THE HOME HEALTH INDUSTRY COULD TURN UPSIDE DOWN for all Vira Lermo knows.

Aside from a weekly trip into town to have lunch with friends and a daily jaunt around her log cabin home with a tailor-made walker, the 97-year-old Eureka woman, known as "Vi," remains sheltered from the world in her woodsy haven down Brier Lane on the outskirts of Eureka.

Unless some unforeseen incident occurs, Lermo's ready for her century milestone with a little help from General Hospital Home Health Services.

"Her blood pressure is better than mine," remarked registered nurse Jo Borchardt, after taking Lermo's vital signs on a recent visit. In what's considered a "skilled" visit, Borchardt comes out to Lermo's home to monitor her health and the medications she takes for back pain. Twice a week, the agency assigns workers to come out and help bathe her.

Two years ago, while alone for the day, Lermo fell and broke her hip. She inched her way on the floor to the telephone but couldn't reach it. Four hours later, her grandson found her and called for help.

Following surgery, Lermo stayed in a board-and-care home for a month then came home with a referral for home health care. That's how home health is supposed to work.

Lermo is not particularly aware that dramatic changes in 1997 to the federally funded Medicare system caused all three local home health care agencies to lose revenue, forcing cutbacks over the last 18 months. Losses at Humboldt Home Health Services the area's oldest and largest agency have resulted in a major shakeup of that organization announced June 3 by its parent corporation, St. Joseph Health System of Humboldt County, part of the Sisters of St. Joseph of Orange. The Orange County-based nonprofit also owns St. Joseph Hospital, Redwood Memorial Hospital and numerous physician practices and laboratories on the North Coast.

Home health care administrators say although there have been significant cutbacks, direct patient care has not been compromised by the Medicare squeeze. But some health care workers are saying a reduced level of patient care is inevitable.

"I like (home health). I don't know what I'd do without it," Lermo said as she negotiated the mole holes in her yard on her walker to look at the lilacs she planted in 1960.

"People do a lot better when they get home," said Borchardt, a veteran home health nurse who starts her route near her house in McKinleyville and continues to Eureka, Carlotta and Ferndale. She may log up to 100 miles in one day, an aspect of the job that demands reliable transportation.

"You go through cars like candy," Borchardt said, as she rides around in a new Mercury Mystique for now.

General Hospital's 20 home health employees juggle field work and mounds of regulation-induced paperwork that accompany more than 1,200 visits a month in a region that runs from Trinidad to Rio Dell. Its coverage area overlaps the other two agencies in the county, but all three service pockets of concentrated clients. Mad River Home Health is slightly larger with 35 employees tending to 1,500 to 2,000 visits a month mainly in Arcata, Eureka, McKinleyville and Blue Lake among other communities.

But the Eureka-based Humboldt Home Health Services is huge by comparison. It has 155 employees who log almost 6,000 patient visits per month in Humboldt County, some as far away as Hoopa and Redway. It even has some clients in northern Mendocino and Trinity counties.

The shakeup at Humboldt Home Health stunned many in the medical community who were given little or no warning of the reorganization before June 3.

In the wake of a projected loss at Humboldt Home Health $400,000 for the fiscal year ending June 1999 and $4 million for the entire St. Joseph home health system in California St. Joseph officials announced a system-wide reorganization plan.

The controversial plan includes merging Humboldt Home Health with seven St. Joseph agencies in Northern California including a rehabilitation center, two hospices and several home health agencies in Sonoma and Napa counties.

The positions of all seven directors, the governing board of Humboldt Home Health, are to be eliminated including the executive director.

"A memo was sent around late in the day on June 2," said one of several sources within the organization who declined to be named because her job may be affected. "It was the first anyone heard of it."

There was a series of four meetings June 3, three in Eureka and one in Fortuna, according to sources. The Humboldt Home Health directors were notified at the first meeting followed by all other staffers potentially affected. The final two meetings were with all employees in Eureka and Fortuna.

The consolidation, set for October, sparked a swift and negative reaction from home health workers, some doctors, and according to home health workers even patients.

The most controversial part of the plan is that the headquarters of St. Joseph's home health services will be moved to Sonoma and an 800-number set up to take calls from patients and physicians. The termination of the directors including the agency's founder, Catherine Krause, prompted outrage.

Krause refused to accept telephone calls or otherwise comment. She was offered another position with St. Joseph Health System, according to St. Joseph spokeswoman Laurie Watson Stone, but she declined.

Krause started Humboldt Home Health in 1977 out of the Humboldt Senior Resource Center. Nine years later, the Sisters of St. Joseph of Orange Corp. bought the agency.

Following the June 3 meetings, calls from angry employees were made to a corporate hot-line office in Orange County. Lauri Rose, a Humboldt Home Health registered nurse who works out of the Fortuna office, said many workers were calling for the resignation of St. Joseph Chief Executive Officer Neil Martin for his part in the plan.

Members of the St. Joseph Board of Trustees were just recently notified that there would be some reorganization but not of specific plans, according to board Chair Dennis Hider of Fortuna. The decision apparently was made by Martin and fellow CEOs in Napa and Sonoma.

Several Fortuna physicians, including Drs. Larry Baker and Ron Jones, called a meeting at Fortuna City Hall for June 14.

"It was strictly for those who work in home health and the community," one source said. "St. Joseph was not invited. We didn't want the `suits' (administrators from the Sisters of Orange) there. It was for the employees."

But if this were a chess game, St. Joseph officials moved a knight. On Friday prior to the Monday meeting they notified Gary Fybel, the chief operating officer of Mission Hospital Regional Medical Center in Mission Viejo, a St. Joseph affiliate, to board a plane for Humboldt County in time for Monday's meeting. He was to be appointed interim CEO. On Monday, after just 18 months on the job, Martin resigned for "personal reasons," according to a hospital release. Martin could not be reached for comment and hospital officials have declined to confirm that his resignation was requested.

The Journal attempted to send a reporter to the meeting, but she was told the meeting was private. According to several persons who did attend, Dr. Baker told the crowd the reorganization was a "fait accompli." Many health workers, particularly those in administration, were angry they were never consulted on a reorganization plan.

"The town hall meeting was just to pacify the employees. The `suits' showed up anyway to tell us it was a done deal," one source said.

The prospect of layoffs in the coming months prompted a flurry of job-hunting activity among Humboldt Home Health workers, said Rose. St. Joseph officials estimate that 15 positions, primarily in administration, will be eliminated from the new Northern California home health system.

"We will do everything we can to find comparable positions elsewhere in the health system for these individuals," said Beth Gardner, St. Joseph's vice president of patient care services. Those who lose their jobs will receive severance packages and help finding new positions.

Job status is one thing. Patient care is another. Rose said home health workers have "tried to shield the patients" from previous cost-cutting measures. However, the latest cutbacks have caregivers concerned that there will be a reduction in the number of visits or the geographic areas served, particularly the service to patients in remote areas.

St. Joseph is not alone in operating in the red. General Hospital's home health agency had an estimated loss of about $130,000 in the last year, according to Chief Executive Officer Martin Love. Mad River Community Hospital Administrator Doug Shaw said its home health program figures are under review.

St. Joseph CEO Martin told home health workers on June 3 that the new consolidated system would use an 800-number for referrals, in addition to a local number, which particularly angered some physicians.

"I would worry about any home health service (solely relying on) an 800 number," said Dr. David Gans, chief of staff at Mad River Hospital who refers the majority of his patients to Mad River Home Health.

Gans spoke of the growing importance of home health in an era of shorter hospital stays. Often patients discharged from a hospital or nursing home still need a high level of care to track medication and to observe and report on a patient's progress.

"Some of these patients are on meds that would knock your socks off," he said.

Borchardt, who has worked as a case manager, medical surgery supervisor, discharge planner and on utilization review boards, said nurses often become "advocates for patients who insist they'd rather recover at home.

"Some people stay home on a very fine line," Borchardt said. And when a patient has to be rehospitalized, costs mount quickly.

As rewarding as she finds her job, there are realities she finds "appalling," she said, like having to justify some expenses that should be routine with patient care, such as blood lab draws, gloves and tape.

Medi-Cal, the state health insurance program for the poor, refuses to cover tape as a standard.

"Tell me how I'm supposed to change a dressing without tape?" Borchardt said.

Until last year, home health care represented the fastest growing segment of services paid for by Medicare, the federal program of health care for the elderly and provider of 40 percent of the income to home health agencies. (The balance comes from private plans and patients.) The number of agencies climbed to a high of 10,000, according to the General Accounting Office.

But with that growth spurt came fraud, especially in large metropolitan areas, prompting the government to mandate greater control and documentation and stricter reimbursement standards. The Medicare squeeze has caused 2,200 agencies to close their doors since 1997, according to the National Association for Home Care.

The advocacy group is now lobbying to counterbalance the effects of the Balanced Budget Act of 1997. The act required a shift last July from a cost-based system to one based on predetermined, fixed rates for expenses by October 2000. In the meantime, an interim formula sets Medicare limits on reimbursements to agencies, which serves a system of more than 8 million Americans in the 65 and older population.

Besides home health, the fixed-rate system has caused financial distress in the nursing home industry many of which are scrambling to open outpatient services as a potential profit center. In the mid-1980s, hospitals also entered or expanded their outpatients services in response to the changing requirements of federal reimbursement.

A General Accounting Office report documents rising Medicare expenditures for home health up from $3.7 billion in 1990 to $17.8 billion in 1997. The report noted that patients are benefiting from more home health visits per person. In California, there were 46.1 visits in 1994 and 48.7 in 1997. Under the new system, fewer visits per patient are encouraged, but the real change is the shift toward basing reimbursement on specific illnesses, not on individuals.

"That's the real difference," said one source. "This is basically the HMO model that's happening across the United States. We are not to look at the individual but to the illness which dictates treatment and things like the number of follow-up visits."

The GAO study found that the number of home health agencies has retreated to the level of 1994 the year that serves as a base for the new Medicare payment structure. Analysts have found that smaller home health agencies are particularly vulnerable and those that have less ability to recruit low-cost patients. Examples of low-cost visits include basic dressing changes or catheter removal as follow-up to urology surgery. High-cost conditions involve diabetes patients, chronic heart illnesses, femur or neck fractures.

A bill introduced in Congress in May seeks to make additional Medicare payments amounting to $250 million a year for three years to certain home health agencies with high-cost patients. The proposed legislation the Home Health Access Preservation Act of 1999 has gained bipartisan support.

"The Medicare cuts contained in the Balanced Budget Act (of 1997) have done tremendous harm to the home health care community," Rep. Jim McGovern, D-Mass., one of the bill's authors, said in an issued statement. Medicare cuts were estimated to net $16 billion by 2002 but nearly $48 billion has already been recovered.

"We need to have politicians out there with nurses watching what we have to do to care for these people," Borchardt said.

Rep. Mike Thompson, D-St. Helena, already has an inside track. His wife was a home health nurse before becoming a nurse practitioner.

"This was a way to build a budget surplus for tax cuts," Thompson said sarcastically in a telephone interview last week referring to the GOP-led agenda.

As state senator, he served on a health and human services committee and went out on visits in Napa, Lake and Sonoma counties.

"Home health is critically important to health care in this nation," he said. "It helps people live healthier lives and saves us a great deal of money in hospital stays."

Thompson supports the bill to help provide relief for home health agencies.

Gerry O'Brien, Mad River Home Health's new executive director, said it's ironic the federal government began mandating shorter hospital stays for certain illnesses at the same time as the clampdown on home health.

"I almost didn't get back into (home health) again," said the 11-year veteran following a move from Susanville. It's tough to strike that balance between productivity standards, good care and keeping an agency afloat, which nowadays means cutbacks, she said.

"Everybody (in Humboldt County) has had to make adjustments," said Victoria Onstine, director of General's home health. The rumblings at Humboldt Home Health "look much more sweeping" because it's the largest agency.

"It's just the first time a change (in home health) of this magnitude has hit the North Coast," she said.

Meanwhile, the caregivers of patients like Vi Lermo watch and worry about how the Medicare squeeze with ultimately affect those who need it the most.

PHOTOS:

1. Eva and Walt Swanson talk with Mad River Home Health Physical Therapist Betty Sasaki. (photo by Trish McGraw)
2. General Home Care patient Vi Lermo (photo by Mark Lufkin)
3. General RN Jo Borchardt Checks Vi Lermo (photo by Mark Lufkin)
4. Registered nurse Jo Borchardt (photo by Mark Lufkin)
5. Virginia Dresser, a Mad River Home Health patient with her feline companion (photo by Mark Lufkin)

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