Evaluating the Risks of Home Health-Care and Hospice Services

Clark: They range from companion care to home health-care to infusion therapy, where the service administers medications intravenously. You also have home health-care services that supply durable medical goods. If a physician prescribes a wheel chair, for example, the home health-care service can arrange for it. It may provide the service itself or contract out for it.

Q: How would you describe hospice services?

Clark: Hospice services have an interdisciplinary team that provides services to terminally ill patients, with the primary goal of making them comfortable. They also provide services to the family–ongoing support, grief counseling, etc. Like home health-care services, hospice services come in many forms. They can be for-profit or nonprofit, and publicly or privately owned. They may be affiliated with hospitals or operate independently. With regard to underwriting, the differences do not matter greatly, although I'd say we primarily underwrite nonprofits.

Q: Don't some hospices have facilities for admitting and caring for patients?

Clark: That's correct. For the most part, hospices provide services at patients' homes, but some also operate facilities where patients can reside.

Q: Do underwriters treat such hospices differently?

Clark: The rating bases are a little different, but not drastically. The rating primarily is based on the type of staffing a service has.

Q: How many home health-care and hospice services are there?

Clark: I can give you information about Medicare-certified facilities–and most of these services are Medicare certified. As of January 2005, there were about 7,700 home health-care services nationwide and a little more than 2,600 hospices. While we consider companion-care services part of the home health-care niche, they are not Medicare-certified, because they just provide non-clinical services in the home, like housekeeping, babysitting, reminding patients to take their medications, and assisting them with bathing and grooming. They may provide such services in the form of respite care for primary caregivers, typically relatives.

Q: How are the numbers changing? What's the trend?

Clark: The trend is definitely upward. With the aging of the population, the use of home health-care services is going to increase, just as we've seen with senior living facilities. Also, it just makes sense to provide these services in someone's home rather than in an acute care setting.

Q: Are there some services that provide only companion-care services, as opposed to home-health care services that might also provide companion-care service?

Clark: Absolutely.

Q: Aren't home health-care and hospice services too dissimilar to put into one program?

Clark: They do offer slightly different services, but, generally, both provide clinical services to patients in their place of residence. For this reason, we feel comfortable placing them in one program.

Q: Where can an agent or broker find prospects in this niche?

Clark: For home health-care services, I would recommend the accreditation agencies like the Community Health Accreditation Program, the Commission on Accreditation of Rehabilitation Facilities and the Joint Commission of Accreditation of Healthcare Organizations. They can also contact the state home care & hospice associations. Additionally, for hospices, there is the National Hospice and Palliative Care Organization. For both home care & hospice, the National Association for Home Care and Hospice may be a viable choice. For underwriting, we visit www. Medicare.gov/homehealthcompare. It compares home health-care services within a state and community. It also could be used for prospecting. An agent could type in the name of a city and find the Medicare-certified home health-care services operating in it and also make an initial evaluation of them.

Q: This sounds similar to the Med-icare site that evaluates nursing homes.

Clark: It's exactly the same thing.

Q: Are there centers of influence agents might use to initiate relationships with home health-care or hospice services?

Clark: Senior-living facilities could be helpful. They certainly know the local home health-care & hospice agencies. So do hospitals and physicians.

Q: Who are the decision-makers at these businesses?

Clark: For the larger organizations, I would say the chief financial officers or chief operating officers might be the key decision makers. Some also have risk managers that weigh in on insurance choices. For the sole proprietors, agents would contact the owner/operators.

Q: What sort of sales approach seems to works best?

Clark: From what I understand, sending out brochures and also attending state and national association meetings can be productive. I would say the best thing to do is cultivate personal contacts and develop a good understanding of the business. If a producer doesn't understand the business, the director of a home health-care or hospice organization can tell pretty quickly.

Q: How should producers qualify accounts?

Clark: They should look for experienced accounts, those that have been in business for at least three years. Poor financial statements and poor federal and state survey outcomes are, obviously, a red flag. Accreditation is a good sign. That means a service has gone above and beyond what is mandated by the state.

Q: So not every home health or hospice licensed to do business in a state is accredited?

Clark: Correct.

Q: For home health-care services, what information does an agent need for a submission?

Clark: Among other things, credentials of the employees, the client's hiring procedures, and its operational policies and procedures. We also look at the federal and state survey reports, which producers can obtain from prospects. If there are any deficiencies, we would want to see a prospect's plan to correct them.

Q: In regard to the credentials of the staff for home health-care agencies, what should the agent be looking for?

Clark: They should make sure the service is obtaining federal and state background checks on their employees and potential employees, to screen for criminal backgrounds. Producers also should ensure that insureds and their staffs have valid professional licenses and are meeting education requirements.

Q: Who do the employees tend to be?

Clark: They're all licensed professionals, including licensed practical nurses, certified nursing assistants, social workers, and registered nurses. Sometimes home health-care services subcontract for physical therapy, speech therapy or other services.

Q: What credentials should the owners and managers have?

Clark: Owners and managers generally have a management, medical, or nursing background. Usually you have a medical director, who could be a physician. You also have people with nursing backgrounds.

Q: What is a desirable workload?

Clark: It varies by type of professional. A certified nursing assistant might be able to go to five or more homes in a day, whereas an RN, who is providing more clinical services and training to the family, might not be able to serve as many. This could vary with the acuity of the patient.

Q: What sort of risk-management procedures should home health-care agencies have?

Clark: They should have proper incident-reporting procedures, as well as systematic follow-up. It's good to have a peer group or committee review incident reports to make sure the incidents are handled correctly. Health-care services also should make sure their client and patient files are well documented in regard to such matters as services and medications provided. You could have a list of items that you want to see in clients' files: their doctor-prescribed treatment plans, how often clients are visited, any correspondence between the physician and the family and properly completed informed-consent forms. We also look at drug handling procedures.

Q: How do risk management procedures vary for hospice services?

Clark: They're similar. With hospices, however, volunteers tend to be part of the care team. Therefore, you need to make sure the volunteers are properly trained and that background checks have been done on them. Hospices also have social workers, who should have proper credentials.

Q: How is the market for home health-care and hospice services?

Clark: We have not seen an abundance of carriers enter it. Those that have tend to be involved in similar risks, like senior living risks or other health-care services. But we haven't seen carriers leaving the market either. It's pretty specialized.

Q: What's the toughest sort of risk to bring to the market?

Clark: An account that has a pharmacy exposure. Home health-care and hospice services usually enter into a relationship with a pharmacy. The meds are called in, and the pharmacy delivers them, particularly in urban and suburban areas. In rural areas, however, home health-care services may pick up the meds for their clients. Some also have their own pharmacies, and those providers can be difficult to place. We can place such a service if the pharmacy accounts for no more than a small amount–say 10%–of its business. Services that have a durable medical goods exposure, where they sell or repair this equipment, also can be hard to place, as are home-health services that deal with children.

Q: Where are rates headed?

Clark: In the past five years, rates have gone up maybe 25% to 50%. In the last year, they've flattened, but I haven't seen significant reductions.

Q: Is coverage usually admitted or nonadmitted?

Clark: It varies by carrier and line. The property and hired/non-owned auto (an important coverage for these sort of accounts) are generally admitted, but the general and professional liability often are nonadmitted.

Q: What is the range of premiums?

Clark: Premiums for sole proprietors can run from $15,000 to $50,000. Of course there are larger services out there, but that would be the average.

Q: What sort of exclusions or conditions does one commonly see?

Clark: Typically, there will be an exclusion for Medicare/Medicaid fraud. Physicians are excluded from coverage, except insofar as they are acting in the capacity of a medical director.

Q: Where do claims come from?

Clark: From improper handling of clients. For instance, an employee may help a client into bed and hurt her by accident. Or perhaps the employee didn't realize that an infection was setting in. An employee may fail to show up at a patient's home, and the patient may have required assistance in the employee's absence.

Q: I assume claims severity is the chief concern, or can there be claims frequency too?

Clark: The only frequency claims you might encounter are thefts of clients' property.

Q: What can home-health care and hospice services do to combat that?

Clark: They can have their employees bonded, although we do not do that. We provide a small amount of coverage for client's property.

Q: Once an agent gets one of these accounts, what sort of service must they be prepared to offer?

Clark: It's helpful if they can provide safety and risk-management. Some producers we work with sell them to clients on a fee basis.