Contributors: Adam Groff, MD ’06, WG ’06 and David Baiada, WG ’06
To learn more about Adam and David, click here.
One of the greatest challenges for countries around the world is the aging of their populations. In the United States, baby boomers are rapidly enrolling in Medicare, and the ratio of workers per retiree is dropping. Pressure to reduce total healthcare costs will only become more intense. Additionally, patient expectations for convenience, quality, and customer service are changing, and people increasingly prefer to age-in-place rather than spend time in nursing homes or hospitals.
We believe these trends - an aging population, the need to do more with less, and demand for community-based care - present a fantastic opportunity for home healthcare. In this last of a three-part series, we describe the major strategic initiatives that will ensure BAYADA’s people are empowered well into the future to help patients live a safe life at home.
Home Healthcare as a Service
Providing services in the home is not easy. As we described in Part 1 of the series, it is very hard to operationalize high quality, reliable, home-based care. It requires specialized culture, systems, and capabilities to manage a mobile workforce.
It is common for hospital-owned home health or hospice agencies to face challenges with leadership, management, quality, reliability, and financial sustainability. These struggles are not surprising, as home-based care is very different than managing hospital assets or physicians in the clinic. Still, many health systems understand that home health and hospice care are strategic capabilities they need as healthcare financing migrates to risk-based payment.
BAYADA is working with health systems to manage their home health and hospice functions as a service. Our scale and complete focus on delivering outstanding care in the home environment allow us to execute more effectively and with the agility to adapt as home healthcare evolves.
To ensure integration between BAYADA and our health system partners, we use three typical models aligned for long term, mutual success:
- Joint Venture – In this model, BAYADA and a health system partner to co-own an entity that serves a market. Existing assets are merged, and the joint venture is capitalized. BAYADA operates as the day-to-day manager and provides the people, operating model, and back-office platform. Effective governance is critical to making this relationship successful, and both BAYADA and the health system have Board of Director representation and financial risk at the joint venture level.
- Management Agreement – Sometimes it is not practical for a health system to spin out existing home health assets. Under a management services agreement, BAYADA has a long-term contract to manage day-to-day operations. The health system owns the agency and can set strategic priorities, while BAYADA executes against the plan. The benefit of this model is that a health system that views home healthcare as a strategic asset under risk-based payment can subsidize home-based services to reduce costs elsewhere, while BAYADA focuses on execution excellence. The challenge here is that these are complex contracts to negotiate and manage.
- Full Acquisition with Preferred Partnership – Historically, the most common model was for hospitals to fully divest agencies that BAYADA would acquire. We would then work as a preferred partner with the health system. The benefit of this structure is that it is the simplest to manage, as the agency is fully owned by BAYADA. The challenge is that the health system has reduced governance power and financial ties.
By allowing BAYADA to focus on day-to-day execution with a governance structure that creates strategic health system integration, “home healthcare as a service” is a win-win that is certain to gain traction.
Building Better Services to Manage Risk
As we described in Part 2, home-based services are divided into four general categories – post-acute home health, home hospice, medical home care, and non-medical home care. Today, these services have different payment streams which largely define what services patients receive and when – usually in an uncoordinated way.
It is well established that a relatively small number of people drive a disproportionate amount of healthcare spend. Caring for people in the community – at home or a home-like environment (e.g., assisted or independent living) – is an opportunity to integrate services to keep people out of high cost settings like hospitals, emergency departments, and nursing homes. Too often the services these complex patients receive are fragmented and not optimal for their medical, social, or behavioral health needs.
We believe there is tremendous opportunity in redesigning care and payment to achieve the goal of helping people live at home. As the payment focus shifts for value over volume, we are seeing an increasing appetite from CMS and managed care companies to push risk to organizations that manage total healthcare costs by focusing on delivering care in the community.
At BAYADA, we have two key efforts that will help us organize to achieve the goal of keeping people at home. First, we believe an employed physician group will allow us to integrate our various clinical services to better achieve the goal of keeping people at home. Second, we are working with payers to structure contracts that give us the financial tools to achieve this goal:
- Physician Services – Historically, home healthcare has had limited direct participation of physicians and nurse practitioners. While these providers order home-based services, their involvement is usually constrained within the walls of a clinic. BAYADA is in the process of building out a national group practice that will elevate the capability of our teams to deliver increasingly sophisticated care in the home. We believe this group will be the platform for both direct care delivery in the form of house calls, in addition to coordinating care among internal and external providers. This group practice will augment rather than compete with physician groups and hospitals, as we will be better able to achieve results that matter to them (e.g., reduce readmissions, improve end-of-life transitions, optimize medication adherence, close quality and risk-adjustment gaps, and reduce total cost of care).
- Risk-based Contracting – We are amazed at the speed with which payers are embracing new financing models. CMS provides two opportunities we believe will grow enormously – Independence at Home (IAH) and Program for All-Inclusive Care of the Elderly (PACE). Commercial payers under Medicare Advantage or duals programs (D-SNP and FIDE-SNP) are increasingly amenable to risk-based contracts. Other than PACE (which has been around since the 1970s), experience with these new types of contracts is limited. However, we at BAYADA are very optimistic that our proven results in care delivery will help us to be a leader and preferred contract partner.
Just like every other industry, technology will play a critical role in reshaping how home healthcare is delivered. We are optimists and believe technology will provide us with the opportunity to serve more people, better, and at lower cost.
For most of our service lines, technology will be an enabler to improve patient experience while reducing overhead. Easy to use applications for self-service, simpler payment functions, and better communication tools will improve the experience of home-based care for patients and caregivers. Payment compression is inevitable, as are rising wages, so technology will allow us to reduce administrative overhead, improve team communication, and protect margins.
Disruptive technologies do have the potential to threaten some of our service lines. In particular, medical and non-medical home care where patients and hired caregivers directly interact and self-manage could make the full-service agency model less viable. It is our belief there will always be a need for some managerial oversight and personal touch. That said, we will need to adapt to ensure we are competitive with venture-backed companies like HomeTeam and Honor.
In summary, it should be clear we are very optimistic about the future of home healthcare. We provide a service that people want and need, while payment and technologies are adapting to better help us achieve our goals. BAYADA is fortunate to be well positioned as a long-term oriented, national scale provider with authentic mission, values, and culture. Ultimately, our success will be dependent on our people, who will always be empowered to heroically deliver the care their patients need.