Home Healthcare Agencies care for a significant number of patients with chronic diseases. Of the over 3 million persons cared for by Home Healthcare Agencies in 1998, over 50% suffered from one or more major chronic disease (National Association of Home Care and Hospice 2001).

Profit margins are thin in this industry and home health agencies continue to consolidate due to these financial pressures and the need for more sophisticated management approaches and information technology infrastructures. Under the Medicare prospective payment system instituted in 2000, Home Healthcare Agencies have a clear incentive to reduce costs in such a prospective-payor system. While they are required to provide a minimum number of face-to-face visits for most episodes of care, the additional visits needed simply reduces margins on the prospective payments.

Extending their human resources is therefore a key aspect of efficiency. In addition, Home Healthcare Agencies must work on improving quality and outcomes, since government reimbursement is adjusted depending on the Home Healthcare Agency's patient care outcomes.

Finally, Home Healthcare Agencies are significantly impacted by the growing nursing shortage in the United States, and are looking for ways to leverage their scarce health-care human resources.

Home Healthcare Agencies are the most natural market entry segment for the BL Healthcare platform and will make up a significant portion of the customers in the first two years. The company's early market assessments have demonstrated that these customers are highly motivated to procure such a solution and will rapidly adopt this approach. The company estimates that Home Healthcare Agencies care for approximately 150,000 patients under prospective payment arrangements that would benefit from the BL Healthcare technology platform.