NURSING: A Surge in Home Care : Home Medical Care Industry Showing Strong Vital Signs : Nursing: Thousands of patients are treated in cozy surroundings with the latest medical and computer technology. The number of companies in the field has doubled since 1980.

A thin, almost nervous, smile crossed the face of David Reyes as he held out his left arm to nurse Karen Wilson, who knelt before him while preparing an array of syringes and swabs on the coffee table.

Working intently on her 39-year-old AIDS patient, Wilson cleaned and sterilized an implanted intravenous feeding tube that ran from an artery in his forearm to his aorta, the main artery to the heart.

She quickly drew a vial of fresh blood.

“How’s your digestion? Have you been running a temperature?” Wilson asked, marking Reyes’ answers on his medical history chart. Behind her, happy chatter blared from a TV in his Torrance apartment.

Reyes represents a growing number of patients who are shunning hospitalization and choosing what some consider a cost-efficient answer to spiraling health care costs.

Before long, tens of thousands of patients--from asthma sufferers to terminal cancer patients to people with acquired immune deficiency syndrome--will receive treatment in their homes via nurses equipped with the latest medical and computer technology.

“I tell you,” Reyes said, his face relaxing visibly as the half-hour examination ended, “this is a lot better than sitting in a hospital.”

Indeed, a 1991 study conducted by Washington-based National Research showed that 71% of patients prefer going home to recuperate rather than staying in a hospital.

Home care may also be an answer to the problem of managing U.S. health care costs, which a growing number of medical experts and politicians say are fast spiraling out of control.

As politicians push for varied health care reforms, more than 300 U.S. medical practitioners and administrators gathered in San Francisco last week to debate the affordability--or lack of it--of health care in the 1990s.

There is good reason to worry.

Recent studies have shown that health care spending has “grown faster than the overall economy in almost every one of the last 30 years,” according to an article last year in an academic journal, Health Care Financing Review.

In 1960, for instance, health spending represented 5.3% of the U.S. gross national product; by 1989 it represented 11.6%.

Most medical practitioners who attended the Affordable Health Care 2000 conference at the Sheraton-Palace Hotel in San Francisco on Thursday agreed that home health care, a $15-billion industry growing annually by 25% to 30%, will be a major component of U.S. medicine by the turn of the century.

“The support you get from home care is tremendous,” said Dr. Mary E. Frank, president of the San Francisco-based California Academy of Family Physicians and a practicing family doctor in the Bay Area. “The nurses go above and beyond what the job calls for.”

Frank said that as the 21st Century approaches, exorbitant cost will continue to be the primary roadblock to good, universally available care.

Extended hospital stays are increasingly frowned upon by insurance companies as they struggle to balance their books. She predicted that reimbursement for some treatments will probably decrease or remain flat, while the cost of medical care will increase steadily.

With so-called managed care becoming more popular--and more necessary to control costs--expensive hospital procedures will be scrutinized more closely, she said, adding that without safe, cost-efficient alternatives, the medical community will fail to provide sufficient health care.

“We have hospitals that are getting caught in the cost-cutting crunch,” Frank said during her opening remarks Thursday. “We have providers that are getting very frustrated in trying to provide the same kind of quality care at a cost-effective level and finding themselves caught . . . in a bureaucratic morass.”

Home health care providers maintain that such care will ultimately help the medical and insurance communities work together, developing a more streamlined health care system, with less waste, less hospitalization and more focused treatment.

“Most physicians view home health care as an important and valuable part of the whole health care system,” said Dr. Norman Kahn, director of education for the American Academy of Family Physicians.

“We can now do more and more in the home than we could in the old days,” he said. “We can do more technically without sacrificing quality. In some instances, home care increases the quality of care to a patient.”

Once considered just changing bedpans and taking temperatures, modern in-home care has advanced to include respiratory services, pregnancy monitoring and self-administered intravenous feeding--services that once took place only in a hospital setting.

“It’s definitely growing,’ said David Anast, publisher of the Costa Mesa-based Biomedical Market Newsletter, which tracks medical and health care trends in the county. “The market is looking pretty rosy.”

Mike Miller, chief operating officer for Abbey Healthcare Group Inc. in Costa Mesa, one of the nation’s largest health care service providers, said just 5% of patients who could benefit from home health care use such services today.

“Home health care is evolving hourly, daily and weekly,” Miller said. “It’s becoming a big player.”

How big? Evelyn Nerrman, director of the Home Health Care Expo in Atlanta, said there are 10,000 home health care companies in the United States, ranging from small operations to large national chains such as Abbey Healthcare, which had 1991 revenue of $227 million, and Homedco Group Inc. of Fountain Valley, with 1991 revenue of $222 million.

Nerrman said the number of such companies today is double the number of 1980. As long as “people live longer and have more (non-acute medical) problems,” new home care companies will continue to enter the market, she said.

“It’s been recognized that people recuperate faster at home,” Nerrman said. “It’s the (home) environment. They are around their own things. They simply recover faster.”

With more physicians becoming comfortable sending their patients home, Miller estimated that up to half of all patients will be treated at home for varied illnesses and recuperative procedures by 2000.

That would translate into the industry growing to $350 billion annually in eight years, he said.

The percentage of home care patients is sure to grow as more insurers recognize the financial benefit of allowing patients to return home to recuperate from surgery and to encourage them to remain at home for non-emergency care.

“There is a lot of price pressure,” said Allison Cherney, a home health care consultant. “More and more hospitals will be closing. (Insurers) know it is cheaper to hire a nurse than keep a patient in the hospital.”

Drew Cree of the Costa Mesa office of Foster Higgins & Co. Inc., a consulting firm for health care insurers, agreed.

Acceptance of in-home care by health insurance companies “is very strong. It is looked at as a lower-cost alternative,” he said. “It works out to be a win-win situation for the patient and the employer.”

For instance, Susan M. Ebel, a benefits accounting manager for Rohr Industries in San Diego, who was a speaker at the San Francisco conference, said her company has seen its payments to hospitals decrease by nearly 15% and a gradual rise in payments to ancillary medical programs, chiefly home health care.

“Anything that can be done as an alternative is important to the insurance industry,” she said. “We find it a reasonable approach” to cutting costs.”

There are, however, limits to insurer acceptance. Cree said insurance companies regularly set price ceilings on home health care based upon an “underlying medical necessity” as determined by insurance case managers.

“Custodial” care, in which the patient receives rudimentary care but no medical treatment, is usually not covered, Cree said. Patients eligible for home health care coverage are generally given an automatic 120 days of coverage. The case manager then re-evaluates the case to see whether care coverage is warranted beyond four months.

Insurance companies will also not cover patients who are part of human clinical studies, which involve experimental treatments, medical devices or drugs under Food and Drug Administration review.

In-home care has become so commonplace, Cree and other home care proponents warned, that hospitals will have to offer similar programs to survive.

Some hospitals have already begun, said Duane Donner, president of the Sacramento-based California Assn. of Hospitals and Health Care Systems, a nonprofit organization of private hospitals.

“There’s a good deal of integration now” on the hospital level, Donner said, “and it will become more prevalent as the home health care system grows. It is universally accepted that utilization (of home health care services) will increase. Hospitals will stay involved and become an integral part of the total health care system.”

But there remain reservations about home health care.

Eva Eagle, spokeswoman for Kaiser Foundation Health Plan, the nation’s largest health maintenance organization, questioned whether it is always less expensive to care for a patient at home.

She said some home services, especially for home infusion therapy, might overcharge on prescriptions or send nurses to visit patients who could otherwise benefit from cheaper outpatient visits.

“I just don’t think it always is less expensive,” she said. “That is a myth, and I think it can lead to problems if the patient thinks there is ‘a right’ to stay at home in all instances.”

Nevertheless, in-home care will probably increase as more medical devices are designed for exclusive home use. Home health care has been a boom for other portions of the medical industry, including manufacturers of pharmaceutical and medical devices.

“Home health care is a very large customer for us,” said Larry Watts, spokesman for McGaw Industries, based in Irvine, which makes, among other products, a line of plastic intravenous bags.

In Orange County, home health care companies such as Abbey Healthcare and Homedco are booming, collectively generating almost $700 million in revenue last year.

Their success lies in the idea that they can sell a cost-savings package.

Critical Care of America in Costa Mesa, for whom Wilson works, said its services can save insurers up to 50%, compared to a hospital stay, and lets patients recuperate among family and friends in comfortable and familiar surroundings.

“There’s a whole dynamic that doesn’t exist in hospitals,” said Wilson, a registered nurse, who once worked at Hoag Hospital in Newport Beach. She said she joined Critical Care America three years ago, after deciding that she “wanted to get to know the patients” she treats.

“Getting involved with the family is really a part of nursing that I like,” she said.

The major home health care players in the county are as diverse as the patients they treat. Some companies specialize in infusion care, treating AIDS patients, cancer victims and other ailing patients who need occasional intravenous drug therapy. With national revenue of $4.3 billion a year, infusion therapy is the largest segment of the home care industry.

Other companies offer such diverse treatments as respiratory therapy, pregnancy monitoring, occupational therapy and long-term hospice care for terminally ill cancer patients.

Quantum Health Resources in Orange, one of the industry’s more esoteric companies, generated revenue of about $100 million last year.

It is one of the only companies in the nation to specialize in treating homebound hemophiliacs and patients with rare genetic disorders, including the so-called “bubble kids” who are born without an immune system and are extremely sensitive to infection.

“This organization is extremely fo

cused,” said Douglas H. Stickney, chief executive of the 4-year-old company. “What we attempt to do is meet the psychological needs of the patient. And we do that by having the understanding of the rare disorders they suffer from.”

Another extremely focused company is Tokos Medical Corp., the nation’s largest manufacturer of a uterine monitoring device and service provider for women threatened with premature labor. The Santa Ana company in April was named Emerging Company of the Year by the county chapter of the Assn. for Corporate Growth.

The company, which had 1991 revenue of $115 million, has also recently acquired a smaller competitor, CareLink Corp. of Irvine, in a bid to establish market superiority.

“We have a different approach (from other home care companies), and it has become successful,” Tokos president Craig T. Davenport said. “There’s a great benefit to being specialized.”

Davenport said that regardless of the specialization, all home health care operators credit their recent strong growth to technological innovations that have revolutionized the industry in the past 10 years.

Tokos’ Genesis uterine monitoring device, for instance, detects warning signs that can mean a woman is in premature labor. Using laptop computers and modems, a visiting nurse can transmit medical data directly into the company’s mainframe computer for access by the patient’s physician.

“What we are all about is providing a better quality of life,” Davenport said. “We are all looking for more cost-effective ways to provide humane care. That’s what we have in common.”

Orange County, in fact, has been in the forefront of home health care for more than 10 years.

Home Health of America of Newport Beach, one of the nation’s first home health care companies, Davenport said, was founded in 1979 by McGaw chief executive James Sweeney and Tokos chief executive Robert Byrnes.

That company was bought out in 1987 for $586 million by Baxter International(cq), the giant Illinois-based medical products manufacturer and distributor, and renamed CareMark Inc. CareMark has since been relocated to Lincolnshire, Ill., and has increased annual revenue to $700 million, making it the largest home health care service provider in the nation.

Abbey Healthcare and Homedco belong to a smaller group of home care companies that provide a wide range of services, including intravenous, respiratory and rehabilitative therapies.

“The reality is that many of these services were not around 10 years ago,” Homedco chief executive Jeremy M. Jones said. “Those (technologies) have changed dramatically.”

The aging population in the United States will further “drive home care services,” he said. “These patients are best suited for home care. They can take care of themselves to a degree, but they require some specialized care.”

For instance, he said, easier-to-use medical devices such as electronic drug pumps designed for exclusive home use make patients more independent, allowing nurse visits to be reduced from daily to biweekly.

The pumps inject a pre-programmed amount of fluid in the bloodstream. Some of them are small enough for patients to carry when at work or traveling.

Stock analysts who follow the industry suggest that the publicly held companies should continue their growth. For instance, John F. Hinderlong of Donaldson, Lufkin & Jenrette Securities, a brokerage in New York, has buy orders for three home care firms.

“Each company has its own story to tell,” Hinderlong said. “But they generally offer a real niche, a good alternative to hospital care.”

No Place Like Home The in-home health care industry has burgeoned during the past few years, and that’s good news for millions of Americans. Studies show that not only do people prefer to recuperate at home, but for certain illnesses in-home care is more cost effective than a prolonged hospital stay.

Where to Recuperate: Patients overwhelmingly say they prefer to recuperate from an accident or serious illness at home. Own home: 71% Hospital: 21% Home of family member: 5% Nursing home: 1% Other: 2%

Services Needed: One in four Americans say they’ve needed home health care services in the past five years; of those, two-thirds say they’ve needed it for themselves or a spouse. Themselves: 40% Spouse: 25% Parent: 17% Child: 10% Other: 8%

Savings to Society: Americans spend more than $1 billion annually on hip fractures. In-home services cansave hundreds of millions of dollars yearly for hip fractures and other maladies. A few examples:

Savings Number of Annual Savings Type of Patient Per Episode Yearly Episodes (In millions) Hip fracture $2,300 250,000 $575.0 Lou Gehrig’s disease (with pneumonia) 300 1,533 0.5 Chronic obstructive pulmonary disease 520 93,184 48.5

Hospital Versus Home: The monthly savings using in-home care as opposed to a hospital stay can be dramatic.

Cost of Cost of Service Hospital Care Home Care Savings Infant breathing, feeding problems $60,970 $20,209 $40,700 AIDS care 23,190 2,820 20,370 Chemotherapy 10,500 3,500 7,000 Pulmonary diseases 3,600 600 3,000 Routine nursing 2,000 750 1,250 Ventilator care 2,320 1,766 554

Sources: National Assn. of Medical Equipment Suppliers; the Lewin Study