Health-Care Firms Find No Place Like Home : Medicine: Medical services, from infusion therapy to X-Rays, are moving from hospitals to the home. Insurance companies love it, and many patients prefer it.

In the beginning, there was some apprehension about whether he could actually do it. But no such qualms were apparent on this particular morning as Jerry Francek, a 43-year-old AIDS patient, stood shirtless in front of his bathroom mirror. He quickly located the catheter implanted in the large vein above his heart and inserted the needle and thin tube necessary to connect the apparatus that would deliver therapeutic drugs directly into his bloodstream.

For the next couple of hours, Francek would relax in his bedroom, chatting with friends and family on the telephone while an intravenous pump slowly fed a pre-mixed drug solution into his body. “I would hate to have to do this in a hospital,” he said.

His doctors said there were no medical reasons for Francek to be hospitalized for therapy at this stage of the disease. He would take the antiviral AIDS drug AZT orally. And the doctors would allow Curaflex Health Services to oversee the intravenous delivery of the drug Ganciclovir (prescribed to ward off a debilitating infection) at Francek’s home.

Francek’s care illustrates the growing importance of home care in the nation’s health-care system. Home care is among the fastest-growing segments of the health-care industry. Companies providing such diverse services as skilled nursing, portable X-raying, dialysis and home care for infants at risk, had revenue of about $16 billion last year, and the industry has been growing at a 12% annual rate.

Rancho Cucamonga-based Curaflex, with revenue of $30 million last year, supplies drugs and intravenous equipment and is part of the infusion-care niche that produced $1.5 billion in revenue in 1989. The home IV market, which barely existed before 1980, is expected to grow about 30% a year over the next two years.

Demographics--a growing population of elderly people who need and want care at home--and technology, which has made medical equipment smaller and simpler to operate, are important factors in the growth of the home-care industry. But the biggest factor is price: Home health care is 50% to 70% cheaper than the same care provided in a hospital.

Infusion care “is one of the most attractive solutions to the cost-containment problem which has faced the health-care industry over the past several years,” said Rae E. Alperstein, an analyst who has studied infusion-care companies for Los Angeles-based Bateman Eichler, Hill Richards Inc.

“Insurance companies absolutely love it,” said R. Ross Dale, president and chief executive of HMSS Inc., the Houston-based infusion-care company owned by Secoamerica Inc. of Newport Beach. Secoamerica, which owns Westec Security Inc. and is the American unit of Tokyo-based Secom Co., signaled the growing value of home health-care companies last September when it agreed to pay $255 million for HMSS. The price per share was nearly a 50% premium over what it was before the bid.

The large size of the potential market has attracted several players into infusion care, and there has been some consolidation. The niche is dominated by Baxter Travenol Inc.’s Caremark, which has about one-third of the market. National Medical Care, a $68-million unit of W. R. Grace Inc., bought Foster Infusion Care from Avon Products last year. Last week,Beverly Hills-based Salick Health Care Inc. agreed to buy a regional infusion-care company based in Laurel, Md.

Curaflex is dropping its unrelated home nursing lines to focus completely on home infusion care, which might place it among the top 10 in that market niche. HMSS is ranked fourth, according to Alperstein’s 1990 revenue estimates for the top companies. But HMSS is growing fast--60% last year--and has maintained healthy profits. Ross said about 92% of its patients are privately insured.

One attractive thing about the young home-care industry--from a profitability standpoint--is that, so far, insurance companies have been willing to pay what home health-care companies charge because the savings over hospitalization is so dramatic.

Cost containment may eventually cause insurance companies to look more closely at home-care charges, analysts said, but Alperstein doesn’t believe that tighter reimbursement policies will be an issue in the near future.

Insurance companies are clearly becoming more comfortable with home health care. Last year, 88% of employers offered a health plan with a professional home-care component, up from 79% in 1986, according to a recent survey by A. Foster Higgins Co., a Princeton, N.J.-based employee benefits consulting firm.

Blue Shield of California included home care in an alternate-care program begun last month. To save money, the insurer put together a statewide contracting program to provide outpatient services for the approximately 1 million people in its preferred provider organization. (The PPO consists of health-care providers who have agreed to provide services at a set fee. Blue Shield members in the plan must use those providers or pay the difference out of pocket.) Among the 300 providers initially included in the network are home nursing agencies, infusion-care companies, providers of home medical equipment and home hospice services.

Boston-based John Hancock Mutual Life Insurance Co. has provided for home care in its case management program for catastrophic illnesses since 1987. Home care was included because the company believed that elderly people would be a much larger percentage of its market in the future, said Nancy Bern, vice president for group marketing. “When we designed the program, we wanted the insured to have total flexibility. In doing research on health care for the elderly, we found that if a person has a choice, they want to stay in the home,” she said.

“Most insurance companies realize that this is really the market of the future. It is going to be interesting to watch over the next decade whether the demand outstrips the supply,” Bern added.

The notion of home care as a significant part of the health-care market of the future hasn’t gone unnoticed by hospitals. Servicemaster Home Health of Clearwater, Fla., provides home health care exclusively through joint ventures with approximately 60 hospitals around the country. Servicemaster acts as managing partner for a venture owned by St. Joseph Hospital in Orange and St. Jude Hospital and Rehabilitation Center in Fullerton, said President William C. Hardy.

“Home health care is very different from inpatient care. It takes a special expertise to operate successfully,” Hardy said.

Home care also needs the cooperation of a community’s physician to be successful. “The physician is still the gatekeeper of home health-care services,” said Dr. Bernard Ferrari, senior health-care consultant for McKinsey & Co.’s Los Angeles-based health-care practice. “There are national trends. But home health care is a local market business, and every local market will have a different look about it because physicians in different markets have different practice patterns,” he said.

Some doctors may not yet be comfortable with patients receiving certain therapies without their close supervision, Ferrari said. Medicare has developed a certification process to help ensure quality of home care. The Joint Commission on Accreditation of Healthcare Organizations also has a certification process. Still, some observers worry that the industry has grown faster than the ability of authorities to regulate it.

Hardy said he believes that physicians are increasingly willing to change their attitudes. “When we first started (1982), we had to sell the concept to physicians. We don’t have to sell it anymore,” he said.

Physicians in Southern California appear to be accepting home care in greater numbers, said Dr. Stephen J. Gabin, a Los Angeles internist who recently became medical director at Curaflex. Gabin has a large number of AIDS patients and said he believes that colleagues in similar practices are especially willing to recommend home health-care services.

Gabin said he has prescribed home care for people with AIDS who need to be fed a huge volume of calories intravenously. Others have received long-term intravenous medicine at home for the fungus infections that often strike AIDS patients, he explained. Gabin said he has had no trouble finding local home-care companies to serve a variety of his patients. He has found a mobile X-ray service to take chest X-rays in patients’ homes and he found a service that would periodically send nurses to take blood tests in the homes of elderly patients on medication to prevent blood clots, he said.

“Two months ago, I had a patient with a severe infection in his leg. He needed an IV once a day. A week in the hospital would have cost him $10,000 to $15,000. We got service at his house and we got him just as well as we would have in the hospital for a lot less,” Gabin said.

Aside from the money that it saves, Gabin said, he used home health services long before his involvement with Curaflex because his patients were happier with it.

Jerry Francek, one of Gabin’s patients, said he appreciates such considerations. He spent Christmas at home with his own 12-foot tree--decorated with his own special ornaments, he said. He plays golf frequently in the Southern California sunshine, he added. And, in January, he packed his stainless-steel IV pole, sterilization equipment and drugs, and flew to Hawaii for a two-week vacation.

Francek said he was initially a little nervous about whether he could operate the IV equipment. A Curaflex registered nurse, Robin Mendoza, trained him and continues to monitor him and report to his doctors. She also wears a beeper so that he can reach her 24 hours a day.

Mendoza visits every Monday. Francek’s treatments are prescribed for five days a week to prevent an infection that causes blindness. For months, he has hooked up his own IV with only one minor incident. “I was in a hurry to go out one day and I ran it a little bit too fast. It made me really sick to my stomach,” he said.

“I’m not locked into a hospital,” Francek added. “I don’t have to be there or go to a doctor’s office. I have my own refrigerator. I’ve put on 25 pounds since I left the hospital.”