Caring in the Home
Wound care management is a growing cause of concern in the home health care market. Earlier under the cost-based reimbursement system, home care providers were paid to treat wounds based on home health visits regardless of the outcome of their care. Now with the implementation of prospective payment system (PPS) for Medicare reimbursement, home care providers are held accountable to heal the wounds. To the concern of wound care product manufacturers and home health care providers, the add-ons that were implemented in 2000 to ease the changes and cuts in the reimbursement expired as of Oct. 1, 2002.
Home Health Care
Home health care services, as defined by Medicare, are skilled, intermittent, part-time services provided under a physician's written direction and plan of care in the residence of the homebound patient. Home care in the United States is a diverse and dynamic service industry. Currently more than 20,000 home care providers in the nation cater to approximately 8 million people. The demand for home health care has increased in recent years. The following three factors are driving growth in the home care market:
Economic Factor
Home care is emerging as a cost-effective alternative to an expensive hospital stay. It helps people recuperating from a hospital stay or those suffering with functional or cognitive disability to cut costs.
Technological Factor
Technological advancements have enabled patients to receive appropriate therapies in the home, that were not possible a decade ago.
Demographic Factor
The aging population of the United States is putting tremendous demand on the home care services. Currently more than 70 percent of the home care population is 65 years or above.
Home care forms approximately three percent of the total healthcare expenditure in the United States and this number is expected to increase in the future. However, the growth in this segment of the health care industry is constrained by healthcare financing reforms.
Reimbursement Changes Impact the Market
The 1997 Balanced Budget Act instituted a revised payment system for Medicare home care. It amounted to cuts in reimbursement of 15 percent for Home Care and 10 percent for skilled nursing facilities or long term care. These cuts were phased to ease the transition. Also, add backs implemented in 2000 to reduce the impact expired as of Oct. 1, 2002. Under this act, the Medicare services moved from cost-based reimbursement to fixed reimbursement per unit of service. With an emphasis on efficient resource utilization, it enforced a shift in the unit of payment from the home health visit to a 60-day episode. The care providers instead of being paid per visit are paid based on services provided. In addition, the new system mandated Outcomes and Assessment Information Set (OASIS), a more comprehensive but stringent rate system of assessment. Some of the resulting changes in reimbursement include:
- Reduced spending on equipment purchase
- Reduced number of nursing staff and assistants
- Late discharge of patients from acute care settings
- Prolonged discharge of patients from acute care settings
- Competitive bidding among HME providers
- Long-term care most effected by the legislation
- Increased focus on the prevention of diseases like chronic wounds
According to the Healthcare Financial Management Association estimates, home health payments are projected to grow at 2.1 percent for the year 2003. But the actual payment per episode are expected to decline by 4.9 percent due to 7 percent statutorily required reduction this year. The 2003 payment amount for the standard 60 day national per episode rate has been set at $2,159.39 reflecting the 2.1 percent update and the 7 percent statutorily required reduction. Overall, the annual update adds $320 million to this year's home health expenditures, but the 7 percent reduction takes away $821 million. In spite of this reduction slated, Medicare's total spending on home health services is projected to grow 12.2 percent in 2003, 8.3 percent in 2004 and 7.4 percent in 2005, because of the anticipated increase in the number of episodes.
To maintain positive PPS margins, home care providers must provide quality wound care at a lower cost with better outcomes. Cost concerns initiated by these changes in the reimbursement system are forcing home care providers to re-evaluate traditional wound care practices.
Wound Management in Home Care
According to a 1999 study by the National Association for Home Care, about one third of home care patients suffer from a chronic wound. Even though home care agencies show a lack of consistency and a standardized wound care protocol, the market has predominately followed the traditional way of wound management. This method uses conventional wet-to-dry dressings for the treatment of wounds. The treatment is marked by lengthy healing time and re-occurrence of wounds that adds substantially to the total cost of wound care. The association estimated that the average cost of healing a wound at home cares including supplies and labor cost approximates $13,000.
Such approach toward wound healing leaves little or no profit margins for the providers in the new prospective payment system of reimbursement. Home care agencies are increasingly realizing the importance of faster healing of wounds in order to control the total costs of wound care.
The lack of awareness for advanced wound management often restricts the growth of the market. Nurses play an important role in home care wound care management. Doctors are involved in the prescription for wound care products only 25 percent of the time. The nurses, who are trained to use gauze dressings and follow conventional methods of treatment, find it difficult to accept new wound care technology. The lack of information about the benefits of a moist healing environment for speedy wound healing and importance of early intervention to prevent wound formation, hinders the market growth through restricted product usage.
Cost Effective Products as a Solution to Cost Constraints
Advanced wound care products offer a cost-effective solution to home health agencies. There is increasing focus on early intervention and prevention of wounds, and rising demand for better products that reduce wound healing time. As a result, the market for advanced wound care technologies is constantly evolving and becoming highly competitive. The market is driven by rising demand for efficient and cost-effective dressings to address the chronic wound care market. The market for traditional dressings is estimated to decline in the future, whereas the advanced wound care market is expected to grow between 7 to 15 percent. The cost benefit analysis shows that the traditional dressings may be less costly than the advanced dressings, but the latter proves to be more cost effective in terms of reduced healing time and thus less labor costs involved.
The three factors most valued by home care consumers include efficacy of the wound care product, pricing and personal benefit. |
Increasing emphasis on the cost benefit analysis of the product usage, has established product efficiency and efficacy as the two most important parameters of product usage. By the year 2005, the advanced wound care market is expected to achieve 60 percent of the wound market.
A few years ago, there were only a limited number of wound care products available in the market. Presently, a high proliferation of wound care products characterizes the wound care market. Current estimates show that the wound care market hosts approximately 400 brands of dressings that are categorized into 16 different categories. These dressings range from simple gauze dressing to technologically-advanced dressings that constantly deliver a continuous stream of silver ions to prevent wound infection.
The expanding home care facilities are a viable market for manufacturers of wound care products. Even though the new reimbursement is expected to further lower payment per episode this year, the number of episodes is on rise.
Home Care as a Retail Market for Wound Care Products
The advanced wound care market has started to penetrate the retail pharmacy. The fast growing home care consumer market is identified as potential market for these products. There are two types of consumers targeted in this market. First the actual patients in home care, and secondly, the family caregivers. Market studies suggest that aging baby boomers are likely to spend more in order to take care of their families. A Medtrade study conducted in 2002 estimates that family caregivers spend about $2 billion monthly purchasing home care equipment and supplies. Some of the wound care products, considered as core products, include wound cleansers, non-adhering dressings, primary and secondary dressings and surgical tapes. The sale of these products is mainly driven by demand instigated by increasing incidences of pressure ulcers and other medical conditions like diabetes among the elderly. The related products, including skin lotions and band aids are not necessary driven by needs but are viewed as subsidiary wound care products for the home care consumer market. The three factors most valued by home care consumers include efficacy of the wound care product, pricing and personal benefit. The sellers, through price incentives and extended customer services, can benefit from this growing segment of the population. Although the challenge for the retailers is to keep pace with the evolution in the wound care market, know about the products and determine what products to stock.
Remote Management of Wounds
Another important development of wound care management in the home is the introduction of tele-management of wounds. The adoption of these methods including combination of video-conferencing equipment, diagnosis-specific clinical software and experienced wound care professionals, has led to reduced spending on wound management. With data compiled and constantly updated, individual cases are closely followed on a weekly basis. The resulting information leads to better choices on a range of issues from use of products, to frequency of visits and use of therapy. This approach results in significant cost savings in the home care wound management market.
The reimbursement act has initiated both opportunities and obstacles for the wound care manufacturers in this market. The market is driven by the growth of the market size and the demand for efficient products. There is definitely a need to develop a protocol that emphasizes the need to adopt a cost-effective approach to wound management. Informed decisions about wound care products as a means to cut costs will lead to increased profit margins for home health agencies. Overall, coordinating the activities of care will provide a better chance for home health agencies to succeed in such a cost constrained environment.
This article originally appeared in the April 2003 issue of HME Business.