Home Care and Chronic Disease: The Untold Story

CARING Magazine October 2008
Dr. Robert Fazzi, Managing Partner
Timothy Ashe, Partner
Lynn Harlow, Partner

The Milken Institute knew it and they let the world know in October 2007. Johns Hopkins University made their findings known a month later in November 2007. Not to be outdone, the Agency for Healthcare Research and Quality (AHRQ) came out with their report in May 2008. And if none of this is compelling enough, a recent Robert Wood Johnson funded report (September 2008) compiled by Trust for America’s Health provided the final exclamation point – chronic diseases are growing, are getting more costly, and are directly impacting the quality and financial viability of home care agencies throughout the country.

For home care, these and a growing number of other reports, makes it clear that there are significant threats and incredible opportunities related to serving people with chronic disease. The challenge to home care agencies is to first understand the realities of these threats and their implications to service delivery and then zero in on the one service delivery option that has shown to have a positive impact on the quality and financial outcomes for agencies who use them. That option? Telehealth!

The Reality of Chronic Diseases

There is not a home care agency in the country whose leaders wouldn’t readily attest that the challenge of treating patients with chronic disease is both difficult and costly, costly in terms of their financial impact on the agency, and costly in terms of their impact on the agency’s quality scores. Chronic cases traditionally lead to the greatest number of re-hospitalizations and emergent care visits. They often have a very negative effect on quality outcomes. They are costly. And, given CMS’s new Pay for Performance initiatives, an agency’s inability to effectively treat chronically ill patients can have serious implications to their Home Health Compare quality reports and ultimately their financial viability.

The only ones more concerned about these realities are the patients themselves. They are the ones who continually struggle with the fear and pain associated with living with chronic disease and they (and their families) are the ones who share the home care agency’s commitment to improving service delivery.

How significant is the problem? An October 2000 report by the Rand Corporation (Projection of Chronic Illness Prevalence and Cost Inflation) reported that in the year 2000, 125 million Americans had one or more chronic diseases. By 2010, that number was projected to jump to 141 million and by the year 2020, it was expected to reach 157 million. But, for home care, that is really only the tip of the chronic disease iceberg.

When you begin looking at Americans over the age of 65, the population served by home care, the numbers become far more dramatic and far more threatening. The November 2007 report by Johns Hopkins University reported that 90% of Americans over the age of 65 have one or more chronic diseases, 70% have two or more. And when you take into consideration a U.S. Bureau of Census report that states that by the year 2020, one out of every six individuals will be over the age of 65, the magnitude of the growing problem is obvious.

As a side note, in reviewing these projections, it is interesting to note that women are more likely than men to have a chronic disease. But, before the male authors and readers of this article become too smug, we should quickly point out that the reason is not that men are healthier, they just don’t live long enough.

While percentages are interesting, what is even more interesting are the numbers. When looking at the four major chronic diseases served by home care agencies – chronic obstructive pulmonary disease (COPD), heart disease, diabetes and hypertension – the numbers are staggering. According to the 2007 statistical supplement to the Health Care Financing Review, the subscription journal of the Centers for Medicare & Medicaid Services (CMS), in calendar year 2006, nearly 700,000 patients received services due to chronic disease. That was over 26 million visits.

Chronic Disease and Cost

While the numbers are staggering, the financial implications are even more overwhelming. The May 2008 AHRQ Report (Health Care Expenses for Adults with Chronic Conditions, 2005) found that those with one or more chronic conditions accounted for the overwhelming majority of total medical expenses for all conditions. The AHRQ Report stated that, “among persons age 35 and over, those with one or more chronic diseases accounted for the overwhelming majority of medical expenses for all conditions – 88.4% for those age 35 to 54, 95.8% for the near elderly (ages 55 to 64), and 98.9% for the elderly age 65 and over.”

The above chart makes it clear just how significant these numbers are. Together, they represent over 3.3 billion dollars in direct home care costs and double to triple that figure when co-morbidities are included.

For home care agencies, it is not simply that the dollar amounts are so large, which they are, it is that they also represent a major part of home care’s revenue. When analyzing the household section of the Medical Expenditure Panel Survey (2005), AHRQ reported that revenues from chronic diseases represented nearly 60% of all Medicare revenues received by home care agencies. It is no wonder that there is a growing interest in finding more effective ways for agencies to control costs and services for chronically ill patients.

The Emergence of a Real Option – Telehealth

If there has been one area that telehealth vendors and those who use telehealth services have been interested in, it has been the impact of telehealth on patients with chronic disease. Part of the reason is their firm belief that telehealth does have a positive impact on service delivery and quality outcomes. The other reason has to do with money. Because telehealth is presently not reimbursed by Medicare, proponents realize that to expand the adoption of telehealth by home care agencies, the value of telehealth – the clinical and financial value – needs to be substantiated. Given the numbers and costs associated with patients with chronic disease, proving the value here would have a major impact on future use of telehealth

Over the past five years, there has been a growing volume of studies that document the quality and/or financial value of telehealth. There are two recent publications or findings worth noting. The first comes from the Advanced Medical Technology Association. In a report titled Telehealth and Remote Monitoring: An Outcomes Overview, 2007, the authors stated that “the results of studies to date are promising and show clear value in remote monitoring and telehealth.” While many studies were cited in the paper, there are two that we would like to focus on.

A 2006 Canadian study of COPD patients found that remote patient monitoring led to fewer nursing visits and rehospitalizations for patients on the telehealth program. According to the study, “remote monitoring saved $355 per patient (15% of the total cost of the services) compared to traditional home care in the controlled group.

A second study of frail, elderly veterans in the VA Connecticut Healthcare System who suffered from CHF, COPD or DM, found that those who received home telehealth services used fewer nurse visits at home, fewer bed-days-of-care, fewer urgent care visits and had fewer transportation to facilities “yet had equivalent outcomes in comparison to the participants who received standard care.” The study also tracked the cost of telehealth services and reported that although “telehealth added $1,666 to the cost during the six month study, the overall health care costs decreased by 58% for the groups receiving telehomecare.”

The other study worth noting (and there are many more than two worth noting) comes from the NAHC co-sponsored 2007 Philips National Study on the Future of Technology and Telehealth in Home Care. During the study, the research team ran a quality and financial comparison of two groups of agencies that were part of Fazzi’s National Best Practice Service - those who did not have a disease management program versus those who used telehealth services as part of their disease management program.

Note: The BestWorks® sample is not a representative sample of the home care industry. Agencies who participate in this best practice service tend to be more aggressive towards achieving higher levels of quality and financial outcomes. We can, however, still compare the impact of practice on outcomes.

We compared 100 agencies that were part of the BestWorks® program; 50 of which had no disease management program and 50 who had a disease management program using a telehealth system. We compared them on two dimensions: profitability as measured by profit/Medicare episode and quality as measured by their Home Health Compare scores. We used nationally reported comparisons to help put the findings in perspective. In both cases, the findings were significant.

In terms of profitability, agencies that used telehealth services as part of a disease management program reported higher profitability than those who did not. We also compared these numbers to the base line average profitability per Medicare episode as reported by NAHC (3.14%). It is important to note that both hospital-based and freestanding agencies were included in both the NAHC figures and the BestWorks® sample. Hospital-based agencies tend to have lower margins because of hospital allocations.

The quality findings were even more definitive. Using a composite index for agency Home Health Compare scores, we compared BestWorks® agencies that did not have a diseased management program with those who had a program that included a telehealth component. Those who did not have a disease management program had composite quality scores that were sixteen points lower than the agencies that reported having a formal disease management program using a telehealth system. These agencies were at the 76th percentile, very close to the 80th percentile where the CMS Pay-for-Performance bonus system is expected to go into effect.

So, What’s the Bottom Line?

When you put all of this together, there is an important story that needs to be told. First, the numbers of home care patients with chronic disease are significant and the numbers will continue to grow. Second, patients with chronic diseases represent some of the most challenging and costly patients served by agencies. They are patients who have higher incidence of rehospitalization and use of emergent care. They are also the patients who are the greatest challenge to an agencies Home Health Compare scores.

Third, and what we believe to be most significant finding of all, is that telehealth has clearly emerged as the single best tool for better serving and managing patients with chronic diseases. It is this recognition, in fact, that has lead Philip’s Telehealth Solutions to partner with the National Association for Home Care and Hospice and Fazzi Associates to initiate a national project designed to identify the best practices for dealing with the four major chronic diseases using telehealth systems. The national project will bring together chronic disease medical experts with the home care industries leading telehealth clinicians from every state in the country. Results of the project will be reported in a future issue of Caring Magazine.

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Tim Ashe, RN, MS, MBA is a Partner with Fazzi Associates. He is the author of numerous articles on management and performance improvement and is presently serving as the Co-Director of the Philips National Study.

Dr. Robert Fazzi is the Managing Partner and Founder of Fazzi Associates. He has been involved in providing consultation, training, and research to the home care and hospice community for over 30 years, and has served as director on numerous national studies. He is co-director of the Philips National Study

Lynn Harlow is a partner with Fazzi Associates and serves as the Director of Business Intelligence, the division that conducts in-depth marketing studies for home care agencies and vendors.