In 2019, before the pandemic, the U.S. Census Department estimated that 611k people were treated at hospitals every day. In mid-January 2022, at the absolute height of the Omicron surge, there were ~150k daily hospital in-patient admissions recorded due to Covid. As there are 6,093 hospitals in the United States with approximately 921k staffed hospital beds, it is understandable how battered the healthcare delivery system was during that surge. In addition to the pressures to dramatically lower hospital operating costs, it became clear that innovative new care models had to quickly evolve in response.
While many providers have piloted hospital-at-home (“H@H”) programs, often at sub-scale levels, market forces now make it quite clear that a robust tech-enabled H@H company could be successful. Last month the formation of Inbound Health, a partnership between Allina Health and Flare Capital, was announced with a $20 million Series A. To Allina’s great credit, at the pandemic’s outset its executive team developed a H@H program that has now managed over 4,400 admissions. This program replaced facility-based observation, both for acute and skilled nursing episodes. These cases covered patients across more than 180 diagnosis-related group (“DRG”) codes. In fact, nearly 60% of the episodes since May 2020 are for non-Covid cases.
Inbound Health provides both the technology infrastructure and analytical capabilities, in addition to the care model, virtual workforce, supply chain, payment models, and a local staff presence as a turnkey solution for other providers to launch H@H programs. The Inbound Health service offers a flexible workforce solution, utilizing employed and contracted labor. Specifically, this program includes physician visits, 24-hour monitoring, nursing services, diagnostics, and drug dispensing, whenever necessary. There are two principal value components to the Inbound Health offering: (i) historic Allina data shows a dramatic reduction in length of stay versus inpatient episodes; and (ii) enables customers to own another dimension of the care continuum.
Inbound Health has developed a fully aligned payment model with its customers, charging a modest fee at the outset to enable the company to start to capture patient data. As the data set is enriched, the reduction in length of stay and significant cost benefits will become readily apparent, facilitating attractive reimbursement models from payers. Ultimately, Inbound Health will be able to identify certain at-risk populations who would be appropriate for H@H offerings in advance.
Over the past 30 years, hospital expenses have increased nearly 5-fold and yet overall in-patient hospital admissions have remained relatively constant at around 35+/- million each year. This is clearly untenable and will require that much of that care must be provided in community-based settings, outside of the hospital’s four walls. The situation is further exacerbated by the acute hospital labor shortage. Long-term care facilities are also struggling to provide adequate staffing, encouraging even more of these cases to be handled in home settings.
In November 2020, the Centers for Medicare & Medicaid Services (“CMS”) launched the Acute Hospital Care at Home program, which granted waivers to meet certain reimbursement requirements (i.e., 24/7 onsite nursing care, etc) to a total of 114 systems covering 256 hospitals in 37 states. Patients are only to be admitted from emergency rooms or discharged from inpatient beds, often in lieu of being admitted to skilled nursing facilities (“SNF”). In 2019, the national annual average discharge rate was approximately 33 patients per bed, of which 5% were assumed to be H@H eligible per a pre-Covid Milliman analysis. This would imply that ~825k Fee for Service (“FFS”) and Medicare enrollees are appropriate for H@H programs each year.
The benefits of H@H programs are numerous. Outcomes arguably are superior to inpatient stays with many providers reporting approximately 20% reductions in mortality. Patients often prefer to be cared for in their homes and tend to show significant improvement in familiar surroundings. In fact, H@H patients are 3x less likely to be readmitted within 30 days. And patients appear grateful for such care models; Inbound Health has lifetime net promoter scores 86+.
Importantly, the potential cost savings are dramatic: early trial work at Johns Hopkins demonstrated 32% cost savings while an American Hospital Association 2019 study concluded that home hospital patients realized a 38% cost savings when compared to in-hospital care. At a time when rural hospitals are closing and many communities are struggling to provide inpatient care, H@H programs will serve to augment those losses at lower costs.
Against those benefits, there are concerns with H@H programs which must be managed carefully. The implementation can be complex as supplies and staff need to be coordinated very carefully. In-home environments need to be assessed, and whenever necessary, improved to accommodate such clinical services. Patient acquisition can be complicated as demand can be inconsistent given the novelty of such an approach. Certain patients will remain convinced that the highest quality care can only be provided in a hospital (notwithstanding the risk of infection, inconvenience, etc.). H@H providers need to maintain a minimum level of patient volume to ensure that the program can be profitable given the associated overheads required. Additionally, there are possible novel legal exposures to H@H providers associated with non-medical factors involving supply chain issues, logistics, and managing third-party providers.
Arguably the greatest concern involves the enduring payment model. In general, there are two approaches to structuring H@H payment models: top-down versus bottom-up. The top-down approach involves a Medicare payment of approximately $17.5k to the hospital per episode of care based on the acute inpatient prospective payment system. The bottom-up payment approach looks to rates paid to home-based care providers, which are consistently lower, and tend to total approximately $10.5k per episode. Most of this difference is due to larger acute DRG payments in the top-down approach and SNF avoidance.
Given the uncertainty still with the longevity of the waiver program and the somewhat unsettled payment models, the CMS Innovation Center in October 2021 announced efforts to encourage beneficiaries of covered entities to seek care from organizations accountable for quality and cost, providing incentives for such organizations to adopt H@H programs. Specifically, the 2021 stimulus package earmarked an additional $400 billion for reimbursement of home and community-based care. But concerns remain among providers. A recent survey conducted by Hospital at Home User Group concluded that only one-third of respondents were likely to continue with H@H programs even in the absence of the waiver, suggesting a relatively high degree of uncertainty still in the marketplace as to the enduring economics of these programs (27% stated that they would need the waiver to remain in order to continue).
Additionally, it is expected that H@H programs will bundle additional services such as transportation, home modification, and food provision to increase the revenue per episode potential. Interestingly, a recent Modern Healthcare survey concluded that 50% of the time adequate broadband access is lacking and must be deployed. Undoubtedly, this played a role in Best Buy’s $400 million acquisition of Current Health in 2021 to provide more robust remote patient monitoring solutions.
The investment community has also recognized more broadly the compelling market opportunities in senior care revealed by the pandemic. Venture capital investment activity in 2021 spiked to well over $2 billion in nearly 40 deals, while private equity investment also increased significantly last year; both seemed to have returned in 2022 to levels seen in recent prior years, according to Pitchbook and Axios data.
Consistent with the movement to more community-based care, it is not surprising to see that the rate of home births is now at a 30-year high in the U.S. It is estimated that 1.4% of all births in 2021 were in the home, which would be the highest level since 1990. For many of the same reasons that more acute hospital services are moving to the home, rural hospital closures and limited access to obstetric services are encouraging more women to consider in-home delivery options. An analysis from the International Journal of Environmental Research and Public Health concluded that home births cost approximately $4.7k versus in-hospital delivery costs of $19k, an even more dramatic cost savings when compared to traditional H@H savings.
Technology is the great democratizing force in healthcare. World-class care can now more readily be delivered to disenfranchised populations who struggle with access and affordability. The advent of robust H@H programs like what is being delivered by Inbound Health promises superior outcomes at dramatically lower costs.