At the Intersection of Health, Health Care and Policy Cite this article as: Robert J. Rosati, David Russell, Timothy Peng, Carlin Brickner, Daniel Kurowski, Mary Ann Christopher and Kathleen M. Sheehan Medicare Home Health Payment Reform May Jeopardize Access For Clinically Complex And Socially Vulnerable Patients Health Affairs, 33, no.6 (2014):946-956 doi: 10.1377/hlthaff.2013.1159

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Health Affairs is published monthly by Project HOPE at 7500 Old Georgetown Road, Suite 600, Bethesda, MD 20814-6133. Copyright © 2014 by Project HOPE - The People-to-People Health Foundation. As provided by United States copyright law (Title 17, U.S. Code), no part of Health Affairs may be reproduced, displayed, or transmitted in any form or by any means, electronic or mechanical, including photocopying or by information storage or retrieval systems, without prior written permission from the Publisher. All rights reserved.

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Medicare

10.1377/hlthaff.2013.1159 HEALTH AFFAIRS 33, NO. 6 (2014): 946–956 ©2014 Project HOPE— The People-to-People Health Foundation, Inc.

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Robert J. Rosati (rrosati@ centerlight.org) is vice president of clinical informatics at CenterLight Healthcare, in the Bronx, New York. Prior to working at CenterLight Healthcare, he was vice president of clinical informatics at the Visiting Nurse Service of New York (VNSNY) when the study was conducted. David Russell is a senior evaluation scientist at the VNSNY, in New York City. Timothy Peng is director of business intelligence and outcomes at the VNSNY. Carlin Brickner is associate director of biostatistics at the VNSNY. Daniel Kurowski is a research analyst at the VNSNY. Mary Ann Christopher is president and CEO of the VNSNY. Kathleen M. Sheehan is vice president for public policy of the Visiting Nurse Associations of America, in Washington, D.C.

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By Robert J. Rosati, David Russell, Timothy Peng, Carlin Brickner, Daniel Kurowski, Mary Ann Christopher, and Kathleen M. Sheehan

TH E C A R E SPAN

Medicare Home Health Payment Reform May Jeopardize Access For Clinically Complex And Socially Vulnerable Patients The Affordable Care Act directed Medicare to update its home health prospective payment system to reflect more recent data on costs and use of services—an exercise known as rebasing. As a result, the Centers for Medicare and Medicaid Services will reduce home health payments 3.5 percent per year in the period 2014–17. To determine the impact that these reductions could have on beneficiaries using home health care, we examined the Medicare reimbursement margins and the use of services in a national sample of 96,621 episodes of care provided by twenty-six not-for-profit home health agencies in 2011. We found that patients with clinically complex conditions and social vulnerability factors, such as living alone, had substantially higher service delivery costs than other home health patients. Thus, the socially vulnerable patients with complex conditions represent less profit—lower-to-negative Medicare margins—for home health agencies. This financial disincentive could reduce such patients’ access to care as Medicare payments decline. Policy makers should consider the unique characteristics of these patients and ensure their continued access to Medicare’s home health services when planning rebasing and future adjustments to the prospective payment system. ABSTRACT

I

n an effort to rein in health care spending, the Affordable Care Act mandated changes to Medicare’s payment policies for postacute services—that is, care provided after a hospitalization. These services are paid for by the federal government and provided to people ages sixty-five and older and to those who are permanently disabled. In the United States, postacute care is delivered in a variety of settings, including skilled nursing and inpatient rehabilitation facilities, long-term care hospitals, and hospices, and via home health. Both Medicare spending on home health ser-

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vices and the share of beneficiaries using those services have risen steadily during the past eight years, with large differences in spending observed across regions of the country.1,2 Policy makers have criticized the substantial margins earned by Medicare home health providers— margins that were expected to average 12 percent in 2013—and have argued that the payment model included financial incentives that were often not aligned with the cost and quality of care.1,3,4 Until 2014 Medicare’s home health payments had been based on an assessment of cost and utilization that was made in 2000. Payments had been updated annually to reflect market-

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basket adjustments. The Affordable Care Act directed Medicare to update its prospective payment system for home health services to reflect more recent data on costs and use of services—an exercise known as rebasing.5 As a result, the Centers for Medicare and Medicaid Services (CMS) issued a final rule in late 2013 that reduced payments to home health agencies by 3.5 percent per year for the period 2014–17.6 These reductions are expected to save Medicare $25 billion over the next ten years.7 Organizations representing home health care providers opposed the CMS rebasing, arguing that adequate margins were needed so that the providers could invest in service infrastructure, respond to changing regulatory requirements, and subsidize care for the sickest and most costly Medicare beneficiaries.7,8 Others argued that home health payment reductions could have the unintended effect of reducing access for less profitable patients.9 Nevertheless, the 3.5 percent reduction in payments to Medicare home health care providers took effect in 2014.10 The reduction has prompted home health advocacy organizations to continue pressing policy makers to eliminate the rebasing adjustment and future cuts. A major concern among home health care providers is that payments will be so low for patients with complex conditions that providers will not be able to continue offering them appropriate care. Historically, home health providers have quickly responded to changes in Medicare’s reimbursement policy by altering the level of services provided to patients. The Balanced Budget Act of 1997 modified the way in which Medicare paid for home health care: Specifically, it introduced a prospective payment system and imposed caps on agencies’ home health payments per user. Passage of the act was followed by decreased use of home health services, with greater-than-average reductions in the number of visits observed among beneficiaries who were older than seventy-five, female, and nonwhite and those living in rural areas.11,12 Research has shown that policies decreasing Medicare’s payments to home health care providers are linked to greater reductions in services for beneficiaries with greater functional, health, and cognitive impairments than in those for healthier beneficiaries with fewer functional and cognitive impairments.13–16 These studies highlight the need to examine whether inefficiencies are present within the current Medicare reimbursement model that provide financial disincentives for serving the most vulnerable and clinically complex of the beneficiaries who receive home health care. Using financial and clinical assessment data

collected from a national sample of not-for-profit home health agencies, this study sought to explore associations among three types of patient characteristics (social, clinical, and functional), service use, and Medicare reimbursement margin (that is, the difference between Medicare reimbursement and service delivery costs). Our aim was to identify groups of patients whose needed services tend to be under- or overpaid. Results from this study could help inform discussions of postacute payment reform that consider whether or not the Medicare rebasing cuts that began in 2014 should remain in effect.

Background The Medicare Home Health Prospective Payment System A growing number of homebound seniors receive skilled nursing, physical therapy, and other medical services through the Medicare home health benefit, which was introduced in 1965 as part of efforts to shorten inpatient hospital stays.2,17,18 Medicare reimburses certified agencies under a prospective payment system for sixty-day episodes of care provided to acutely ill homebound patients. Home health care is often provided to Medicare beneficiaries following a hospital stay. However, nearly two-thirds of the episodes in 2009 were not directly preceded by a hospitalization.2 The Medicare benefit differs from other government and privately insured home care programs in that under Medicare, agencies must be certified by the Centers for Medicare and Medicaid Services. Certified home health agencies utilized licensed health care professionals, including nursing staff (who handled 51 percent of all visits in 2011) and therapy staff (who handled 33 percent).19 The remaining visits were handled by home health aides (15 percent) and medical social workers (1 percent). Payment per episode is determined by a base rate that is adjusted for case-mix using 153 home health resource groups, which distinguish patients in their clinical and functional condition according to measures from the Outcome and Assessment Information Set (OASIS).17,20–22 The groups incorporate clinical characteristics such as the patient’s clinical diagnoses, receipt of therapies (for example, infusions and intravenous nutrition), vision limitations, wounds and lesions, the presence and stage of pressure ulcers, the presence of stasis ulcers, shortness of breath, bowel incontinence, and injectable drug usage.21 Payment is also adjusted for case-mix according to the patient’s functional status (for example, any need for assistance with dressing, bathing, and using the toilet) and use of physical, occupational, and speech therapy services.21 June 2014

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Medicare Furthermore, payment is adjusted when patients meet one of three therapy thresholds, at the sixth, fourteenth, and twentieth therapy visits.23 A perfectly equitable payment system would precisely account for variability in service delivery costs across beneficiaries with higher and lower levels of clinical complexity and needs for assistance with functional limitations, medication administration, and medical procedures. However, the current payment system encourages agencies to deliver the maximum volume of therapy services for which a patient is eligible and to restrict the number of visits by skilled nurses and home health aides. This is because increased payments for episodes meeting therapy thresholds at the fourteenth and twentieth visit give agencies a strong financial incentive to provide care for rehabilitation patients who need a high volume of services.2 The absence of similar visit-based thresholds for other types of home health services provides financial disincentives for agencies to serve patients who need instead a high volume of services from nurses and home health aides—particularly patients with clinically complex conditions and poorly controlled chronic conditions.24,25 These inefficiencies within the payment system may leave certain groups of patients with high service costs and inadequate reimbursement. These groups include patients who do not qualify for therapy and those who require a large number of skilled nursing visits. Previous research has not examined whether or not home health care patients with more clinically complex conditions and greater social vulnerability have lower Medicare margins under the current payment system. This study seeks to fill this gap by identifying the characteristics of patients that are associated with lower Medicare margins and greater service use. Our aim was to determine which subpopulations had payments that were substantially above or below costs and to develop recommendations for changes in policy to revise or rebalance the payment system. Identifying Vulnerable Populations Of Home Health Patients We hypothesized that lower Medicare margins and greater use of skilled nursing services were more likely to be observed in Medicare’s home health episodes if the patients had clinically complex conditions and limited social resources. Our study was guided by the concept of vulnerable populations, defined as groups of people whose limited resources lead to social and environmental challenges to their health and well-being.26 People can be vulnerable for many reasons, including severe illness, disability, poverty, race, and limited social networks.26 There are also many health care issues facing vulnerable pop948

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Home health care patients tend to have many characteristics that are associated with vulnerable populations.

ulations. They include obstacles to obtaining care, lack of coverage for health care services, disparities in health care quality, and unmet health care needs.27,28 Home health care patients tend to have many characteristics that are associated with vulnerable populations, including older age, increased prevalence of complex chronic conditions, and increased cognitive impairment.29 Many of the patients also are dually eligible for Medicare and Medicaid benefits and have lower socioeconomic status, both of which are associated with increased service use and costs.30,31 Researchers have called for further studies to investigate whether the current Medicare prospective payment system underestimates the needs and costs of these vulnerable patients.14 Conceptual Framework The conceptual model that guided our study is graphically displayed in the online Appendix.32 This model was informed by previous work that examined the role of social and health system factors in health service use among older adults.33,34 Drawing on this literature, we hypothesized that various social, clinical, and functional characteristics predisposed patients to use different levels of home health services. Medicare’s prospective reimbursement per episode is directly influenced by patients’ clinical characteristics (for example, diagnosis, pressure ulcers, and bowel incontinence), functional characteristics (such as the ability to bathe, move about, and use the toilet), and use of therapy services.21 The per episode cost to providers is directly influenced by the level of service use (for example, the number of skilled nursing, physical therapy, and home health aide visits). Assuming that the payment system is efficient, variations in the Medicare margin should be randomly distributed across episodes, after the factors included in the payment system are controlled for.

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Study Data And Methods The data for this study were collected from a national sample of not-for-profit Medicarecertified home health agencies, randomly drawn from the membership of a national organization for nonprofit home health and hospice providers. We attempted to recruit several large for-profit agencies that were not members of the national organization, but we did not succeed in convincing them to participate. Candidate agencies were stratified based on geographic region and the number of Medicare beneficiaries served (which we estimated using data from Medicare’s standard 5 percent analytic file for 2008). We randomly selected fifty home health agencies from among the stratified groups. Twenty-six agencies submitted complete data, yielding a 52 percent participation rate. Compared to other Medicare home health care providers, the participating agencies were larger, in terms of both their clinical workforce and the number of episodes of care they provided; were more likely to be located in the northeastern region of the United States; and had provided services through the Medicare program for a longer period of time. We asked each agency to collect and transmit the complete OASIS,20 service use by discipline, and selected payment information for all Medicare prospective payment episodes that ended in 2011. These data were supplemented with information from the Healthcare Cost Report Information System (HCRIS) data set for home health agencies35 and the Medicare Provider of Services file.36 Dependent Variables Service use in each sixty-day episode was represented by three variables: the total numbers of skilled nursing visits, therapy visits, and home health aide visits. We calculated the Medicare reimbursement margin for each episode as the difference between the total Medicare payment amount and the cost of providing the services. A negative margin indicates that service costs for a sixty-day episode of care exceeded the amount of Medicare reimbursement. A positive margin indicates that the amount of reimbursement exceeded the service costs. The total Medicare payment was based on the per episode utilization data submitted by the home health agencies and the CMS reimbursement methodology that was in place during the study period, the 2011 calendar year.17 The estimated cost of services was calculated using information from Medicare cost report data. We multiplied the cost for each service discipline reported by each agency for 2011 by the number of visits that the agency delivered per episode for that discipline. Then we summed the discipline

costs to estimate the total cost of each episode. Patient Characteristics We measured a broad range of patient characteristics using information from the OASIS start-of-care assessment. OASIS is a comprehensive assessment that also serves as the basis for measuring quality improvement and monitoring outcomes.20 Analytic Strategy Multivariate mixed models were developed to identify the characteristics of home health patients that were associated with lower Medicare margins and higher use of services. We chose to use mixed models because of the hierarchical structure of the data, in which Medicare payment episodes were nested within agencies and home health resource groups. Our unit of analysis was the episode. The models included data from all episodes (N ¼ 96; 621). The sample did not include episodes characterized as having a Low Utilization Payment Adjustment, because those episodes are paid per visit. Most of the patients in our sample received a single episode of care, with the average being 1.2 episodes. Approximately 14 percent of the patients received two or more episodes during the study period. Limitations Several factors may limit the generalizability of our findings to all home health care agencies in the United States. First, our sample of providers was drawn from a population of not-for-profit agencies that were members of a particular organization. For-profit and government agencies were not represented in our study sample, and we cannot be certain that our results would apply to them. Second, as noted above, compared to other Medicare home health care providers, the agencies in our sample tended to be larger, both in terms of the number of staff they employed and in the number of episodes of care they provided to patients; were more likely to be in the northeastern United States; and had provided services through Medicare for a longer time. The technology and resources needed to prepare and submit the data we requested for our study may have limited the ability of smaller agencies to participate. Moreover, the participating agencies were largely mission-driven organizations that served vulnerable populations, regardless of the complexity of care they needed or, in some cases, their ability to pay for services.8 As a result, the proportion of patients in our study sample who were socially vulnerable and had clinically complex conditions may have been greater than that in a more nationally representative sample of Medicare home health care patients. Further research should be conducted to determine whether the proportion of episodes provided to vulnerable patients varies across agencies June 2014

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Medicare with different characteristics (for example, agencies that are large, not-for-profit, and in urban areas). Third, the estimated cost of home health services was calculated using information from the Healthcare Cost Report Information System data set, which consists of aggregate information submitted to CMS by providers. The margins that we report might have been different if we had calculated them based on the actual observed cost of services. Nonetheless, the data set that we used provides the best estimates and is used by CMS, the Medicare Payment Advisory Commission, and others to determine margins.

Study Results We found considerable variation in Medicare margins and service use across a consistent set of patient characteristics. The online Appendix presents the full results from the multivariate regression models that we used to examine the effects of those characteristics on Medicare margins and service use.32 Social Characteristics Of Patients Episodes of care provided to patients with both Med-

icaid and Medicare as their current payment source had significantly lower margins (a difference of $162) than episodes of care provided to patients with Medicare only (Exhibit 1). Patients who were eligible for both programs received 6 percent fewer therapy visits and 18 percent more home health aide visits than patients who were not eligible for Medicaid. Lower Medicare margins were also observed for episodes provided to racial or ethnic minorities, compared to white non-Hispanic patients (Exhibit 1). The lower margins for blacks and Hispanics may be attributable to their greater use of nursing and home health aide services compared to non-Hispanic whites. Episodes of care provided to patients who lived alone had lower margins compared patients in congregate living arrangements—that is, elderly or disabled patients living in supportive housing (Exhibit 1). Compared to patients living with others, those who lived alone used more nursing and home health aide services, while those who lived in congregate arrangements used more skilled nursing and therapy services than patients living alone. We also found that the median household in-

Exhibit 1 Average Effects Of Selected Patients’ Social Characteristics On The Medicare Reimbursement Margin, Compared To The Respective Reference Group Race/ethnicitya Black, non-Hispanic Hispanic Other race/ethnicity Living arrangementsb Living alone Congregate living Current payment sourcesc Current payment sources include both Medicare and Medicaid Community median household income, population densityd $41,376 annual median income, 356 per square mile $41,376 annual median income, 3,097 per square mile $52,382 annual median income, 356 per square mile $52,382 annual median income, 3,097 per square mile $63,889 annual median income, 356 per square mile $63,889 annual median income, 3,097 per square mile –500

–400

–300

–200

–100

0

100

200

Average effect on Medicare margin compared to reference group ($)

SOURCE Authors’ analysis of data from a multivariate model of Medicare reimbursement margins; Medicare claims data; Outcome and Assessment Information Set (OASIS) C; the US census; and the Medicare Provider of Services file. NOTES A negative margin indicates that service costs for a sixty-day episode of home health care exceeded the amount of Medicare reimbursement; a positive margin indicates that the reimbursement exceeded the costs. All social, clinical, and functional characteristics are held constant in the model. “Congregate living” refers to supportive housing for frail elderly and nonelderly disabled people. aReference group: white, non-Hispanic. b Reference group: living with others. cReference group: current payment sources include only Medicare. dReference group: $0 annual median income, 0 people per square mile.

950

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come in a patient’s community was a significant predictor of the Medicare margin (Exhibit 1). Episodes of care provided to patients living in communities with higher median household incomes had higher margins. Episodes provided in areas with lower population density also had higher margins. Furthermore, we found evidence for an interaction between household income and population density: Episodes of care

provided to patients who lived in areas with both the highest density and the lowest household income that we measured had the lowest overall margins. Clinical Characteristics Of Patients Perhaps the most striking findings involved the relationships that we observed between patients’ clinical characteristics, the Medicare margin, and service use (Exhibit 2). The Medicare mar-

Exhibit 2 Average Effects Of Selected Patient Clinical Characteristics On The Medicare Reimbursement Margin, Compared To The Respective Reference Group Clinical complexity groupa Postacute, clinically complex Postacute, other Community admission, clinically complex Community admission, other Chronic conditions and symptom controlb Hypertension: well controlled Hypertension: controlled with difficulty Hypertension: poorly controlled Diabetes: well controlled Diabetes: controlled with difficulty Diabetes: poorly controlled Heart failure: well controlled Heart failure: controlled with difficulty Heart failure: poorly controlled Dementia: well controlled Dementia: controlled with difficulty Dementia: poorly controlled Peripheral vascular disease: well controlled Peripheral vascular disease: controlled with difficulty Peripheral vascular disease: poorly controlled Pressure ulcersc Stage 1 Stage 2 Stage 3 Stage 4 Overall status of patientd Temporary high health risks Likely to remain frail Serious progressive condition –600

–500

–400

–300

–200

–100

0

100

200

Average effect on Medicare margin compared to reference group ($)

SOURCE Authors’ analysis of data from a variety of sources as listed in the Exhibit 1 Source. NOTES A negative margin indicates that service costs for a sixty-day episode of home health care exceeded the amount of Medicare reimbursement; a positive margin indicates that the reimbursement exceeded the costs. All social, clinical, and functional characteristics are held constant in the model. “Restorative care” is care designed to restore functional and physical status. “Controlled with difficulty” refers to when disease symptoms affect daily functioning and the patient needs ongoing monitoring. “Poorly controlled” refers to when a patient has frequent hospitalizations and adjustments in treatment and dose monitoring. Pressure ulcer stages in the Outcome and Assessment Information Set (OASIS) C data range from less severe ulcers with reddened or discolored skin (stage 1) to more severe ulcers with very deep and extensive tissue damage (stage 4). aReference group: Postacute, restorative care. bReference group: chronic conditions not present. c Reference group: no pressure ulcer. dReference group: stable with no heightened risk for serious complications.

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Medicare gin and level of service use varied significantly across the five groups of clinical complexity that we analyzed, based on the categories developed by Christopher Murtaugh and coauthors.25 For example, postacute episodes that did not involve restorative care had significantly lower Medicare margins (Exhibit 2) as well as more skilled nursing use and less therapy use, compared to postacute episodes that did involve restorative care. Many chronic conditions and their associated level of symptom control were significantly associated with margin and service use. For instance, episodes of care provided to beneficiaries with poorly controlled chronic conditions such as diabetes, heart failure, and peripheral vascular disease had significantly lower Medicare margins (Exhibit 2) and involved more nursing and fewer therapy services than episodes provided to patients without those conditions. The presence and stage of pressure ulcers were also highly predictive of the Medicare margin and service use. Patients with a stage 3 or 4 pressure ulcer had episodes of care with Medicare margins that were considerably lower than the margins for episodes that did not involve pressure ulcers (Exhibit 2). Furthermore, the level of nursing and home health aide use was substantially greater among beneficiaries with a stage 4 ulcer (66 percent) than among those with no ulcer (18 percent). Functional Characteristics Of Patients Episodes of care that were provided to patients who were moderately or very impaired had Medicare margins that were significantly lower than episodes provided to patients with no functional impairment (Exhibit 3). Not surprisingly, each increase in the degree of functional impairment was associated with a 10 percent increase in the amount of therapy and home health aide use. However, we did not observe a significant relationship with nursing use. Patients who required some level of preparation of their oral medications also had lower Medicare margins than those needing no help (Exhibit 3) and used 2 percent more nursing services. Similarly, patients who depended upon another person to administer their injectable medications had significantly lower Medicare margins than those who injected themselves (Exhibit 3), and they used 5 percent more nursing services. One of the most notable drivers of Medicare margin and service use was the availability of a caregiver to provide assistance with functional limitations and essential medical care. We observed significantly lower Medicare margins for episodes in which a caregiver was not available to provide assistance with activities of daily living, instrumental activities of daily living, or 952

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Attempts to revise Medicare’s home health prospective payment system should focus on inefficiencies within the current model.

medical procedures (Exhibit 3). Episodes of care provided to patients who needed but lacked caregiver assistance with medical procedures used 70 percent more nursing services and 11 percent fewer therapy services, compared to episodes provided to patients who did not need caregiver assistance with medical procedures. Use Of Home Health Services And Predicted Medicare Margin To better illustrate the relationship between home health service use and Medicare margins, we compared the average level of service use between episodes with lower and higher margins based on predictions of margin from our multivariate model that included patients’ social, clinical, and functional characteristics. Episodes of care provided to patients with lower predicted Medicare margins included more skilled nursing visits and fewer therapy visits, compared to the episodes provided to patients with higher predicted Medicare margins (Exhibit 4). For example, episodes provided to patients with predicted margins in the lowest decile included more than ten skilled nursing visits, compared to slightly more than six visits for episodes with the highest predicted margins.

Discussion Medicare home health spending has risen significantly, increasing from $8 billion in 2001 to nearly $20 billion in 2011.2 Recent efforts to reduce the rate of spending growth have largely focused on resetting or rebasing episode payments under Medicare’s home health prospective payment system. A reduction of 3.5 percent has already occurred, and by 2017 the base payment will have been reduced by 14 percent compared with 2013 levels.10 These payment reductions could create financial disincentives for home health care agencies

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Exhibit 3 Average Effects Of Selected Patient Functional Characteristics On The Medicare Reimbursement Margin, Compared To The Respective Reference Group Average severity of ADL limitationa Low ADL limitation Moderate ADL limitation High ADL limitation Oral medication managementb Independent with preparation by another person Independent with reminders by another person Dependent upon administration by another person No oral medication Injectable medication managementc Independent with preparation by another person Independent with reminders by another person Dependent upon administration by another person No injectable medication Level of caregiver assistanced Caregiver is providing assistance with ADLs Caregiver needs training with ADLs/unclear Caregiver assistance with ADLs is unlikely Caregiver is providing assistance with IADLs Caregiver needs training with IADLs/unclear Caregiver assistance with IADLs is unlikely Caregiver is providing assistance with medication administration Caregiver needs training with medication administration/unclear Caregiver assistance with medication administration is unlikely Caregiver is providing assistance with medical procedures Caregiver needs training with medical procedures/unclear Caregiver assistance with medical procedures is unlikely –600

–500

–400

–300

–200

–100

0

100

Average effect on Medicare margin compared to reference group ($)

SOURCE Authors’ analysis of data from a variety of sources as listed in the Exhibit 1 source notes. NOTES A negative margin indicates that service costs for a sixty-day episode of home health care exceeded the amount of Medicare reimbursement; a positive margin indicates that the reimbursement exceeded the costs. All social, clinical, and functional characteristics are held constant in the model. ADL is activities of daily living. IADL is instrumental activities of daily living. “Caregiver needs training/unclear” refers to when the caregiver needs supportive services to complete caregiving tasks or when it is unclear if the caregiver will provide assistance with caregiving tasks to the patient. aReference group: no ADL limitations. bReference group: able to take oral medications independently. c Reference group: able to take injectable medications independently. dReference group: no caregiver assistance required.

to serve patients with complex clinical conditions and limited social and economic resources, particularly if agencies’ overall margins get closer to zero or become negative. Patients who are vulnerable to these inefficiencies within the payment system include those with poorly controlled chronic conditions such as diabetes and congestive heart failure, those who have severe pressure ulcers, and those who have limited assistance from caregivers in managing functional impairments and medical procedures. Our findings suggest that these patients tend to have substantially higher service delivery costs (and lower Medicare margins) because of their needs

for more skilled nursing services. Left unchecked, the financial disincentives within the current payment system could lead to reduced access for these less profitable groups of patients. Instead, these patients could face longer hospitalizations or stays in other postacute care settings such as skilled nursing and inpatient rehabilitation facilities, long-term care hospitals, or nursing homes—options that are considerably more costly than home health care.37,38 The study results also suggest that there are financial incentives for home health care agencies to serve Medicare beneficiaries with conditions that require higher levels of therapy, June 2014

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Medicare Exhibit 4 Average Service Use, By Predicted Medicare Reimbursement Margin Amount 20 Nursing visits

Aide visits

Therapy visits

Number of visits

15

10

5

0 1

2

3

4

5

6

7

8

9

10

Decile of predicted reimbursement margin

SOURCE Authors’ analysis of data from a multivariate model of Medicare reimbursement margins. NOTE Decile 1 is the lowest reimbursement margin, and decile 10 is the highest.

including those patients who are recovering from a stroke, hip fracture, or neurological disease. Attempts to revise Medicare’s home health prospective payment system should focus on inefficiencies within the current model. The reimbursement received by agencies for the care they provide to patients with clinically complex conditions who require significant nursing care might not cover all service delivery costs. In contrast, reimbursement for care provided to beneficiaries who receive substantial therapy services often exceeds costs. Policy makers should further investigate Medicare’s current reimbursement methods and service delivery costs and examine how payment formulas could be redesigned to account for the higher service delivery costs among those beneficiaries who require significant nursing care. Our results suggest that the current case-mix adjustment for Medicare patients with wounds or more severe pressure ulcers (stage 3 or 4) and therapies such as intravenous or infusion therapy and enteral or parenteral nutrition may not account for the typical full cost of services provided to these patients. Furthermore, the current reimbursement system was designed using assessment measures from OASIS B, an older version. We identified several factors that had been added to the current version, OASIS C, that were highly predictive of cost. We also believe that adding measures of the patient’s socioeconomic status to calculations of reimbursements might redress some of the inefficiencies that we observed.

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Conclusion If rebasing payments to home health care providers proceeds without consideration of the inefficiencies described above, certain groups of patients may be more adversely affected than others. Previous work suggests that changes in Medicare reimbursement policy influence service delivery patterns in the home health care setting, including reductions in services provided to frailer patients with greater health impairments.13–16 Changes in reimbursement policy that were intended to reduce spending have led to large cutbacks in service delivery for patients who have greater cognitive, health, and functional impairments.14 Simple across-the-board reductions that fail to take into account the service needs of the most vulnerable populations of home health care patients may result in lowerincome beneficiaries’ having to forgo care or rely to a greater extent on informal caregivers.39 Further careful examination of home health care use and costs is needed to inform current policy discussions. Policy advisers to Congress have suggested that the Medicare home health care benefit serves two different populations: patients whose episodes of home health care are typically preceded by a short-term hospitalization; and patients who have longer-term needs for assistance, most of whom have not recently been hospitalized.19 The latter group does have a longer length-ofstay in home health care. In 2010 those patients received an average of 2.6 episodes of care, as compared to the 1.4 episodes received by patients who had had postacute care before home health care.19 Patients in the former group are older and

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more likely to have multiple chronic conditions or to be eligible for both Medicare and Medicaid, compared to patients in the latter group.19 Supplementary analyses of data from the current study corroborate the 2013 report by the Medicare Payment Advisory Commission indicating that home health stays have grown longer and less focused on postacute care during the previous decade.19 The analyses also suggest that Findings from this research were presented at the annual meeting of the AcademyHealth Long Term Care Interest

patients admitted to home health care from the community were significantly more likely than patients who had recently been hospitalized to have psychiatric and neurological conditions, pressure and stasis ulcers, and a history of falls. Policy makers need to consider the unique characteristics of these two populations as they plan future adjustments to the Medicare prospective payment system. ▪

Group, Baltimore, Maryland, June 22, 2013. Support for this study was provided by the Community Health

Accreditation Program, the Visiting Nurse Associations of America, and the Visiting Nurse Service of New York.

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Now/2013/11/22/HomeHealthRule/ 7 National Association for Home Care and Hospice. Rate rebasing in Medicare home health services: a review of the 2014 HHPPS proposed rate rule [Internet]. Washington (DC): NAHC; 2013 Aug 6 [cited 2014 Apr 23]. Available from: http:// www.congressweb.com/nahc/doc files/Home%20Health%20 Rebasing%20White%20Paper.pdf 8 Visiting Nurse Association of America. Medicare home health rebasing [Internet]. Washington (DC); VNAA; [cited 2014 Apr 14]. Available from: http://vnaa.org/Files/PublicPolicy/ Regulations/home-health-4america/Issue%20Overview%20%20Proposed%20Home%20 Health%20Prospective%20 Payment%20System%20%28HH %29%20Regulation.pdf 9 Grabowski DC, Huckfeldt PJ, Sood N, Escarce JJ, Newhouse JP. Medicare postacute care payment reforms have potential to improve efficiency of care, but may need changes to cut costs. Health Aff (Millwood). 2012; 31(9):1941–50. 10 Centers for Medicare and Medicaid Services. Medicare and Medicaid programs; home health prospective payment system rate update for CY 2014, home health quality reporting requirements, and cost allocation of home health survey expenses. Federal Register [serial on the Internet]. 2013 Dec 2 [cited 2014 Apr 14]. Available from: https://www.federal register.gov/articles/2013/12/02/ 2013-28457/medicare-andmedicaid-programs-home-healthprospective-payment-system-rateupdate-for-cy-2014-home 11 McCall N, Komisar HL, Petersons A, Moore S. Medicare home health before and after the BBA. Health Aff (Millwood). 2001;20(3):189–98. 12 McCall N, Petersons A, Moore S, Korb J. Utilization of home health services before and after the Balanced Budget Act of 1997: what were the initial effects? Health Serv Res. 2003;38(1 Pt 1):85–106.

13 Choi S, Davitt JK. Changes in the Medicare home health care market: the impact of reimbursement policy. Med Care. 2009;47(3):302–9. 14 Davitt JK, Kaye LW. Racial/ethnic disparities in access to Medicare home health care: the disparate impact of policy. J Gerontol Soc Work. 2010;53(7):591–612. 15 Davitt JK, Marcus SC. The differential impact of Medicare home health care policy on impaired beneficiaries. Journal of Policy Practice. 2008;7(1):3–22. 16 McKnight R. Home care reimbursement, long-term care utilization, and health outcomes. J Public Econ. 2006;90(1–2):293–323. 17 Centers for Medicare and Medicaid Services. Home health prospective payment system [Internet]. Baltimore (MD): CMS; 2012 Dec [cited 2014 Apr 15]. Available from: http:// www.cms.gov/Outreach-andEducation/Medicare-LearningNetwork-MLN/MLNProducts/ downloads/HomeHlthProspaymt .pdf 18 Fishman EZ, Penrod JD, Vladeck BC. Medicare home health utilization in context. Health Serv Res. 2003; 38(1 Pt 1):107–12. 19 Medicare Payment Advisory Commission. Report to the Congress: Medicare payment policy [Internet]. Washington (DC): MedPAC; 2013 Mar [cited 2014 Jan 30]. Available from: http://www.medpac.gov/ documents/Mar13_entirereport.pdf 20 CMS.gov. OASIS C [Internet]. Baltimore (MD): Centers for Medicare and Medicaid Services; [last modified 2014 Mar 12; cited 2014 Apr 15]. Available from: http://www.cms .gov/Medicare/Quality-InitiativesPatient-Assessment-Instruments/ HomeHealthQualityInits/OASISC .html 21 Medicare Payment Advisory Commission. Home health care services payment system [Internet]. Washington (DC): MedPAC; [revised 2012 Oct; cited 2014 Apr 15]. Available from: http://medpac.gov/

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