Evaluation of the Health Care Financing Administration's Proposed Home Health Care Cost Limits

In response to congressional concern that the limits proposed by the Health Care Financing Administration (HCFA) on home health care reimbursements were too high, GAO reviewed the accuracy of the database used to develop the limits, the methodology used, the accuracy of the HCFA estimated savings, and alternative methods HCFA could use to improve existing limits or develop subsequent home health reimbursement limits. Under the methodology used, relatively minor changes in the number of home health agencies included in the database or the data themselves could result in substantial changes to the computed reimbursement limits. And, small changes in the level at which the limits were set could have a relatively large impact on the savings resulting from implementation of the limits.

In reviewing the database, GAO found the following problems: (1) HCFA included home health agencies in the database which should have been excluded and excluded agencies which should have been included; (2) it included information from unaudited, unsettled home health agency cost reports; (3) costs reported under certain cost reporting methods permitted by HCFA had to be allocated in order to obtain the data needed to compute the proposed limits; and (4) a computer programming error resulted in the limits being set too high. In addition, anomalies were noted with the wage index data used to establish the reimbursement limits for individual agencies. Because of the problems with the database, GAO could not determine the correct levels at which the proposed limits should be set using the HCFA methodology, nor could it verify the accuracy of the estimated savings.