Cost of Home Health Rising Faster than Skilled Nursing — with Care Diversions to Blame

The pressure to shift more care from skilled nursing facilities to the home setting has led to rapid increases in the cost of home health services, according to the latest entry in a long-running measure of senior care costs.

The median annual cost of a home health aide in 2019 rose 4.55% from the year before, insurance giant Genworth Financial (NYSE: GNW) reported in its most recent Cost of Care Survey, released Wednesday — topping out at $52,624 per year. For less medically intense “homemaker services,” which typically consist of cooking, cleaning, and transportation, costs leapt 7.14% to $51,480, according to Genworth.

While that figure is still about half the cost of a year in a nursing home, it represents a much steeper gain than institutional care costs. The median cost of skilled nursing care in a semi-private room rose less than 1% to $90,155, while a private room saw a 1.82% increase to $102,200.

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The Richmond, Va.-based Genworth, which offers long-term care insurance, interviewed a variety of home health professionals who indicated that payers’ aversion to the high-cost skilled nursing setting has pushed more higher-acuity patients — and thus the costs — downstream to their firms.

“A change from a fee-based to value-based Medicare payment system has resulted in the reduction of skilled nursing days provided to patients following their release from a hospital,” Genworth observed in its findings. “As a result, many patients are sent home with more acute care needs and costly care episodes often not covered by Medicare.”

Out-of-pocket payments typically account for a fraction of the average skilled nursing facility’s income, which is dominated by Medicaid, Medicare, and Medicare Advantage plans. But the Genworth results reveal another side of the long-heralded push to home, which has seen a variety of alternate payment models — from bundled payments to accountable care organizations (ACOs) — turn up the heat on hospitals and skilled nursing facilities to reduce lengths of stay in institutional settings.

For instance, a Harvard study published earlier this year found that the Comprehensive Care for Joint Replacement (CJR) bundled payment model achieved savings “nearly exclusively” by reducing skilled nursing utilization, while one skilled nursing executive called hospital-controlled bundles “one of the biggest threats to our profession” earlier this year.

That said, not all services can be shifted to the home. George Hager, CEO of nursing home giant Genesis HealthCare (NYSE: GEN), has frequently challenged observers to tour one of his company’s facilities and identify patients who could safely receive care at home — with the implication that there are few, if any.

“Both the reimbursement systems and all the diversion efforts have moved those patients over the last five to 10 years into the community, where they can be served and cared for safely in the community,” Hager said earlier this year. “The acuity levels of an average patient in a skilled nursing center have increased dramatically.”

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