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AReportontheFiscalHealthof HomeCareinNewYorkState
KeyFindings
Homecareprovidermarginsplungefurtherintothe red,threateningviability.Thepercentageofhome careproviderswithnegativeoperatingmargins increasedbyanalarming22%between2010and2011, themostrecentyearofdataavailable.In2o11,79%of surveyedhomecareprovidershadnegativeoperating margins. CHHAoperatingmarginsdrivedeeperintothered. ThemedianoperatingmarginofsurveyedCertified HomeHealthAgencies(CHHAs)was13.94%in2011,a precipitousdropfrom2010whenthemedianoperating marginwas0.31%forsurveyrespondents. LTHHCPsfaceauniquethreattotheirfinancialand programmaticviability.Themedianoperatingmargin ofsurveyedLongTermHomeHealthCarePrograms (LTHHCPs)was11.47%in2011.Between2009and 2010,totaloperatinglossesforallLTHHCPsincreased from$21.2millionto$38million,a79%increasein operatinglosses. Widevariancesincontractratesandalackof transitionsupportarefurtherjeopardizingprovider sustainabilityevenashomecareagenciesworkto meetthestatesmandatorymanagedcare enrollmentpolicy. HCAssurveyfindsthatthevast majorityofhomecareprovidersareworkingingood faithtoestablishcontractpartnershipswithManaged LongTermCare(MLTC)plansandManagedCare Organizations(MCOs).Yetin2011,whenthe Medicaidfeeforservice(FFS)ratehashistorically proveninadequate,twothirdsofsurvey respondentsindicatedtheyarereceivingMLTCand MCOrateswellbelowthealreadyinsufficientFFS rates.ForthoseproviderswhoreceiveratesbelowFFS, theirMLTCratesareonaverage8%belowFFSand theirMCOratesareonaverage20%belowFFS,further compromisingthefiscalstabilityofhomecare providers,79%ofwhomarealreadyoperatinginthe redunderFFS.Theseresultsspeaktotheneedfor adequatepaymentstoprovidersaswellasadequate premiumpaymentstoplansfortheprovisionofhome careservices.Meanwhile,whenaskedwhichsupports areneededtocontractwithMLTCs/MCOs,stronger continuityofservice/transitionpoliciesrankedsecond onlytoconcernsaboutadequatepayment.
WhyTheseFindingsMatter
Homecareprovidersdelivercosteffectiveservices topatientsathomeinthecommunity,helpingto keepindividualsoutofinstitutionsandother highercostsettings.However,inanincreasingly worseningpattern,ratesofreimbursementhave notkeptpacewiththealreadyeconomicalcostof deliveringtheseservicestopatientsathome, threateningaccesstohomecareservicesand potentiallycausinghospitalizationorhighercost servicesforvulnerablepatientswhosehealth statusmayspiraldownwardwithouttheneeded inhomesupport. Meanwhile,thestateisembarkingonapolicyof mandatoryenrollmentinMCOsandMLTCsforthe financingandauthorizationofhomecareservices. Toensuresuccess,thispolicydependsonastrong networkofhomecareproviderstodeliverhome careservices.Continuederosionofthehomecare providerfinancialbaseseriouslyjeopardizesthe successofthispolicy.
ExecutiveSummary
Afinancialdataandsurveyanalysisconductedby theHomeCareAssociationofNewYorkState (HCA)usingthemostrecentdataavailablefrom independentlycertifiedandstaterequiredcost reportsfindsthathomecarefinancialmarginshave plungedalarminglyintotheredduetochronic reimbursementcutsandstatepolicychangesthat haveerodedthefinancialbaseofhomecare providersinanenvironmentwherecostscontinue toincrease. Thesefindingsweremostdramaticin2011whenan alreadyconsistenttrendofdeclininghomecare operatingmarginsplungedsharplyintonegative territory.2011wasalsoayearofunprecedented statebudgetcutsforhomecarecombinedwith continuingnewcostburdens especiallyforwages andbenefits thatarelikewisetiedtostatebudget policies.
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AReportontheFiscalHealthofHomeCareinNewYorkState
ExecutiveSummary continued
Toputthisinperspective,while thepercentageofhomecare providerswithnegativeoperating marginsgrewfrom63%to65% between2009and2010(a3% increase),thispercentagerocketed to79%in2011(a22%increase), accordingtoconservative estimatesculledfromananalysis ofproviderscompletingHCAs 201213FinancialConditionSurvey latelastyearandearlythisyear. InthecaseofsurveyedCHHAs, medianoperatingmargins droppedfrom+0.3%in2009to 0.31%in2010andthendoveto 13.94%in2011. InthecaseofsurveyedLTHHCPs, medianoperatingmarginshada similarnegativetrendline:6.3%in 2009,7.21%in2010and11.47% in2011atatimewhenlongterm carepolicychangeshavejust beguntosqueezethereferralbase ofLTHHCPsandwillcontinueto dosoaslongtermcarepolicy changestakehold. Meanwhile,variancesin negotiatedcontractratesanda lackoftransitionsupportcontinue tojeopardizethestandingof providersintheireffortstomeet stateinitiatedchangesinthelong termcaresystem changesthat homecareprovidersarestrivingto meetingoodfaith.Thesefindings makecleartheneedformore adequateFFSpaymentsto providersaswellaspremium paymentstoplansfortheprovision ofhomecareservices. Atpresent,NewYorkshomecare systemisoperatingunderthree paymentmodelsduringthistime oftransition.Thefirstandprimary oftheseisaFFSsystemthathas beeninplacefordecades, althoughsubjecttobudgetcuts slashingreimbursementtolevels whichhavenotkeptpacewiththe costofprovidingcare,asisevident fromprioryearfinancialstudiesin homecareandinthefindingsof thisreport. Morerecently,thestatehas embarkedontwoadditional paymentmodels:anepisodic paymentsystemforCHHAcases upto120daysinduration;and enrollmentofcertainpatient populationsinmanagedcareand managedlongtermcareforthe provisionofservices,withthe ultimategoalofnearuniversal mandatoryenrollment.Giventhat HCAs2009,2010and2011cost reportanalyseslargelyreflecta FFSworld,HCAfocusedmuchof ourprovidersurveyonthecurrent experiencesofprovidersasthey beginfeelingtheeffectofthe movementtowardmandatory enrollment,whichisexpectedto bethedominantpaymentmodel forthelongtermcaresystemin thefuture. Atatimewhenthevastmajorityof homecareproviderswerealready operatingatalossunderFFSrates thatwerelargelystillinplacefrom 2009to2011,HCAssurveyfinds thatthenegotiatedratesbetween homecareprogramsand MLTCs/MCOsweresubstantially lowerthanthisalreadyinadequate FFSpaymentinthevastmajority ofcases. Twothirdsofsurvey respondentsindicatedtheyare receivingMLTCandMCOrates belowtheirFFSrates.Forrates thatarebelowtheFFSrate arate ofpaymentwhichisalready contributingtonegativemargins for79%ofproviders MLTCrates areonaverage8%belowFFS,and MCOratesareonaverage20% belowFFS,furthercompromising thefiscalstabilityofhomecare providers. Whatfollowsbelowarefurther detailsonthedatacollection processandsurveymethodsused inthisstudyaswellasfurther elaborationofthesekeyfindings.
BackgroundonHCAsDataandSurveyAnalysisMethods
Inlate2012,HCAconductedasurveyofourhomecareprovidermemberstoassessthefinancialimpactofprioryear reimbursementcutsandtofindoutwhatactionsprovidersaretakingasaconsequenceofthesecutsandotherMedicaid redesigninitiativesthataredramaticallychangingthedeliveryofhomecareservicesinNewYorkState. HCAhadalsopreviouslyobtainedfromthestateDepartmentofHealth(viaaFreedomofInformationActrequest),the 2009and2010costreportdataforallCHHAsandLTHHCPsinthestate,comprisingastatewideuniverseoffinancial datainhomecarefortheseyears.
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AReportontheFiscalHealthofHomeCareinNewYorkState
Background continued
Inhomecare,allCHHAandLTHHCPprovidersare requiredtosubmitcostreportsannuallytothestate asafinancialbasisforthestatesMedicaidrate settingprocess.Thesecostreportsprovideofficial, independentlycertifiedfinancialandstatisticaldata relatedtoallcategoriesofanorganizations revenuesandexpenses(notjustforMedicaid,butfor allpayors).Giventhisarrayofreliabledata,these documentsareafundamentalinstrumentfor gauginganorganizationsfinancialhealth,especially inthecontextofdiscussionsaboutMedicaidpolicy. Toobtainmorerecentdata whichisnotyet publiclyavailablefromtheDepartmentofHealth HCAusedour201213financialconditionsurveyof providerstospecificallyaskCHHAandLTHHCP memberagenciestosubmitanarrayof2011 financialdatabasedontheirjustsubmitted2011 MedicaidCostReports. HCAscollectionof2009and2010costreportdata forall250CHHAsandLTHHCPs,coupledwiththe surveyrespondentdatain2011,offeredHCAthe mostuptodatesetofdatapracticableforassessing thefinancialhealthofNewYorkshomecare industry.(Sincethestateusestwoyearoldcost reportsasabaseforsettingproviderreimbursement rates,the2011costreportdata whichproviders submittedtothestateduringthesummerof2012 arethemostcurrentdataavailable.) LicensedHomeCareServicesAgencies(LHCSAs) alsoparticipatedinHCAssurvey.Theseagencies providevitaltraining,recruitment,employment, oversightanddirectionpredominatelyof paraprofessionalcaregiverswhomeettheneedsof thousandsofelderly,chronicallyillanddisabled patientsinthehomeundercontractwithLTHHCPs, CHHAs,MLTCandMCOplansandlocalsocial servicedistricts.OnlyLHCSAsthathavepersonal carecontractssubmitcostreports.Therefore, LHCSAcostreportdatawasnotincludedinHCAs financialanalysis.However,HCAdidcaptureother importantfinancialdataandsurveyresponsesfor LHCSAsbasedonseparatemeasuresfurther detailedlaterinthisstudy.
BecausetheMedicaidCostReportincludesvarious revenueandexpendituredata,HCAwasabletouse thesereportsasabasisforcalculatingaggregate provideroperatingmargins(calculatedasthe differencebetweenrevenueandexpenses)and medianoperatingmargins.Theoperatingmarginis abenchmarkindicatorofanagencysfinancial health. Ofthenearly80homecareprovidersthatanswered HCAssurvey,45CHHAsandLTHHCPssubmitted detailedinformationfromtheir2011costreports. This2011datawasthencomparedto:1)the2009 and2010costreportdataHCAhadobtainedforall 250CHHAsandLTHHCPsstatewideaswellas2)the 2009and2010costreportdataforthoseproviders answeringHCAssurvey. Inemployingthismethod,HCAfoundthatthe2011 costreportdatafromsurveyedproviderswasnot onlyconsistentwiththefinancialtrendsgloballyin homecare,butthe2011surveydataactually providedaconservativereflectionofthemarginsfor allhomecareprovidersin2011sincetheproviders answeringHCAssurveytendedtohavemore positiveoperatingmarginsthantheindustryasa whole. Inadditiontocompilingcostreportdata,HCAalso usedour2012 2013surveytoaskprovidersabout otherfinancial,operational,programmaticand strategicexperiencesoccurringinthefieldasa consequenceofprioryearreimbursementcutsand policychanges. Thesequestionsfocusedonafewkeypolicyand fiscalareas,including:thestatesongoingtransition ofMedicaidcasestoMLTCandMCOplans; unfundedmandatesandnewadministrativecosts suchastheHomeCareWorkerWageParityLaw; andtheimpactofnearly$1billioninMedicaidcuts duringthepasttwoyearsaspartofthestates MedicaidRedesignTeam(MRT)andstatebudget process.
AReportontheFiscalHealthofHomeCareinNewYorkState
BackgroundonMLTCEnrollmentTransition
Inordertoappreciatethe informationfoundinoursurvey analysis,oneneedsto understandthepolicy frameworkdrivingthese outcomes. The201112StateBudget beganaprocessofrequiring thatduallyeligiblepatients21 andolderneedingmorethan 120daysofMedicaid communitybasedlongterm careservicesmustenrollinan MLTCplan.Thisprocess,also knownasmandatory enrollment,hasalreadygone intoeffectforspecific populationsinNewYorkCity, andithasorisabouttogointo effectforLongIslandand Westchester.Thepolicyis expectedtobesystematically implementedstatewideundera fluidtimetablethatdependson thestateDepartmentof HealthsdeterminationofMLTC servicesinacounty,federal waiverauthorizations,and otherdeterminations, eventuallyredirecting thousandsuponthousandsof patientsandtheprovidersthat servethem. Forhomecareproviders,this policymeansthatmany agencies(includingthosewith longestablishedcare managementexperienceand wellestablishedrootsinthe community)willincreasingly expecttooperateina subcontractingrole,providing servicestothispatient populationundercontractwith MLTCsorMCOsratherthan directlyfunctioningasthecare managersforthesepatientsand theMedicaidprogram. Asthestatesownpolicy objectivesmakeclear,home careprovidersareinstrumental tothesuccessofthisendeavor becausetheyformthecore infrastructureandexpertise neededtodeliverandcare managetheservicestopatients undercontractwithMLTCsand MCOs.Theircapacitytoserve patients and,thus,their financialviability is paramount. Mindfulofthesetrends,several ofHCAssurveyquestions attemptedtogaugethecurrent andfuturefinancialimpactof mandatoryMLTC/MCO enrollmentonvitalfrontline homecareproviderswhoare onlynowstartingtofeelthe effectofthispolicychange a changethatwillbecomeeven moreprofoundasNewYork Stateprogressestostatewide mandatoryenrollment implementation. Thus,inanenvironmentwhere prioryearcostreportsshow thatthevastmajorityofhome careprovidersarealready operatingintheredwhen directlybillingunderMedicaid FFS duetoreimbursement ratesreducedbelowprovider costs,asotherwisefoundinour report someofHCAssurvey questionsattemptedto determinehowproviders negotiatedcontractrateswith MLTCs/MCOscomparedwith theratesthatprovidershave beenreceivingunderMedicaid FFS. Thiscomparison marriedwith costreportdataotherwise obtainedinHCAsanalysis providesasenseof:1)home careproviderfinancial experiencesunderMedicaidFFS and2)howthisexperiencemay befurtherchallengedunder marketconditionswhere negotiatedratesfalleven furtherbelowtheFFSratesthat havealreadyproveninadequate inmeetingprovidercosts. Startingonthenextpageisa summaryoffourkeyfindings fromHCAscostreportand surveyanalysisoverall.
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AReportontheFiscalHealthofHomeCareinNewYorkState
Finding1:HomeCareProviderMarginsPlungeFurtherintotheRed,ThreateningViability
Homecareprovidersareexperiencingcontinuederosionintheiroperatingmarginsduetoacombinationof reimbursementcutsandincreasedcosts aconditionwhichisonlyexpectedtointensifywiththecontinuation ofthesetrendsalongsidethecontinuing,broadstateMedicaidcutsandtheapplicationoftheglobalMedicaid capcuts,andthestatessweepingprocessoftransitioninghomecarecasesintomandatoryMLTC/MCO enrollment. Anorganizationsoperatingmarginiscalculatedbasedonthedifferencebetweenrevenueandexpenses.HCAs membershipsurveyfoundthatthetwohighestrankedimpactsonproviderMedicaidrevenueare:1)theEffect ofPaymentChanges/ReimbursementCutsand2)theTransitiontoManagedCare.Ontheexpenditureside, thebiggestcostincreaseswereforwages,benefitsandunfundedmandates. Wroteonesurveyrespondent:Salaries,benefits,contractualandotherexpensesareincreasing.Federaland statemandateshavebeenexponentiallyadded.Reimbursementhasconstantlyerodedoverthepastfewyears. Countiesareleavinghomehealth.Otherproviderswilltoo.NewYorkStatewillbeleftwithlarge,multiarea entitieswhodrivetheservicesprovided,likelywithoutthesamelocalinteractions,qualityandoutcomes. Theseandotherfindingsaredetailedbelow.
OperatingMargins
HCAexaminedthe2009and2010costreportssubmittedby45providersthatreportedtheir2011datainour survey. Thefindingsforthesereported2011dataareconsistentwiththetrendsgloballyinhomecare.Forthesesurvey respondents,themedianoperatingmarginsdroppeddramaticallyin2011.InthecaseofCHHAs,themargins dippedfrom+0.3%in2009to0.31%in2010to13.94%in2011.ForLTHHCPs,themarginsdroppedfrom6.3% in2009to7.21%in2010to11.47%in2011. Thetablebelowandchartonpage6illustratethesefindingsbycomparingthemedianoperatingmarginsof surveyedCHHAsandLTHHCPswiththemedianoperatingmarginsfromstatewidecostreportdata.
HomeCareMedianOperatingMargins
200920102011 ProviderCostReportCostReport CostReport
AllCHHAsstatewide AllLTHHCPsstatewide CHHAsthatcompleted HCAsurvey LTHHCPsthatcompleted HCASurvey %ofproviderswithnegative operating margins 1.71% 8.1% 1.81% 8.771%
+0.3%
0.31%
13.94%
6.3%
7.21%
11.47%
63%
65%
79%
AReportontheFiscalHealthofHomeCareinNewYorkState
RevenueandCostImpacts
AccordingtoHCAssurveyresults,thetopthreefactorshavingthelargestimpactonanagencys risingcostswere:wages(66%ofprovidersrankeditaslargestimpact);benefits(52%)and unfundedmandates(40%). Eightyfivepercentofprovidersreportedanincreaseinadministrativecostsduetostateand federalauditsalone. InresponsetotheWageParityLaw,inparticular,57%ofprovidershavelaidoffnondirectcare staff,50%havestoppedacceptingcaseswherethecontractorrateisinadequatetomeetthecosts oftheunfundedmandate,36%havereducedhoursandovertimeofdirectcarestaffand7%of providershavelaidoffdirectcarestaff. Overthepasttwoyears,almosthalfofrespondentshadtousealineofcreditorborrowmoneyto meetexpenses.
January2013AReportontheFiscalHealthofHomeCareinNewYorkState
Finding2:CHHAOperatingMarginsDrivenDeeperintotheRed
Cutsenactedinthe201112StateBudgethavetakenanenormoustollonCHHAoperatingmarginsatthesame timethatstatepoliciesostensibly,andironically,viewCHHAsascriticalcomponentsofthestatesmandatory enrollmentpolicy,asdemonstratedinthestatesrecentrequestforapplications(RFA)toopenuptheCHHA licensureprocess. ThemedianoperatingmarginofCHHAswas13.94%in2011.FortheCHHAsthatcompletedHCAsfinancial conditionsurvey,thedropinmedianoperatingmarginswentfrom0.3%to0.31%in2009and2010, consistentwithhistorictrends,butthendroppedprecipitouslyto13.94%in2011atatimewhenCHHAswere hitwithunprecedentedcuts,includingtheCHHAspecificexpenditurecap.
Finding3:LTHHCPsFaceaUniqueThreattotheirFinancialandProgrammaticViability
Atthetimeofthiswriting,thestateisseekinga1915(c)waiveramendmenttodiscontinueLTHHCPenrollment inareaswherethemandatoryenrollmentpolicyisgoingintoeffect.LTHHCPsalreadyreportasubstantialdrop inreferralsduetothispolicywhichisfurthererodingtheirfinancialstability. LTHHCPshavealonghistoryofcaremanagementexpertiseofenormousvaluetopartnersinanevolvinglong termcaresystem;thesealreadyefficientprogramsservenursinghomeeligiblepatientsatanaverageof50% thecostofnursinghomecare.However,LTHHCPprovidersarefacingwhatmaybeinsurmountablehurdlesto viabilityinthiscontextofbothinadequatepaymentsandthemandatoryenrollmentparadigm. Whilethepolicytrendsinitiatedin2011arealreadyaffectingtheLTHHCP,theDepartmentofHealthslatestplan toeliminateenrollmentoftheprogramscorepatientpopulationwithoutsecuringtheprogramsroleand providingforeffectivetransitionsupportwillhaveanexponentiallygreaterimpactintheimmediatefutureifthe DepartmentsLTHHCPwaiver/policyintentionsbecomeareality. HCAsfindingsaredetailedbelow. Between2009and2010,totaloperatinglossesforallLTHHCPsincreasedfrom$21.2millionto$38million,a 79%increaseinoperatinglossesduringthisperiod. ThepercentageofLTHHCPs reportingnegativeoperatingmarginswas74%in2009,75%in2010and77%in 2011. Whenproviderswereaskedwhatchangestheyhavemadeorexpectwilloccurinordertopreparefor subcontracting,41%ofrespondentssaidtheywillphaseoutoraltertheuseoftheirLTHHCP.
AReportontheFiscalHealthofHomeCareinNewYorkState
Finding4 continued
Despiteprovidersgoodfaitheffortstosupportthestatesmandatoryenrollmentpolicy,oursurvey revealsthatcontractedratesofpaymentundermanagedcarearemostoftensignificantlylowerthan theFFSrate,whichisalreadysoinadequatethat79%ofproviderswereoperatingintheredin2011. Meanwhile,morethanhalfofrespondentshave,orexpectto,reduce[d]staffandotherexpensesto becomemoreefficientasameansofparticipatinginamandatoryenrollmentcontractarrangement. Beyondtheneedforconsistentratesofpayment,providersseekadditionaltransitionsupportstomake contractingworkfortheirorganizations.WroteonerespondenttoHCAssurvey:LTHHCPsneedclear operatingguidelinesandpossiblechangesinregulationtobeabletocompeteinthisnewcare environment. Theseandotherfindingsaredetailedbelow. ProvidersareworkingtopursuecontractswithMLTCs/MCOs.WhenaskedHaveyou,orareyou planningto,contractwithanMLTC/MCOtoprovidehomecareservices?almost90%ofproviders answeredYes. Yet,astatepolicyofchronicMedicaidunderpaymentanduncleartransitionguidelines neverthelessputshomecareprovidersatriskevenincaseswheretheyareabletocontractfor services.TwothirdsofsurveyrespondentsindicatedtheyarereceivingMLTCandMCOratesbelow aFFSratethatisalreadyinadequate;inmanycases,thevarianceincontractedratesissubstantial andinconsistent.ForthoseratesbelowFFSMedicaid underwhichnearly80%ofprovidersare operatingintheredin2011 theMLTCrateisonaverage8%belowFFSMedicaidandtheMCOrate isonaverage20%belowFFSMedicaid,withonerespondentexperiencingaratedifferenceashigh as50%belowFFS. Overall,thetransitiontomandatoryenrollmenthasaffectedagencyfinancesatatimewhenthe vastmajorityofproviderswerealreadyoperatingataloss:Whilemostprovidersrankedpayment cuts/reimbursementchangesasthenumber1reasonforarecentdecreaseinMedicaidrevenues, transitiontomanagedcarerankedasthenumber2reasonaffectingmostprovidersMedicaid revenues. Whenaskedwhichtransitionsupportsareneededtomakeitpossibleforproviderstocontractwith anMLTC/MCO,theneedforpaymentadequacywasratedhighestbyrespondents,followedby strongercontinuityofservice/transitionpoliciesandthenstaffretrainingfundsorsupport.
January2013AReportontheFiscalHealthofHomeCareinNewYorkState
Conclusion
HCAs20122013costreportandsurveyanalysisprovidethemostcurrentinformationtodateonthe financialstandingofNewYorkshomecareindustry.Whilepreviousstudieshaveshownatrendof underreimbursementresultinginaconsistentdeclineinhomecareprovideroperatingmargins,the datafor2011revealsthestarkestdeclineyetintheoverallfinancialhealthofhomecareagenciesata timewhenthestatehasenactedunprecedentedcutsandchangestothedeliveryofhomecare services. Evenwhilehomecareprovidersareclearlystrivingtoworkaspartnersinthestatesefforttoredesign thelongtermcaresystem,pastfundingcuts,newandincreasinglyonerousmandates,anoveralllack oftransitionandfundingsupportorclearoperatingguidelinesinthestatesmovetomandatory enrollment,andotherfactorshaveallworkedinacounterproductivewaytogreatlyhindertheefforts ofhomecareprovidersinnavigatingthisnewsystemofcaremanagementonbehalfofpatientsinthe community. HCAurgesstatepolicymakerstoworkwiththehomecarecommunityonacomprehensivesetof transitionsupports,regulatoryreforms,operatingguidelinesandfundingassistancetoensurethe sustainabilityofNewYorksvitalhomecareinfrastructure,whichhasbeencultivatedovertimeto: effectivelymanagelongtermcare,helppatientsavoidhighercostcare,supportcaretransitions,assist familycaregiversandmaintainthepatientsqualityoflife.
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