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Buying a Home Health Care Business: The Industry’s Outlook and What’s Driving It

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Buying a Home Health Care Business: The Industry’s Outlook and What’s Driving It

Buying a Home Health Care Business The Industry’s Outlook and What’s Driving It

The home health care industry is comprised of both medical and non-medical products and services that are used in the home. The largest segment of this industry is home health care and home nursing care followed by home hospice care. Other services include home therapy, caregivers, homemakers and home companions.

Is there a strong demand for home health care?

Home health care is one of the fastest growing industries in the United States. Americans are living longer and our population is aging. With rising healthcare costs, both public and private coverage providers are turning to more cost-effective treatment options. As an increasing number of elderly people with chronic diseases and other illnesses are seek treatment, the demand for home health care is expected to grow.

  • Aging population. The number of adults age 65 and older growing at a faster rate than the general population. With an aging population and an increase in chronic disease and other health issues comes a greater demand for home health care related products and services.
  • Affordability and insurance coverage. Home health care is more affordable compared to inpatient hospital care and other substitute services. It saves patients billions of dollars each year. Plus, those covered by private insurance is expected to grow as disposable income rises.
  • Rising per capital disposable income. Disposable income rises along with per capita disposable income. Thus, more people are likely to purchase health insurance and are able to afford healthcare expenses such as home health care.

Where is the biggest market for home health care?

Home health care primarily serves the elderly, yet its local market concentration is influenced by a combination of age demographics as well as the presence of alternative sources of care, referrals and level of state government resources.

  • Locations where demand is strong. While home health care is primarily provided to elderly patients, markets vary based on demographics. The state with the highest concentration of home health care agencies is Texas, followed by California, Florida, Ohio and Michigan. The states with the most people receiving Medicaid home and community-based health services are California, Florida, Illinois, Minnesota, New York, North Carolina, Ohio and Texas.
  • Doctors, hospitals, insurers and managed care companies (MCOs). Although the elderly and chronically ill are the biggest users of home health care, most marketing is targeted to those who authorize or pay for the treatment. Larger home health care provider businesses have the ability to provide services to insurers with regional or national needs.

How do home health care businesses generate most of their revenue?

The largest market served by the home health care industry are government reimbursement programs, such as Medicare and Medicaid, which together make up over 75% of the industry’s revenue. Yet, federal reimbursements have been cut in recent years and margins have grown thinner, causing many home health care businesses to improve efficiency.

  • Medicare and Medicaid funding. Both federal and state funding of Medicare and Medicaid stimulates demand for healthcare services. Together these programs account for 75 percent of total home health care revenue.
  • Private insurance and out-of-pocket payments. Those covered by private insurance policies are more likely to use healthcare services more frequently. The number of people with private health insurance is expected to grow in the future. Some services, such as homemaker are not always covered by third-party payers and must be paid out of pocket.
  • Managed care organizations (MCOs) and workers’ compensation. MCOs often cover home health care. MCOs contracting with Medicare are required to provide all Medicare-covered home health care available in certain geographic areas. Individuals with job-related injuries are also eligible to receive home health care services.

What types of services do home health care businesses provide?

  • Traditional home healthcare. Both medical and nursing care is provided to patients who are at home suffering from chronic illnesses. These services include medical or psychological assessment, wound care and pain, disease and medication management and education.
  • Home hospice care. Supportive care is provided to those living out their final stages of a terminal illness at home. The focus of hospice care is to provide comfort and a better quality of life while the goal is to enable patients to be as free of pain as possible.
  • Home therapy services. The largest portion of home therapy is infusion therapy, which is intravenous administration of chemotherapy, nutrients and other medications. Other types of home therapies include respiratory therapy, which is for treating respiratory illnesses, such as emphysema and chronic bronchitis, occupational therapy, speech therapy and physical therapy.
  • Homemaker and personal services. Nonmedical assistance is often provided to those individuals who are either recovering from an injury or unable to function independently. Personal assistants or caregivers provide services such as transportation, errands, housekeeping, meal preparation, companionship, and assistance with daily living activities.
  • Other home health care products and services. Other means of generating revenue in this industry include renting and selling durable medical equipment (DME), such as wheelchairs, hospital beds, ambulatory aids and rehabilitation equipment. Home health care also involves the usage of prescription and nonprescription drugs, nutritional products and orthopedic supplies.

With an aging population and rising healthcare costs, steady growth in the home health care industry is expected to continue. Yet, decreases in federal funding and cuts to reimbursement programs are expect to put pressure on profitability. To combat lower margins, more home health care consolidation activity is expected. In addition, the industry is expected to boost demand and compete more effectively with hospitals and other institutions by shifting its focus to more chronic disease management and self-care services.

To further explore the entrepreneurial world of health care, browse available health care and fitness businesses for sale, or consider buying a health and senior care franchise.



Sources:

“Home Care Providers in the US”, IBISWorld Industry Report 62161, IBISWorld, August 2017 https://www.ibisworld.com

“Home Health Care Services”, First Research Industry Profile, First Research, 5 February 2018, https://www.firstresearch.com