.. 
Departmentof Health  and Human  Services 
OFFICE  OF 
INSPECTOR  GENERAL 
HOME  HEALTH  AGENCIES: 
ALTERNATIVE  COVERAGE  AND 
PAYMENT  POLICIES 
smwlcfi 
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% 
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i?  JUNE  GIBBS  BROWN 
3 Inspector  General 
* 
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MAY  1995 
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OEI-12-94-00180  . 
EXECUTIVE  SUMMARY 
PURPOSE 
The purpose  of this inspection  is to provide  information  to Health  Care Financing 
Administration  (HCFA) on how selected other payers  structure  and manage their home health 
benefit. 
BACKGROUND 
. .  .. 
Title XVIII of the Social Security Act, Section  1861, authorizes  Medicare payments  for home

health  services under  certain  conditions.  The care must be provided  by certified  home health

agencies  (HHAs),  which may be either freestanding  or facility-based.  The Medicare  home

health benefit coverage  includes  the following  items and services:  1) part-time  or

intermittent  nursing  carq  2) physical,  occupational,  or speech thempy;  3) medical  social

services;  4) part-time  or intermittent  services of a home health aide;  and 5) medical  supplies

other than drugs and biological.

The HCFA  has convened  a task force to examine its home health benefit.  One of the

reasons  for this examina tion is the significant  increase  in expenditures  in this category  of

service.  Between  1988 and  1992, they rose from $2.3 billion to $7.1 billion.  During  this

time,  the number  of Medicare beneficiaries  who used these services increased  ahnost  65

percent.  The number  of services per beneficiary  also increased  by the same  amount.

We selected twenty thee  payers  of home health  services.  Our fd  list include fifteen

nxpondents;  three Medicaid  agencies;  five private  insurance  companies;  five Health

Maintenance  Organizations;  the Department  of Veterans  Affairs  (DVA); and the Civilian

Health  and Medical  program  of the Uniformed  Services  (CHAMPUS).  We conducted

telephone  interviews  with each of the ftieen  respondents  using a focused discussion  guide.

We asked each private  payer  to describe  their policies  as a general  matter and to reflect  in

their responses  what constituted  the  rule,  rather  than the  exception.  Each offers many

different products,  and their policies  can and do differ among their insured population.

FINDINGS 
Home Health  Benefits  in Other Health  Plans are Generally  Structured  Similar to 
Medicares 
Other payers  are similar to Medicate  in their criteria  for eligibility;  requirements  placed  on 
home health agencies;  services  covered  under their basic home health benefi~  quality 
monitoring  processes  and how they pay providers.  Other  Plans Approaches  to Controlling Home H@th  Expenditures  are Different  from 
Medicares 
Other payers  differ  from Medicare  in setting limits on home health benefits  or moving mom 
intensive  and special needs patients  to targeted programs;  and in their utilization  control 
mechanisms. 
POINTS  OF FURTHER  ANALYSIS 
The practices  of other payers  could provide  potential  ideas for reforming  or managing 
Medicares  home health benefit.  We believe  that HCFA  might study the merits  of some of 
..  ...  .*  .- these approaches .as.it-dekxmines  .hmwbestxo  cmxm&-utilizatiQQand expenditwes-avhik- -:-.  ---------
assuring  the appropriate  delivery  of high quality care to Medicare  beneficiaries.  Among 
those approaches  which might hold promise  for Medicare  anx 
	 Targeting Needs.  Rather than a one size fits all home health benefit,  Me&are 
might wish to channel different patients  into different  home health  progmrns  where 
the benefit  could better  conform  to different patient  needs and progmm  management. 
In addition,  controls  could be designed more effectively. 
E	 Case Management.  Case managers  might be particularly  appropriate  for certain 
classes  of beneficiaries  who are expected to require  services  over a specified period  of 
time  (e.g.  patients  with chronic care needs). 
	 Beneficiary  Participation.  The use of Explanation  of Benefits  @OBs) (perhaps on a 
monthly basis to avoid unnecessary  administrative  burden) and imposition  of 
qxyrmt.s,  previously  proposed  in various  legislative  initiatives  are avenues to 
increase  the beneficiarys  stake in their  own health care and identify potential 
overutilization,  abuse or quality problems. 
F	 Limitations  on Coverage.  Caps on number  of visits allowed each year,  or some 
other kinds of limitations,  would not only be consistent  with the policies  of some 
other payers  but also with Medicares  own policies  with regard  to skilled nursing 
care,  hospital benefits,  and other categories  of service. 
As HCFA  considers  these ideas,  it must struggle with a number  of questions,  including the 
impact  of such changes  on beneficiaries.  To assist HCFA  in answering  some of these 
important  questions,  the Offke  of Inspector  General  is currently  engaged  in a home health 
initiative  to examine payments  made to home health agencies on behalf  on Medicare 
beneficiaries.  This initiative  involves the OIGS investigations,  audit,  and evaluation  staffs. 
Among the upcoming  products  emanating  from this initiative  are reports  on provider  audits 
and validation  of claims;  the physicians  role in home health  services;  and an overall 
assessment  of payment  made to HHAs and the relationship  of those payments  to HHA 
characteristics,  beneficiary  characteristics,  and other potentially  relevant  factors. 
ii  COMMENTS  ON THE DRAFT REPORT  AND OIG RESPONSE 
The HCFA  indicated  that the report  would be usefid in assessing possible  changes to the 
home health  benefit.  However,  HCFA  stated that our report  appears to assume that other 
agencies  are mom effective  than Medicare  in controlling  costs.  Further,  HCFA pointed  out 
that there  are no data in the report  comparing  the average  number  of visits or expenditures 
per  beneficiary.  The HCFA  speculated  that age,  health  status, and income  could explain 
differences  in utilization  if they exist,  as well as plan characteristics  and benefit  management. 
We appreciate  HCFAs comments.  We recognize thut there are no data in the report 
compating  the number of visits or expenditures per  benej?ciary; however,  this was beyond the 
.-.  -
WPe  of ourinqmv. Z%?purpose-of  W  repro?wvw10d~~c~~b~]~w .~~~e~~d-~~m- -.. ......  ----=..- .. 
structure and manage their home health hen@  as compared to Medicare.  Our anulysis 
indicated  that other payers  limt the benqjit and use a variety of techniques to control 
utilimon  more than Medicare.  TWether these techniqws  actually  result in luwer per  capita 
costs is subject to fimther anulysis.  It is clear,  however,  that other payers  have many more 
oppo~ties  to mu.nugemlization of the bengjit and control costs compared to Medicare 
coverage  and payment policies for  hone  agencies. 
%fill  text of HCFAs comments can be found in appendix A. 
... 
lu  TABLE  OF  CONTENTS 
PAGE 
EXECUTIVE  SUMMARY 
INTRODUCTION  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 
FINDINGS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...3 
POINTS  OF FUR- ANALYST::.  : . . . . . . . . . . ...  .. . . . . ..  . ...10 
APPENDIX  A  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..  A-l  INTRODUCTION 
PURPOSE 
The purpose  of this inspection  is to provide  information  to Health  Care Financing 
Administration  (HCFA) on how selected other payers  structure  and manage their home health 
benefit. 
BACKGROUND 
,.. .  M&i&m?  . . ..... ..  ..  ..  -..  --- -.  t  ...... . ._. .,- .....=..  *%  .,* 
Title XVIII of the Social Security  Act,  Section  1861, authorizes  Medicare  payments  for home 
health  services under certain  conditions.  The care must be provided  by certified  home health 
agencies  (HHAs) which may be either fnxxdanding or facility-based.  They can be voluntary 
not-for-profit,  proprietary  or governmental  in nature. 
Virtually  all Medicare  reimbursements  for home health care are made under  Part A,  (hospital 
insurance).  Beneficiaries  pay no coinsurance  or deductibles  for home health care covered 
under Part A or Part B, except for durable  medical equipment  (DME) fimished  by a home 
health agency,  nor do they receive  an Explanation  of Medicare  Benefits  (EOMBS).  Home 
health care may be covered  under  Part B (supplementary  medical  insurance)  if a beneficiary 
has only Part B coverage.  ClaimS are submitted  to one of nine fiscal intermediaries  known 
as Regional  Home Health Intermediaries. 
The Medicare  home health benefit coverage  includes the following  items and services: 
1) part-time  or intermittent  nursing  cae;  2) physical,  occupational  or speech therapy; 
3) medical  social services;  4) part-time  or intermittent  services of a home health aide;  and 
5) medical  supplies other than drugs and biological. 
TO qualify for home health benefits under  either Part A or Part B of Me&are,  a beneficiary 
must:  be considered  homebound,  except to receive  services that due to special equipment 
needs,  can not be provided  in the patients  home;  need care on an intermittent  basis;  and 
receive  services under  a plan of cam established  and periodically  reviewed  by a physician. 
Skilled care includes:  skilled nursing  services,  physical  therapy,  or speech therapy  services. 
In addition,  only after the patient  receive  one of these qualifying  services  may he or she then 
receive  the services  of an occupational  therapist,  a medical  social worker,  or a home health 
aide.  Home  health aides provide  hands-on personal  care of beneficiaries  which must be 
necessary  to the treatment  of the beneficiarys  iUness or injury.  Home health aide services 
include:  1) personal  care  services,  2) simple dressing  changes,  3) assistance  with some 
medications,  4) activities  to support  skilled therapy  services,  and 4) routine  care of prosthetic 
and orthotic  devices.  A beneficiary  whose sole need is for custodial  care does not qualify. 
Medicare  beneficiaries  who are eligible  for home health  services  may receive  care as long as 
it is reasonable  and necessary;  there  are no limits to the number  of visits or length of 
1  coverage.  Medicare  does not require  copayments  or deductibles  for home health care,  except 
for dumble  medical  equipment.  b  addition,  the COUrtShave limited Medicares  ability to 
deny home health coverage.  In the case,  Dwzan VS. su~van,  Medic-am Was hlStfUCtedthat 
suftlcient  evidence  in the medical  record  was necessary  to deny a claim.  This high standard 
has led to a decrease  in home health denials.  TO ensure that payments  for home health 
services  are appropriate,  Medkme  requires  intermediaries  to conduct post-payment  reviews 
of home health claims and monitor  those providers  that appear to have high utilization  rates 
that are unexplainable. 
Medicare  reimburses  home health agencies  on a reasonable  cost basis (subject to limits) for 
costs related  to visits for patient  care.  Visit costs include  all incurred  costs related  to 
,- mak!ng th? visits  such. as pmpaxatiawfor  the visits,  tekphone  calls,  CQnfbmrxwsabout the  , T~  s -~ 
patient  and maintaining  patient  records. 
The Medicare  program  addresses  the quality of home health  services through:  annual 
beneficiary  satisfaction  surveys,  certifkat.ion  requirements  for home health agencies,  and, 
agency  surveys conducted  at least once every  15 months. 
The HCFA  has convened  a task force to examine  its home health benefit.  One of the 
reasons for this examination  is the signifkxmt increase  in expenditures.  Between  1988 and 
1992, they rose from $2.3 billion to $7.1 billion.  During  this time,  the number  of Medicare 
beneficiaries  who used these services  increased  almost 65 percent.  The number  of services 
per beneficiary  also increased  by the same amount. 
METHODOLOGY 
We selected twenty-three  payers  of home health  services.  We made initial telephone  calls to 
verify  that those we planned  to interview  provided  such services.  Our final list includes 
ftieen  respondents;  three Medicaid  agencies;  five private  insurance  companies;  five Health 
Maintenance  Organizations;  the Department  of Veterans  AITairs (VA); and the Civilian 
Health  and Medical  Program  of the Uniformed  Services  (CHAMPUS).  We conducted 
telephone  interviews  with each of them using a focused discussion  guide and later followed 
up to collect  any missing  data. 
We asked each private  payer  to describe  their policies  as a geneml  matter  and to reflect in 
their responses  what constituted  the  rule,  rather  than the  exception.  Each offers many 
different products,  and their policies  can and do differ among their insured population. 
We also collected  information  from ofiicials  in Australia  and the province  of Ontario, 
Canada.  Because  of the basic dissimilarity  in health care  systems between  the United  States 
and these countries,  a strict comparison  is not useful.  Instead,  we are providing  a 
description  of our discussions  with those oftlcials  under  separate cover to HCFA. 
2
 FINDINGS 
HOME  HEALTH  BENEFITS  IN OTHER HEALTH  PLANS ARE GENERALLY 
STRUCTURED  SIMILAR  TO MEDICARES 
Other payers  are similar to Me&are  in their criteria  for eligibility;  the requirements  they 
place  on home health agencies,  the services covered  under their basic home health benefit, 
their quality monitoring  processes,  and how they pay providers. 
Other Payers Have Similar Eligibility  Requirements  to Medicare. 
,,  .  .. ...+-w------.  --w. ..  -.  - - -
Medicares  requirements  for eligibility  are similar to those used by the private  payers  we 
interviewed,  as demonstrated  below. 
CONDITIONS  OF COVERAGE  FOR HOME  HEALTH  BENEFIT 
Medicare  and Private  Payers 
MEDICARE	 PRIVATE  PAYERS 
(Total  =  10) 
I Homebound  1X1  6 
I Prior Hospitalization  I  I  1 
skilledcam  x 
Requk  9 
1  I 
Intermittent  Care  1X1  9 
Like Medicare,  six of the ten private  payers  have a homebound  requirement.  The four 
private  payers  who do have some requirement  that patients  be confiied  to the home,  also 
consider  different  patient  needs and circumstances  when malting coverage  decisions.  For 
example,  patients  with AIDS may be employed  full-time and still receive  home health care 
benefits. 
Similarly,  nine of the ten private  insurers  do not require  prior  hospitalization  in order  to 
receive  home health benefits.  These  same nine private payers  require  that  skilled care be 
needed as a precondition  for receiving  other home health  services. 
One plan mandates  that a completed  home health care plan be completed  within seven days 
following  the end of a hospital  confinement,  and that the care be for the same or related 
condition  which caused the hospitalization.  Rather  than having an explicit  skilled care 
requirement,  this plan requires  that the physician  certifj  that,  in the absence  of the home 
health care  services,  the proper  treatment  of the injury or iUness would require  continued 
hospitalization. 
3
 All but one of the private  payers  require  that care be provided  to patients  on an intermittent 
basis. 
The three Me&aid  programs  we interviewed  have slightly less restrictive  eligibility 
requirements.  Two of the the  do not require  that patients  need skilled care or rehabilitative 
therapy  in order to receive  the benefit,  nor do they have a strict homebound  requirement. 
The U.S.  Department  of Veterans  Affairs  (VA) and CHAMPUS  are also slightly less 
restrictive  than Medicare.  Unlike Medicare,  they do not require  that patients  be homebound 
in order  to be eligible  for home health  services.  The VA does not set an explicit 
intermittent  standard  for its beneficiaries;  care may be authorized  as long as it is necessary 
or appropriate  for effeetive  andeccmmnieal  treatment.  .-TIE5VLA allows care @be-provided  -- =------ -
on a daily basis as long as the total costs in one month do not exceed the costs that would 
have been incurred  in an institution.  The CHAMPUS  program  does require  the care be 
intermittent  to qualify for its basic home health benefit.  Both progmms  require  that patients 
need skilled care in order  to be covered. 
Other Payers Place  Similar Requirements  on Home Health Agencies for Care to be 
Covered. 
All of the private  payers  requi.m a formal plan of care established  for the home health care 
patients.  Most payers  use plans of care  similar to Medicares,  though there  are some 
variations.  One indemnity  plan,  for example,  uses a formal plan of care for catastrophic 
cases only. 
All three Medicaid  agencies  require  use of a formal plan of cam which must be ordered  and 
signed by a physician. 
The VA requires  a physicians  statement be completed  in order  for care to be authorized. 
Such a statement  must include the specific medical  services required,  the duration  authorized, 
frequency  of visits by providers,  and estimated  total monthly costs of providing  home health 
services.  The VAs physicians  (either employed  by the VA hospital or with staff privileges) 
are responsible  for ordering  the care and following  the patients  progress.  Similarly, 
CHAMPUS  requires  that services be ordered  by a physician  and have a treatment  plan 
describing  the frequency  and duration  of thempies,  procedures  and medication,  and the 
prognosis  for the patient. 
Most payers  require  that HHAs be Medicare-certifkd,  or accredited  in lieu of certilkation, 
in order  to receive  payment. 
Benefit  Packages  Offered  by Other Payers are Similar to Medicares. 
Genemlly,  services  covered  by other payers  as part  of their basic benefit packages  are similar

to Medicares,  including  coverage  of skilled nursing  care,  therapy  services,  and aide

services.  Only two differences  emerged:

4
  A number  of other payers  also offer a drug benefit in conjunction  with their 
home health benefit  or as a general  benefit in their insurance  prugram.  The 
availability  of this benefit in the private  market  might vary from employer  to 
employer.  For Medicaid,  prescription  drug coverage  is an optional offering 
but is currently  included  in all State Medicaid  programs. 
 The VA does not cover aide services  as part of its basic home health benefit, 
which is limited to medical  services.  The VA has determined  that 
homemaker,  domestic-type  services  (such as house cleaning,  meal preparing, 
companion)  are not medical  services  and cannot be authorized  under its home 
health program.  Vetemns  may qualify for another program  which would 
.  .  .----- .. ...  .  . 
provide  those servkes. 
Like Medicare,  other payers rely on beneficiary  surveys,  complaint  programs  and 
provider  audits and reviews to ensure quality; none reported  using outcome measures. 
Like Medicare,  most of the private  payers  beneficiary  surveys are conducted  as part of a 
larger  satisfaction  survey on all services  covered  and not speciilcdly  on home health 
services.  The HMOS, in particular,  emphasized  this practice,  ~rting  that they conduct 
such sumeys  several times a year.  Indemnity  plans vary more in their use of beneficiary 
surveys.  One plan conducts quarterly  surveys;  two other plans  survey only when there is a 
case manager  involved;  another  does not survey beneficiaries  at all.  Many payers  also 
reported  using various  types of internal  audits,  complaint  monitoring  progmms,  and provider 
reviews,  as a means of ensuring  that necessary  services  are rendered  and beneficiary  abuse 
does not occur. 
The VA also conducts  surveys to monitor  beneficiary  satisfaction  with all covered  services. 
In addition,  VA medical  centers  have quality assessment  committees  which sample patients 
from their  outpatient  centers to ask them about the cm.e they receive. 
Although  we asked about the use of outcome  measures,  none of the payers  report ustig  these  . 
to measure  the quality of home health  services.  A few report  they are developing  some 
measures  for future use. 
Like Medicare,  Most Other Payers Reimburse  Providers  on a Per Service Basis; HMOS 
Use a Capitated Approach 
AU of the private  indemnity  plans pay for services  by visitor  by hour depending  on the 
service.  Payers  often negotiate  rates with home health agencies  using the Medicare  fee 
schedule  as the basis for negotiation.  Rates frequently  are determined  locally,  taking cost-
of-living  and other local factors  into consideration.  One plan pays a flat $40 per visit with a 
visit defined  as an eight-hour  shift from a nurse or aide,  one therapy  session,  or one social 
worker  visit. 
The HMOS negotiate  capitated  rates with home health agencies.  One common pmctice  is to 
negotiate  a capitated  rate for nurses and home health aides and hourly payments  for therapists 
5  or other  services.  Under  this scenario,  HMOS pay agencies  a flat sum per enrollee  with 
agencies providing  all necessary  nursing  and aide care to enrollees  as needed.  Rates are 
established  based on prior  payments  and can be adjusted if necessary. 
Medicaid  agencies  generally  pay providers  on a per-visit  or per unit basis. 
Agencies  are paid by the VA on a per visit basis,  either under cent.met or on a usual and 
customary  basis.  When the cost of care at home begins to exceed nursing home care,  the 
VA will authorim  placement  in an institution. 
OTHER PLANS APPROACHES  TO CONTROLLING  HOME HEALTH 
EXPENDITURES  ARE llmTERENT  FROM MEDICARES   
Other payers  differ  from Medicare  in setting limits on home health benefits;  moving more 
intensive  and special needs patients  to targeted  progmms;  and in their utilization  control 
mechanisms. 
Several Payers Place Limits  on Their Home Health Benefits. 
Some payers  structurally  limit their  home health benefit through  limits,  or caps,  on the 
number  of services  allowed  for any one beneficiary.  ~  of the five indemnity plans who 
use service caps either  cap the number  of visits allowed per year or limit the amount of time 
per visit (in programs  that pay by the hour).  Two HMOS lhnit the amount of physical  and 
occupational  thempy  services  delivered. 
The VA limits  coverage  of home health  services to six months for veterans  without semice
connected  injuries. 
One of the Medicaid  agency officials  we interviewed  specitkally  mentioned  service caps. 
This State limits beneficiaries  to 50 skilled nursing and aide visits annually,  although 
exceptions  are allowed. 
Other Government  Payers  Supplement  Their Basic Home Health programs  with 
Targeted  Efforts Devoted  to the Care of Special Populations. 
Our conversations  with other  government  payers  yielded  information  regarding  special efforts 
to target  certain  populations  and develop  special programs  to meet their requirements,  rather 
than relying  on their basic home health benefit to add.mss those needs. 
Medicaid 
Medicaid  can cover  home health  m  for needs beyond  part-time  or intermittent  with 
State-only  dollars.  States can pay for home health  services up to the equivalent  cost of the 
States share of a nursing  home  stay.  Long-term  home-based  care to special populations 
(frail elderly,  disabled  children,  AIDS patients)  can also be provided  under Medicaid  waivers 
with both Federal  and State dollars. 
6
 Depmttnent  of  Vetemns  Aflaim 
The VA has a special  aide and attendant  program  for those with severe disabilities, 
including  vetemns  with service-comected  spinal cd  injuries.  IMSprogram  provides  a cash 
benefit to purchase  needed  services  (to pay the salary of an aide,  for example);  the cash 
benefit may be supplemented  by skilled services under the home health benefit. 
CE4MPUS

For CHAMPUS,  patients  who need more intensive  care than can be provided  through  its 
basic home health benefit  can be enrolled  in one of three  demonstration  projects. 
.	 The fmt  demonstmtion  project  identifies  patients  with catastrophic,  complex  needs 
and develops  home and cmnrmmity-based  treatment  plans,  with case managers  helping 
patients  gain access to sophisticated,  cost-efficient  care.  Patients  sham in the costs, 
with active-duty  families paying  20 percent  of CHAMPUSS allowable  charge  (limited 
to $1000 out-of-pocket)  and other families paying  25 percent  (limited to $7500). 
.	 The second demonstration  project  is designed to keep patients  at home in lieu of 
hospitalization  when such care is cost effective.  This demonst.mtion focuses on high-
cost patient  populations  including  children,  hospice patients,  and patients  with AIDS, 
those who have had transplants,  or those who require  intense rehabilitation  efforts. 
The physician  must sign a detailed  treatment  plan,  including  an estimate  of the length 
of time the patient  would spend in an institution  if the home health  ~  were not 
provided.  An itemized  comparison  of the costs of hospitalization  versus the costs of 
home care is required. 
.	 The third  demonstration  provides  fmcial  assistance  to active-duty  families  with a 
severely-handicapped  family  member.  The family pays initial costs based on the 
active-duty  personnels  pay gmde;  CHAMPUS  pays up to $1000 a month.  If more 
than one family member  qualiiies,  CHAMPUS  pays all allowable  costs for the 
additional  handicapped  persons.  Covered  services include nursing,  physical, 
occupational  and speech therapy,  durable  medical  equipment,  hearing  aids,  and 
schooling  or residential  care. 
In all these demonstrations,  the goal is to convert  the patient  to the regular  benefit plan.

This tmnsition  would take place when the patient  no longer needs the care provided  under the

demonstration,  when such care is no longer  cost effective,  or when the  policy holder  is no

longer  on active duty.  The transition  is achieved  through  following the plan of care,

stabilizing  the patient,  and training  the camgivers.  The case management  coordinator  follows

patients  progress  after they have left the demonst.mtion,  to ensure that they are stable and to

prevent  rehospitalization.

7
 Case Management,  Post Payment Utilization  Review,  and Beneficiary  Participation 
Through  Copayments  and Explanation  of Benefits  (E(Ilk)  are Used by Other Payem to 
Ensure Appropriateness  of Services and Detect Fraud and Abuse. 
When asked,  about what techniques  they used to manage  and control  utilization  of their home 
health benefit,  respondents  indicated  that the methods used in any plan depends largely  on the 
tmns  of the contract  negotiated  with employers,  these payers  generally  reported  a variety  of 
techniques  in common use. 
METHODS  USED TO CONTROL  UTILIZATION  OF HOMB HEALTH  BENEFITS 
Medicare  and Private  Payers 
MBDICARB  PRIVATE  PAYERS 
(Total  =  10) 
Case Management  9 
Utilization  Reviews  x  10 
* 
Copayment/Deductibles  9 
Explanation  of Benefits  6 
* Medicare  requires  a 20 percent  coinsurance  charge for DME. 
Case Management 
Almost  all payers  used some form of ease management  to ensurt  quality of service  and to act 
as gatekeeper.  Indemnity  plans tend to target  their case management  efforts.  For example, 
one plan focuses its ease management  efforts on its catastrophic  and chronic  patients. 
Another plan  hires case managers  only in major urban  areas to work with local physicians 
and nurses  with a goal of helping patients  access other community  serviees.  All of the 
HMOS use ease managers  and primary  care physicians  to monitor  and manage patients  care. 
The VA also reports  using ease managers.  For that program,  because  of its link to its 
hospital  system,  the hospital  social workers  acts as a case manager  and is responsible  for 
reauthorizing  care if appropriate.  The CHAMPUS  also reports  using ease managers  under 
one of its three  home health  demonstration  programs. 
U#ili~on  Review 
The payers  cite a number  of utilization  review  measures  including:  intensive  intemction  with 
physicians,  review  of physician  referral  rates,  post-pay  edits, prior  approval,  utilization 
proftig  combined  with physician  education,  and active fraud units.  One HMO  conducts  an 
analysis  of the cost of providing  care in the home compared  to skilled nursing  facilities 
(SNFS).  The patient  and family may then choose whether  to contribute  the difference  in 
cost,  supplement  professional  care with volunteers,  or admit the patient  to the SNF. 
8  The three Medicaid  programs  cite a post-payment  utilization  niwiew measures  such as post 
pay edits,  exception  reviews  where high use cases are identified  for close monitoring,  and 
verification  of incoming  claims against the plan of care. 
Copayment  and Deductibles 
Almost all of the private  payers  report  that they commonly  require  some level of fmcial

participation  by the beneficiary.  TWOof the five indemnity  plans mention  a coinsurance

charge  of 20 percent  was common in their plans.  Two other indemnity  plans contract  with a

network  of home health providers,  and when used,  require  no copaymen~  otherwise  they

also require  a copayment.  The other indemnity plan requires  a copayment  after 90 days of

full coverage.  The HMOS .cither have no copayment  charges  at all,  or charge  some nmnimd  -- -- -

amount  (e.g.  one HMO charges  $5.00 per visit).  Two of the four HMOS require  either  a

copayment  or deductible  for durable  medical  equipment  only.  None of the Medicaid

agencies  we interviewed  require  copayments  (although this is not true for all Medicaid

programs).

Explanation  of Bene@s 
Four  of the five indemnity  plans provide  beneficiaries  with an explanation  of benefits 
(BOBS); one provides  them only upon request.  The HMOS were mixed in their use of 
EOBS.  None of the Medicaid  programs  we interviewed  use EOBS. 
Rece@icalion  of Need/Reauthorization  of Services 
Most private  payers  have a formal progmm  in place for reauthori@ion  or mcertiilcation  of

need.  Generally  they follow Medicares  practice  of recertification  every  60 days.

Medicaid  agencies  also review  cases every  60 days,  according  to statutory  requirements.

The VA has a 12-month review process  in place for all veterans  receiving  home health

benefits under  the fee for service program.  lhis redetermination  process  assesses whether

care should continue  in the home or another  alternative  employed.  The VA also submits all

cases whose authorizations  are to expire in the next three  months to VA officials,  who

consult with the home health provider,  review  the veterans  medical  record,  and consider

alternatives  and costs of alternatives.

9
 POINTS  OF  FURTHER  ANALYSIS 
Due to the rapid incmse  in home health care costs and the need to ensure the quality of 
services  delivemxl in the home,  HCFA  has initiated  efforts to improve  Medicares  home 
health benefit.  We are supporting  HCFA  in that effort by providing  this report  as well as 
others focusing  on a variety  of home health issues. 
Despite  the small number  of other payers  that we examined  during the course of this review, 
their practices  could provide  potential  ideas for reforming  or managing  Medicares  home 
health benefit.  The HCFA  might study the merits of some of these approaches  as it 
determines  how best to control utilization  and expenditures  while assuring  the appropriate 
delivery  of high quality care to Medicare  beneficiaries.  Among those approaches  which 
might hold promise  are: 
Targeting needs.  Rather than a one size fits all home health benefit, 
F	
Medicare  might wish to channel  different patients  into different  home health 
progmms  where the benefit  could better  conform  to different patient  needs 
and program  management.  In addition,  controls  could be designed mom 
effectively. 
b	 Case Management.  Case managers  might be particularly  appropriate  for 
certain  classes of beneficiaries  who are expected to require  services over a 
specified period  of time  (e.g.  patients  with chronic  care needs). 
b	 Beneficiary  Participation.  The use of EOBS (perhaps on a monthly basis to 
avoid umecessary  administrative  burden)  and imposition  of copayments, 
previously  proposed  in various  legislative  initiatives,  can increase  the 
beneficiaries  stake in their own health care and identify potential 
overutilization,  abuse or quality problems. 
	 Limitations  on Coverage.  Caps on number  of visits allowed each year,  or 
some other kinds of limitations,  would not only be consistent  with the policies 
of some other payers  but also with Medicares  own policies  with regard  to 
skilled nursing care,  hospital  benefits,  and other categories  of service. 
Our additional  work ongoing and planned  in the home health area will assist HCFA  in testing 
out some of these ideas.  Some of the questions that would need to be answered  in assessing 
the validity  of these approaches  for Medicare  include: 
E	 What have been the patterns  of utilization  and health care consumption  for 
beneficiaries  in plans with experience  with these approaches,  as compared  to 
Medicare? 
  What impact  would such changes  have on Medicare  beneficiaries? 
10
 	 What impact  would such changes have on the fiscal soundness of the Medicare 
program? 
One of the factors  that makes assessment  of impacts difilcult  is the lack of outcome 
measures.  While many of the payers  we spoke to told us that they are interested  in and/or 
developing  outcome  measures  for their prugrams,  we found they had little to offer on this 
subject at the current  time.  Therefore,  we support any efforts by HCFA  to address the issue 
of developing  methods to measure  and monitor  the quality of home health  services. 
AMdional  OIG Work 
The OIG is currently  engaged  in a home health initiative  to examine payments  made to home 
health agencies  on behalf  on Medicare  beneficiaries.  l%is initiative  involves  the OIGS 
investigations,  audit,  and evaluation  staffs.  Among the upcoming  products  emanating  from 
this initiative  am reports  on provider  audits and validation  of claims;  and on the physicians 
role in home health  services;  an overall  assessment  of payment  made to HHAs and the 
relationship  of those payments  to HHA chamcteristics,  beneficiary  characteristics,  and other 
potentially  relevant  factors. 
COMMENTS  ON THE DRAFT REPORT  AND OIG RESPONSE 
The HCFA  indicated  that the report  would be useful in assessing possible  changes to the 
home health benefit.  However,  HCFA  stated that our report  appears  to assume that other 
agencies  are more effective  than Medicare  in controlling  costs.  Further,  HCFA pointed  out 
that there  are no data in the report  comparing  the average  number  of visits or expenditures 
per beneficiary.  The HCFA  speculated  that age, health  status,  and income  could explain 
differences  in utilization  if they exist,  as well as plan characteristics  and benefit management. 
We appreciate  HCFAs comments.  We recognke  that there are no hta  in the report 
comparing the number of visits or tzxpendituresper  berw$aary; however,  this was beyond the 
scope of our inqmry. I%epurpose  of this report was to describe  how selected payers 
structure and manage their home health benefit as compared to Medicare.  Our analysis 
indicated that other payers  limit the benefit and use a variety of techniques to control 
utilization more than Medicare.  TW.etherthese techniques actually result in lower per  capita 
costs is subject to jlwther  analysis,  as indicated in the report.  It is clear,  however,  that other 
payers  huve many more oppomties  to manage utilizxxonof the benejit and control costs 
compared to Medicare  coverage  and payment policies for  home agencies. 
Thefidl  text of HCFAs comments can be found in appendix A. 
11
 APPENDIX  A 
AGENCY  COMMENT S TO THE DRAFI REPORT 
A-1  *.. * ,*& Wm,.o  +   Health Care 
5	 DEPARTMENT  OF HEALTI-&I  HUMANSERVICES  Financing Administration 
; 
8
k.
Memorandum
A 
DATE  Ifu!R27  1995  JJLA 
L
FROM  Bruce  C. Wade 
Administrator  v 
SUBJECT  Office  of Inspector  General  Draft  Reports:  The Physicians  Role  in Home 
Health  Care,  (OEI-02-94-O0170)  and  Home  Health  Agencies:  Alternative 
Coverage  and  Payment  Policies,  (OEI-12-94-00180) 
TO  June  Gibbs  Brown 
Inspector  General 
We  reviewed  the  subject  draft  reports  which  examine  home  health  care  provided  under 
the  Medicare  program.  Our  comments  are  attached  for your  consideration. 
Thank  you  for  the  opportunity  to review  and  comment  on these  reports.  Please  advise 
us if you  would  like  to  discuss  our  position  on the recommendations. 
Attachment  Comments  of the  Health  Care  Financing  Administration  (HCFA) 
on  Office  of In~ector  General  (OIG)  Draft  Reports: 
The  Phvsicians  Role  in Home  Health  Care,  (OEI-02-94-00170) 
and  Home  Health  Agencies:  Alternative  Coverage  and  Pavment 
Policies,  (OEI-12-94-00180\ 
OIG  Recommendations  on The Physicians  Role  in Home  Health  Care 
1.	 The  HCFA  should  continue  its efforts  to change  the  plan  of care  to ensure  it 
conveys  critical  information  to caregivers  and  relieves  unnecessary  burden  from 
physicians. 
2.	 The  HCFA  should  further  communicate  its expectations  about  physician 
involvement  and  take  steps  to assure  that  it is more  clearly  understood  by home 
health  agencies  and  physicians. 
HCFA  Re,soonse

HCFA  defers  action  on  the  above  recommendations  at this  time.  We  are  in the  process

of examinin g issues  related  to plans  of care  and  the  physicians  role  and  recognize  the

importance  of both  recommendations.  However,  we believe  it would  be  premature  to

make  immediate  changes.

Clearly  one  of the  most  important  problems  facing  the  Medicare  home  health  benefit  is

utilization.  OIG  is commended  for its attempts  to better  understand  the  appropriate

role  of the  physician  in monitofig  utilization  and  appropriateness  and  duration  of care.

HCFA  has  addressed  the  i-e  of physician  involvement  through  regulations.  In the

December  8, 1994 Federal  Re@terj  HCFA  issued  a new regulation  providing  separate

payment  for physician  care  plan  oversight  services.  Reimbursing  physicians  for care

oversight  services  should  lead  to greater  physician  involvement  and  prudent  utilization  of

the  home  health  benefit

HCFA  has  also  established  a Medicare  Home  Health  Care  Work  Group  which  is

currently  drafting  revised  Home  Heal&  Agency  Conditions  of Participation.  HCFA  is

also  developing  a Core  Standad  XSsment  IiMxument,  Requirements  for  the

assessment  insfiment  could  signifiuntiy  impact  the  information  requirements  on the

plan  of care.  The  work  group  expects  to develop  recommendations  after  it completes  its

research.  Until  men  our  operational  plans  are  to continue  using  HCFA  Forms  485 and

486 (Medicare  Couection  of Medical  Information  on Home  Health  Services).

We  note  that  the  report  recommendations  do not  address  the  two main  questions  listed

on page  3:  Are  physicians  effectively  fulfilling  their  gatekeeper  role  in initiating  and

monitoring  the  plan- of care?  Do physicians  rubber  stamp  the  plan  of care?  wile  the

report  recognizes  bat  there  are  discrepancies  in how physicians  and  agencies  view the
 Page  2 
physicians  role  in coordinating  care,  it does  not  address  whether  physicians  are  an 
effective  gatekeeper,  Perhaps  the  study might  more  effectively  address  Does  greater 
physician  involvement  result  in a more  cost-effective  utilization  of the  home  health 
benefit? 
Additionally,  we would  be  interested  in any specific  suggestions  OIG  may  be  able  to 
offer  on the  following: 
o	 After  interviewing  both  agencies  and physicians,  does  OIG  have  any 
specific  suggestions  of ways the  plan  of care  can  be  changed? 
o	 Does  OIG  have  specific  suggestions  on how the  role  of physicians  should 
be  better  communicated? 
o	 Does  OIG  feel  tha~  after  talking  to agencies  and  physicians,  there  is a 
consensus  on what  the  physician  role  ought  to be? 
Comments  on Home  Health  Agencies:  Alternative  Coverage  and  Pavment  Policies

The  report  appears  to  assume  that  other  agencies  are  more  effective  than  Medicare  in

controlling  costs.  However,  there  are  no data  in the  report  comparing  the  average

number  of visits  or  expenditures  per  beneficiary.  While  the  report  identifies  other  plans

limits  on utilization,  there  may be  other  factors,  such as age,  health  status,  and  income,

that  could  explain  differences  in utilization,  if they exist.

We  are  in the  process  of develop~g  our approach  to revitalizing  the  coverage  and 
payment  policies  for  home  health  agencies.  The  Points  of Further  Analysis  in this  report 
raise  interesting  alternatives  that  W  be considered  by HCFA  as it formulates  its plan  to 
revitalize  the  home  health  benefits.