Health Care Comes Home : More Than 100 Firms Vie to Serve O.C. Patients in the Growing Market
A decade ago, Patricia Etue might have been wasting away at the hospital.
Now, despite being incurably ill with cancer and crippled since childhood with polio, the 62-year-old retired software programmer can be treated at home.
Etue, radiant in flowered-print dress, uses a wheelchair as she leads visitors around her Buena Park house, showing off the benefits of home care: the small, battery-driven chemotherapy pump she keeps in a belted pack at her waist, the intravenous hookup implanted in her chest, the cheerful clutter of books and toiletries within her reach.
“I’ve got my husband, my own bed and better food. I can do what I want, when I want,” she said. “I don’t know of anybody who’d rather be at the hospital.”
Thanks to enthusiastic patients, changes in technology, and cost pressures on health care, Etue represents one of the health care industry’s fastest-growing markets.
At home, Etue, who receives Medicare, avoids $800-a-day rates at a local cancer ward but still racks up huge bills. Altogether, the nurse who visits her once a week, the aide who comes by three times to bathe her, and her chemotherapy supplies cost about $1,800 a month.
Such expenses make tens of thousands of homebound patients hot prospects for more than 100 home care companies vying to serve Orange County.
These firms provide services and products for treating at home virtually every condition that used to require hospital care, short of surgery. They dispatch skilled nurses, unskilled aides, social workers; physical, occupational and speech therapists, and even podiatrists. They deliver high-tech sleep monitors, respirators, X-ray equipment, lab machines, hospital beds, lifts and the like.
Every year, they handle a growing number of Orange County residents with strokes, cancer, heart problems, nervous and respiratory disorders, fractures, AIDS, paraplegia and other conditions. About half of these patients are more than 65 years old. Many are dying.
But competition is intensifying, making it especially difficult for home care businesses to thrive here.
Contenders range from small specialty shops, such as Oso Home Care Inc., the Irvine pharmacy that supplies Etue’s chemotherapy, to local hospitals such as St. Joseph Health System in Orange, which runs its own home health agency.
And at the top of the heap are the nationally diversified home care giants, such as Abbey Healthcare Group Inc. in Costa Mesa and Homedco Group Inc. in Fountain Valley, which aim to merge this summer.
“It’s a little guy versus big guy fight,” said William Dombi, an official of the National Assn. for Home Care, a Washington-based trade group. “We are seeing vertical integration, horizontal integration, mergers and acquisitions. We are seeing people saying, ‘I want a little niche. I want to make sure I’m still here.’ ”
Like their peers elsewhere, home care companies here of all sizes must contend with the increasingly complex, and often conflicting, demands of local health care payers, providers and the patients themselves. They face rising pressures to save costs and improve service. And they are bracing for expected reimbursement cuts by Medicare, the industry’s biggest funding source.
Though demand for home care has exploded in Orange County over the past decade, the extraordinarily strong influence of the managed care industry makes it especially tough for home care companies here. Price pressure is acute.
And it isn’t getting easier. Abbey, Homedco and other large industry merger partners, having landed big managed care contracts, now must prove they can ably attend to individual markets in the vast geographic areas they serve. Small and regional companies, facing cost pressures from the giants, are banding together in hopes of signing big deals too.
“A lot of people think that if you can be a success in Orange County, you can be a success anywhere,” said Gordon Martin, president and chief executive officer of VNA Home Health Systems in Orange, the nonprofit Visiting Nurses Assn. that serves the county.
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Though happy to be home, many patients aren’t necessarily having their needs met.
For instance, Etue, the Buena Park resident, said she had trouble finding a reliable pharmacy. Diagnosed with colon and liver cancer in early 1993, Etue said she tried Curaflex Inc., an Ontario pharmacy company. But she found Curaflex “didn’t always deliver the right things and didn’t make out their bills right for Medicare.”
Her nurse, Margaret Belanger, a VNA Home Health Systems manager, attributes the service problems to Curaflex’s merger last year with other pharmacies that formed Denver-based Coram Healthcare Corp. The merger, which caused Curaflex to close the Fountain Valley branch that was serving Etue and shift operations to Ontario, created organizational turmoil, Belanger said. “People move around,” she noted, “and you never talk to the same person twice.”
Michael Akahoshi, Coram’s regional director in charge of the Orange County market, acknowledged that during the consolidation “a lot of things probably did fall through the cracks.”
Etue finally tried Oso Home Care, which met her needs. Randy Bohart, the pharmacist who owns Oso, said he’s happy to have her business but isn’t taking it for granted. He calls her a few days before she’s scheduled for a two-week chemotherapy session to arrange home delivery of supplies. Once she begins the session, he monitors her lab reports to make sure her body is responding as it should.
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But these days, local home care companies have to answer to managed care companies.
Said Sherry Swayne, executive director of the St. Joseph Health System’s home health agency: “We no longer have the freedom to just go and see a patient whenever we want. Managed care says you have two visits, or four visits with a patient, so you have to find the best way to teach the patient [how to care for himself] in as few visits as possible.”
What’s more, large health maintenance organizations often prefer dealing with home care suppliers that cover large geographic areas: They only have to deal with one provider. And, assuming there’s economies of scale, they get better rates.
This year, PacifiCare Health Systems, the national HMO with corporate headquarters in Cypress, signed a one-year contract with Homedco. The deal gives Homedco the opportunity to supply respiratory services and home medical equipment to 175,000 PacifiCare members across the state. Alan Hoops, PacifiCare’s president and chief executive, said: “My guess is, what we wanted and needed couldn’t be done by a smaller player.”
In Orange County particularly, Homedco’s merger partner, Abbey Healthcare, is also trying to make the case that big is better. Janet Azevoedo, an Abbey senior vice president, said the company’s sales for the first quarter of this year were up nearly 18% in Orange County, though she wouldn’t disclose figures. She attributed much of the growth to managed care business. “There are many physicians and payers who are looking for a comprehensive offering,” she said, “so they don’t have to call multiple providers.”
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Meanwhile, in an industry that’s increasingly driven by regional and national contracts, many local and regional purveyors are struggling to hold their own. Earlier this year, VNA Home Health Systems joined with 19 similar visiting nurses associations across California to bid together for large contracts. The network is offering competitive pricing and an 800 number that care-givers can call for patient referrals to the local association.
Martin, VNA Home Health System’s chief executive, said the statewide network has “several deals on the table” with large health care contractors. He declined to be specific because “this is a cutthroat market and I don’t want our competitors to know what we’re doing.”
But big isn’t necessarily best.
For example, industry sources say that Saddleback Home Medical Equipment recently outmaneuvered Homedco on a piece of business in Newport Beach. The small, privately held Laguna Hills company, which has a sister company in Corona, sold about $2.5 million worth of medical equipment in Orange County last year, said Jerry Waller, its executive director.
Waller said Saddleback takes pains to make good on its promise to deliver medical equipment to a patient’s home within two hours of hospital discharge. It provides trained technicians and therapists to educate a patient on the equipment’s use. And, he said, it responds to patient calls for service around the clock.
Last fall, Waller said, Saddleback won a one-year contract to supply products and services to patients referred by Greater Newport Physicians. Greater Newport is a group of staff physicians at Hoag Memorial Hospital Presbyterian that contracts with medical plans to provide health care to about 60,000 patients.
Industry sources say Greater Newport signed up with Saddleback after dropping Homedco. “The big knock we heard about all the competition was that it took them days to get there,” Waller said. And, he said, Greater Newport told him the competition was dropping off equipment with minimum instruction.
Greater Newport refused to comment specifically about its change in suppliers. A Hoag spokeswoman said, “We did terminate a vendor and hired another for business reasons,” but she wouldn’t comment on the names of the companies involved or why the changes were made.
Lawrence Smallen, a Homedco spokesman, said the contract is such a small bit of business--$10,000 a month in revenue--that “it’s not even worth talking about.” He attributed the contract loss to a competitive bid by Saddleback, not service problems, but insists Homedco is trying to win it back.
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Companies of all sizes face more pressure than ever to show they give quality service. Among other things, health care payers are demanding providers get approved by the Joint Commission on Accreditation of Healthcare Organizations, a nonprofit organization in Oakbrook Terrace, Ill., that accredits hospitals and other health care providers nationwide. Nationally, accreditations for new home care providers--the commission’s fastest-growing category--jumped 35% to 3,800 last year, spokeswoman Alice Brown said.
Even Best Care Medical Equipment Inc., a small Costa Mesa store with sales of about $1 million last year, is applying for accreditation. “Now we have to fall in line, just like the big guys,” said Mark Grzeskowiak, Best Medical’s manager.
And that’s not easy for a small company with limited resources, he added. Accreditation costs thousands of dollars, involves following policies and procedures spelled out in a phonebook-size handbook, and requires on-site visits between commission representatives and patients served. “It’s not for the faint of heart--or for the small business,” Grzeskowiak said.
Sometimes the competitive pressure yields better care for patients. ModernHealth Inc., a Glendale company which projected revenue of $33 million this year, expects Orange County revenue to rise 30% this year, said Michael Shea, its chief operating officer.
He attributed the growth partly to a change in the company’s approach to managing patient cases. Six months ago, it reorganized its county branch staff in Tustin by creating two professional teams to handle about 50 cases apiece. Each team includes a nurse, pharmacist, reimbursement specialist and customer service representative. Though team members used to work in separate offices, spread out in different parts of the branch’s 8,000-square-foot building, Shea said, they now work in the same room.
The team approach recently helped the company land a one-year contract with the Clinical Practice Group, the managed care patients of more than 300 faculty members at UC Irvine’s College of Medicine. Sherry London, a group manager, noted that the teams provide better continuity of care. “You’re always dealing with the same person or group of people.”
And patients seem to be getting more attention. London noted how a middle-aged patient with cervical cancer, who lives in the Norwalk area, went to the emergency room three times in four months last year because she was suffering from uncontrolled pain. Since ModernHealth took over the woman’s care, London said, she hasn’t had to seek emergency room care.
Said London: “I think they are able to anticipate what her needs are.”
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Providing for Patients
HOW MANY?
The number of patients of licensed home health care agencies providing skilled care in Orange County rose more than 60% in the 1989-93 period. (see newspaper for chart)
1993: 53,263 WHO PAYS?
In 1993, the most recent year for which information is available, Medicare was by far the most likely provider of home health payments in Orange County.
Medicare: 74% Private insurance: 21% Medi-Cal: 3% Other: 1% No reimbursement 1%
Sources: National Assn. for Home Care, California Assn. for Health Services at Home, California Office of Statewide Health Planning and Development
Researched by JANICE L. JONES / Los Angeles Times
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Home Care Demand Rising
Efforts to control medical costs have made home health care a rapidly growing service industry. The number of certified home health agencies nationwide has increased 32% since 1990. Here’s the trend: (see newspaper for chart)
1994: 7,521
Medicare’s Role
Medicare is the single largest payer of home care bills. Since 1990, there has been steady growth in Medicare home care expenditures, number of clients and client visits. The trends:
1994
Expenditures (millions): 13,787
Clients (thousands): 3,345
Visits (thousands): 218.6
Sources: National Assn. for Home Care, California Assn. for Health Services at Home, California Office of Statewide Health Planning and Development
Researched by JANICE L. JONES / Los Angeles Times
