The last segment marked the end of our discussion of hospitals. We are now going to spend the next few segments discussing what is known as post-acute care. Post-acute care typically refers to care provided to patients recently released from the hospital, and can take place in many settings including nursing homes, rehabilitation centers and most commonly at the patient's home. This is related to but not the same as long-term care, which is traditionally provided in nursing homes to patients who can no longer be cared for at the home, and require support for both daily living activities and complex medical problems. As the proportion of older people in the general population steadily increases, and as the need for care for chronic degenerative diseases grows, care has become increasingly expensive. In addition, there has been a decline in informal care giving for the elderly due to demographic trends like a decreasing the number of children per family, greater employment mobility that makes it more likely that people will reside far from their parents, higher divorce rate and increased labor participation for women. All these leads to greater emphasis on formal post-acute care, to enable close monitoring of patients health and reduce hospital re-admissions. Some examples of post-acute care facilities include inpatient rehabilitation facilities, skilled nursing facilities, long-term acute care facilities, hospice and home health. Skilled nursing facilities or nursing homes are licensed health care residential facilities for individuals who require a higher and persistent level of care. Long-term acute care facilities are specialty care centers designed for patients who have very serious medical problems and need intensive treatment for an extended period. Hospice provides end-of-life care predominantly in the home. It will be our topic in the next segment. Arguably, one of the most effective post-acute care outlets is home health care. Though similar to nursing facilities in style of care, perhaps the most salient feature of home health care is the sight of care. As the name indicates, care services are delivered in the home rather in a centralized facility. The services provided can range from providing complex care to assisting in basic activities of daily living like bathing, dressing, getting out of bed, feeding and so on. Skilled care can include skilled nursing services, occupational therapy, physical therapy, speech therapy, medical social services, home health aide, dietary and nutritional counseling as well as drug and lab services. With services delivered in the home rather than in a centralized facility, the nature of competition in home health is different. For a hospital and physician offices, location provides a degree of market power that does not exist for home health agencies, because the consumers do not face travel costs when receiving home health services. Travel costs in both emergencies and non-emergencies lead most patients to prefer a closer provider. Without location as a natural barrier to competition, home health markets are likely to be highly competitive. Quality of care in home health may be more important for agency choice because consumers do not need to trade higher quality for shorter distance, as is the case for hospitals, nursing home, ambulatory surgical centers and other facilities. Studies of hospitals and other health care facilities have shown distance to be an important factor in the choice of health care provider. Patients often prefer to receive care at a nearby hospital, even if it has higher mortality rates and less experience with certain procedures. In addition, geographic proximity was found to be a strong predictor of whether or not a physician utilizes a hospital. In 2010, a day in the hospital cost approximately $6,000. A typical day in a nursing home costs approximately $600, and a typical home health visit cost approximately $130. Obviously, these activities involve different resources and target different patients. But on some level, they exhibit a degree of substitutability. For example, replacing the very last day of hospitalization with a series of home health visits or an early transition to a skilled nursing facility can save money. The growing reliance on home health care is also appealing to payers, mostly to public payers. Medicare is the largest payer of home health care services, accounting for around 40 percent. Medicaid covers around 25 percent and other government sources cover another 15 percent, to make up 80 percent of coverage for all home health services. With minimal barriers to entry and exit, home health agencies are responsive to industry changes. For example, in the Balanced Budget Act Amendment of 1997, Medicare shifted from paying a fixed fee per home health visit to a prospective payment system where a fixed amount is paid per a 60 day home health episode. As a result, during the period of transition into the new system, 30 percent of Medicare certified home health agencies exited the market, which led to an annual reduction of 1.3 million home health care episodes, and to a substantial reduction in spending. All in all, the rise of home health care is a solution to the rising costs of care as well as a product of changing technology, demographic and preferences of patients. Patients prefer to receive care at home. It is less likely that such care will be provided by family members. And technology, whether monitoring, communication, diagnostic and therapeutic, allows for providing such care to the home. It is important to know that while home health possesses great opportunities for increased value, it is inherently a labor intensive local business that is very difficult to scale. This is one reason why the home health industry is highly fragmented. In the next segment, we will discuss hospice care. Hospice is supportive care to people in their final phase of a terminal illness, and focuses on comfort and quality of life rather than cure.
