeping the cost down,” he said.
Home Instead, an Omaha, Neb.-based provider of home-care services, is one of the largest such franchises in
the United States. It has more than 1,000 franchises globally and accounts for about 60,000 home visits daily
in the United States alone. About 90 percent of its services are private-pay.
“I don’t care how big we get, we’re not big enough to meet all the demand out there,” said Roger Baumgart,
Home Instead’s CEO.
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