Cost-Effectiveness of Homecare

Home medical equipment allows seniors, persons with disabilities or chronic health issues, and individuals recovering from an accident, surgery or illness to stay in their homes, often at a much more affordable cost than an a brief stay in a hospital or a longer stay in a nursing home or assisted living facility. For example, as the chart below shows, the daily cost of home oxygen for Medicare patients is 1/30th of the cost of a  day in a nursing home, and – or 1/268th of the cost of a single day’s hospital stay.

Homecare can play a tremendous role in reducing care spending by treating more people in a cost-effective manner at a fraction of the cost of other institutional settings – all in the patient-preferred setting of the home. Numerous studies attest to the value and clinical effectiveness of home-based care, a sampling of which follow below.

Medicare Spending Infographic

DME Order Process Comparison Infographic

Medical Studies Show Home-Based Care Is Cost-Effective

The Imperative of Home-based CareNew England Journal of Medicine
A 2010 article in the New England Journal of Medicine states, “ultimately, health care organizations that do not adapt to the home care imperative risk becoming irrelevant. It seems inevitable that health care is going home.” Steven H. Landers, M.D. of the Cleveland Clinic describes demographic, clinical, economic, and technological forces that make home-based care “imperative.” He cites oxygen as an example of advances in portable medical technology and cites parenteral nutrition and infusion as examples of care that are less expensive than and as equally effective as institutional care. He notes that there may be more than 70 million Americans age 65-plus by 2030. “Many of these older adults will have limitations on their activities, including difficulty walking and transferring from bed to chair, that make leaving their homes difficult. Bringing care to the home improves access for such people…. Older adults are particularly prone to complications of confinement in hospitals, such as delirium, skin conditions, and falls. Treating people at home may be one way to avoid such complications.” (Landers, S. “Why Health Care Is Going Home,” New England Journal of Medicine, October 20, 2010.)

Oxygen Therapy Is Cost Effective, but Improvements Needed in Medicare Policy
An article published in the February 2009 American Journal of Managed Care on long-term oxygen therapy concluded that “continuous oxygen therapy for chronic obstructive pulmonary disease is highly cost-effective.” The article states, “The Deficit Reduction Act [of 2005] provision that limits rental of all home oxygen equipment to 36 months … may significantly reduce services for fragile elderly patients and could raise numerous patient safety issues…. There is substantial room for improvement in the current Medicare policies regarding long-term oxygen therapy. Medicare coverage can be improved by prescribing long-term oxygen therapy to patients who will receive substantial benefit and by providing adequate support for services and maintenance.”  (Oba, Y. “Cost-Effectiveness of Long-Term Oxygen Therapy for Chronic Obstructive Pulmonary Disease,” American Journal of Managed Care, February 2009.)

Self-Monitoring of Blood Glucose in Diabetes: Cost-effectiveness in the U.S.
Analysis in the American Journal of Managed Care, March 2008, documents an extremely large and growing economic burden of the chronic disease diabetes mellitus. According to the Centers for Disease Control, about 14.7 million people in the U.S. had been diagnosed with diabetes through 2004, with type 2 diabetes mellitus accounting for about 90 percent of those cases. A total of $92 billion in direct medical expenditures were attributable to diabetes for 2002, and the projected increase in the diabetes population suggests that annual direct costs could reach $138 billion by 2020. Identifying cost-effective technologies for diabetes management is an important goal. One tool repeatedly shown to improve glycemic control for insulin-using patients is the self-monitoring of blood glucose (SMBG). Clinical guidelines recommend SMBG at least three times daily for patients with diabetes who use insulin. The report demonstrates cost-effectiveness for SBMG patients who test both 1 and 3 times daily. (Tunis, S., Minshall, M., “Self-Monitoring of Blood Glucose in Type 2 Diabetes,” American Journal of Managed Care, March 2008.)

Oxygen Therapy Reduces Hospitalization and Mortality
A 2004 assessment of clinical literature on long-term oxygen therapy by the U.S. Agency for Healthcare Research and Quality found oxygen therapy reduces mortality and hospital frequency and length of stay for patients with severe COPD. The average number of hospital admissions per patient year decreased from 2.1 to 1.6 and the average number of days hospitalized decreased from 23.7 to 13.4 after long-term oxygen therapy. (Lau, J., et al., Long-Term Oxygen Therapy for Severe COPD, Tufts-New England Medical Center Evidence Based Practice Center, June 11, 2004.)

Equipment Represents Less than One-Third of Medicare Home Oxygen Cost
An assessment of the costs required for providing home oxygen therapy to Medicare beneficiaries was conducted by Morrison Informatics in 2006. To identify costs and resources used, Morrison gathered data from 74 oxygen providers that serve more than 1.7 million Medicare beneficiaries.  Analysis of the results found that the oxygen equipment represents less than one-third (28 percent) of the cost of providing prescribed oxygen to patients at home. Oxygen therapy in the home requires services such as preparation and delivery of equipment, patient assessment, patient training and education, medical documentation, maintenance, replacement supplies, and 24-7 availability for emergency service. The non-equipment expenses represent 72 percent of the cost of home oxygen therapy for Medicare beneficiaries. (Morrison Informatics, Inc., “A Comprehensive Cost Analysis of Medicare Home Oxygen Therapy,” June 2006.)

Homecare Reduces Costs by 37 Percent for Heart Failure Patients
The May 2004 Journal of the American Geriatrics Society reports that homecare, directed by Advanced Practice Nurses (APNs), reduced total costs of care for patients suffering from heart failure and co-morbid conditions, attributable to fewer and later hospitalizations and fewer deaths.  (Naylor, Mary D., et al., “Transitional Care of Older Adults Hospitalized with Heart Failure: A Randomized Controlled Trial,” Journal of the American Geriatrics Society, May 2004.)

Review of Medicaid Homecare in Seven States Shows Reduced Costs
A 2002 study published in Health Care Financing Review describes the characteristics of Medicaid home and community-based programs in seven states. In Washington, for example, the state imposed strict fiscal caps, keeping spending to 40 percent of the cost of nursing home care on a per capita basis. (Wiener, J., et al., “Home and Community-Based Services in Seven States,” Health Care Financing Review, Spring 2002.)  

Lower Cost of Home Intravenous Antibiotic Treatment v. Hospital, SNF Settings
A study described in Clinical Infectious Diseases quantified cost savings of a home intravenous antibiotic program in a Medicare managed care plan. The average cost per day of home therapy was $122, compared to $798 in the hospital and $541 in a skilled nursing facility. (Dalovisio, J., et al., “Financial Impact of a Home Intravenous Antibiotic Program on a Medicare Managed Care Program,” Clinical Infectious Diseases, 2000.)

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