Medicare

GAO concludes that allowing hospitals additional reimbursement for home health services is consistent with Medicare payment principles and federal legislation. The add-on is designed to pay a hospital for legitimate costs allocated to its home health agency if those costs cause its total home health agency costs to exceed predetermined Medicare cost limits. Nonetheless, the effect of this policy is to pay some hospitals more than freestanding home health agencies for the same services. GAO discusses several factors that suggest that the add-on may be unnecessary to ensure beneficiary access to home health care.

GAO found that: (1) Medicare's HHA policy, which allows hospitals additional reimbursement for home health services, is consistent with Medicare payment principles and federal legislation; and (2) although Medicare designed the add-on to pay hospitals for legitimate costs allocated to HHA if those costs cause total HHA costs to exceed predetermined Medicare cost limits, Medicare pays some hospitals more than freestanding HHA for the same services because the Medicare cost-allocation system requires that a portion of hospital overhead be allocated to hospital-based HHA. GAO also found that the add-on may not be necessary to ensure beneficiary access to home health care, since: (1) the number of freestanding HHA has doubled over the last decade; (2) about one-third of hospital-based HHA would be unaffected if the add-on were eliminated, since their costs were lower than the freestanding HHA limits; and (3) authority exists for payment of additional reimbursement to hospital-based HHA with costs above the freestanding limits if they are the only home health care source in a community.