Medicare Home Health Agencies

Until last year, home health care was one of Medicare's fastest growing benefits. In response to concerns about rising costs, fraud and abuse, and inadequate oversight, an interim payment system has been introduced that limits Medicare payments for home health care. Industry representatives claim that the cost limits are too stringent, causing some home health agencies to close. GAO found that prior to the widely publicized closures of agencies, both the number of agencies and the use of home health services had grown considerably. Although 14 percent of agencies closed between October 1997 and January 1999, beneficiaries are still served by more than 9,000 agencies--about the same number that were in business in 1996. Forty percent of the closures were concentrated in three states with considerable growth in the number of agencies and had utilization rates (visits per user as well as users per thousand fee-for-service beneficiaries) well above the national average. In addition, most closures occurred in urban areas that still have a large number of agencies offering services. The pattern of agency closures suggests a response to the interim payment system. Attention has focused on the number of Medicare-certified home health agencies available to provide care, but GAO believes that the more important question is whether beneficiaries continue to have access to Medicare-covered home health services. Overall home health utilization in the first quarter of 1998 had declined since 1996, but it was about the same as a comparable period in 1994--the year that serves at the base for interim payment system limits. Moreover, the sizeable variation in utilization between counties with high and low use has narrowed. These changes are consistent with interim payment system incentives to control utilization. GAO interviews in 34 primarily rural counties with substantial closures indicate that beneficiaries continue to have access to services.

GAO noted that: (1) prior to the HHA closures that have attracted widespread attention, both the number of HHAs and utilization of home health services had grown considerably; (2) although 14 percent of agencies closed between October 1, 1997, and January 1, 1999, beneficiaries are still served by over 9,000 HHAs, approximately the same number that were available in 1996; (3) 40 percent of the closures were concentrated in three states that had experienced considerable growth in the number of HHAs and had utilization rates well above the national average; (4) furthermore, the majority of closures occurred in urban areas that still have a large number of agencies to provide services; (5) the pattern of HHA closures suggests a response to the interim payment system (IPS); (6) the IPS revenue caps would prove particularly stringent for agencies that provided more visits per user, for smaller agencies, and for those with less ability to recruit low-cost patients; (7) closing agencies were also about half the size of agencies that remained open, and they had been losing patients before the implementation of IPS; (8) attention had been focused on the number of Medicare-certified HHAs available to provide home health care, but the more important issue is whether beneficiaries have access to Medicare-covered home health services; (9) evidence shows that overall home health utilization in the first 3 months of 1998 had declined since 1996, but it was about the same as a comparable period in 1994--the year that serves as the base for IPS limits; (10) moreover, the sizeable variation in utilization between counties with high and low use has narrowed; (11) these changes are consistent with IPS incentives to control utilization; (12) in counties without a HHA, both the proportion of beneficiaries served and the visits per user declined slightly during the first 3 months of 1998 compared with a similar period in 1994, but these counties' levels of utilization remained above the national average; (13) GAO's interviews in 34 primarily rural counties with substantial closures indicate that beneficiaries continue to have access to services; (14) overall, the 130 stakeholders GAO interviewed in 34 counties with significant closures or declines in utilization reported few access problems; and (15) however, those interviews also suggest that as HHAs change their operations in response to the IPS, beneficiaries who are likely to be costlier than average to treat may have increased difficulty obtaining home health care.