Statistical Trends and Published Articles with Studies and Research from 2002-2017

This is part nine of a ten-part CMA Issue Brief Series examining the growing crisis in access to Medicare home health coverage and necessary care – and outlining the Center for Medicare Advocacy’s work to address these issues. We invite you to follow this Issue Brief Series and submit Medicare home health stories to the Center at https://www.medicareadvocacy.org/submit-your-home-health-access-story/.

CMA Issue Brief Series: Medicare Home Health Care Crisis

1. Overview – The Crisis in Medicare Home Health Coverage and Access to Care
2. Medicare Home Health Coverage, Legally Defined
3. Medicare Coverage for Home Care Is Based On a Need For Skilled Care – Improvement Is Not Required
4. Misleading and Inaccurate CMS Medicare Home Health Publications
5. The Home Care Crisis: An Elder Justice Issue
6. Beneficiary Protections Expanded in Revised Home Health Conditions of Participation
7. Barriers to Home Care Created by CMS Payment, Quality Measurement, and Fraud Investigation Systems
8. Proposed CMS Rules and Systems Will Worsen the Home Care Crisis
9. Statistical Trends and Published Articles with Studies and Research from 2002-2017
10. Strategic Plans to Address and Resolve the Medicare Home Care Crisis

Statistical Trends and Published Articles with Studies and Research from 2002-2017

1. Introduction
2. Evolution of Medicare Home Care
3. Statistical Trends
4. Patient Quality, Value and Access
5. CMS Quality and “Star” Ratings
6. Staffing
7. Mergers and Acquisitions
8. Payment Reforms
9. Center for Medicare Advocacy Discussion of Published Article Information

      1. Introduction

The Center for Medicare Advocacy reviewed key articles, published between 2002 and 2017, that cite data and research and provide theories/conclusions about the evolution and current status of the Medicare home health benefit. This Issue Brief quotes or paraphrases these articles by topic in Sections 2 through 8. An endnote for each of Sections 2 through 8 provides citations to articles referenced. Section 9 is a Center for Medicare Advocacy discussion of the impact this information has on current Medicare beneficiary access to home health care.

2. Evolution of Medicare Home Care [1]

Medicare has always included a home health benefit, but over time changes in laws, regulatory rules, and administrative practices have influenced its provisions and use. Originally, beneficiaries with a recent hospital or nursing home stay could receive up to 100 visits under Part A with no beneficiary cost sharing. Those who did not have an institutional stay, or who had exhausted their 100 visits under Part A, could receive up to 100 visits under Part B; however, Part B services were subject to cost sharing – the Part B deductible and 20% coinsurance.

In 1972, the coinsurance requirement was eliminated from Part B home health services. By the OBRA (Omnibus Reconciliation Act) of 1980, Congress removed the prior institutional stay requirement for Part A, the 100 visit cap for both Parts A and B, and the application of the Part B deductible to home health. OBRA made it easier for for-profits to participate in Medicare by eliminating the requirement that they be licensed by their state. A combination of regulatory practices and other policies effectively constrained the benefit’s use through most of the 1980’s.

A clarification and expansion of eligibility and coverage rules in 1989 sparked a period of rapid growth in Medicare home health use and spending.  Rule revisions confirmed that eligibility based on intermittent skilled nursing could usually be established if a beneficiary needed skilled nursing services at least once in 60 days. Rules further clarified that a beneficiary’s condition did not need to improve to qualify for services. Also, skilled nursing services were defined to include observation and management of patient care, as well as direct services. Daily skilled care was allowed for up to 21 days, or longer in exceptional circumstances.

Between 1988 and 1996, the proportion of beneficiaries using the home health benefit more than doubled, from 4.8% to 10.7%. In the same time period, the average number of visits nearly tripled, from 24 visits per user, to 74 visits. Home health spending increased from $83 per beneficiary to $528. As a result, home health grew from 2.4% of total Medicare payments in 1988 to 10% in 1996. The home health benefit was one of the few parts of Medicare under which payment was still largely based on the provider’s costs, rather than on prospectively established rates. An agency had an incentive to expand its volume of visits, so long as the cost of additional visits was below its average Medicare dollar limit. Cost-containment concerns centered on agency fraud and over-utilization of the benefit.

After enactment of the 1997 Balance Budget Act (BBA), the traditional, cost-based payment system for Medicare home care was changed to an interim prospective payment system (IPS), imposing predetermined per-episode reimbursement limits. The BBA’s aim was to control the price of home health services and constrain the volume of services, largely by changing the financial incentives of home health agencies. Dramatic decreases in home health use occurred, particularly by persons with impairments in activities of daily living, health and memory. In many ways the policy design did not create incentives to eliminate inappropriate use of the benefit. Rather, it generated incentives for agencies to cut the amount of services provided to the most potentially high-cost patients, regardless of the legitimacy of their claim and need for home health care. Home health agencies responded to IPS by reducing care to relatively unhealthy beneficiaries. Some studies demonstrated increases in skilled nursing facility use and emergency room use post-BBA.

In two years, between 1997 and 1999, under the interim prospective payment system (IPS), average home health visits per beneficiary fell by 54%. Spending per beneficiary fell by 52%. The largest drop in the likelihood of obtaining any home health care at all occurred in three beneficiary groups: those age 75 or over, enrollees with Medicaid, and residents of rural areas. The proportion of users with home health episodes lasting at least 6 months also fell by nearly one-half, from 31% in 1997 to 17% in 1999.

At the turn of the 21^st century, the prospective payment system (PPS) introduced the case-mix adjustment, a structure intended to reimburse agencies based on expected service needs for different categories of patients rather than on actual cost to deliver services, arbitrary criteria or agency cost history. Its base rate, however, was established by still using expenditures from the greatly reduced IPS. Some agencies were forced to close if they could not manage to balance low and high-cost patients.

Patient need for services, and Medicare coverage for those who qualify, has not significantly changed since 2000, but access to those services for vulnerable Medicare beneficiaries has been dramatically affected. The combination of incentives in the policy and gaming behaviors at the practice level have the potential to generate fraud in two directions – either over or under use. Medicare home health care has been refocused on post-acute management rather than on chronic illness care. In the process, home care episodes have been shortened with fewer visits per episode and, in particular, far fewer home health aide visits.

Medicare home health policy focuses on controlling costs rather than on responding to the legitimate needs of beneficiaries by improving quality and efficient delivery of care. Changes to home health care policies have altered the profile of users and the practice of home health providers. Agencies strategically altered their admissions and service delivery practices in response to these changes, in order to continue to provide services while maintaining fiscal stability. Thus, both policy and market response to the policies have been critical to benefit use and access to necessary home care. Assumptions changed regarding the goal of the Medicare home health benefit (acute care versus long-term care) and the appropriate target population for service (post-acute care versus chronic care), and currently continue.

3. Statistical Trends [2]
4. Utilization

Between 1997 and 2016, visit type as a percent of total visits changed as follows: skilled nursing from 41% to 51%; therapy from 10% to 39%; and, home health aides from 48% to 10%. Number of visits per user decreased from 73 to 33. Average visits per episode between 1998 and 2016 changed as follows: skilled nursing from 14.1 to 9.4; therapy 3.8 to 7.5; and home health aides 13.4 to 1.8. (Note: not all episodes use all types of care.) The total number of traditional Medicare home health episodes increased 60% between 2002 and 2015 and episodes per home health user increased from 1.6 to 1.9. (Note: an episode = 60 days of services.) Since 2001, episodes not preceded by a hospitalization increased from half to two-thirds of total episodes.

2. Access

In 2018, the Medicare Payment Advisory Commission (MedPAC) reported that beneficiary access to home health care was generally adequate as over 99% of beneficiaries lived in a ZIP code where Medicare home health care services operated, and 86% lived in a ZIP code with 5 or more agencies. The number of agencies nationwide in 2016 (12,204), was higher than the previous peak in the 1990s when supply exceeded 10,900 agencies. In 2016, 88% of all agencies were for-profit owned.

3. Spending and Payments

Medicare home health spending has risen significantly, increasing from $8 billion in 2001 to over $18 billion in 2016. Between 2002 and 2016, Medicare spending for home health care increased 80%. Between 2001 and 2015, marginal annual profit for home health agencies averaged 16.4%, suggesting a significant financial incentive for home health agencies to increase their volume of [traditional] Medicare patients. Two factors have contributed to payments exceeding costs: Agencies have reduced episode costs by lowering the number of visits provided, and cost growth has been lower than the annual payment updates for home health care.

4. Patient Quality, Value, and Access [3]

An equitable health care system should be driven by patient-need. Thus, patients who are sicker and more impaired should receive greater health care services. Patients with greater health, functional, and mental impairments may have experienced reduced access to home health care after the implementation of IPS in 1997. There was a significant increase in the percentage of home health patients who had a skilled nursing facility admission within 120 days of admission to home health (from 7.8% to 8.8%). Visits to an emergency room increased from 17% to 19%; visits to an emergency room for the same body system diagnoses as the home health care increased from 7.2% to 8.2%. The number of deaths rose from 9.0% to 9.7%.  

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, socially vulnerable patients with complex conditions represent less profit – lower-to-negative Medicare margins – for home health agencies. This financial disincentive could also reduce patients’ access to care as Medicare payments decline.

One of the most notable drivers of Medicare service use and profit margin is the availability of a caregiver to provide assistance with functional limitations and essential medical care. There were substantially lower Medicare margins for episodes in which a caregiver was not available in the home to provide assistance with activities of daily living, instrumental activities of daily living, or medical procedures.

Left unchecked, the financial disincentives within the current payment system could lead to reduced access for less profitable groups of patients. Instead, these patients could face options that are considerably more costly than home health care. Further, Medicare beneficiaries above the poverty line, but with limited financial and social resources, may continue to have difficulty obtaining needed home health care.

Seeking improved functional status is a domain that appears to be more consistently unmanageable in a population with a high burden of chronic illness and frailty. Heterogeneity of circumstance, social determinants, frailty, and other local influences shape home care, which is inherently provided in environments that are uncontrolled and often unpredictable. Under such conditions, because of how and what is measured, optimal performance must sometimes remain elusive.

Non-profit agencies showed greater improvements on quality measures than for-profits. For-profit agencies had higher costs but poorer performance than non-profit agencies.

Overall, there is a pervasive lack of true integration of home health care into the main fabric of total health care delivery. The need to “knit the fabric” of health care together is simply not yet urgent enough in a world where patient-centered, safe-care should rule.

5. CMS Quality Criteria and “Star Ratings” [4]

CMS has tested models that focus on reimbursement for agencies based on outcomes of care. However, these models currently measure quality (through a series of outcome indicators) on global aggregate data. Very little attention is paid to ensuring quality for subgroups of patients who are most needy and vulnerable. CMS needs to ask the question, quality for whom, and ensure that impact assessment does not overlook need in evaluating the effectiveness of home health care.

CMS criteria for selecting quality measures include the following: a measure must apply to a substantial portion of home health patients; a majority of agencies must have sufficient data to report; the measure shows a “reasonable amount of variation among agencies”; agencies can improve their performance on the measure; the measure has “high face validity and clinical relevance”; and the measure is stable over time and doesn’t experience variation.

Claims-based measures (such as the emergency department use without hospitalization measure), are generally viewed as less prone to manipulation when compared to a process measure. When CMS proposes measures, they purportedly seek to ensure that there are no unintended consequences.

A study of over 11,000 Medicare-certified home health agencies between 2011 and 2015, serving over 92% of all zip codes, found that agencies with longer tenures as Medicare-certified providers were more likely to have high-performing scores. Agencies only offering some home health services, proprietary ownership, or long travel distances to reach patients, had lower performance. Agencies serving low-income counties and counties with lower proportions of women and senior residences and greater proportions of Hispanic residents were more likely to attain lower quality performance scores. Since 1997, there have been greater than average reductions in the number of home health visits among beneficiaries who were older than 75, female, non-white, and those living in rural areas.

6. Staffing [5]

The number of employees per agency declined 16% between 1996 and 2002. Low home health care reimbursement rates are expected to increase the shortage of qualified home health aides, therapists and nurses.

Demand for home health aides is expected to rise rapidly over the next several years, but factors like low pay and lack of training have made it one of the hardest jobs to fill. The projected growth for the home health aide profession between 2014 and 2024 is 38%. Home health aides and other home care workers are already leaving the industry in droves, attracted to jobs that pay similarly, if not better, but take less of a physical and emotional toll. Some studies have shown that more training in this workforce leads to less turnover, better patient outcomes and satisfaction, and likely more attraction for the job in the long term. There is a connection between training, quality of care, better health outcomes and lower health care costs.

7.  Mergers and Acquisitions [6]

Of all the health care sectors, home health posted the highest trading multiples for mergers and acquisitions in 2016. Purchase volume increased 8% in 2015, and deal value increased 121%. Home health volume and valuations increased, are likely due to the continued acceleration of value-based care models. The models are designed to increase home health volume by diverting patients from more expensive and sometimes unnecessary in-patient post-acute facilities. Home health agencies are becoming an even more important factor in reducing costs and improving patient outcomes in the post-acute care continuum. Buyers are seeking home health assets with the size and scale to satisfy this additional demand.

8. Payment Influences [7]

The provision of home health care is “quite sensitive” to the structure of reimbursement. Medicare home care payment policy and practice may ultimately jeopardize access to quality care for vulnerable populations. Shifting risk to agencies has historically led to adaptive gaming practices, and changes in delivery of services, to reduce the agency’s financial risk or enhance profit. Gaming has been demonstrated throughout the Medicare program’s history; agencies tend to modify their practice in reaction to policy changes to either capitalize on generous aspects of changes or to counteract financial harm due to restrictive changes. It is very challenging to predict how agencies will react to proposed changes. The impact of such policy estimations on vulnerable patient groups, those with greater and legitimate need for care, is overlooked.

Socially vulnerable patients with complex conditions represented less profit – lower-to-negative Medicare margins – for home health agencies. Further, research has shown that policies decreasing Medicare’s payments to home health care providers are linked to greater reductions in services for beneficiaries who have greater functional, health, and cognitive impairments than those for healthier beneficiaries with fewer functional and cognitive impairments.

In 2010, CMS imposed a new home health agency-level cap on outlier payments (an added payment meant to encourage agencies to serve high-cost beneficiaries, still currently in effect). Agencies are held to 10% of total payments for outlier claims in an effort to combat fraudulent behavior by agencies. U.S. General Accounting Office (GAO) studies show much of fraudulent practice from outlier payments happens from a limited number of agencies. But the remedy makes all agencies subject to the outlier payment limit. Such sweeping policies do not necessarily eliminate fraudulent providers from the system. They raise the real prospect that legitimate, high-need, and thus high-cost, beneficiaries will receive fewer visits if all agencies have to cut their services to counteract reductions in base rates or stay below the 10% outlier limit. (Note: Section 3131(b)(2) of the Affordable Care Act states that the total amount of additional payments or payment adjustments for outlier episodes are not to exceed 2.5 percent of the estimated total annual home health PPS payments.)

Episodes that did not involve restorative care had significantly lower Medicare margins. Similarly, 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. 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. These payment methods 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.

Payment reforms that shift reimbursement from fee-for-service towards episode-based payment predict a decline in the likelihood of use and costs. Payment reforms under the current and previous payment systems (PPS and IPS, respectively) showed little evidence of “cherry-picking” patients based on observable characteristics in data, and limited effects on costs in other post-acute care settings, hospital readmissions, and mortality. [Note: data does not capture information about people who are refused services.] Provider behavior might be more responsive to reimbursement at the margin. Estimates from the PPS show offsetting effects of reduced marginal reimbursement and increased average reimbursement. Home health agencies adopted a nuanced response to expected service utilization under the PPS and were more likely to target the therapy visit threshold to maximize payment and also increased the number of 60-day episodes. Still, the amount of care provided (measured by average visits per home health patient), remained well below pre-IPS levels. If payments increased, any reductions in care translated to higher margins for providers (as in the PPS) rather than savings to Medicare.

Changes in per-patient average reimbursement predicts what services will be provided and, to a lesser extent, probability of admission to home health care. Bundled payment and accountable care organizations that further reduce marginal reimbursement are likely to impact provider behavior. Additionally, payments have declined as a result of rebasing – an exercise that reflects data on costs and use of services – and decreased Medicare home health payments by 3.5% per year in the period 2014-2017. Thus, home health payment reductions could accelerate the unintended consequences of reducing access for less profitable patients.

Attempts to revise Medicare’s home health PPS should focus on inefficiencies within the current model. Policy makers should examine how payment formulas could be redesigned to account for higher service delivery costs among those beneficiaries who require significant nursing care. Also, adding measures of the patient’s socioeconomic status to calculations of reimbursements might redress some of the observed inefficiencies.

9. Center for Medicare Advocacy Discussion of Published Article Information

Policy and practice should be aligned to effectuate Medicare coverage laws. The home health benefit, as intended by Congress, including all covered disciplines – nursing, therapies, home health aides, and medical social services – should not be undermined by administrative policies and industry incentives. In the 1997 Balanced Budget Act, which developed the payment system that exists today, Congress reviewed Medicare home health coverage and chose not to limit it to a short-term, acute care benefit.

The Center for Medicare Advocacy focuses on the impact of laws, regulations, policies and procedures on Medicare beneficiaries, particularly those with longer-term conditions and serious illnesses. How are these systems working, or not working, for all people who are served by the program? How do they affect chronically ill beneficiaries? While providers must be fairly reimbursed to deliver care, ultimately the guiding principles of CMS should be to provide health care for all qualified beneficiaries and efficient, effective management of public funds.

The home health care delivery system has become a profit-making enterprise, as evidenced by the flood of mergers and acquisitions and for-profit corporations that have taken over the industry. There is an inherent tension between profit and care delivery. Too often the result is the sickest and most vulnerable people are denied access to care. The data shows agencies have lowered the number of visits provided under PPS, while consistently making more than 16% profit annually from traditional Medicare. If the PPS system was intended to provide bundled payments that balanced lower cost patients with higher cost patients, for-profit agencies, which comprise 88% of agencies today, have adapted to the payment system and serve those who are in relatively less need of care, and most profitable. Access to services for people most in need is denied.

The existence of one or many home health agencies in a ZIP code area is of no use if beneficiaries who need care find each one denying even an assessment for services. While studies may have shown limited evidence of patient “cherry-picking”, this is misleading as the system would not be able to identify all the patients rebuffed from services. Similarly, viewing data in aggregate does not help subgroups that are on the margins of care.

Barriers to home health care access are also created by quality measures that inform the CMS star rating system but do not measure achievement of patient goals. Thwarted by a requirement that quality measures must apply to a substantial portion of home health patients, “improvement” is mandated by CMS to meet almost all measures. This creates real access barriers for patients with longer-term or chronic illnesses and provides more disincentives for agencies to serve patients with the greatest needs.

One issue we have not seen studied, and is concerning for potential home health patients, is what appears to be rapidly growing number of home health agency “spin-off” affiliates that offer a variation of home health aide services. Medicare covers personal care services by home health aides, up to 28-35 hours a week, but home health agencies report they don’t provide home health aides in their Medicare-certified enterprises. Instead, they state that they can provide similar services (“personal care assistants” or “companions”) through a private-pay affiliate. The Medicare PPS system provides little to no incentive for home health agencies to staff home health aides, assistance from whom is often the key to people with longer-term and chronic conditions ability to remain in their homes.

Finally, a note must be made about the influence of Medicare fraud audits on home health agencies. CMS appears to aggressively audit cases of patients with longer-term and chronic impairments. Based on our work the Center for Medicare Advocacy has significant concerns that the reviews are not accurately based on Medicare law, regulations, or policy and are sometimes without basis in (or sometimes contrary to) law, regulations, or policy. Such erroneous audits (applying inappropriate law and criteria to inaccurate facts), establishes dangerous precedents and can reduce beneficiary access to legal Medicare coverage. These kinds of audits can also create misleading and illegal standards that may interfere with the effective identification of true fraudulent barriers to Medicare program integrity.

CMS must create effective regulations and policies that allow equal access for all patients who qualify for care, especially for those who most need those services.