Federal Cuts Could Impact Home Healthcare Device Market

Strong growth is predicted for the U.S. home healthcare equipment market, but it’s unclear how changes proposed at the federal level might affect the sector.

In the United States, the market for home health devices, a category that includes hearing aids, respiratory equipment, and devices for drug delivery, patient monitoring, and managing diabetes, is expected to grow 6% per year through 2017, according to a report by market research provider GBI Research. The United States accounts for 40% of global demand for the devices.

“The United States will continue to be the major market for this industry in the near future as baby boomers retire in large numbers from the workforce, and rising healthcare costs will lead to higher demand for these products … ,” says GBI research analyst Sapna Rawat.

But government cost-cutting measures could also have an impact.

In July, CMS proposed a 3.35% reduction in the 2012 Medicare Home Health Prospective Payment System (HH PPS) rate, through which home healthcare providers are reimbursed. The change would reduce HH PPS payments by an estimated $640 million, and home healthcare providers would suffer as a result, one advocacy group says.

Analysis by the National Association for Home Care and Hospice (NAHC), a nonprofit organization that advocates  for the home care industry, found that the rate reduction would result in negative Medicare financial margins for more than half of U.S. home health agencies.

A new White House deficit-reduction plan also proposes cuts to Medicare spending on post-acute care, including home health services, through measures such as requiring a copay for home services.

William Dombi, NAHC vice president for law, says it’s uncertain how such changes might affect the market for home healthcare equipment. In one scenario, he says, home health agencies might turn increasingly to telehealth devices to reduce provider visits, thus lowering the cost of care.

“If they believe it will … stretch their dollars better, they will use it,” Dombi says.

On the other hand, with margins squeezed, agencies might take a closer look at efficiencies, he says. If the cost of the equipment exceeds the value of its performance, home healthcare providers might decide it’s not worth the investment.
“Not every provider has made effective use of [this equipment], and they may find it to be a cost they can do without,” Dombi says.

To make their equipment indispensible, Dombi suggests that equipment makers focus on training providers to use it better. Going forward, he says providers will focus not just on the dollars-and-cents return on investment but on performance metrics such as rehospitaliztion rates.

“They’ll have to have the ability to sell themselves within accountable care organizations,” Dombi says.

—Jamie Hartford