Medicare Home Health Care:

Prospective Payment System Will Need Refinement as Data Become Available

HEHS-00-9: Published: Apr 7, 2000. Publicly Released: Apr 7, 2000.

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Pursuant to a legislative requirement, GAO reviewed the Health Care Financing Administration's (HCFA) research on a home health prospective payment system (PPS), focusing on: (1) the objectives, findings, and costs of the research and demonstration projects HCFA has funded that were related to the design of the PPS; and (2) how these projects contributed to the proposed PPS design and which design decisions were based on incomplete information.

GAO noted that: (1) HCFA has sponsored a number of research and demonstration projects on payment design and home health care users and service delivery since 1987 at a cost of almost $27 million; (2) despite these important efforts, key features of a PPS were not evaluated in these projects, which limits the ability to evaluate the effects of certain payment policies on home health care service delivery and spending; (3) HCFA's major home health agencies (HHA) payment demonstration project provided evidence that HHAs would reduce their costs of providing home health visits when paid under a PPS model that tightly limited both their profits and their losses; (4) furthermore, the demonstration did not develop a case-mix adjustment method to alter payments for expected differences in resource use across groups of patients; (5) however, an ongoing research project has constructed an initial case-mix adjustment method for the PPS and will continue to refine this method as more data become available; (6) other HCFA-sponsored research projects have documented the variation in home health care service delivery; (7) these projects have demonstrated that methods for quality measurement and monitoring are not well developed, which will impair the ability to evaluate the effect of payment changes; (8) although HCFA's research and demonstration projects have proven useful in designing the PPS, information gaps remain; (9) these gaps mean that the PPS could cause unintended consequences for some beneficiaries, some HHAs, or the level of Medicare spending; (10) concerns remain about whether the case-mix adjustment method will adequately group patients with like resource needs and then appropriately adjust payments for beneficiaries in each group; (11) furthermore, how a patient is classified and how much the agency is paid are very dependent on whether, and how much, therapy services are provided; (12) without adequate design features, Medicare could overpay for unneeded services or underpay for required care, resulting in beneficiaries facing access problems or receiving poor quality of care; (13) although the change from cost-based payments to prospective payments is intended to help Medicare control its spending, how costs and service provision will change under the new system is unknown; and (14) therefore, HCFA will need to have sufficient resources to monitor service delivery across types of beneficiaries and across HHAs so that inadequate or medically inappropriate care can be identified.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: CMS has several programs in place to monitor utilization and quality of care in home health services. Medicare contractors/Regional Home Health Intermediaries (RHHI) process home health claims and conduct medical review. In addition, Program Safeguard Contractors are available to perform data analysis and program integrity activities, such as identification of atypical billing trends. As part of a quality improvement initiative begun in 2000, CMS requires home health agencies to submit health status information through the Outcome and Assessment Information Set (OASIS), which the agency uses to construct publicly reported quality measures. To ensure OASIS data quality, CMS has provided training for the home health industry, Medicare contractors and federal and state surveyors; contractors also review OASIS data and support provider education efforts to address problem areas. Finally as part of the Survey and Certification program, CMS and state survey agencies monitor and oversee home health agency compliance with Medicare health and safety requirements. In 2003, CMS enhanced its protocols for these surveys to help surveyors identify areas to focus on.

    Recommendation: In order to minimize unintended consequences on beneficiaries, HHAs, and Medicare, and to narrow information gaps in the PPS design, the Administrator, HCFA, should ensure that adequate resources are devoted to utilization monitoring and medical review to ensure that Medicare does not make inappropriate payments for home health services and that quality of care is not compromised.

    Agency Affected: Department of Health and Human Services: Health Care Financing Administration

  2. Status: Closed - Not Implemented

    Comments: CMS notes that it is analyzing data to ensure that payments to providers are adequate and that quality of care is not compromised by examining utilization and payment levels, provider and beneficiary characteristics, quality indicators, and operational implementation.

    Recommendation: In order to minimize unintended consequences on beneficiaries, HHAs, and Medicare, and to narrow information gaps in the PPS design, the Administrator, HCFA, should incorporate a risk-sharing arrangement into the PPS design, consistent with methods tested in the demonstration, until available analyses indicate that it is no longer needed to protect beneficiaries, HHAs, or the Medicare program.

    Agency Affected: Department of Health and Human Services: Health Care Financing Administration

  3. Status: Closed - Implemented

    Comments: Consistent with our recommendation, CMS has been involved in an ongoing effort to refine the home health prospective payment system (HHPPS). Since the implementation of the HHPPS, CMS has maintained ongoing research and analysis to support refinement efforts. For example, in 2004, CMS awarded a contract for empirical analysis of a new payment system, and in 2005 through 2006, the agency convened three meetings of a technical advisory panel. These analytic efforts culminated in the HHPPS Refinement and Rate Update for CY2008 proposed rule, published in the Federal Register on May 4, 2007, in which CMS proposed refinements in seven major areas, including case mix coding and the low-utilization payment adjustment. CMS published the HHPPS final rule on August 29, 2007.

    Recommendation: In order to minimize unintended consequences on beneficiaries, HHAs, and Medicare, and to narrow information gaps in the PPS design, the Administrator, HCFA, should modify the PPS design, as appropriate, on the basis of continued study of the variations in service use and patient needs and the effects of the change in payment method on service use.

    Agency Affected: Department of Health and Human Services: Health Care Financing Administration

 

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