Medicare Home Health:

Effect on Spending of Limiting Payment for Non-Patient-Care Costs

HEHS-00-19R: Published: Oct 19, 1999. Publicly Released: Oct 19, 1999.

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William J. Scanlon
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Pursuant to a congressional request, GAO modelled the impact of constraining, through various limits, home health agency (HHA) costs that are not directly related to patient care, focusing on the: (1) variation in total and non-patient-care costs across agencies; and (2) effect on Medicare payments if constraints were imposed on payments for non-patient-care costs.

GAO noted that: (1) per-visit costs varied widely both by visit type and across free-standing agencies; (2) home health aide visits were the least expensive, and medical social service visits were the most expensive; (3) across agencies, costs per visit for the most expensive agencies were 4 to 10 times those of the least expensive agencies, depending on the type of visit; (4) non-patient-care costs constituted a substantial portion of the cost for each home health visit, averaging around 44 percent for each visit type; (5) moreover, the portion of visit costs that were not directly related to patient care was higher for more expensive visits; (6) in addition, for the sample of free-standing HHAs GAO analyzed, Medicare payments would have been approximately 4 to 13 percent less if payments for non-patient-care costs had been held to various limits based on the cost experience of a subset of HHAs; (7) for example, if Medicare payments for non-patient-care costs had been limited to the median costs of free-standing HHAs (the 50th percentile), total payments would have been reduced by 3.9 percent; (8) if payments for non-patient-care costs had been limited to the cost level of the least expensive 20 percent of HHAs (20th percentile), total spending would have been 12.6 percent lower; (9) the per-visit cost limits already indirectly constrain Medicare payments for non-patient care costs, although not as much as a limit applied directly to non-patient-care costs would; and (10) it is not known how the savings estimates would have differed if all HHAs, including the generally higher-cost hospital-based ones, had been included in the analysis.

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