One of our readers noted that there is likely overlapping overhead in the two-tier structure of home health agencies in New York and asked how that came to be. Here's some history.
Going back 25 years or more New York had home health agencies, such as Visiting Nurse Services (VNS) that were Medicare certified. Because of that status, they were also certified to bill Medicaid directly. By practice, and shall we say cultural bias, they were all not-for-profit. By law, for-profit corporations, whose stock was publicly traded could not be certified because New York policy requires that the character and competence of corporate governing persons (such as stockholders) be assessed before certification. As a practical matter that works for closely held corportions, but not for those whose stock is constantly changing hands.
However, there was no legal prohibition against operating for-profit home care agencies. They simply couldn't bill Medicare or Medicaid directly. During the 1970s, many small, mostly "mom and pop," for-profit agencies emerged. They served many private clients directly and many contracted for specific services with counties to serve Medicaid clients. The counties did the direct Medicaid billing and subcontracted for these services, primarily aide services.
While there was no legal prohibition against the operation of these agencies, neither was there any State oversight. In fact, the State didn't even know how many such agencies existed.
In the late 1970s, the State wished to dramatically expand home care. At the same time, it was nervous about the operation of totally unregulated agencies and wished to have at least some minimal knowledge of their operations and oversight of the quality of their care.
Yet culturally and politically there were two very different organizational types. The first were the old-line nurse dominated, not-for-profit, certified agencies, mostly VNSs. The second type were young, entrepreneurial, aide focused agencies. The not-for-profits wanted the new ones regulated, but didn't want new certified competition. The newer for-profits wanted to be able to seek certification. The structure of the political compromise to come was obvious. It was codified in Article 36 of the Public Health Law.
All agencies would require some form of regulatory oversight.
For profit agencies would not be barred from seeking certification, but while there would be a dramatic increase in system capacity the total expansion of that capacity would not be open-ended. Thus, only a portion of the for-profits would be able to become certified.
This was accomplished by maintaining the certification requirements and adding a less demanding set of licensure requirements. For example, licensed agencies would not be required to meet the "public need" requirements of the certificate of need law. They could just do their own market assessment and take the risk. They were required to file cursory financial disclosure documents, but not Medicare/Medicaid cost reports. (Their cost reporting requirements were expanded last year.) They were not subjected to the OASIS requirements imposed later on certified agencies. At the same time, no one would be legally able to operate a home health agency without at least being licensed.
When the new law took effect, Health Department staff had to scour every phone book in the state to even find all of the agencies that were operating. There were over 500.
So this is the structure that's been in place for a bit over 25 years. Certified agencies bill Medicare and Medicaid directly. Mostly, they provide the assessment, oversight, case management, nursing and rehab services. Most, but not all are still not-for-profits. Licensed agencies include many more for-profits, though some certified agencies have not-for-profit licensed subsidiaries. They primarily provide the aide services, but also some nursing services, especially under subcontracts to certified agencies.
Yes, this means extra overhead. However, to some unknown degree this is offset by the lesser regulatory and reporting requirements that apply to licensed agencies (no certificate-of-need, less financial reporting, no OASIS reporting, etc.). I'm not sure that anyone knows where the balance point is.
The more modest cost structure of licensed agencies also means that they can contract directly with private pay patients and charge them lower fees without runnign afoul of Medicare and Medicaid certification requirements that no one pays less than they do.
I continue to think that the inability to spread overhead costs horizontally (for example, geographically) is probably at least as important as the extra overhead that comes from having two organizations vertically.
Even if the overhead costs balance out, there may still be a hidden disadvantage to this two-tiered structure. That is that it's even harder to integrate the aides into the care teams and to require that they participate in care planning. Even if aides are part of the same organization, they may not play these roles in a meaningful way. But their being in different corportions makes it even more challenging to integrate them and their roles in patient care.