by Ken Accardi, Founder & CEO of Ankota

July 2016 – When we think of healthcare, our immediate images are of the hospital or perhaps our doctor’s office.  This is because the hospital and the physician’s practice are the places that we traditionally go for healthcare services, and for most of us this won’t change.  The reality, however, is that the majority of healthcare spending is on the elderly and chronically ill.  In fact, according the Centers for Disease Control (CDC at http://www.cdc.gov/chronicdisease/) chronic disease accounts for 86% of our nation’s healthcare costs.

Healthcare is in the midst of a major reform in the way that services are reimbursed, guided by a policy called “The Triple Aim” of healthcare.  The triple aim of healthcare is to 1) improve the experience of care, 2) lower per capita cost, and 3) maximize population health.  With no disrespect to our hospital system, the hospital is the place where we have our worst experiences of care at the highest cost.  Further, US healthcare costs are increasing at an alarming rate and are higher than all other countries.

For the majority of people (the 80% of Americans who collectively consume 20% of healthcare cost) this is our normal life and the system works great. When we get a cold or experience a sports related injury, we go to the doctor or hospital and get it fixed.  This is why the talk of shifting to a preventive medicine approach has never amounted to very much.  Let’s face it, the people who wear their Fitbits regularly are generally the healthiest among us who cost the health system virtually nothing.

Unlike acute healthcare issues that can be cured or fixed by visiting a doctor or hospital, chronic healthcare issues are long-term and require ongoing management.  On most days, people with chronic health issues tend to feel pretty well, but inevitably those conditions flare-up and often result in trips to the emergency room (the pinnacle of high-cost, low-satisfaction).  The key, therefore, to reforming healthcare is to focus on the elderly and chronically ill population and to come up with ways that keep them out of the hospital.

The Inevitable Shift to Healthcare at Home

By contrast to the emergency room, our time at home (or otherwise stated, the time that we spend outside of the hospital) is where we have our best experience of health and where our costs of healthcare are lowest.  Whereas an emergency room admission to intensive care is likely to cost $8,000 per day, and skilled nursing will generally cost $1,000 per day, the healthcare costs for a day at home are minimal.  Even if we look at an individual in their mid-80s with four chronic conditions who has a home care attendant for 2 hours per day and a weekly nursing visit, the cost for their care would be below $60 per day.  But just because it makes sense, doesn’t mean that this shift will occur.  A shift like this needs help.

CMS, which provides care for Americans over 65, as well as for the poor and disabled, is shifting to value-based purchasing models.  Whereas healthcare has historically been reimbursed under a fee-for-service model that encourages more treatments to be done, these value-based initiatives encourage a Triple Aim inspired approach of finding the best way to care for an individual at the lowest cost.

One example of value-based care is the Accountable Care Organization (ACO) model that is currently in place for just under 20% of Americans.  Following the models of organizations like Kaiser, the Mayo Clinic Health System, and the Geisinger system, a health system is given a fixed cost to manage a population, and its profitability depends on reducing cost. There’s an excellent article about what makes this work in the New Yorker titled The Cost Connundrum.

Another model called the Joint Replacement Bundled Payment just went into effect on April 1, 2016 at approximately 800 hospitals. In a nutshell, a joint replacement generally costs $17,000 for the hospital and surgeon.  This new model pays the hospital $28,000 and requires that hospital to also bear the costs for recovery.  And, as reported in the Wall Street Journal, hospitals that discharge to rehabilitation and skilled nursing facilities will lose money on the bundle.  By contrast, they can be profitable by sending the patient home, but only if the care is successful and avoids a readmission.

Care at home being less expensive and resulting in higher quality of life has never been sufficient to drive this needed paradigm shift.  Payment reform will get the job done.  Ultimately, it’s inevitable that healthcare at home will emerge as the solution to healthcare reform.

The Healthcare at Home Landscape

There is already a large and booming home care industry employing almost 5 million Americans.  This has been the fastest growing area of job growth in the US economy.  The problem, however, is that the industry acts in silos that are not in any way integrated and don’t coordinate their care.  Some of the market segments (silos) are home health nursing (such as the Visiting Nurses), non-medical home care (home care attendants or aides who help with personal care and chores), durable medical equipment (DME – such as walkers, geri-chairs), and other specialty services like tele-health and phlebotomy.  The next frontier for healthcare improvement will be to reorganize home care into integrated delivery systems that provide all the services required to prevent avoidable hospitalizations for our elderly and chronically ill.

I started by saying that today we picture healthcare as being in the hospital and the doctor’s office.  If we get this right, future generations will understand that the key to sustainable healthcare relies on the successful birth of healthcare at home.

About the Author

Ken Accardi is the founder and CEO of Ankota, a software company that enables home care organizations to efficiently deliver care at home.  The software helps home care organizations whenever possible to keep our aging loved ones out of the hospital. You can learn more about Ankota at www.ankota.com or read more about the transformation to healthcare at home on Ken’s blog at www.ankota.com/blog.