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Managed Care: Threat or Opportunity for Home Health?

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Carolyn Bonner, RN, BSN
Barbara Boyd, RN, BSN


The focus of this article is a description of how two Northwest home health agencies, Group Health Cooperative and Providence Health System, have responded to the managed care environment. These agencies experience and response to the increased managed care provision of services is discussed. Strategies for providing quality home care at reduced care prices are described.

Citation: Bonner, C.,  Boyd, B., (January 6, 1997). "Managed Care: Threat or Opportunity for Home Health?" Online Journal of Issues in Nursing Vol 2, No. 1, Manuscript 4. Available:

Keywords: HMO, Managed Care Programs, Home Health Agencies, Northwestern US, Home Health Care


Managed care is described as both a threat and an opportunity for home health. Home health has become an obvious alternative care setting since more and more patients receive health care outside the institutional setting. At the same time managed care decision makers vary in their knowledge and experience with home health services. Not all managed care decision makers view home health as a major strategy to maintain and even exceed quality standards of care while at the same time reducing costs. The focus of this article is to describe how two Northwest home health agencies, Group Health Cooperative and Providence Health System, are responding to managed care. These two organizations currently face these challenges and desire to strengthen home health care clinical practice, by examining their environments, developing information technology, and designing new structures.

The Organizations

Group Health Cooperative

Group Health Cooperative of Puget Sound (GHC), headquartered in Seattle, Washington, is the nation's largest consumer-governed health care organization, serving nearly a half-million people in the Pacific Northwest. Founded in 1947, it is one of the nation's oldest and largest health maintenance organizations, operating hospitals, specialty medical centers, family health centers and other health care services. GHC is an innovator in quality assurance programs, services for senior adults and health promotion for people of all ages.

Today, GHC enrollees include 51,000 seniors. While the majority of the GHC delivery system remains a staff model, GHC is increasing its network relationships. The competitive market environment has inspired GHC to develop new and creative insurance models. The affiliation with a local entity will place GHC in an alliance that will increase its market share as well as its competitive edge. GHC prides itself in a community commitment and on its efforts to ensure that everyone has access to quality, affordable health care.

Providence Health System

The Providence Health System (PHS), based in Seattle, Washington, is one of the largest, private, non-profit health systems in the country with 1995 net revenues at $1.6 billion, more than 18,000 employees, 900,000 patient/resident days and 475,000 home health and hospice visits.

Health care facilities and services are located on the west coast from Anchorage, Alaska to Burbank, California and are managed through ten geographical service areas, one of those entities being the Puget Sound Service Area, serving metropolitan Seattle. The PHS also includes Providence Health Plans with 230,000 HMO members and 285,000 Preferred Provider Organization (PPO) subscribers.

Since its founding by the Sisters of Providence in 1859, the PHS has established a mission of charitable works, investing $100 million in 1995 in unsponsored community benefit services. The focus of the PHS today is on building healthier communities through integrated delivery systems. Each PHS Service Area is in the process of constructing the continuum of care through its own services and by forging new partnerships with other providers and payers. The goals of these efforts are improved community health and clinical outcomes.

Background and Environment

Nationally, home health providers who are located in high managed care states, are involved in capitation with payors and have been effective in reducing the overall costs of health care with positive clinical outcomes. Primarily this has been done by reducing hospital length-of-stay (LOS). In the Northwest, the trend has been for physicians to take capitation contracts from payors. These physician groups may be responsible for all the health care expenditures, or may be responsible for only outpatient services. is not uncommon for patients referred to home care to either go without care for two to three weeks or have the home health agency provide care without authorization.

Outpatient services frequently include home care. However, the physician groups generally have minimal, if any, experience in global capitation in which the provider is responsible for the total care under prearranged conditions. In addition, the allocation for home health services within the capitation rates is nonexistent or unavailable. In many cases, the physicians are unaware of how home health might be utilized to impact their overall costs.

There is a tendency for the physician groups to micro-manage care, focusing on short-term savings at the expense of potential long-term losses. Many of the physician offices do not have the staff or systems to oversee the authorization, approval and utilization process. Consequently, it is not uncommon for patients referred to home care to either go without care for two to three weeks or have the home health agency provide care without authorization.

There are two types of liability risk for the home health providers that drive decisions: clinical liability and financial liability. Home health providers make decisions while weighing these two types of risk. Further, some physician groups use their own office staff to provide care in the home. These physician groups may be unaware of the licensing and/or certification requirements and the standards needed to provide quality home health care.

The Northwest health care environment is unique in many ways. While the overall HMO penetration is not great, since 1947, the Northwest has had the presence of Group Health Cooperative of Puget Sound (GHC). This HMO has done much to influence the health care practices in this area. Hospital LOS's are shorter than the national average (Washington State is 4.9 days, in contrast to 6.7 days nationally). Home health providers also have shorter LOS and reduced visits per case. (Washington State is approximately 30 visits per case in contrast to 68 visits per case nationally.)

An environmental factor may be that the Northwest seems to attract or foster healthy life styles. Consumers tend to be more independent in their care and have higher expectations. There is less utilization of home health aide services and more use of professional staff. The health care staff are frequently unionized in the hospital setting or almost exclusively unionized, as is the case of GHC, where the co-op was started by a union. The Northwest is also dominated by non-profit health care providers. There are virtually no for-profit hospitals or health care systems. Although, there are some proprietary home health agencies, they have a small percentage of the home health market at this time.

In the home health environment, there continues to be ongoing debate around costs and quality. Home health providers struggle with the goal of how to maintain quality in this rapidly changing environment. A major obstacle to this goal is the lack of documented clinical outcomes, not just for home health, but for the patient across the entire health care system. Home health providers are in the process of actively modifying and changing the number of visits per case in the absence of concrete outcome practice data. Tools for measuring and/or tracking these system outcomes are also deficient. Most agencies are still in the process of developing these standardized tools and information systems.

Information Technology

Home health is eagerly awaiting the flexibility and portability of technology. Remote access and lap top computers will make assessment and interventions possible anywhere the patient is located. "Technology will so change the character, availability and usability of information that it will increasingly change the character of our lives and the function of our work." (Porter-O'Grady, 1995, p. 10) . In this virtual office, supervisors will lead a team with less face to face interactions.

Clinical productivity is expected to improve due to reduced travel time, improved documentation and less duplication or gaps in service, which often lead to additional, unnecessary, or longer visits.

They will need to train staff, develop new policies and procedures, readjust staffing and productivity standards, and guarantee that patients' and families' rights and confidentiality are being maintained.

Further, electronic and communication technology will change the services offered by home health. "A technology such as telemedicine is one vehicle that will permit providers to see more patients spread over a wide service area, at a lower cost per patient." (Remington, 1996, p. 14) . This new technology can change how an organization functions and how it is able to compete in the marketplace.

Locally, PHS is in the process of implementing a computer system that includes lap top computers with remote access for the home health staff. GHC is about one year away from implementing a similar system. These projects are a primary strategy to reduce costs while maintaining quality. Clinical productivity is expected to improve due to reduced travel time, improved documentation and less duplication or gaps in service, which often lead to additional, unnecessary, or longer visits. Administrative productivity is also expected to improve due to an elimination of manual processes and a reduction in duplication or hand-offs. In addition, these endeavors will electronically connect home health staff to physicians in clinics and staff in the institutional settings.


Both GHC and PHS have structured themselves based on the type of organization they are and how reimbursement mechanisms have been established. PHS has traditionally been a fee-for-service organization while GHC had capitated reimbursement. As data in the following table show, each organization is expanding the types of visits that they include. For example, PHS in promoting managed care contracts has established a specialized home health team to handle these contracts. In contrast, GHC has adapted its structure to include the fee-for-service Medicare. While GHC now has the option of making more home visits per patient, under Medicare fee-for-service, there have been no changes in policy or practice regarding the number of visits per patient between fee-for-service and managed care. The slight increase noted in 1996 managed care visits is probably a result of increased acuity driven by decreased hospital LOS (see GHC data below). The table below demonstrates the number of visits per patient for the years 1990 and 1996.

Visits/Case Comparison

  1990 1996 1990 1996
Fee-for-Service * 7.3 26.5 17.4
Managed Care 10.0 10.0 ** 10.0

* = No Fee-for-Service || ** = No Managed Care

A strong belief exists that to achieve positive clinical and financial outcomes, one must track interventions and outcomes across the entire system. This concept supports the model of an integrated health care system where all components of care are interlinked. Capitation and managed care also reinforce the need for an integrated delivery system. Components of prevention, smooth and predictable transitions across the continuum of care, and care that is provided in the right place at the right time must all be present for quality care to occur. GHC and PHS are both attempting to create these integrated systems.

Even within an integrated health care system, home health providers must position themselves within the structure to ensure a strong voice for home health. Home health care is often overlooked as an alternative to other care settings. Home health providers need to advocate by asking the question: "What would it take to allow this patient to be at home?" (Always with the realization that some cases are not appropriate or cost effective in the home). It is here where the historical roots of home health, which started within community health, are valuable. Unfortunately other factors often impact a patient's ability to have home health care and to achieve a positive clinical outcome.

No longer do we have the luxury of attempting to meet all patient needs or applying resources in a shotgun approach.

These factors include the patient's support system, their living arrangement, and psychosocial issues.

Historically, health care providers have had a very parental approach to care. Goals have been established and care provided with only minimal patient involvement. If we are to achieve positive clinical outcomes with fewer costs, it is clear that patients must be involved in goal setting and providing as much of the care themselves, as possible.

Home health providers, as well as the overall health care system will need to sharpen their skills at implementing the 80/20 rule, both in clinical and administrative areas. Each clinician must ask, "What are the critical items required to achieve the best results?" No longer do we have the luxury of attempting to meet all patient needs or applying resources in a shotgun approach. Instead, health care providers must take additional time to assess and plan where to apply selected resources to achieve maximum results. In this process, one must use the resources of other providers as well as the patient's resources and support systems.

Through pathways and protocols for care, an important question continually begs to be asked, "How can cost and quality exist in creative tension?" Some strategies both GHC and PHS are using to manage these tensions include:

  • The use of paraprofessionals (i.e., Licensed Practical Nurses, Physical and Occupational Therapy Assistants). This strategy implies that the delegation skills of the professional are fine-tuned, not only to meet the requirements of the licensing laws, but to assure that quality outcomes are achieved.
  • The development of clinical protocols. GHC & PHS have both developed protocols for conditions such as Coronary Arterial Bypass Graft (CABG), Total Hip, Congestive Heart Failure (CHF) & Diabetes Mellitus (DM).
  • The restructuring of home health teams. Both PHS and GHC have restructured their home health teams. Team managers supervise an interdisciplinary team. The team manager may be a nurse, physical therapist, occupational therapist, speech therapist or medical social worker. While there are pros and cons to this structure, it has served to reduce the isolation of discipline specific departments and organizes the agency around patient care rather than a specific discipline.

As managed care expands as a reimbursement mechanism, the goal of gaining the best clinical outcomes focuses on the team providing the right amount and type of services instead of the number of visits per discipline. Leaders of these teams need special skills to ensure success Both GHC and PHS are in the process of expanding this concept to include the physician. At one clinic, the home health nurse spends one hour per week meeting with the clinic physicians and discussing the active home health cases. At PHS, one home health team is assigned to two large physician clinics. The key to all of these models, is communication and relationship. The physicians authorize the care and the face to face interaction with the home health nurse creates trust and continuity of services. In this way, home health becomes part of the physician's basic plan of care.

Clinical Practice

The managed care environment has implications for education and clinical practice. The home health practitioner, especially nurses, must function independently and apply critical decision-making, patient teaching and coaching, and address issues and needs beyond the purely medical model. In addition, home health practitioners must understand the health care system and be able to visualize care for patients across this continuum. They also must be willing and able to work in a variety of interdisciplinary teams to achieve positive clinical and financial outcomes. While this has been a common practice in home health, these clinical teams now must expand beyond the nuclear home health team. It must expand to teams in primary and specialty care clinics, hospitals, subacute and long-term care facilities.

Home health practitioners must have good communication skills, both written and verbal. Teaching and prevention are primary focuses for the home health practitioner.

Home health practitioners must be computer literate.

Support groups and self-help teaching protocols with a home health provider as a consultant or resource become the norm. One's ability to communicate at all levels in an organization will be crucial not only in providing information, but in delegation to paraprofessionals, as well as teaching patients to be independent in their care.

Home health practitioners must be computer literate. The need for technological connectivity to physicians and the entire health care system are upon us. The virtual home health office will create an independent practice whose only linkage to others is through technology.

Home health care in this managed environment creates opportunities for nursing research which are endless and exciting. As a result of both education and experiences in home health practice, nurses have begun to realize the importance of research to their practice and professional satisfaction in their work. As health care continues to move from the institutional setting to the community, the role of home health will continue to grow. "Although there will always be an acute care component to managing most chronic illnesses, we believe the "organizer" of the continuum of care for patients suffering from multiple chronic illnesses will be the home health agency working jointly with the patient's personal physician." (Shortell, 1996, p. 222) . Further, the health care environment is becoming more and more data driven. The combination of these two facts afford nurses the opportunity to ask, "Were the right patients identified? Were the right interventions provided? Did the interventions make a difference? Were the patients satisfied with the interventions?" and "Did the organization maximize their health care dollars?" Patient outcome studies need to be linked to nursing interventions. Home health nurses need to be committed to generate the body of knowledge that will guide this growing area of nursing practice.

Finally, a home health organization also has a role in providing a positive environment, culture and leadership to achieve and maintain quality services. All staff in the organization must be empowered to make decisions regarding the use of resources, as well as to achieve and maintain the quality of all services - administrative and clinical. Leadership must encourage risk-taking behaviors, reinforce creative models and solutions, and promote system thinking. Compensation and reward systems must acknowledge and reward those staff who strive, achieve, and maintain the quality of the services. The organization must reward those who work across the historical territorial boundaries within organizations (nursing vs. physical therapy or clinical vs. administrative). The entire staff need to work toward the best possible outcomes and strive to achieve them in the most efficient way for the entire organization and especially, the patient.


GHC and PHS have chosen to view managed care as an opportunity rather than a threat. No easy answers have been found. Their strategies for success have included new relationships and structures, new information systems, and new roles in clinical practice. Like pioneers, GHC and PHS are exploring uncharted territory. They continue to hold themselves accountable for quality outcomes as they survive and thrive in this managed care environment.


Carolyn Bonner, RN, BSN

Home Care Director
Providence Home Care Services of Seattle
425 Pontius Avenue N, Suite 300
Seattle, WA 98109-5452

Carolyn Bonner is a graduate of Eastern Washington University, Cheney, Washington, through the Intercollegiate Center for Nursing Education, in Spokane, Washington. She has 23 years of nursing experience with 21 years in Home Health within Washington State. She is currently Director of Homecare at Providence Homecare/Hospice of Seattle, a large, hospital-based home health agency providing 115,000 visits annually in the Puget Sound area. In this role, she is active in negotiating managed care contracts, establishing and overseeing the Quality Improvement programs and participates in several professional associations in these areas of expertise.

Barbara Boyd, RN, BSN

Administrator Home and Community Services
Group Health Cooperative of Puget Sound
83 South King, Suite 815
Seattle, WA 98104

Barbara Boyd is a graduate of Pacific Lutheran University, Tacoma, Washington and has 26 years experience in Public Health and home health, both in California and Washington states. She has worked in a variety of program areas, including Adult, Maternal/Child Health and Hospice. She has been a Clinical Field Instructor in Public Health Nursing for California State University, Hayward. She has been working at Group Health Cooperative of Puget Sound for eight years and currently is the administrator for Home Health, Hospice, Community Parent Child Services, AIDS Care Coordination, Home and Community Volunteer Services, providing 112,000 visits annually in the Puget Sound area. This role includes the oversight of fee-for-service and managed care contracts outside of GHC, budgets, and all quality improvement initiatives for all GHC home services.


Porter-O'Grady, T. (1995). Managing along the continuum: A new paradigm for the clinical manager. Nursing Administration Quarterly 19(3) 1-11.

Remington, L. (1996, January/February). Top predictions for 1996 in home care. The Remington Report 4 (1), 12-15.

Shortell, S. M. Et al. (1996). Remaking Health Care in America - Building Organized Delivery Systems . p. 222. San Francisco: Jossey-Bass

© 1997 Online Journal of Issues in Nursing
Article published January 6, 1997.

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