The poor and sometimes rough inner-city neighborhoods of West Baltimore might seem hardly the place to launch a venture with national implications for improving publicly funded health care for the elderly -- and to make a buck doing it.
But you'll find just that in the works in a former B&O Railroad warehouse at the corner of West Pratt Street and Arlington Avenue.
It's there that Elder Health, a Columbia-based venture, has just opened its first comprehensive geriatric health care site.
Elder Health's target market: frail, inner-city residents whose health care is often poorly managed -- and costly to the publicly funded entitlement programs, Medicare and Medicaid.
The company, backed with $12 million in venture capital, is the first venture in the country aimed at making money on this gamble, say geriatric care experts.
L In Elder Health's favor, they say, are two important trends.
First, there's the coming surge in the elderly population. It is expected to double to 64 million by 2020, creating a large potential market for health care service providers.
Second, the 30 percent annual rise in the cost of the $140 billion medical entitlement programs has created a need for health care providers offering quality care at a better price.
"The market is so huge and unmet that there should be plenty of room for nonprofits and for-profit ventures to make a go of it," said Dr. Burton V. Reifler.
Reifler is a nationally recognized expert on health care for the elderly and chairman of the Department of Psychiatry at Wake Forest University's Bowman Gray School of Medicine.
Reifler and other experts say that the key to success for nonprofit ventures that have tried to do what Elder Health plans to offer is to sign up a large client population for each geriatric care center so that the cost risk is spread enough to make the finances work.
Elder Health projects it can turn a profit if it can sign up 3,000 clients for the three centers it plans to launch in Baltimore.
"What we've done is make a bet that we can change the way health care is delivered to the elderly, bring down the cost associated with that service, and improve the quality of that care dramatically," said Chuck Newhall, general partner at Baltimore-based New Enterprise Associates, one of three venture-capital firms backing Elder Health's launch.
"The president and Congress have been talking about how to tackle this problem with the [medical] entitlements for years, but they don't act. So it's been clear that change was going to have to come from the private sector," said Newhall, whose venture firm has a record of backing health care start-ups that turned into financial winners.
Elder Health's challenge, he said, will be to provide quality service to a huge underserved market while controlling expansion costs.
The company's game plan: Contract with insurers to provide and manage health services for poor elderly clients at a fixed rate. In assuming the risk of a fixed cost, the company hopes to make money by managing clients' health care in such a way that costly hospitalization visits are avoided.
"Prevention is the key to making this work," said Rebecca Ruggles, Elder Health's executive director for the Baltimore region.
"Even before a client comes into the centers, we expect to have seen them two or three times just to get up to speed with what they need."
Michael Steele, Elder Health's president and chief executive officer, said the company plans to provide comprehensive, preventive health care, ranging from visiting clients' homes to see if they need hand rails and other assistive devices to prevent injuries, to ensuring that people take medications to prevent chronic ailments from developing into more serious conditions.
Each client will be assigned to a nurse practitioner who will manage that person's case, and each center will have an adult day-care service.
That's a component many experts see as key because it makes it much easier for health care professionals at the center to check on how well the clients are keeping up with their medications, physical therapy and other needs.
"The goal is good health," Steele said. "We will put money heavily into preventive care so that we avoid medical emergencies and episodes that put the elderly in the hospital."
By doing business that way, he said, the company believes it can beat the fixed-rate risk and provide the client with a better quality of life.
So far, Elder Health has struck one agreement with an insurer that processes entitlement payments, Blue Cross/Blue Shield of Maryland, to serve as a comprehensive health care manager for inner-city elderly clients.
Elder Health is working on building alliances with nursing homes, community health care centers and senior centers in neighborhoods it will serve to drum up referrals for clients.
Meanwhile, the company said it plans to open two more Elder Health centers in Baltimore by March, and that it has its sights on opening up to 10 sites on the East Coast in five years. National expansion plans will follow if the business proves profitable.
Elder Health is not the first group to try to improve the way health care is delivered to the elderly, notes Reifler at Wake Forest University.
More than a dozen organizations nationwide have set up not-for-profit geriatric health care sites under the congressionally authorized Program for All-inclusive Care of the Elderly, or PACE, Reifler explained. Elder Health is patterned, in part, after this program.
Pub Date: 5/23/96