We at Union Healthcare Insight are kicking off the new year the same way we closed last year: Keeping a sharp eye on healthcare innovation and digging deeper into its most important trends.
In this post, I will share some overall insights from the report, along with a set of observations about the state of innovation and adoption in one of the top innovation vectors we should all be tracking: No, not (just) AI, but also home-based care.
Research context
Today marks the launch of our most recent report, The future of innovation: A 5-year outlook, a full copy of which is now available for Union members to download. The report covers findings from our project to assess which healthcare innovations are most likely to have a significant impact on the overall market and delivery environment in the next two to five years.
Based on both primary and secondary research, we developed seven insights into the future of healthcare innovation (see report) as well as identifying four innovation categories that have the greatest potential to shake up investment and market dynamics in the next few years. These are the areas that every healthcare generalist should invest time in becoming generally familiar with, and in tracking ongoing developments in coming months and years.
The top four innovation categories, in our view, are: Artificial intelligence (of course), personalized care, home-based care, and chronic care. They rose to the top among a crowded innovation field based on the attention and investment they're currently receiving from incumbent industry players as well as outside investors and new entrants/disruptors.
To get a handle on the 'so what' within each category, we analyzed how each is likely to reshape industry priorities, as well as identifying top misconceptions and over-generalizations in each area--a critical discipline within the innovation terrain. I won't get further into the report's conclusions in today's post, except to say that we have come to believe that the chronic care space in particular is ripe for particularly fundamental and widespread market dynamic shifts in the next two to five years.
Let's look closer at the state of innovation within home-based care
Second only to AI, home-based care was the topic that came up most often in our innovation research. Let's examine why it’s getting so much attention, and some of the nuances in danger of being missed by those less familiar with the ins and outs of home-based care.
Union Insight: There's nearly universal industry preoccupation with the concept of 'home-based care.' But don't let the singular, broad term mislead you; it masks a complex web of motivating and hindering forces, with hindering forces drawing much less attention than they deserve. The interplay between motivating and hindering forces is creating an array of niche opportunities, which will lead to a focused and localized pattern of adoption of the home-based care model.
During the pandemic, home-based care was one of the healthcare sectors that received a substantial boost in interest and investment. In interviews, we found that a preponderance of healthcare leaders and experts share the belief that some version(s) of care in the home—along with the technologies and delivery methods that facilitate this care—will going to reshape healthcare delivery in the short- to medium-term. We often hear the sentiment that provider organizations and payers must both get on board with home-based care or risk being left behind by competitors with faster adoption.
However, a deeper examination of the reasoning behind this belief shows a more nuanced picture. Yes, there is cross-sector consensus about the inevitability of home-based care; but what interviewees mean by 'home-based care' is actually a piecemeal set of opportunities, each with its own incentives, players, and goals.
Additionally, while tools necessary to make home-based care work are increasingly available, significant operational limitations persist.
Incentives creating home-based care niche opportunities
Innovation proceeds fastest when there are clear incentives to take on the risk, work, and expense of developing new models. Within the realm of home-based care, it is helpful to examine the theoretical incentives each by each -- doing so helps illuminate the array of relatively niche motivations, applications, and organizations that together make up the 'home-based care' innovation opportunities.
Consumer preference: In theory, providers and payers alike could use the availability of home-based care services or coverage to attract new patients or members, thus driving up market share. However, for providers, this differentiating opportunity is relatively limited, as it is linked (as always in healthcare consumerism) to cases in which patients have the time and ability to shop around for care--always less frequent in healthcare delivery in reality than one would think from the outside. In contrast, there may be greater potential for health plans to use home-based care benefits as a sweetener to drive enrollment.
Catchment area expansion: Could providers leverage home-based care to expanding their market share by way of reaching further beyond their immediate catchment areas, without costly brick-and-mortar investments? This opportunity seems most applicable to brand-name specialty facilities--facilities that patients would chose distance where less of an obstacle. While in most cases, it is not feasible to deliver all services in the home, home-based care capabilities can meaningfully cut down the number of in-person visits; for brand-name facilities, this could enough to build share among just-out-of-area patients.
Reimbursement: Are providers being sufficiently reimbursed for home-based care to make service additions financially sustainable on a per-service basis? Medicare, which often leads the charge on reimbursement that private plans follow, has traditionally had limited home care coverage. It pays for qualifying sub-acute care (e.g. intermittent skilled nursing or physical/occupational therapy). During the pandemic, CMS released a waiver that would allow participating providers to be reimbursed for hospital at home services. This opens the door to more acute forms of home-based care, but because the reimbursement rate is the same for in-patient and in-home care, in most cases, hospitals would need to find a way to deliver care more cheaply in the home in order for the waiver to offer enough financial upside to pursue it. That means provider ROI hinges on attaining operational efficiency of the home-care model--a tough ask in these early days of home care and with a very thin workforce. Additionally, the waiver has only been extended through 2024, meaning that providers considering leaning into home care now have no guarantee that coverage will continue past this year--presumably a chilling factor for making necessary investments and putting the time and energy into building out programs.
Decanting: Could providers improve their service/acuity mix by decanting some patients into the home? Again, in theory yes--and, if feasible, that would give home-based care services a positive ROI overall, even if home-based care delivery cost were slightly higher to providers than care delivery in the inpatient setting. But in reality, this opportunity is open only to a subset of providers: those that operate near maximum in-patient capacity and who can easily backfill patients into the inpatient setting.
Supporting value-based care/risk: The other scenario in which providers or payers could spend the same or even a bit more on home care and still come out on top is by using it as a tool to manage risk. The value-based-care logic is only sensible for providers with sufficient incentives tied to risk to make programatic investments sustainable. Early findings from hospital at home waiver participants found positive health outcomes for patients, with fewer being readmitted to an inpatient setting. However, for providers with hefty risk incentives in the portfolio, the bigger opportunity may not be 'hospital at home', as much as it is identifying ways to prevent hospitalizations in the first place by way of more/more effective primary and preventive care in the home.. This is a potential avenue for payers as well as providers who have taken on risk; however, high-value preventive care in the home is an area that will need considerable attention and model development to determine what approach can work (at scale).
For more information on predicting adoption/feasiblity based on incentives, members, please see our home-based care financial feasibility calculator in the full report.
Barriers to home-based care adoption
In general, as important as it is to understand as the incentives moving certain parts of the industry toward home-based care, it is equally key to have a grip on the forces pushing back.
Those barriers generally fall into one of three buckets:
Financing: Most services still do not qualify for Medicare or health plan reimbursement and/or are more expensive when delivered in the home.
Workforce: As we’ve discussed, the nursing workforce, which would be primarily responsible for much home-based care, is already spread thin. Requiring nurses to visit patients at distributed locations would worsen shortages if providers can’t replace hands on care.
Quality and safety: Ensuring technology, medications, and treatment is functioning optimally in a facility setting with virtually 24/7 in-person monitoring is hard enough. Replicating that level of control in the uncertain environment of a patient’s home can be challenging or, in some cases, impossible.
An overview of enabling developments
Turning to developments that can help ameliorate some of these barriers: Some relatively recent innovations, such as advances in remote monitoring tools and digitally enabled medical devices, are well positioned address issues of safety and quality in home-based care. AI data analytics tools and upgraded workflow platforms have the potential to cut down on staffing requirements, mitigating provider direct cost burden.
If and as innovations address safety and quality concerns, patients, providers, and payers will be more open to adoption; and if services tick the quality/safety, patient acceptance, and efficiency boxes, this will create more payer coverage, making the overall financial feasibility for providers greater as well. It's your basic virtuous cycle--if all the stakeholders can succeed at keeping that wheel moving forward, despite the various impediments.
In sum: there's been considerable industry focus on positive factors—patient interest, new government reimbursement, technological advancements, etc.—suggesting a future explosion in home-based care service adoption. However, enabling factors must contend with an equal or larger set of serious impediments.
Overall, it's helpful to break the "will it or won't it take off" question into a more nuanced set of niches and use cases. Home-based care makes short- to medium-term sense for a subset of payer and provider entities, depending on their objectives, resources, and operating parameters. Keeping this lens in mind will help support a more accurate sense of the state of home care innovation/adoption in the next couple of years.
Keep the conversation going
If one of your new year’s resolutions was to get smarter on healthcare, you’ve come to the right place. Union Healthcare Insight members can visit our website to access the full innovation report, a companion report on the 5-year outlook for AI, and dozens of other resources. If you’re not yet a member, reach out to us at info@unionhealthcareinsight.com to learn how we can help your organization in 2024!
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