Sourcebook : 9.1 Medicare Payments for Fee-for-Service Programs : 9.1.1 Home Health Care

Medicare will cover home health care for beneficiaries who meet four criteria. The beneficiary must:

• Need intermittent skilled nursing care or physical therapy or speech language pathology
• Be homebound
• Be under a physician's care plan
• Receive services from a Medicare participating home health agency (HHA)

Once a beneficiary qualifies, Medicare will pay for the following services, if medically reasonable and necessary:

• Part-time or intermittent skilled nursing care
• Part-time or intermittent home health aide services
• Part-time or intermittent physical therapy or speech language pathology
• Continued occupational therapy services
• Medical social services
• Durable medical equipment (subject to 20 percent coinsurance)

Medicare does not cover prescription drugs or personal care provided by home health aides (custodial care) if this is the only care that the patient needs. The Social Security Act contains blanket exclusions of coverage for custodial care (personal care unrelated to skilled treatment of a specific illness or injury) and personal comfort items.

Home health care had been growing dramatically under a fee-for-service reimbursement, limited mainly by eligibility requiring skilled services. The Balanced Budget Act of 1997 (BBA) instituted major changes in payments to home health agencies, initially under the Interim Payment System (IPS) for fiscal years 1998 and 1999. A home care Prospective Payment System (PPS) is to begin on October 1, 2000. The IPS and the PPS have dramatically increased financial risks to programs and diminished potential returns from home care, and many have left the field. The combined effect of the new regulations will require many agencies to reduce their average cost per visit and average cost per patient, which usually means limiting enrollment and the number of visits and aiming to have patients whose costs are lower and whose need for services is shorter.

Many home health providers who have traditionally cared for patients with serious and complex illness now need to balance patients whose care is expensive with those whose care is cheaper because their stays are shorter. The new aggregate cost limit per beneficiary will be different for every agency. Each agency's own case mix will determine its ability to care for seriously ill patients. Projecting the patient mix requires a large and stable patient mix. This, in turn, requires avoiding adverse bias in referrals - in other words, avoiding a reputation as the place to go for good care for serious illness.

From the perspective of many managers, the IPS translates into an annual flat fee per patient (who qualifies). This reimbursement strategy creates a serious problem for patients who most need end-of-life care: those with substantial disability, complex illnesses, and unpredictable timing of serious need. Most agencies will have no problem caring for short-term, low-maintenance clients within the reimbursement cap. Patients who need wound dressings changed a few times, or who need supervision of glucose monitoring for their first few weeks at home with diabetes, will be "winners" for home care programs.

Patients who need more intense or prolonged care, and those who come to the agency late in the course of their disease, will far exceed the reimbursement cap. To prevent significant financial losses, the agency needs to recruit low-cost patients while limiting services to high-cost patients. Administrators must carefully manage the case mix.

Many patients whose costs are expected to be quite high have either been denied admission or been preemptively discharged because managers believed such action was essential in order to stay under the reimbursement cap. Whether or not this is the case, this mindset is making it much more difficult for very sick patients to get the care they need.

At the same time, major efforts continue to move these patients out of hospitals quickly and to keep them from using nursing homes. The denial of home health services could effectively mean that they have no Medicare-paid services. Having the cap rate set by reimbursement levels of five years ago exacerbates the scarcity of services for the seriously ill.

Home health agencies have come under scrutiny for fraud; investigations seem to have focused on the merit of visits, on billing for visits not made, and on abuse of the provision of durable medical equipment. Providing medically certified skilled services to people with serious and eventually fatal conditions has not been a particular locus for allegations of fraud.

Most agencies have already calculated their new per beneficiary limit and will have made some decisions about their increased risks. The accompanying chart will help to determine what the service reimbursement will be for each service to each patient. To estimate financial returns, a manager needs to multiply the cap by the number of patients, then modify that based on the likely service array actually provided.

<<< Previous Next >>> [ Go Up ]

This online version of the book Improving Care for the End of Life: A Sourcebook for Health Care Managers and Clinicians is provided with permission of Americans for Better Care of the Dying [ www.abcd-caring.org ] and Oxford University Press. All rights reserved. For further information on quality improvement in end-of-life care visit The Palliative Care Policy Center [ www.medicaring.org ].