Department  of Health  and Human  Services 
OFFICE  OF 
INSPECTOR  GENERAL 
HOW  HMOs  MANAGE  HOME  HEALTH 
SERVICES 
JUNE GIBBS BROWN 
Inspector  General 
JUNE1997 
OEI-O4-9SOOO80  OFFICE OF INSPECI-OR GENERAL 
The  mission  of the  Office  of Inspector  General  (OIG),  as mandated  by Public  Law 95 
452 is to protect  the  integrity  of the  Department  of Health  and  Human  Services 
programs  as well  as the  health  and  welfare  of beneficiaries  served  by them.  This 
statutory  mission  is carried  out  through  a nationwide  program  of audits,  investigations, 
inspections,  sanctions,  settlements,  and  fraud  alerts.  The  Inspector  General  informs 
the  Secretary  of program  and  management  problems,  and  recommends  legislative, 
regulatory,  and  operational  approaches  to  correct  them. 
Office of Evaluationand Inspections 
The  OIGs  Office  of Evaluation  and  Inspections  (OEI)  conducts  short-term 

management  and  program  evaluations  (called  inspections)  that  focus  on  issues  of 

concern  to  the  Department,  the  Congress,  and  the  public.  The  inspection  reports 

provide  findings  and  recommendations  on  the  efficiency,  vulnerability,  and 

effectiveness  of departmental  programs. 

OEIs  Atlanta  Regional  Office  prepared  this  report  under  the  direction  of Jesse  J. 

Plowers,  Regional  Inspector  General,  and  Christopher  Koehler,  Deputy  Regional 

Inspector  General.  Principal  OEI  staff  included: 

Atlanta  Region  Headouarters 

Joe  Townsel,  Project  Leader  Jennifer  Antico,  Program  Specialist 

Betty  Apt,  Team  Leader  Barbara  Tedesco,  Statistician 

Jackie  Watkins,  Program  Analyst 

Tammy  Hipple,  Statistician 

To  obtain  a copy  of this  report,  call the  Atlanta  Regional  Office  at  (404)  331-4108.  EXECUTIVE  SUMMARY 
PURPOSE 
To  describe  home  health  service  management  by Medicare  health  maintenance 
organizations  as compared  to fee-for-service. 
BACKGROUND 
Home  health  care  is nursing,  therapeutic,  medical  social,  and  aide  service  provided  in 
a persons  home.  It allows  people  with  limited  mobility  to  live independently  while 
still receiving  professional  health  care  services.  Generally,  a Medicare  beneficiary 
must  be  homebound  to be  eligible  for  home  health  care.  Also,  their  care  must  be 
prescribed  by a physician. 
Over  the  past  5 years,  Medicare  expenditures  for  home  health  services  have  increased 
over  fourfold  to $15.1 billion  and  expenditures  have  varied  significantly  among  the 
nations  home  health  agencies. 
The  rapidly  escalating  costs  and  wide  variation  among  providers  raised  concern  about 
differences  in how  home  health  care  is managed  by various  providers.  Prior  Office  of 
Inspector  General  (OIG)  reports  have  shown  that  costs  can  be  controlled.  Cost  for 
home  health  by about  two-thirds  of fee-for-service  providers  is well below  the  national 
average. 
In view  of the  reputation  of Medicare  risk  health  maintenance  organizations  (HMOs) 
for  controlling  costs, we examined  how  those  HMOs  manage  home  health  services. 
<Where possible,  we compared  HMO  management  of home  health  care  to  practices 
used  by fee-for-service  providers,  including  selected  home  health  agencies  which  also 
contract  with  HMOs.  We  surveyed  132 risk  HMOs  which  served  at  least  450 
Medicare  beneficiaries  each.  Our  response  rate  was 77 percent.  We  also  surveyed  93 
HMO  home  health  contractors.  Our  response  rate  was 46 percent. 
FINDINGS 
MOST  HMOs  CLOSELY  MANAGE  HOME  HEALTH  SERVICES 
HMOs  Gene&y  Contmct for  Home  Halth  Services 
Eighty-nine  percent  of HMOs  contract  for  all of the  home  health  services  they  provide 
beneficiaries.  Most  HMOs  pay  home  health  contractors  on  a fee-for-service  basis. 
HMOs  and  their  contractors  expressed  opinions  that  contracting  for  home  health  care 
benefits  HMOs,  contractors,  and  Medicare  beneficiaries.
r. 
i  lhey  Vie  Cbe  Managers to Help  Cinabol the Number and Qudity  of Home  Heal&  Vi 
Virtually  all of the  HMOs  use  case  managers  to  approve,  coordinate,  and  monitor 
home  health  visits.  The  primary  control  methods  used  are  pre-authorizing  services, 
conducting  case  management  conferences,  reviewing  patient  progress  reports,  and 
evaluating  services  provided. 
HMOs  Z&t&  Co-1  tits  and the Number of Vi& 
Data  from  49 of the  HMOs  we surveyed  showed  that  they  authorized  only  19 percent 
as many  home  health  visits  per  beneficiary  in  1994 as were  authorized  under  the  fee-
for-service  system.  The  average  was  11 visits  for  HMOs  and  58 visits for  fee-for-
service.  In many  instances,  HMOs  specify  the  number  and  type  of visits  each 
beneficiary  will receive.  Other  factors  such  as cost  per  visit,  health  status,  duration  of 
care,  and  enforcement  of homebound  status  influence  costs.  However,  by controlling 
the  number  of visits,  the  overall  cost  of home  health  care  in HMOs  is less. 
Ahxt  Half the HAU& We Surveyed provided  Home  Heawl  Care for About  One-Fourth 
the Cost  Under the Fee-For-Service System 
Of  102 HMOs,  49 reported  that  home  health  cost  $882 per  beneficiary  in  1994.  This 
was about  25 percent  of the  average  cost  per  beneficiary  under  the  fee-for-service 
system.  The  home  health  contractors  we surveyed  corroborated  the  cost  per 
beneficiary.  They  stated  that,  on  average,  home  health  care  costs  for  HMO 
beneficiaries  is about  23 percent  of that  for  fee-for-service  beneficiaries. 
HOME  HEALTH  CONTRACTOR  OPINIONS  ARE  MIXED  ON ADEQUACY  OF 
THE  NUMBER  OF  VISlTS  AUTHORIZED  BY HMOs 
About  56 percent  of the  home  health  contractors  we surveyed  expressed  views that  the 
number  of visits  authorized  by $IMOs  was adequate.  However,  51 percent  of the 
contractors  said  HMO  beneficiaries  are  disadvantaged  in terms  of overall  home  health 
care,  when  compared  to  fee-for-service  beneficiaries. 
AGENCY  COMMENTS 
The  HCFA  had  no  comments  on  this  report. 
-.  -. 
ii  TABLE  OF  CONTENTS 
PAGE 
EXECUTIVESUMMARY 

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

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

.......................  5 

MANAGEMENT  OF  HOME  HEALTH  SERVICES 
Contractors  ...................................................  5 

Case  Managers  ................................................  7 

Visits  ........................................................  9 

14 

costs  ....................................................... 
...........................................  15 

ADEQUACY  OF  CARE 
APPENDIX 
Analysis  of Respondents  vs. Non-Respondents  .......................  A-l  INTRODUCTION 
PURPOSE 
To  describe  home  health  services  management  by Medicare  health  maintenance 
organizations  as compared  to fee-for-service. 
BACKGROUND 
Home  health  care  is nursing,  therapeutic,  medical  social,  and  aide  service  provided  in 
a persons  home.  It allows  people  with  limited  mobility  to live independently  while 
still receiving  professional  health  care  services.  Generally,  a Medicare  beneficiary 
must  be  homebound  to be  eligible  for  home  health  care.  All  home  health  services 
must  be  specified  in a plan  of care  certified  by a physician. 
The  Social  Security  Act  authorized  Medicare  Part  A payments  for  home  health  care. 
Beneficiaries  who  do not  have  Part  A entitlement  may  be  covered  under  Part  B. 
Home  health  services  may  be  provided  through  fee-for-service  providers  and  through 
Medicare  managed  care  -- such  as health  maintenance  organizations.  The  Health 
Care  Financing  Administration  (HCFA),  Department  of Health  and  Human  Services 
has  Federal  oversight  of the  Medicare  program,  including  home  health  services. 
This  inspection  examines  the  provision  of home  health  services  by HMOs.  Risk 
HMOs  receive  a fixed  payment  per  beneficiary.  Therefore,  they  have  an  incentive  to 
judiciously  manage  home  health  services  and  control  cost.  Where  possible,  we 
compare  HMO  practices  for  managing  home  health  care  to  those  used  by fee-for-
service  providers,  including  selected  home  health  agencies  that  contract  with  I-IMOs to 
provide  care  to Medicare  beneficiaries. 
Health  Maintenance  Organizations 
The  HCFA  contracts  with  health  maintenance  organizations  (HMOs)  to provide 
health  care  for  Medicare  beneficiaries.  Medicare  HMOs  must  offer  all home  health 
services  that  are  available  under  fee-for-service  systems.  In some  instances,  HMOs 
may  elect  to  provide  services  that  are  not  covered  under  fee-for-service  systems.  For 
example,  HMOs  may  elect  to  give home  health  care  to a patient  who  is not 
homebound  -- particularly  if it appears  home  health  care  might  prevent  more 
expensive  inpatient  care. 
The  HCFA  contracts  with  two types  of HMOs.  They  are  risk HMOs  and  cost 
HMOs.  A risk  HMO  receives  a fixed monthly  Medicare  payment  per  beneficiary. 
Such  HMOs  are  at risk  for  any  health  care  cost  that  exceeds  the  fixed  payment. 
Medicare  pays  cost  H@s  based  on the  costs  they  incur  for  health  care  services  they 
provide.  The  majority  of Medicare  HMOs  are  risk  HMOs. 
1 
 Growth of Home  Health Care 
Medicare  expenditures  forhome  health  care  increased  dramatically  in recent  years. 
To  illustrate,  between  1990 and  1995 Medicare  expenditures  for  home  health  care 
grew  from $3.7 billion  to  $15.1 billion  -- an  increase  of over  fourfold  in just  5 years. 
By the  year  2002, HCFA  projects  that  Medicare  home  health  care  costs will be  about 
$33 billion. 
Variation  In Cost For Home  Health Care 
Medicare  expenditures  for  home  health  care  per  beneficiary  have  varied  significantly 

among  providers  in recent  years.  To  illustrate,  we reported  in  1995 that  home  health 

care  provided  by about  two-thirds  of the  nations  home  health  agencies  cost  Medicare 

about  $2065 per  beneficiary.  However,  home  health  care  provided  by the  remaining 

one-third  of the  home  health  agencies  cost  Medicare  about  $4431.  We  further 

reported  that  most  of the  variation  can  be  attributed  to  the  number  of visits  a provider 

chooses  to  make  per  beneficiary.  On  average,  the  high  cost  providers  make  five  times 

more  visits  per  beneficiary  than  do the  low cost  providers. 

Coocern  About  Escalating Cost of Home  Health  Care 
The  rapidly  escalating  cost  and  wide variation  in cost  among  providers  raised  serious 
concern  about  differences  in how  home  health  care  is managed  by different  providers. 
Our  prior  reports  on  home  health  care  have  shown  that  controlling  cost  of home 
health  care  is possible.  For  example,  over  two-thirds  of the  home  health  agencies 
have  demonstrated  that  home  health  care  needs  of Medicare  beneficiaries  can  be  met 
at or below  the  national  average  cost  per  beneficiary. 
Concern  About  Quality of Home  Health Under  HMOs 
Various  health  care  researchers  have  raised  concerns  about  the  quality  of home  health 
care,  including  that  provided  by HMOs.  According  to a study  funded  by HCFA, 
HMO  members  receive  fewer  home  health  visits than  beneficiaries  under  fee-for-
service2.  The  researchers  found  that  most  HMO  beneficiaries  in that  study  had 
outcomes  inferior  to fee-for-service  beneficiaries  at the  time  home  health  services 
were  terminated.  However,  the  researchers  did not  substantiate  that  HMO 
beneficiaries  needed  more  services  than  they  were  getting. 
Variation Among Home Health Agencies In Medicare PaymentsforHome Health Services: 
OEI-04-%-(30260 
-.._ 
Center for Heal6  Policy Research,A Study ofHome Health Care Qualityand Costs Under 
Capitated and Fee-For-Service Payment Systems, February1994 
2  Efforts  to  assess  quality  include  an  ongoing  initiative  by HCFA  to develop  and  test  an 
instrument  called  the  Standardized  Outcome  and  Assessment  Information  Set 
(OASIS).  In the  future,  HCFA  expects  the  instrument  to be  a means  by which  the 
quality  of home  health  services  can  be  monitored. 
Selection of HMOs and Home  Health Contractors 
At  the  time  of our  inspection,  HCFA  contracted  with  152 risk  HMOs  nationwide. 
Within  that  population,  we identified  132 HMOs  that  served  at least  450 Medicare 
beneficiaries.  We  included  100 percent  of the  132 HMOs  in our  survey.  We  excluded 
the  remaining  20 HMOs  because  their  enrollment  was less than  450.  HMOs  with  low 
enrollment  levels  would  likely  have  few beneficiaries  who  receive  home  health  care. 
Therefore,  such  HMOs  would  have  limited  experience  in managing  home  health 
services.  Collectively,  the  20 HMOs  we did  not  select  had  an  average  enrollment  of 
171 Medicare  beneficiaries. 
Likewise,  we surveyed  93 home  health  agencies  (HI-&)  that  contract  with  our 
selected  HMOs  to provide  home  health  care.  Our  selected  HHAs  represent  100 
percent  of the  HHAs  that  our  selected  HMOs  identified  as their  main  contractor. 
Data Collection and Analyses 
We  conducted  our  inspection  between  July  1995 and  July  1996.  We  used  standardized 
questionnaires  to collect  data  from  both  selected  HMOs  and  their  contractors  on  costs 
and  management  of home  health  care  by HMOs.  We  mailed  our  questionnaires  to 
120 of the  132 selected  HMOs,  and  personally  visited  the  remaining  12.  Similarly,  we 
mailed  our  questionnaires  to  87 of the  selected  93 HHA  contractors,  and  personally 
visited  the  remaining  6.  During  each  site visit, we interviewed  appropriate  staff  on 
program  management,  controls,  and  results.  We  also  reviewed  contracts  and  other 
records  on  home  health  care  operations. 
We  collected  quantitative  data  on  such  practices  as the  numbers  of Medicare 
beneficiaries  served,  visits  made,  and  cost.  We  also  collected  qualitative  data  showing 
policies,  procedures,  and  practices  used  to authorize,  manage,  and  control  use of home 
health  care.  We  based  our  analyses  on  1994 data.  We  used  unaudited  data  provided 
by the  selected  HMOs  and  HHAs  that  responded  to our  survey. 
Of  the  132 selected  HMOs,  102 responded  to our  survey  -- a response  rate  of  77 
percent.  An  analysis  of HMO  respondents  and  non-respondents  showed  that  the 
possibility  of bias  based  on  HMO  size is limited.  Our  non-response  analysis  is in 
Appendix  A 
.  .L... 
3 
 Of the  93 selected  home  health  contractors,  43 responded  to our  survey,  for  a 
response  rate  of 46 percent.  We  did  not  conduct  an  analysis  of contractor 
respondents  and  non-respondents  for  lack  of available  provider  numbers  for  many 
contractors  in both  groups.  However,  the  responding  contractors  are  located  in  19 
States,  serve  Medicare  beneficiaries  under  HMOs  as well  as fee-for-service,  and 
represent  proprietary  and  non-proprietary  ownership  about  equally. 
Where  appropriate,  we conducted  t-tests  on  our  findings  to  determine  if differences 
noted  were  significant. 
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  Quaky  Stundardrifor Inspections 
issued  by the  Presidents  Council  on  Integrity  and  Efficiency. 
4 
 FINDINGS 
HMOs CLOSELY  MANAGE  HOME HIXALTH SERVICES 
Most HMOs Contract For Home  Health services 
About  89 percent  (91 of  102) of the  Medicare  HMOs  that  responded  to  our  survey 
contract  for  all home  health  services  they  provide  to beneficiaries.  On  average,  the 
remaining  11 percent  contract  for  about  25 percent  of home  health  services  and 
provide  about  75 percent  directly. 
The  HMOs  we surveyed  each  use  an  average  of  12 home  health  agencies  (HHAs)  as 
contractors.  The  number  of contractors  used  by individual  HMOs  ranged  from  1 to 90 
home  health  agencies. 
Cbnbucting for home health s&es  appears to bent@  HiUOs, wnb-acto~  and Medicare 
beneficiaries 
According  to  the  102 HMOs  and  43 HHAs  that  responded  to our  survey,  contracting 
for  home  health  care  is advantageous  to  HMOs,  HHAs,  and  Medicare  beneficiaries. 
HMO  benefits  The  HMOs  responding  to  our  survey  said  that  by contracting  with 
HHAs,  they  expand  the  geographic  coverage  and  availability  of home  health  care  and 
clinical  expertise.  To  illustrate,  in some  communities,  an  HMO  may  have  difficulty 
staffing  a particular  type  of home  health  service,  such  as infusion  therapy.  Further, 
the  need  for  home  care  in some  communities  is occasional,  and  it may  not  be  practical 
for  an  HMO  to provide  those  services  directly.  In such  communities,  an  HMO  may 
contract  with  HHAs  to  expand  the  scope  of its services. 
Also,  the  HMOs  said  that  contracting  for  home  health  care  is cost  effective.  They  said 
that,  because  HHAs  are  interested  in getting  and  keeping  HMO  business,  HHAs 
generally  offer  quality  home  health  care  at  competitive  prices. 
Home  health agency benefits:  The  43 HHAs  that  responded  to our  survey  said  that 
their  contracts  with  HMOs  for  home  health  care  offer  two major  advantages  for  them. 
First,  the  HMO  contracts  offer  HHAs  a reliable  source  of revenue.  They  said 
payment  for  services  are  guaranteed  and  timely.  Further,  they  said HMOs  are  gaining 
prominence  in the  health  industry,  offering  opportunities  for  business  growth  toHHAs 
that  serve  HMOs  successfully. 
Second,  the  HMO.,contracts  offer  HHAs  an  opportunity  to provide  continuity  of care 
for  many  patients;  The  HHAs  said  that  in many  instances  they  establish  an  ongoing 
5 
 professional  relationship  with  HMO  physicians  and  case  managers,  thereby  facilitating 
continued  care  and  generally  better  health  results. 
Medicare  beneficiary  benefits:  By contracting  with  HHAs,  HMOs  improve  access  to 
home  health  care  expertise  for  many  beneficiaries.  For  example,  HMOs  gain  access 
to  expertise  in the  home  care  field  that  they  do not  have  in-house.  Collectively,  HHAs 
offer  a wide  range  of specialized  services  and  trained  clinicians  which  can  effectively 
focus  on  problems  such  as insulin-dependent  diabetes  and  surgical  wounds.  According 
to the  HMOs  that  responded  to our  survey,  it is not  always  practical  to  keep  such 
expertise  in-house. 
Accreditatio  is the-ry  cdmion  forselectinhgomehealthconmcmm 
Of 63 HMOs  that  cited  a primary  criterion  for  selecting  contractors,  60 percent  (38) 
said  accreditation  is the  most  important  (see  Table  1).  They  tended  to rely  largely  on 
accreditation  by the  Joint  Commission  on  Accreditation  of Health  Organizations. 
About  88 percent  (90 of  102) of the  HMOs  that  responded  to  our  survey  said  they  use 
all of the  five criteria  in Table  1 for  selecting  contractors  to provide  home  health  care. 
TABLE  1 
CRITERIA  HMOs  USE  FOR  SELECTTNG  HOME  HEALTH  CONTRACTORS 
HMOs  USING  CRUERIA  PRIMARY 
CRITERIA 

Reputation  91  89  10 
Competitive  pricing  95  93  2 
Geographic  coverage  99  97  6 
Adequate  staffing  90  88  3 
Accreditation  91  89  38 
Other  33  32  4 
* This  shows  the  number  of HMOs  that  considered  each  criterion  as most 
important  to  their  selection  of a contractor.  Only  63 of the  102 HMOs  that 
responded  to  our  survey  identified  a primary  criterion. 
The  other  category  of criteria  in Table  1 includes  quality  of care,  which  was cited  by 
about  11 percent  of the  HMOs  (11 of  102).  That  category  also  includes  miscellaneous 
criteria,  such  as having  a philosophy  compatible  with  HMOs,  effective  customer 
service,  and  a low Medicare  fee-for-service  denial  rate.  Mast Heati  Maintenance  organizations  pay  contractors on a fee-for-senice  bask 
About  73 percent  of the  102 HMOs  that  responded  to our  survey  said  they 
compensate  contractors  on  a fee-for-service  basis.  Only  9 percent  of HMOs  pay  their 
contractors  on  a capitated  basis.  The  remaining  18 percent  used  several  methods  of 
payment.  Most  of the  18 percent  used  a combination  of the  capitation  and  fee-for-
service  methods.  Some  of those  HMOs  also  paid  on  a per  episode,  per  diem,  per 
visit,  or per  hour  basis. 
HMOs Use  Case  Managers To Help Control The Number And Quality Of Home 
Health Visits 
Most  HMO  staffs  expressed  views that  the  number  and  quality  of home  health  visits 

are  appropriate  for  the  needs  of their  patients.  They  described  procedures  and  quality 

assurance  activities  designed  to assure  adequacy  of their  home  health  care 
 -- 
regardless  of whether  the  care  was provided  directly  by an  HMO  or  under  contract 

with  a home  health  agency.  For  example,  they  described  specific  case  management 

activities,  management  reviews,  evaluations,  and  quality  assurance  techniques  used  to 

help  assure  that  the  number  and  quality  of visits  for  each  beneficiary  are  appropriate. 

Cizse manager  raponribti  for  reviewing and approving patient  care 
HMOs  describe  the  primary  purpose  of their  home  health  visits  as meeting  patient 
medical  needs  after  inpatient  care,  improving  patient  ability  to function  independently 
after  inpatient  care,  and  keeping  patients  from  needing  inpatient  care.  Toward  that 
end,  virtually  all of the  HMOs  we surveyed  use  case  managers  to  approve,  coordinate, 
and  monitor  home  health  visits.  Those  HMOs  reported  that  case  managers  are 
responsible  for 
--  Working  with  physicians  to  plan  care  and  write  orders, 

--  Reviewing  and  approving  initial  and  continuing  visits, 

--  Reviewing  medical  necessity  and  assuring  that  treatment  plans  are  effective, 

--  Making  recommendations  to  medical  groups  and  physicians  on  patient  options, 

--  Tracking  and  reporting  outcomes  and  cost  savings  on  a monthly  basis,  and 

--  Participating  in quality  assurance  activities  such  as clinical  record  reviews,  team 

meetings,  and  case  conferences. 

Generally,  HMOs  stated  that  their  case  managers  are  not  authorized  to  unilaterally 
approve  or  deny  home  health  services  requested  by physicians.  However,  the  scope  of 
their  responsrbilities  clearly  indicates  that  case  managers  significantly  influence  the 
extent  and  type  of home  health  visits  Medicare  beneficiaries  receive.  About  88 
percent  of the  HMOs  said  their  case  managers  control  both  home  health  cases  and 
cases  involving  other  services.  The  remaining  12 percent  said  their  case  managers 
control  only  home  health  cases. 
7  Case  managers  control  the  type  and  extent  of home  health  care  in various  ways.  The 

primary  methods  cited  by respondents  to our  survey  are  summarized  below. 

Assigning control numbers:  One  way that  case  managers  control  home  health  services 

is by assigning  a pre-authorization  number.  Without  such  a number,  and  the 

accompanying  pre-approval,  HMO  home  health  contractors  are  not  paid  for visits  they 

report  having  made  to beneficiaries. 

Case management  conferences:  About  88 percent  of HMOs  use  case  management 

conferences  to help  assure  the  quality  and  adequacy  of home  health  visits.  Typically, 

case  managers  use  the  telephone  to  confer  with  physicians  and  contractor  staff  on  the 

extent  and  type  of home  health  care  needed  by Medicare  beneficiaries.  The 

conferences  are  held  weekly  or  as-needed.  Generally,  HMOs  said  the  conferences  are 

intended  to  result  in beneficiaries  getting  the  appropriate  number  of visits,  based  on 

their  medical  needs. 

Reviewing patient progress:  About  82 percent  of HMO  case  managers  review 

contractor  progress  reports  for  beneficiaries  to  assess  quality  and  appropriateness  of 

home  health  visits  provided.  Through  such  reviews,  case  managers  determine 

beneficiary  ability  to perform  activities  of daily  living,  and  the  degree  to which  home 

health  visits  are  improving  medical  conditions. 

Also,  about  75 percent  of HMO  case  managers  discuss  patient  progress  with 

physicians,  and  about  30 percent  audit  patient  records.  Such  reviews  enable  case 

managers  to assess  progress  in individual  cases  and  patterns  of care,  such  as the 

number  of visits  needed  for various  diagnoses  and  hospital  readmissions  after  home 

visits. 

Evaluating  care provided:  Many  HMOs  said  case  managers  are  responsible  for 

evaluating  the  need  for,  and  provision  of, home  health services  to assure  appropriate 

use.  Similarly,  24 of  102 HMOs  and  17 of 43 contractors  that  responded  to  our  survey 

said  they  have  performed  outcome  evaluations.  However,  in many  cases,  comments  by 

those  HMOs and  contractors  revealed  that  they  referred  to  satisfaction  rates  as 

outcomes. 

Only  four  home  health  contractors,  and  no  HMOs,  said  they  had  performed 

evaluations  showing  quantitative  results.  One  contractor  that  had  performed  a 

quantitative  evaluation  reported  positive  results.  They  conducted  a study  to  determine 

if newly  diagnosed  insulin-dependent  diabetes  patients  could  be  taught  to 

independently  prepare  and  administer  insulin  by the  15th home  health  visit.  The  study 

showed  that  17 of a sample  of 20 such  patients  were  successful  by the  15th home 

health  visit. 

Also,  38 percent  of the  HMOs  used  beneficiary  satisfaction  surveys  to  assess  adequacy 

of the  number  of home-health  visits. 

8 
 Resolving  disagreements:  HMOs  and  their  home  health  contractors  said  they 
occasionally  disagree  on  home  care  issues,  such  as when  to  terminate  visits for  a 
beneficiary,  and  whether  a beneficiary  needs  skilled  care  or custodial  care.  HMOs 
typically  terminate  home  health  visits  earlier  than  a fee-for-service  provider  would,  and 
deny,  or limit,  custodial  visits.  When  an  HMO  and  contractor  disagree  on  the  number 
and  type  of home  health  visits  a beneficiary  should  receive,  the  case  manager  typically 
consults  with  HMO  physicians  and  contractor  staff  to resolve  the  disagreement.  Then, 
if necessary,  the  HMO  medical  director  and  the  beneficiarys  physician  make  the 
decision  on  home  health  visits  needed.  Beyond  that,  five  contractors  said  they  can 
appeal  even  that  decision.  Four  of them  cited  a decisionmaker  within  the  HMO  and 
one  cited  a third-party--the  State  health  agency. 
HMOs Control  Costs By Controlling  The  Number  Of Visits  Per  Beneficiary 
HMOs  authorize fewer  vii& per  btm@iaty  than do fee-for-senice  pa 
HMOs  control  costs  by controlling  the  number  of home  health  visits  each  beneficiary 
receives.  HMOs  authorize  far  fewer  visits  per  beneficiary  than  do fee-for-service 
providers.  Forty-nine  of the  102 HMOs  that  responded  to  our  survey  provided  data 
on  the  volume  and  cost  of home  health  visits.  Data  from  those  49 HMOs  (48 percent) 
showed  that,  on  average,  they  authorized  81 percent  fewer  visits  per  beneficiary  in 
1994 than  did fee-for-service  (FFS)  providers  (see  Figure  1). 
FIGURE  1 
AVERAGE NUMBER  OF  VISITS  PER  BENEFICIARY 
FF8  HMO 
The  number  of visits  per  beneficiary  was generally  corroborated  by 30 percent  (13 of 
34) of the  HMO  contractors  who  responded  to  our  survey.  The  data  provided  by 
those  13 contractors  showed  that  Medicare  beneficiaries  received  about  74 percent 
9  fewer  visits when  home  health  care  was provided  through  an  HMO.  On  average,  the 
13 contractors  said  that  HMO  patients  received  about  11 visits  compared  to  about  42 
for  fee-for-service  patients.  The  remaining  30 contractors  did  not  respond  to  this 
survey  question. 
Comparison  of home  health visits by HMOs and fee-for-service:  One  home  health 
agency,  which  is both  an  HMO  contractor  and  a fee-for-service  provider,  gave  a case 
example  to illustrate  the  difference  in visits  authorized  by HMOs  and  those  typically 
provided  under  fee-for-service.  The  home  health  contractor  cited  a beneficiary  with  a 
history  of heart  disease  and  in need  of post-operative  home  care  for  a fractured  lower 
extremity.  Based  on  experience,  the  contractor  estimated  that  such  a beneficiary  could 
receive  as many  as  169 more  visits  under  fee-for-service  than  under  an  HMO. 
Likewise,  such  a beneficiary  would  likely  receive  80 more  aide  visits under  fee-for-
service  than  under  an HMO.  Based  on  the  example,  Table  2 shows  the  differences 
between  visits  under  fee-for-service  and  those  under  HMOs  for  a beneficiary  with  the 
same  health  conditions. 
TABLE  2 
A CONTIMCTORS  COMPARISON OF VISITS TYPICALLY  AUTHORIZED  BY 
HMOs VS. VISITS UNDER  FEE-FOR-SERVICE 
* Total reduction in visits  under HMOs could be as much as 169 visits. 
10 
 HMO philosophy  of controlling visits:  The  majority  of contractors  (24 of 43) said 
HMOs  have  a philosophy  on  home  health  care  that  results  in keeping  the  number  of 
visits  low.  First,  they  said  that  HMOs  approve  fewer  visits  and  have  tighter  controls 
on  costs  than  do  physicians  who  authorize  fee-for-service  visits.  Second,  they  said 
HMOs  place  more  emphasis  on  teaching  beneficiaries  to  independently  manage  their 
own  care  needs. 
To  illustrate  how  teaching  reduces  the  number  of visits,  one  contractor  provided  the 
following  example.  A beneficiary  has  chronic  obstructive  pulmonary  disease,  but  poor 
knowledge  of the  medications  and  proper  management  of the  disease.  Under  the  fee-
for-service  system,  that  person  would  likely  receive  2 to 4 months  of visits.  During 
those  visits,  the  contractor  would  provide  care  for  all the  beneficiarys  known  health 
problems  and  gradually  teach  the  patient  self-care.  Under  an HMO,  however,  the 
patient  would  likely  receive  visits  for  only  1 to 2 months.  During  that  time,  the  patient 
would  be  quickly  taught  self-care  and  expected  to become  independent. 
HMOs  ojkm spec@  the number and  type of vids  each  bentfkhy  will receive 
Determining  number  of home  health visits  Most  of the  102 HMOs  (about  68 
percent)  that  responded  to  our  survey  said  HMOs  determine  the  number  and  type  of 
home  health  visits  a beneficiary  will receive.  The  HMOs  said  the  decision  is typically 
made  by physicians  and  case  managers,  or by those  parties  collaboratively.  Table  3 
shows who  determines  the  number  and  type  of visits made  for  HMO  beneficiaries. 
TABLE  3 
WHO DETERMINES  THENUMBERANDTYPEOF 
VISm  HMO BENEJ?ICIARIES RECEIVE 
Number  and type of visits  Number  Percent 
determined  by: 
HMO  unilaterally  I  69  I  68 
HMO  iointlv  with  contractors 
Home  health  contractors 
Hospital  discharge  planners  I  1  I  1 
TOTAL,  I  102  I  100 
Most  of the  43 home  health  contractors  who  responded  to our  survey  verified  HMO 
statements  that  the  HMO  typically  makes  decisions  on  how  many  and  what  type  of 
home  health  visits  a beneficiary  receives.  About  54 percent  of the  contractors  (23 of 
43) said  the  HMO.,unilaterally  makes  the  decision  on  the  number  and  type  of visits. 
Eight  (18 percent)  said  the  decision  is made  jointly  by the  HMO  and  the  contractor. 
11 
 The  remaining  12 contractors  (28 percent)  said  that  contractors  decide  the  number 
and  type  of visits  each  beneficiary  receives. 
Criteria used in determinin g number  of visits  About  75 percent  of the  HMOs  who 
responded  to our  survey  questions  (77 of  102) provided  information  on  their  criteria 
for  determining  the  number  and  type  of home  health  visits  needed  by a beneficiary. 
Table  4 shows  that  almost  half  of the  HMOs  said  they  base  their  decisions  on 
beneficiary  needs  and  response  to treatment. 
About  72 percent  (31 of 43) of the  home  health  contractors  we surveyed  responded  to 
our  question  on  criteria  used  by HMOs  in determining  the  number  and  type  of visits. 
Table  4 also  shows  that  many  of the  contractors  disagreed  with  HMOs  on  the  extent 
that  certain  criteria  were  used.  The  contractors  recognized  that  more  than  one 
criterion  was typically  used.  However,  the  contractors  said  beneficiary  needs  and 
response  to  treatment  were  used  much  less than  the  HMOs  said  it was used  to 
determine  the  number  and  type  of visits  (21 percent  for  contractors  vs. 48 percent  for 
HMOs).  Likewise,  the  contractors  said  more  of the  decisions  on  the  number  and  type 
of visits were  arbitrary. 
TABLE  4 
CRITERM  FOR D-G  NUMBER  AND TYPE OF VISITS 
and  responses  to  treatments 
oals  set  in their  plan 
* The  percentages  total  more  than  100 percent  because  some 
HMOs  and  contractors  gave  multiple  responses  on  this  issue. 
12 
 Beyond the numberof vi&  severalfactor potential&in-e  the cost of home heakh 
care 
We  recognize  that  factors  other  than  the  number  of visits  might  influence  the  cost  of 
home  health  care  per  beneficiary.  The  following  examples  illustrate  how  some  factors 
could  influence  costs.  The  list of examples  are  not  intended  to  be  all inclusive.  Other 
factors  that  our  survey  respondents  did not  identify  could  also  affect  cost  of home 
health  service. 
Cost  per  visit:  The  average  cost  per  visit  for  home  health  care  provided  through 
HMOs  was  about  $20 more  than  the  cost  of such  care  provided  under  the  fee-for-
service  system.  The  average  cost  per  visit was $79 for  all  types  of home  health  care 
provided  by HMOs.  The  average  cost  per  visit under  the  fee-for-service  system  was 
$59. 
Further,  the  cost  of skilled  home  health  care  provided  by HMOs  is higher  than  that 
under  fee-for-service.  The  average  cost per  visit for  skilled  nursing  visits  provided 
through  an  HMO  was $88.  The  average  cost  for  such visits  under  fee-for-service  was 
$70. 
Depending  on  the  number  of visits  per  beneficiary,  HMOs  higher  cost  per  visit 
potentially  increases  their  cost  per  beneficiary  for  home  health  care.  Yet,  as shown 
earlier,  the  overall  cost  of home  health  care  in HMOs  is lower.  This  tends  to highlight 
the  cost  impact  of HMOs  practice  of keeping  the  number  of visits  low. 
Health  status  comparability:  Some  studies  have  concluded  that  HMO  costs  are  lower 
than  fee-for-service  costs because  HMO  beneficiaries  are  generally  healthier.  Other 
studies  showed  the  health  status  of HMO  members  to be  comparable  to that  of fee-
for-service  patients.  Therefore,  the  issue  remains  open  for  debate.  The  HCFA  is 
currently  studying  the  comparability  issue. 
Duration  of care:  Some  observers  argue  that  HMOs  may  terminate  home  health  care 
early  because  they  can  continue  to give therapy  and  other  outpatient  care  as long  as is 
needed.  In  this way, HMOs  may  be  able  to keep  the  number  of home  health  visits 
low without  adversely  affecting  patient  care.  Conversely,  home  health  agencies  might 
provide  care  to fee-for-service  beneficiaries  for  longer  periods  of time  because  therapy 
typically  is terminated  upon  discharge.  The  overall  effect  of the  two practices  on 
patient  health  and  cost  of home  health  care  is not  clear. 
Extent  of skilled  and  unskihed  care:  HMOs  give considerably  fewer  home  health  aide 
visits, but  more  skilled  nursing  visits  proportionately  than  are  provided  under  fee-for-
service.  HMOs  provide  beneficiaries  an  average  of 3 aide  visits,  compared  to  28 
under  the  fee-for-service  system.  The  3 aide  visits  represent  22 percent  of all HMO 
visits, while  the  28 fee-for-service  visits represent  47 percent.
.  L... 
13 
 HMOs  provide  an  average  of six skilled  home  health  visits  per  beneficiary.  This 
represents  about  54 percent  of all visits  to HMO  beneficiaries.  Conversely, 
beneficiaries  under  fee-for-service  receive  an  average  of about  25 skilled  home  health 
visits  per  beneficiary.  This  represents  about  43 percent  of all their  visits. 
Homebound  requirement:  About  50 percent  of the  HMOs  said  they  base  home 
health  visits  on  individual  medical  needs  rather  than  on  a beneficiarys  homebound 
status.  They  said  they  provide  home  services  when  it is cost  effective  and  beneficial  to 
do  so.  For  example,  some  HMOs  provide  home  health  care  to  prevent  or slow the 
progression  of diseases  which  might  otherwise  result  in hospitalization.  Occasionally, 
HMOs  approve  visits  as a practical  response  to a beneficiarys  lack  of transportation, 
need  for  care  on  a weekend,  or inability  to  leave  home  because  of severe  weather. 
Slightly  less than  50 percent  of the  home  health  contractors  that  responded  to  our 
survey  supported  HMOs  statements  on  eligibility  determinations.  They  said  HMOs 
do not  always  impose  the  homebound  requirement.  To  the  extent  this  practice  is 
followed,  it could  affect  the  cost  per  beneficiary  in HMOs. 
Many  HMOs  We Surveyed  Provided  Home  Health  Care  For About  One-Fourth  What 
It Would  Cost  Under  the  Fee-For-Service  System 
Forty-nine  of the  102 HMOs  (48 percent)  that  responded  to our  survey  provided  cost 

data  in response  to  our  questions.  The  49 HMOs  reported  that  their  home  health 

care  costs were  $882 per  beneficiary,  on  average,  in  1994.  This  is about  25 percent  of 

the  average  cost  of $3,464 per  beneficiary  Medicare  paid  to  7,966 home  health 

agencies  for  home  care  under  the  fee-for-service  system  in  19943. 

The  49 HMOs  that  provided  cost  data  to us represent  about  48 percent  of the  102 

HMOs  that  responded  to  our  survey.  This  is also  about  37 percent  of the  132 HMOs 

we surveyed.  Our  analyses  showed  that  respondent  and  non-respondent  HMOs 

served  a comparable  number  of enrolled  Medicare  beneficiaries.  This  indicates 

limited  possrbility  that  our  cost  data  are  biased  by any  significant  difference  between 

the  size of HMOs  that  provided  cost  data  and  those  that  did  not.  See  Appendix  A for 

our  non-response  analysis. 

Further,  the  cost  per  beneficiary  for  home  health  care  provided  through  HMOs  was 

corroborated  by  13 of the  43 home  health  contractors  (30 percent).  The  cost  data 

provided  by the  13 contractors  showed  that  home  health  care  they  provided  for  HMO 

beneficiaries  cost,  on  average,  about  23 percent  of the  cost  to Medicare  for  home 

health  care  provided  under  the  fee-for-service  system.  That  is, those  contractors 

reported  that  they  received  almost  four  times  more  per  beneficiary  for 

Medicare  fee-for-service  patients  than  for  HMO  patients. 

3The fee-for-service costs are based on claims data from HCFA.  The data reflect services billed for 
3.65 million beneficiaries. 
14  HOME  HEALTH  CONTRACIOR  OPINIONS  WIZRE MIXFD  ON THE 
ADEDUACY  OF  CARE 
Fii-Six  Percent  Said HMOs  Authorize  an Adequate  Number  of Visits 
Fifty-six  percent  of the  HMO  contractors  (24)  expressed  views  that  the  number  of 
home  health  visits  authorized  by HMOs  was adequate.  Conversely,  42 percent  (18) 
expressed  concern  about  the  number  of visits  authorized  by HMOs.  One  contractor 
did  not  express  an  opinion. 
The  24 contractors  not  concerned  about  the  adequacy  of visits  under  HMOs  gave 
various  reasons.  Those  included:  (1) that  the  contractor  was under  a capitated 
arrangement  (and  thus  the  HMO  had  less influence  over  the  number  of visits),  (2) the 
contractors  ability  to  negotiate  HMO  approval  for visits,  on  a case-by-case  basis,  and 
(3) having  a long  history  and  a good  working  relationship  with  HMOs. 
The  concerns  about  the  adequacy  of HMO-approved  visits,  as voiced  by  18 
contractors,  were  diverse.  However,  their  concerns  included  that  HMOs  have  a cap 
on visits--specifically  for  each  type  of visit,  that  HMO  physicians  under  capitation  limit 
visits  to  protect  their  interests,  and  that  HMOs  only  authorize  minimal  care. 
Fifty-One  Percent  Said HMO  Beneficiaries  Are  Disadvantaged,  Compared  to Fee-For-
service 
About  51 percent  of the  home  health  contractors  (22)  said  HMO  beneficiaries  are 
disadvantaged  in terms  of overall  home  health  care,  when  compared  to fee-for-service 
beneficiaries.  Some  contractors  noted  that  sometimes  beneficiaries  are  discharged 
from  home  health  too  early--i.e.,  before  they  achieve  independent  living  status.  Some 
contractors  said  HMO  case  managers  do not  always  take  a beneficiarys  individual 
needs  into  account  when  approving  the  number  and  type  of visits.  Other  contractors 
expressed  concern  over  HMO  practices  of rarely  approving  home  health  aide  visits. 
Finally,  some  contractors  were  concerned  that  HMOs  are  so concerned  with  keeping 
visits  (e.g.,cost)  down  that  patient  care  could  be  interrupted,  causing  patient  progress 
to regress.  The  contractors  noted  that  home  health  visits  could  be  interrupted  until  a 
contractor  could  justify  additional  visits. 
Thirty  Percent  Said HMO  Beneficiaries  Are  Advantaged,  Compared  to Fee-For-
service 
About  30 percent  of the  home  health  contractors  (13)  said  beneficiaries  receiving 
home  health  care  through  an  HMO  have  an  advantage  over  those  served  through  the 
fee-for-service  system.  For  example,  they  said  (1) overall  care  under  HMOs  is more 
consistent  and  thorough,  (2) beneficiaries  benefit  from  HMO  case  management 
services,  and  (3) HMOs  often  do not  require  a beneficiary  to be  homebound  to 
receive  home  health  cafe. 
15 
 Another  contractor,  not  included  in the  13 above,  did not  like  HMO  policies  for 
controlling  or  limiting  visits.  This  contractor  admitted,  however,  that  HMO 
beneficiaries  are  advantaged  because  HMOs  do not  always  require  a beneficiary  to be 
homebound  to  receive  home  health  care. 
Nineteen  Percent  Said HMO  Beneficiaries  Are  Neither  Advantaged  nor 
Disadvantaged 
The  remaining  19 percent  (8 of 43) of the  home  health  contractors  said  Medicare 
beneficiaries  receive  essentially  the  same  home  health  care  through  HMOs  and  fee-
for-service  providers.  While  some  of those  contractors  cited  particular  advantages  and 
disadvantages,  they  all concluded  that,  on balance,  the  care  was about  the  same. 
AGENCY  COMME~ 
The  HCFA  had  no  comments  on  this  report. 
16 
 APPENDIX  A 
ANALYSIS  OF  RESPONDENTS  VS. NON-RESPONDENTS 
A consideration  in surveys  of this  type  is whether  the  results  may  be biased  by 
significant  differences  between  respondents  and  non-respondents.  To  determine 
whether  significant  differences  exist in this  survey,  we compared  average  enrollment 
for  those  HMOs  that  responded  and  those  HMOs  that  did not  respond  to our  survey. 
Our  analysis  revealed  no  significant  difference.  Therefore,  related  to HMO  size, the 
possibility  of bias  in the  results  of this  study  due  to non-response  is limited. 
To  test  further  for bias  in respondents  versus  non-respondents,  we used  the  T-test  for 
Large  Sample  Inferences  about  the  differences  between  two sample  means.  In this 
case  the  two samples  are  HMOs  that  provided  cost  data  and  those  HMOs  that  did 
not.  The  means  we tested  were  the  average  enrollment  for  respondents  versus 
average  enrollment  for  non-respondents.  We  can  conclude  through  the  use of this  test 
that  there  is not  a significant  difference  in the  HMO  respondents  and  non-respondents 
by size of agency. 
The  results  of the  T-test  are  a Z-score  of 0.3110 and  a Z-alpha  by 2 value  of  1.645. 
With  this  result,  we can  be  95 percent  confident  that  we can  reject  the  null  hypothesis 
and  conclude  that  there  is not  a significant  difference,  by agency  size, between  HMOs 
that  provided  cost  data  and  HMOs  that  did not  provide  cost  data. 
We  are  reporting  results  of our  analysis  of risk  HMOs  nationwide. 
A-l