Moving into market offers a multitude of possibilities for DME entrepreneurs
by Bradley Smith
October 5, 2018

With the increasing attention to our aging population and their home health care needs, it is inevitable that home health providers would be focused on this population. However, pediatric home health care is actually the fastest growing home health care market and deserves your attention as you plan for future expansion and diversification.

Today, families provide nearly $40 billion of uncompensated pediatric home health care (parents are believed to lose about $3,200 per year in income when caring for a sick child), though this picture is rapidly shifting with the expansion of Medicaid, the increasing influence of managed care organizations (MCOs), and the Centers for Medicare & Medicaid (CMS) emphasis on providing pediatric care in client homes. This accelerating change offers an opportunity for home health care providers to enter and/or increase market share in an area of demonstrated need.

The Nature of the Pediatric Care Market

Children often need home health care for reasons that differ markedly from their elder counterparts, including chronic illness, injury and medical issues that occurred at birth. While many of these may overlap with other needs (e.g., individuals with intellectual/developmental disabilities [I/DD] already eligible for Medicaid), there remains a significant population of infants and children requiring medical care and home health care services. CMS estimates that at least 20 percent of infants and children are eligible for Medicaid-funded home health care services that they currently do not receive.

Why the Unserved and Eligible Population?

The factors are multiple. One issue is the paucity of providers for pediatric services with the qualified labor force often focused on elder care. Another factor is the relative lack of visibility of the pediatric homecare market given the much larger funding now committed to older patients. Add in the dollars and time necessary for a start-up effort and you have a new opportunity not every provider will pursue.

Market Challenges

As in any health care vertical, there are challenges to entering or expanding in the pediatric home care marketplace. Some of these challenges include:

  • The time and expense of investing in new services in which a home health provider may have little experience. While this is a perceived risk a provider may find that they have a successful track record with older adults that can be generalized to a pediatric population.
  • The lack of skilled staff that has experience with this population. Can this issue be addressed by importing the necessary skill?
  • Reimbursement challenges that are gradually decreasing but that still demand some persistence with payers, including Medicaid.
  • The evolving definition of “medically necessary care” that is beginning to favor providers of pediatric homecare, but still requires patience with an eye on a long-term strategy.

Considering these challenges in total will remind some of you how far we have progressed in terms of reimbursement for the elderly population, including those funded through Medicaid and Medicare. My prediction is that we will experience the same journey with pediatric homecare, with similar benefits for patients, families and providers.

Embracing the Pediatric Home Health Care Market

There are several reasons to enter or expand existing services in the pediatric home health care market in the near future:

1. The safety of the pediatric market. Like Medicare, Medicaid will naturally have downward pressure on reimbursement rates. This has, and will continue to manifest itself, in variability of all reimbursements in all of Medicaid including pediatric services, depending on numerous factors. What is different at the pediatric level is that there is a greater willingness for change when a product or service rate become unreasonable.

This willingness to change is driven by two factors. The first is unlike Medicare, Medicaid providers have greater access to their state legislators. Not that they do not have access to their congressman or senator, but that the state representatives are much easier to access and to convey a message as opposed to a U.S. senator who represents half an entire state versus county.

The second is that there is a greater willingness to make changes to a state-managed program. Unlike Medicare, Medicaid is less bureaucratic in nature, with less red tape, and greater administrative freedom at the local level. Also, when a Medicaid policy change negatively impacts children and causes loss of access, or worse loss of life, there is an inevitable hue and cry. Usually watchdog groups and DMEs themselves can draw a direct line to the policy in question and the negative impact it has had to a child’s life. This in itself is usually enough motivation for an elected official to change his or her policy to favor increased reimbursement for pediatric home health care services.

2. The increased reliance of state Medicaid programs on MCOs. This trend will exclude more and more providers while rewarding those that can adapt. MCOs will be looking for ways to let fewer providers into their networks as well as exclude existing providers that do not meet their increasingly sophisticated data requirements. Providers that have the ability to demonstrate their superiority of clinical care will stand out by being a greater value to the MCO, giving these DMEs a seat at the MCO’s table. Because MCOs prefer a smaller network of qualified providers, those that receive in-network contracts will enjoy a company-wide advantage, including expansion into new services such as pediatric home health care, if they are not already a provider, or further growth if they already offer these services.

3. The ability to affect positive social change. Most of us entered this field because we felt good from helping our fellow humans in need at the same time we built a company that could provide sustainable benefit for ourselves, our employees, and our larger communities. Successfully addressing the complex medical needs of infants and children takes the positive impact of our work to a whole new level. There are very few things more rewarding than knowing that you are an instrumental part of a team that fundamentally changes or saves a child’s life, while also helping a family as they may struggle to provide a healthy environment with modest resources.

4. The ability to demonstrate clinical prowess in an area of great need. This will not only set you apart from other competitors in the market but will help you recruit and retain the talent from top to bottom, as well as win you accolades from families, competitors and payers in you market. The leverage you can gain when negotiating contracts with insurance providers and health plans provides immediate benefit as well as strengthening your position for the long-term.

The pediatric home health care market offers a multitude of possibilities for DME entrepreneurs. What do you do if you find yourself lacking the clinical depth you need as a provider but still want the aforementioned advantages for your company? The most effective way to enter the pediatric home health care arena is to acquire a company in the space, and there are plenty of opportunities to do so in today’s marketplace.