Department  of Health and Human Services 
OFFICE  OF 
INSPECTOR  GENERAL 
Operating  Practices  Of  High-Cost  And 
Low-Cost  Home  Health  Agencies 
@ SERVICE$ 
&  ha 
+  *  GIBBS  BROWN 
~.  JUNE 
;	 Inspector  General 
# 
5 
%+.--~ FEBRUARY  1997 
> 
~di+a OEI-04-93-00261  EXECUTIVE  SUMMARY

PURPOSE 
To  determine  how operating  practices  of home  health  agencies  may influence  the 
average  number  of visits per  Medicare  beneficiary. 
BACKGROUND 
Medicare  expenditures  for home  health  services  have  increased  from  $3.3 billion  in 
1990 to $15 billion  in 1995 -- a nearly  5 fold increase  in just  5 years.  Expenditures 
vary drastically,  however,  among  individual  home  health  agencies  (HHAs),  as do 
average  number  of visits per  beneficia~.  The  average  number  of visits per  beneficia~ 
for all Medicare-certified  home  health  agencies  increased  from  50 in 1993 to 58 in 
1994. 
In previous  OIG  studies  of home  health,  we determined  that  differences  in 
characteristics  of home  health  agencies,  characteristics  of beneficiaries  served, 
diagnoses,  and  quality  did not  fully explain  the wide variation  in utilization  among 
home  health  agencies.  Agencies  with a low average  number  of visits are  providing 
appropriate,  adequate  care  as well as those  with a high average  number  of visits. 
Under  Operation  Restore  Trust  (ORT),  the  Department  of Health  and  Human 
Services  k  examining  the  home  health  industry  ;O identify  and  correct  fraud,  waste  and 
abuse.  This  inspection  is part  of ORT. 
METHODOLOGY 
We  sent  a mail  survey to 300 randomly-selected  home  health  agencies  throughout  the 
nation  to obtain  data  on their  operating  practices  and  philosophies.  About  65 percent 
(194)  of the  300 agencies  we surveyed  completed  and  returned  the  questionnaire. 
Eighty  of the  respondents  were  high-cost  agencies,  and  the  remaining  114 were  low-
cost.  High-cost  were  those  agencies  whose  average  number  of visits per  beneficiary 
was above  the  national  average  and  low-cost  agencies  were  those  whose  average  fell 
below  the  national  average.  We  also  performed  an analysis  of HCFA  data  to 
determine  changes  in the  average  number  of visits between  1993 and  1994. 
FINDINGS 
Differences  In The  Average  Number  Of Visits Provided  By High  And  LuwCost 
Home  Health  Agencies  Widened  Considerably  Between  1993 And  1994 
In  1993, the  high-cost  home  health  agencies  made  55 more  visits (85 visits)  per 
beneficiary,  on average,  than  did low-cost  agencies,  which  averaged  30 visits.  In  1994, 
this difference  had  widened  to 69 visits per  beneficia~,  which  is the  difference 
between  102 visits by high-cost  agencies  and  33 visits by low-cost  agencies. 
i  Operating  Practices  Do  Not  Explain  Widening  Variation  In Number  Of Visits 
Both  high  and  low-cost  agencies  had written  policies  and  procedures. 
b 
High  and  low-cost  agencies  mission  or philosophy  statements  tended  to be 
b	
similar  in content. 
w	 High  and  low-cost  agencies  relied  heavily  on their  own staff to make  the  initial 
determination  that  a person  meets  eligibility  criteria  for Medicare  home  health, 
rather  than  on physicians. 
(cid:228)(cid:128) High  and  low-cost  agencies  reported  serving  patients  whose  conditions  were 
acute,  chronic,  and  high-tech,  in approximately  the  same  proportion. 
Nearly  all high and  low-cost  agencies  had  a formal  quality  assurance  program. 
b 
High  and  low-cost  agencies  provided  a similar  mix of services,  e.g., skilled 
b	
nursing,  physical  therapy,  occupational  therapy,  speech  pathology  therapy, 
medical  social  services,  and  aide  services. 
The  major  source  of payment  for high and  low-cost  home  health  agencies  was 
b	
Medicare  fee-for-service. 
High-Cost  Home  Health  Agencies  Tended  To  Be For-Profit  And  Freestanding 
Entities 
Home  health  agencies  at the  higher  end  of the  cost range  tended  to be  for-profit  and 
freestanding  organizations.  The  percentage  of high-cost  agencies  that  were  for-profit 
entities  was almost  five times  that  of low-cost  agencies.  The  percentage  of high-cost 
home  health  agencies  that  were  freestanding  was four  times  that  for low-cost  agencies. 
CONCLUSION 
The  gap  between  high  and  low-cost  home  health  agencies  in average  number  of visits 
per  Medicare  beneficiary  continues  to widen.  Generally,  program  operations  are 
similar  in both  high and  low-cost  agencies  and  do not  explain  the  variation. 
Determining  when  it is appropriate  and  medically  necessary  to provide  Medicare 
home  health  services  is often  ambiguous  and  largely  discretionary.  This  inspection  and 
other  audits  and  inspections  on home  health  continue  to suggest  a need  for greater 
control  over  the  provision  of Medicare  home  health  services.  If control  cannot  be 
achieved  through  more  effective  management  oversight,  then  statutory  or regulatory 
changes  may be  needed  to protect  the  Medicare  program  from  excessive  or 
inappropriate  payments  in this area. 
ii  TABLE  OF  CONTENTS

PAGE

EXECUTIVE  suMMARY

INTRODUCTION  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  1

FINDINGS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...5

l(cid:31)
Differences  In Average  Visits Widened  Considerably  In One  Year  . . . . . . . . . . . 5 
l(cid:31)
operating  Practices  Do  Not  Explain  Widening  Variation  . . . . . . . . . . . . . . . . . .  6 
High-Cost  HHAs  Tend  To  Be For-Profit  And  Freestanding  . . . . . . . . . . . . . ...9

l 
CONCLUSION  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...12

APPENDICES

Methodology  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..A-l

Analysis  Of Respondents  Vs. Non-Respondents  . . . . . . . . . . . . . . . . . . . . . . . . .  B-1
 INTRODUCTION

PURPOSE 
To  determine  how operating  practices  of home  health  agencies  may influence  the 
average  number  of visits per  beneficiary. 
BACKGROUND 
Home  health  care  is nursing,  therapeutic,  medical  social,  and  aide  services  provided  in 
a persons  home.  Home  health  care  allows people  with  limited  mobility  to live 
independently  while  still receiving  professional  health  care  sewices.  All home  health 
services  must  be  specified  in a plan  of care  certified  by a physician. 
Title  XVIII,  Section  1861, of the  Social  Security  Act  authorized  Medicare  Part  A 
payments  for  home  health  care.  For  beneficiaries  who do not  have  Part  A 
entitlement,  home  health  services  may be  covered  by Medicare  Part  B.  To  receive 
Medicare  reimbursement,  home  health  agencies  (HHAs)  must  provide  a skilled  care 
semice  to a homebound  beneficiary  on a part-time  or intermittent  basis. 
Growth  of Home  Health  Care 
Medicare  expenditures  for home  health  care  increased  dramatically  in recent  years. 
To  illustrate,  between  1990 and  1995 Medicare  expenditures  for home  health  care 
grew from  $3.3 billion  to $15.1 billion  -- a nearly  5 fold increase  in just  5 years. 
Between  1992 and  1993, Medicare  expenditures  for home  health  care  increased  by 78 
percent.  During  this period,  expenditures  for home  health  care  by all insurance 
sources  in the  United  States  increased  by 23.8 percent.  In contrast,  HCFAS Office  of 
the  Actuary  estimated  that  the  cost of hospital  care  increased  by 6.7 percent  between 
1992 and  1993.  Likewise,  expenditures  for physician  care  increased  by 5.8 percent 
between  1992 and  1993. 
Variation  in Cost  of Care  Among  Home  Health  Agencies 
Medicare  expenditures  for home  health  care  per  beneficiaries  varied  significantly 
among  home  health  agenciesl  in recent  years.  Importantly,  the  variation  in 
reimbursement  was not  explained  by differences  in diagnosis,  cost per  visit, quality  of 
care,  or beneficiary  characteristics  such as age,  gender,  and  race.  Home  health 
agencies  at both  extremes  of the  spectrum  of average  reimbursement  met  Conditions 
Variation  Among  Home  Health  Agencies  In Medicare  Payments  For Home  Health  Services  0EI-04-93-
1
 of Participation,  which  suggests  they  are  doing  an adequate  job  of meeting 
beneficiaries  needs. 
Most  of the  variation  in reimbursement  was explained  by variations  in the  number  of 
home  health  visits per  beneficiary  among  home  health  agencies.  Medicare  regulations 
allow beneficiaries  to receive  an unlimited  number  of home  health  visits, and  some 
home  health  agencies  provided  five times  more  visits per  beneficiary  on average  than 
other  home  health  agencies. 
On  average,  about  two thirds  of 6803 home  health  agencies  provided  home  health 
care  with  33 visits per  beneficiary  in 1993.  The  remaining  one  third  of the  agencies 
averaged  81 visits per  beneficiary.  The  high-visit  home  health  agencies  were  more 
likely to be  proprietary,  for-profit  and  unaffiliated. 
Concern  About  High-Cost  Home  Health  Agencies 
The  wide variation  among  home  health  agencies  in number  of visits per  beneficiary 
raised  serious  questions  about  possible  differences  in operating  policies  and  practices 
of high  and  low-cost  agencies.  During  a prior  inspection,  we looked  at quality  of care, 
among  other  things,  of low-cost  and  high-cost  home  health  agencies.  We  used  the 
only available  proxies  for  quality  which were  and  are  available  from  HCFA  and  other 
reliable  sources  -- complaints  against  an agency,  survey  deficiencies,  and  accreditation 
status.  With  respect  to these  measures,  we found  that  low-cost  home  health  agencies 
provided  care  that  was comparable  in quality  to that  provided  by high-cost  home 
health  agencies,  but  they  did so with fewer  visits per  beneficiary.  If the  high-cost 
agencies  lowered  the  average  number  of visits per  beneficiary  to  33, we estimated  that 
Medicare  savings would  have  been  approximately  $5 billion  in 1995. 
This  report  describes  the  differences  and  similarities  in operating  practices  of high and 
low-cost  home  health  agencies.  The  operating  practices  used  by low-cost  agencies 
might  provide  examples  that  high-cost  agencies  could  use to keep  cost  down without 
adversely  affecting  quality  of care. 
METHODOLOGY

Sample  Selection 
We  randomly  selected  300 Medicare  certified  home  health  agencies  in the  United 
States  from  HCFAS National  Claims  History  Repository.  Before  sampling,  we 
stratified  the  1993 universe  of 6803 home  health  agencies  into  two categories  -- low-
cost  and  high-cost  agencies.  We based  the  two categories  on average  number  of visits 
made  to beneficiaries.  We  considered  home  health  agencies  that  made  fewer  than  the 
national  average  of 50 visits per  beneficiary  in 1993 to be  low-cost.  We  considered 
those  that  made  more  visits than  the  national  average  to be  high-cost.  We  sampled 
150 home  health  agencies  from  both  the  high and  low groups. 
2
 A detailed  description  of our  sampling  method  is contained  in Appendix  A. 
In addition  to the  survey  of home  health  agencies,  we performed  an analysis  of data 
from  the  common  working  file maintained  by HCFA  to determine  changes  in the 
average  number  of visits from  1993 to  1994. 
Data  Ccdlection  And  Analysis 
We  used  a standardized  questionnaire  to collect  data  on operating  practices  of 
sampled  high and  low-cost  home  health  agencies.  We mailed  our  survey  instrument  to 
each  of the-300  sampled  agencies.  About65  percent  (194)  of the  300 home  health 
agencies  completed  and  returned  our  questionnaire.  To  assure  that  our  analysis  was 
based  on the  most  current  data,  we used  1994 utilization  data  for all home  health 
agencies  appearing  in our  sample.  Of the  194 agencies  that  responded,  114 (59 
percent)  were  low-cost  home  health  agencies.  The  remaining  80 respondents,  (41 
percent)  were  high-cost  agencies. 
In terms  of average  number  of visits per  beneficiary,  the  home  health  agencies  that 
responded  to our  survey were  representative  of the  home  health  agency  universe  in 
the  United  States.  (See  Table  1.) 
II 
TABLE  1 
Comparison  Of Sample  HHAs  To  HHAs  Nationally 
Average  Number  Of Vits  Per Bae6c&y 
1994 Data 
Universe  Sample 
Number  %  Number  % 
HHAs  Below  The  National  4,720  59  114  59 
Average 
HHAs  Above  The  National  3,246  41  80  41 
Average 
TOTAL  HHAs  7,966  100  194  100 
About  35 percent  (106)  of the  300 sampled  home  health  agencies  did not  respond  to 
our  sumey.  An  analysis  of respondents  and  non-respondents  showed  that  the 
possibility  of bias  due  to non-response  is limited,  based  on our  sampling  criteria.  Our 
non-response  analysis  is in Appendix  B. 
We  used  a dBase  file to organize  and  analyze  numerical  data  obtained  from  the  194 
home  health  agencies.  We  aggregated  the  data  to obtain  comparisons  of operating 
practices  of low-cost  agencies  as a group  to those  of high-cost  agencies  as a group. 
3
 To  compare  the  philosophy  or mission  statements  of the  home  health  agencies,  we 
performed  a content  analysis  of those  statements.  To  perform  the  content  analysis we 
first examined  all of the  statements  and  compiled  a list of all major  terms,  phrases  and 
concepts.  We  then  grouped  the  terms,  phrases,  and  concepts  into  four  major 
categories.  We  then  aggregated  the  number  of terms,  phrases,  and  concepts  in each 
of the  four  major  categories  for both  the  high and  low-cost  groups.  We  then 
performed  a statistical  significance  test  on the  total  scores for both  groups. 
We  conducted  t-tests  on all findings  in the  report. 
To  provide  a greater  sense  of what  low-cost  home  health  agencies  are  doing  with 
regard  to operating  practices,  we performed  a case  study of seven  low-cost  home 
health  agencies.  Our  findings  are  shown  in a supplemental  report,  Operating 
Practices  Of Low-Cost  Home  Health  Agencies:  Seven  Case  Studies,  0EI-04-93-
00263. 
OPERATION  RESTORE  TRUST 
This  inspection  was part  of the  Presidents  Operation  Restore  Trust  initiative.  The 
purpose  of Operation  Restore  Trust  (ORT)  is to identify  and  prevent  fraud,  waste  and 
abuse  in the  Medicare  and  Medicaid  programs.  ORT  is a joint  initiative  involving  the 
Health  Care  Financing  Administration,  Administration  on Aging,  Office  of Inspector 
General,  and  various  State  agencies.  In  1995, ORT  began  targeting  home  health 
agencies,  nursing  homes,  hospices,  and  durable  medical  equipment  suppliers  in five 
States  for  evaluations,  audits,  and  investigations.  The  five States  are  Florida,  New 
York,  Texas,  Illinois,  and  California.  These  States  account  for about  40 percent  of the 
nations  Medicare  and  Medicaid  beneficiaries  and  program  expenditures. 
We  conducted  this inspection  in accordance  with the  Quality Standards for Inspections 
issued  by the  Presidents  Council  on Integrity  and  Efficiency. 
4
 FINDINGS

DIFFERENCES  IN THE  AVERAGE  NUMBER  OF  VISllll  PROVIDED  BY 
HIGH  AND  LOW-COST  HOME  HEALTH  AGENCIES  WIDENED 
CONSIDERABLY  BETWEEN  1993 AND  1994 
As reported  in our  prior  report  on variation  in home  health  cost  among  home  health 
agencies  (OEI-04-93-00260),2  the  difference  in cost per  beneficiary  is largely  explained 
by the  number  of visits an agency  makes  to a beneficiary. 
Figure  1 below  shows that  the  difference  in average  visits made  by high-cost  and  low-
cost agencies  has widened  considerably  between  1993 and  1994.  To  illustrate,  in  1993 
the  high-cost  agencies  made  55 more  visits per  beneficiary,  on average,  than  did low-
cost  agencies.  In  1994, this difference  had  widened  to 69 visits per  beneficiary. 
FIGURE  1 
AVERAGE  NUMBER  OF  VISITS 
BY  HIGH  AND  LOW-COST  HHAs 
#  of  Vidt=  P-r  Beneflolary 
120-
1oo-
as 
60-
60-
40-
20-
0-
1993  1994 
=  LOW-COST  HHA8  =  HIGH-COST  HHA8 
Ibid.,  Page  16 
5
 Nationally,  the  average  cost per  beneficiary  for home  health  service  was $3,495 in 
1994.  ~e80high-cost  home  health  agencies  semed72,351  Medicare  beneficiafiesat 
an  average  cost  of $5,407 in 1994.  Conversely,  the  114 low-cost  agencies  sexved 
112,996 Medicare  beneficiaries  at an average  cost of $2,270. 
OPERATING  PRACTICES  DO  NOT  EXPLAIN  WIDENING  VARIATION  IN 
NUMBER  OF  VISITS 
High  And  ImwCost  Home  Health  Agencies  Had  Written  Policies  And  Procedures 
All of the  home  health  agencies  in both  the  high and  low-cost  groups  had  written 
policies  and  procedures.  The  policies  and  procedures,  which were  generally  similar  in 
content  and  scope,  provided  guidance  on important  operating  practices  such as 
determining  eligibility  for Medicare  home  health  services  and  other  important  aspects 
of program  operations.  We  observed  that  the  written  guidance  included  criteria  for 
determining  the  homebound  status  of a beneficiary.  Further,  the  eligibility  criteria  of 
the  agencies  generally  mirrored  the  criteria  contained  in the  Health  Care  Financing 
Administrations  manual  for Medicare  home  health  services,  the  HIM-11  (Health 
Insurance  Manual),  now called  the  HCFA  PUB.  11. 
Likewise,  77 of 80 home  health  agencies  in the  high-cost  group,  and  all  114 agencies  in 
the  low-cost  group  had  written  policies  and  procedures  on monitoring  patient  services 
and  progress,  and  on discharging  beneficiaries. 
High  And  Low-Cost  Home  Health  Agencies  Mission  Or  Philosophy  Statements 
Tended  To  Be Similar  In Content 
All home  health  agencies  responding  to our  survey had  written  statements  on their 
mission  or philosophy  for providing  home  health  care.  The  statements  of both  high 
and  low-cost  groups  of agencies  were  essentially  the  same.  To  illustrate,  both  groups 
emphasized  such  things  as the  importance  of providing  quality  care,  preventing  or 
shortening  institutionalization,  providing  a continuum  of care  after  a hospital  stay, and 
collaborating  with  other  health  care  providers  in the  service  area  or community. 
High  And  Low-Cost  Home  Health  Agencies  Relied  Heavily  On Their  Own Staff To 
Make  The  Initial  Determination  That  A Person  Meets  Eligibility  Criteria  For 
Medicare  Home  Health  SeMces 
In making  the  initial  determination  that  a beneficiary  is eligible  to receive  Medicare 
home  health  services,  both  high and  low-cost  agencies  used  essentially  the  same 
approach.  Table  2 shows that  both  groups  of agencies  relied  most  heavily  on their 
own personnel  to make  the  initial  determination  that  a beneficiary  was eligible,  rather 
than  on physicians  or others.  However,  Medicare  regulations  require  that  a physician 
certify  that  home  health  services  are  appropriate  and  necessary  by signing a Plan  of 
Care  for a beneficiary.  A home  health  agency  cannot  provide  home  health  services 
without  a signed  Plan  of Care. 
6  TABLE  2

Initial  Determination  of Patient  Eligibility 
~&@i&illy  Determines  Eligibility  Low-Cost  HHAs  High-Cost  HHAs 
,~~r ,~bme  Health  Services 
Number  %  Number  % 
I  I  I  I 
Physicians  1  1  3  4 
I  I  66 I 
HHA  Personnel  I  96  84  83 
Both  Physicians  & HHA  Personnel  I  14  I12I1OI13 
Other  (e.g., hospital  staff)  3  3  0  0 
TOTAL  114  100  79  100 
No  Response  To  Question  o  1 
High  And  Low-Cost  Home  Health  Agencies  Reported  Senring  Patients  With  Similar 
Conditions 
Both  high  and  low-cost  home  health  agencies  reported  that  they  served  patients  who 
needed  acute,  chronic,  and  high-tech  home  health  service.  The  agencies  which 
responded  to our  survey  defined  acute,  chronic  and  high-tech  care  as follows.  The 
definitions  of these  three  categories  incorporated  length  of time  a beneficiary  is to be 
served,  stability  of a beneficiarys  condition,  level of services  a beneficiary  needs,  or a 
combination  of those  factors. 
Acute  care:  In general,  the  agencies  defined  acute  care  patients  as those 
needing  short-term,  yet  intensive  services.  Such  care  could  be both  skilled  and 
non-skilled  to obtain  a stable  condition  for a patient.  Such  care  typically 
follows a hospital  stay or exacerbation  of a condition. 
Chronic  care:  Generally,  the  agencies  defined  chronic  care  patients  as those 
needing  long-term,  less frequent  services  than  acute  care  to prevent 
exacerbation  for a patient  whose  condition  is generally  stable. 
High-tech  care:  The  agencies  defined  high-tech  care  patients  as those  needing 
specialized  treatments  and  services.  Such care  includes  intravenous  therapy, 
complex  wound  care,  chemotherapy,  ventilators,  and  procedures  and  services 
carrying  a higher  risk and  requiring  sophisticated  skills and  training. 
The  mix of such patients  served  by the  high and  low-cost  groups  of home  health 
agencies  we surveyed  was about  the  same  (see  Table  3).  We  did not  determine 
whether  or not  the  patient  mix differences  between  high and  low-cost  home  health 
agencies  were  statistically  significant. 
7
 II  TABLE  3 
1 
Patient  Condition
 Mix Served  By High  And  Low-cost  HHAs 
I
 I 
Condition  Category  I
 Low-Cost  HHAs  High-Cost  HHAs 
I 
(Avg. % of Patients)  (Avg. % of Patients) 
Acute  62  59 
Chronic  33  33 
I  1 
High-Tech  5  8 
, 
TOTAL  100  100 
Nearly  All High  And Low-Cost Home  Health  Agencies  Had  A Formal  Quality 
Assurance  Program 
About  98 percent  of the  80 high-cost  agencies,  and  99 percent  of the  114 low-cost 
agencies  that  responded  to our  survey told  us they  have  a quality  assurance  program. 
High  And Low-Cost Home  Health  Agencies Provided A Similar Mix Of SeMces 
The  percentage  of high and  low-cost  home  health  agencies  providing  different  types  of 
home  health  service  was about  the  same  (see  Table  4), except  for hospice  care  and  a 
catch-all  category  called  other.  A smaller  percentage  of agencies  in the  high-cost 
group  provided  hospice  care  and  other  services  than  did low-cost  agencies. 
TABLE  4 
Percentage Of EEL%  ProvidingEach Type Of Semite 
Low-cost  High-Cost 
HHAs  HHAs 
Nursing
 100  100 
Physical  Therapy
 96  96 
Occupational  Therapy
 82  80 
Speech  Pathology  Therapy
 86  89 
Medical  Social  Services
 87  90 
Aide  Services
 100  100 
Hospice
 29  8 
Other  (e.g.,  DME,  nutrition  counseling)  35  10 
8  The Major Source Of Payment For Patients Served By Both High And Low-Cost 
Home Health Agencies Was Medicare Fee-For-Semite. 
Table  5 summarizes  the  source  of payment  for patients  served  by high and  low-cost 
home  health  agencies.  Essentially,  all operated  under  a fee-for-service  system. 
Notably,  none  of the  80 high-cost  agencies  said they  served  Medicare  managed  care 
patients,  as compared  to  15 percent  of the  low-cost  agencies  that  do service  such 
patients. 
TABLE  5 
Percentage Of HHAs That Reported Patient Populations XnEach Common 
Payment Category 
I  I 
IISOURCE  OF  PAYMENT  114 Low-Cost  HHAs  80 High-Cost HHAs 
I  I  II 
Medicare  Fee-For-Service  100  100 
Medicaid  89  83 
IIMedicare  Managed  Care  I  15  I  o 
[ Other  (e.g., private  insurance)  91  89 
A HIGHER  PERCENTAGE  OF HIGH-COST HOME HEALTH  AGENCIES 
THAN LOW-COST HOME HEALTH  AGENCIES  OPEIUTED  AS FOR-PROFIT 
AND FREESTANDING  ENTITIES 
We  previously  reported  that  home  health  agencies  at the  higher  levels  of the  range  of

average  reimbursement  per  beneficiary  tended  to be  for-profit,  freestanding

organizations  .3  The  194 home  health  agencies  that  responded  to our  sumey

confirmed  that  finding.

The  percentage  of high-cost  home  health  agencies  that  were  for-profit  entities  was

almost  five times  that  of low-cost  home  health  agencies  (58 percent  as compared  to  12

percent).  This  is illustrated  in Figure  2.

3
Ibid., Page  11 
9  FIGURE  2

TYPE  OF  OWNERSHIP 
High-Cost  vs.  Low-Cost  HHAs 
80% 
e8.4% 
eos  67.6% 
40% 
20% 
o% 
HIGH-COST  HHAs  LOW-COST  HHA8 
_  For-Profit  =  Non-Profit  EEEl  Publio 
Figure  3 shows that  the  percentage  of high-cost  home  health  agencies  that  were

freestanding  was four  times  that  for low-cost  home  health  agencies  (56 percent  as

compared  to  13 percent).  Freestanding  agencies  are  those  that  are  not  at%liated  with

or part  of another  health-care  entity,  such as a visiting nurses  association,  a

government  or voluntary  agency,  a rehabilitation  facility,  a hospital,  or a skilled  nursing

facility.

10
 FIGURE  3

HHA  FACILITY  TYPES 
Affiliated  vs.  Freestanding 
%
of  HHA8 
1 00% 
a7% 
80% 
60%  66% 
40% 
20% 
o% 
HIGH-COST  HHA8  LOW-COST  HHA8 
_  Affiliated  =  Freestanding 
For-profit  and  freestanding  home  health  agencies  accounted  for much  of the 
increasing  gap  in average  visits per  Medicare  beneficiary  between  high and  low-cost 
agencies. 
Our  sample  of 194 home  health  agencies  included  60 that  operated  on a for-profit 
basis.  In  1994, the  60 for-profit  home  health  agencies  averaged  94 visits per 
beneficiary  while  the  134 non-profit  and  public  home  health  agencies  averaged  47. 
Likewise,  our  sample  included  60 home  health  agencies  that  operated  as a 
freestanding  entity.  These  agencies  averaged  93 visits per  beneficiary  as compared  to 
an  average  of 47 visits per  beneficiary  for affiliated  home  health  agencies. 
11
 CONCLUSION 
The  gap  betsveen  high-cost  and  low-cost  home  health  agencies  in average  number  of

visits per  Medicare  beneficiary  continues  to widen.  In our  previous  inspections,  we

found  that  factors  such  as beneficiary  characteristics,  agency  characteristics,  primary

diagnoses,  and  proxies  for quality  did not  explain  the  wide variation  in average  number

of visits per  beneficiary  made  by home  health  agencies.  We have  continued  to look

for other  explanations.

In this inspection,  we examined  operating  policies,  procedures,  and  practices  as a

possible  explanation  for the  difference.  We  found,  however,  that  generally  program

operations  are  similar  in high-cost  and  low-cost  agencies.  Where  we observed  minor

differences  in operations,  they  did not  explain  the  differences  in average  number  of

visits per  Medicare  beneficiary  among  home  health  agencies.  We  have  not  found  an

explanation  for the  variation  in average  number  of visits.  Despite  this, we will

continue  to analyze  this variation  in other  inspections  and  to look  for explanations.

Determining  when  it is appropriate  and  medically  necessary  to provide  Medicare

home  health  services  is often  ambiguous  and  largely  discretionary.  This  inspection  and

other  audits  and  inspections  on home  health  services  continue  to suggest  a need  for

greater  control  over  the  provision  of Medicare  home  health  services.  If control  cannot

be  achieved  through  more  effective  management  oversight,  then  statutory  or

regulatory  changes  may be  needed  to protect  the  Medicare  program  from  excessive  or

inappropriate  payments  in this area.

12
 APPENDIX  A

METHODOLOGY 
Sample Selection 
We randomly  selected  300 Medicare  certified  home  health  agencies  in the  United 
States  from  HCFAS National  Claims  History  Repository.  Before  sampling,  we 
stratified  the  1993 universe  of 6803 HHAs  into  two categories  -- low-cost  and  high-cost 
HHAs.  We  based  the  two categories  on average  number  of visits made  to 
beneficiaries.  We  considered  HHAs  that  made  fewer  than  the  national  average  of 50 
visits per  beneficiary  in 1993 to be  low-cost.  We  considered  those  that  made  more 
visits than  the  national  average  to be  high-cost.  We  randomly  sampled  150 HHAs 
from  both  the  high  and  low strata. 
Data Collection And Analysis 
We used  a standardized  questionnaire  to collect  data  on operating  practices  of

sampled  high  and  low-cost  HHAs.  We  mailed  our  survey instrument  to each  of the

300 sampled  HHAs.  About  65 percent  (194)  of the  300 HHAs  completed  and

returned  our  questionnaire.  To  assure  that  our  analysis  was based  on the  most  current

data,  we used  1994 utilization  data  for all HHAs  appearing  in our  sample.  Of the  194

HHAs  that  responded,  114 (59 percent)  were  low-cost  HHAs.  The  remaining  80

respondents,  (41 percent)  were  high-cost  agencies.  In terms  of average  number  of

visits per  beneficiary,  the  HHAs  that  responded  to our  sumey  were  representative  of

the  HHA  universe  in the  United  States.  We  did not  independently  verify the  data

reported  by the  respondents.

We used  a dBase  file to organize  and  analyze  numerical  data  obtained  from  the  194

HHAs.  We  aggregated  the  data  to obtain  comparisons  of operating  practices  of low-

cost HHAs  as a group  to those  of high-cost  HHAs  as a group.

To  compare  the  philosophy  or mission  statements  of the  HHAs,  we performed  a

content  analysis  of those  statements.  To  perform  the  content  analysis  we first

examined  all of the  statements  and  compiled  a list of all major  terms,  phrases  and

concepts.  We  then  grouped  these  terms,  phrases,  and  concepts  into  four  major

categories.  We  then  aggregated  the  number  of terms,  phrases,  and  concepts  in each

of the  four  major  categories  for both  the  groups,  and  performed  a statistical

significance  test  on the  total  scores for both  the  high and  low-cost  groups.

We conducted  t-tests  on all findings  in the  report.

A-1
 APPENDIX  B

AN ANALYSIS  OF RESPONDENTS  VS. NON-RESPONDENTS 
A consideration  in surveys  of this type  is whether  the  results  may be  biased  by significant 
differences  between  non-respondents  and  respondents.  To  determine  whether  significant 
differences  exist in this survey, we compared  average  number  of visits per  beneficiary  by 
HHA  and  size of HHAs.  Our  analysis  revealed  no significant  difference.  Therefore,  the 
possibility  of bias  due  to non-response  is limited. 
To  test  for bias  in respondents  versus  non-respondents,  we used  a Two-way  Contingency 
Table  Analysis  with  the  Chi-Square  Test.  We  calculated  the  expected  values  for 
respondent  HHAs  and  non-respondent  HHAs  assuming  that  respondent  HHAs  and  non-
respondent  HHAs  are  independent. 
For  our  test  of bias  by average  number  of visits per  beneficia~  and  size of HHAs,  we 
chose  an  alpha  value  of .05 with  1 degree  of freedom.  That  produced  a Chi-Square 
value  of 3.84146. 
Our  test  statistic  was  .049 for our  analysis by average  number  of visits per  beneficiary  by 
HHA.  This  leads  us to a conclusion  that  classification  of respondent  and  non-respondent 
HHAs  are  independent  by average  number  of visits per  beneficiary. 
NON-RESPONDEITI  ANALYSIS 
BY AVERAGE  NUMBER  OF  VISITS  PER  BENEFICIARY 
BY HOME  HEALTH  AGENCY 
I Sample  II#of  \#of  Non-
Respondents  Respondents 
I II  I 
HHAs  Above  the  National  Mean  of  125 (41.7%) 
58 Visits per  Beneficiary 
~ 
HHAs  Below  the  National  Mean  of  175 (58.3%) 
58 Visits per  Beneficiary 
~ 
TOTALS  300 (loo%)  194 (loo%)  106 (loo%) 
B-1
 Our  test  statistic  for  our  analysis by size of HHA  was 0.642.  This  also leads  us to a 
conclusion  that  classification  of respondents  and  non-respondents  are  independent. 
NON-RESPONDENT  ANALYSIS 
BY  SIZE OF HOME HEALXH  AGENCY 
Sample	 #  of  #  of Non-
Respondents  Respondents 
HHAs That Served 500 or Less  102 (34.0%)  64 (33%)  38 (35.8%) 
Medicare Beneficiaries in 1994 
HHAs That Sewed 501 to 999  98 (32.6%)  66 (34%)  32 (30.2%) 
Medicare Beneficiaries in 1994 
HHAs  That  Served  1000 or More  100 (33.3%)  64 (33%)  36 (34.0%) 
Medicare  Beneficiaries  in 1994 
TOTALS  300 (loo%)  194 (loo%)  106 (loo%) 
Our  non-response  analysis  showed,  however,  that  our  survey results  contained  no 
significant  bias  in terms  of average  number  of visits per  beneficiary,  and  size of HHA. 
B-2