Department of Health and Human Services

OFFICE OF 

INSPECTOR GENERAL 

E H H
FFECT OF THE  OME  EALTH 

P P S
ROSPECTIVE  AYMENT  YSTEM 

Q H
ON THE  UALITY OF  OME 

H C
EALTH  ARE

Daniel R. Levinson

Inspector General 

January 2006

OEI-01-04-00160
 Office of Inspector General 

http://oig.hhs.gov 
The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, 
as amended, is to protect the integrity of the Department of Health and Human Services 
(HHS) programs, as well as the health and welfare of beneficiaries served by those 
programs.  This statutory mission is carried out through a nationwide network of audits, 
investigations, and inspections conducted by the following operating components: 
Office of Audit Services  Services 
The Office of Audit Services (OAS) provides all auditing services for HHS, either by 
conducting audits with its own audit resources or by overseeing audit work done by others. 
Audits examine the performance of HHS programs and/or its grantees and contractors 
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assessments of HHS programs and operations in order to reduce waste, abuse, and 
mismanagement and to promote economy and efficiency throughout HHS. 
Office of Evaluation and Inspections 
The Office of Evaluation and Inspections (OEI) conducts management and program 
evaluations (called inspections) that focus on issues of concern to HHS, Congress, and 
the public.  The findings and recommendations contained in the inspections generate 
rapid, accurate, and up-to-date information on the efficiency, vulnerability, and 
effectiveness of departmental programs.  OEI also oversees State Medicaid Fraud 
Control units which investigate and prosecute fraud and patient abuse in the Medicaid 
program. 
Office of Investigations 
The Office of Investigations (OI) conducts criminal, civil, and administrative 
investigations of allegations of wrongdoing in HHS programs or to HHS beneficiaries 
and of unjust enrichment by providers.  The investigative efforts of OI lead to criminal 
convictions, administrative sanctions, or civil monetary penalties. 
Office of Counsel to the Inspector General 
The Office of Counsel to the Inspector General (OCIG) provides general legal services to 
OIG, rendering advice and opinions on HHS programs and operations and providing all 
legal support in OIG's internal operations. OCIG imposes program exclusions and civil 
monetary penalties on health care providers and litigates those actions within HHS. 
OCIG also represents OIG in the global settlement of cases arising under the Civil False 
Claims Act, develops and monitors corporate integrity agreements, develops compliance 
program guidances, renders advisory opinions on OIG sanctions to the health care 
community, and issues fraud alerts and other industry guidance.  E X E C U T I V E   S U M M A R Y
  EIE NXX TEE RCC OUU DTT UII VVC EET   I SSO UUN MM  MM AA RR YY   

OBJECTIVE 
To determine how hospital readmission and emergency department visit 
rates for Medicare beneficiaries discharged from hospitals to home 
health care have changed since implementation of the home health 
prospective payment system (PPS). 
BACKGROUND 
As a result of the Balanced Budget Act of 1997, the Centers for 
Medicare & Medicaid Services (CMS) implemented the PPS for 
Medicare home health care services in 2000.  PPS was mandated in 
response to rapidly growing home health spending that had resulted 
from financial incentives under the previous cost-based system. Under 
the PPS, home health agencies receive a unit of payment that reflects a 
national 60-day episode rate with applicable adjustments.  That 
payment is designed to reflect the clinical and functional severity of a 
beneficiarys condition. 
The payment for an episode of care under the PPS can create a financial 
incentive to limit visits to patients, thus raising questions about how 
often home health agency staff check the health conditions of their 
patients. CMS, the Government Accountability Office, and the 
Medicare Payment Advisory Commission have all stressed the need to 
monitor outcomes of care following the implementation of the PPS 
because of this incentive.  Increases in the rates of hospital readmission 
and emergency department visits are indicators of poor quality of care. 
We used Medicare claims data and data on beneficiaries clinical and 
functional characteristics to measure the rate of readmissions to 
hospitals and the rate of visits to hospital emergency departments. We 
analyzed these data for a consistent 3-month period (AprilJune) for 
2000 (which served as the baseline), 2001, 2002, and 2003. 
FINDINGS 
Hospital readmission rates remain unchanged. Overall hospital 
readmission rates for Medicare home health beneficiaries discharged 
from hospitals remained at 47 percent from 2000 through 2003.  Our 
analysis showed no consistent trend in hospital readmission rates for 
beneficiaries with at-risk diagnoses, although there were small 
increases in readmission rates for beneficiaries with renal failure, 
OEI-01-04-00160  THE EFFECT OF THE HOME HEALTH PROSPECTIVE PAYMENT SYSTEM ON THE QUALITY OF HOME HEALTH CARE  i  E X E C U T I V E   S U M M A R Y  
multiple sclerosis, and pulmonary disease.  Readmission rates due to 
preventable adverse events remained low.  
Minimal changes in emergency department visits.  The overall rate of 
emergency department visits for Medicare home health beneficiaries 
discharged from hospitals increased slightly, from 29 to 30 percent, from 
2000 through 2003. Our analysis showed a slight increase in rates of 
emergency department visits for beneficiaries with at-risk diagnoses, 
including renal failure and heart failure.  The rates of emergency 
department visits due to preventable adverse events remained low, at 
less than 1 percent.  
CONCLUSION 
Our analysis showed little overall change in hospital readmission rates 
and emergency department visit rates following the implementation of 
the home health PPS.  This result suggests that the change in payment 
systems has not led to increased use of hospital and emergency 
department services. 
At the same time, however, our analysis shows that beneficiaries with 
certain diagnoses, such as renal failure, pulmonary disease, and 
multiple sclerosis, had higher hospital readmission rates and more 
visits to emergency departments than other beneficiaries.   
Consequently, it would be prudent to continue to monitor indicators of 
quality in home health care. 
AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 
RESPONSE 
In its comments to the draft report, CMS agreed with our findings of 
little change in hospital readmission and emergency department visit 
rates following the implementation of PPS.  The agency also agreed 
with our observation that it would be prudent to continue monitoring 
indicators of quality in home health care.  CMS stated that the results 
presented in the report will assist it in measuring and reporting on the 
performance of home health care. 
We clarified the report background based on technical comments that 
CMS provided.  The full text of CMSs comments is included as 
Appendix A. 
OEI-01-04-00160  THE EFFECT OF THE HOME HEALTH PROSPECTIVE PAYMENT SYSTEM ON THE QUALITY OF HOME HEALTH CARE  ii    T A B L E   O F   C O N T E N T S  

EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  i

I N T RO DUC T IO N  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  1

F I N D IN G S  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  5

Hospital readmission rates unchanged  . . . . . . . . . . . . . . . . . . . . . .  5

Minimal changes inemergency department visitrates. . . . . . . . . .  7

CONC LUSION  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  9

E N D NO T ES  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  10

APPENDIX A:  AGENCY COMMENTS . . . . . . . . . . . . . . . . . . . . .  12

A C K NO WL E D G M E N T S  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  15
 I N T R O D U C T I O N
  II NN TT RR OO DD UU CC TT II OO NN   

OBJECTIVE 
To determine how hospital readmission and emergency department visit 
rates for Medicare beneficiaries discharged from hospitals to home 
health care have changed since implementation of the home health 
prospective payment system (PPS). 
BACKGROUND 
The Home Health Prospective Payment System 
Prior to 1997, Medicare paid for home health services under a  
cost-based system. That payment system created an incentive for home 
health agencies (HHA) to increase their Medicare revenues by 
delivering more services than necessary.  From 1990 to 1997, Medicares 
spending on home health services rose from $3.7 billion to $16.7 billion, 
and the number of HHAs increased from 5,730 to 10,807.  In 1997, 
almost 3.6 million beneficiaries received home health services.1 
In response to this rapidly growing home health spending, Congress 
enacted the Balanced Budget Act of 1997 (BBA),2 which required the 
Centers for Medicare & Medicaid Services (CMS) to implement a PPS 
for home health services by October 1, 1999.  In 1999, Congress passed 
the Omnibus Consolidated and Emergency Supplemental 
Appropriations Act, delaying the implementation of home health PPS 
until October 1, 2000. The BBA also called for the implementation of an 
interim payment system (IPS), which revised the payment limits on 
home health services as a transition step to the new PPS.  Beginning in 
October 1997, the IPS subjected Medicare HHAs to a new payment limit 
that was based on an aggregate per-beneficiary amount.  This cap 
applied to an agencys total Medicare payments and did not limit 
payments for specific beneficiaries. 
After implementation of the IPS, Medicares spending on home health 
services fell to $7.9 billion in 1999.3  By that same year, the number of 
HHAs decreased to about 7,830,4 and the number of beneficiaries 
receiving these services fell to 2.7 million.5 
The home health PPS replaced the IPS on October 1, 2000.  Under the 
PPS, agencies receive a payment for each 60-day episode of care.  For 
calendar year 2005, the base payment for each episode is $2,264.28.  
That base payment is adjusted by placing the beneficiary into 1 of 80 
Home Health Resource Groups (HHRG), which reflect the clinical and 
functional severity of a beneficiarys condition and recent use of other 
OEI-01-04-00160  THE EFFECT OF THE HOME HEALTH PROSPECTIVE PAYMENT SYSTEM ON THE QUALITY OF HOME HEALTH CARE  1  I N T R O D
 U C T I O N  
health services.  In addition, the base rate is affected by wage 
adjustment factors (wage index) to account for area wage differences. 
The Outcome and Assessment Information Set  
The Outcome and Assessment Information Set (OASIS) is a clinical 
assessment tool that evaluates patients and measures outcomes 
through the use of 79 demographic, clinical, and functional data items.  
A registered nurse or rehabilitation therapy skilled professional 
conducts a comprehensive assessment of a beneficiary receiving home 
health services when specific events occur and at the end of each 60-day 
cycle of home health services.  This assessment includes collection of 
OASIS data.6,7 
The OASIS serves two major purposes.  First, the PPS uses the OASIS 
data to determine into which HHRG a beneficiary falls.  Second, the 
OASIS provides a mechanism to monitor quality. 
The OASIS captures information regarding hospital readmissions, visits 
to emergency departments, and adverse events that could cause a 
hospital readmission or emergency department visit.  Adverse events 
include:  (1) improper medication administration or side effects, toxicity, 
and anaphylaxis; (2) injury caused by a fall or accident at home;   
(3) wound infection, deteriorating wound status, and new lesion/ulcer; 
and (4) hypo/hyperglycemia or diabetes out of control.  
Earlier Reports on the Effect of Home Health Payments on the Quality of 
Care 
In 1999, OIG assessed how the IPS affected beneficiaries access to 
home health care following discharge from hospitals.  In that report, 
discharge planners volunteered concerns that some beneficiaries may 
not have received the care they needed under the IPS.8 
In response to those concerns, OIG assessed the impact of the IPS on 
readmissions and emergency department visits. That report, released 
in 2000, found that these rates had decreased since implementation of 
the IPS in 1999.9 
Concerns About Implementation of the Home Health PPS and Quality of 
Care 
On its Home Health Compare Web site, CMS states that even with good 
home health care, beneficiaries may require readmission or an 
emergency department visit.10  Home Health Compare also advises 
beneficiaries that some inpatient hospital care [and emergency care] 
OEI-01-04-00160  THE EFFECT OF THE HOME HEALTH PROSPECTIVE PAYMENT SYSTEM ON THE QUALITY OF HOME HEALTH CARE  2  I N T R O D U C T I O N  
may be avoided if the home health staff is doing a good job at checking 
your health condition at each visit to detect problems early. 
The home health PPS creates a financial incentive to limit visits, thus 
raising questions about how often HHA staff check the health conditions 
of their patients.  Increases in readmission rates or emergency 
department visits could indicate poor quality care.  The incentive 
created by the PPS calls for a system to ensure that beneficiaries receive 
adequate visits. 
CMS, the Government Accountability Office, and the Medicare Payment 
Advisory Commission (MedPAC) have stated that monitoring outcomes 
of care following implementation of the PPS is important because of 
incentives in the payment system to lower the level of services 
delivered.11  MedPAC has also cautioned that the ambiguous definition 
of the home health benefit, along with the 60-day episode of care and 
broad range of services offered, can lead to greater opportunities for 
restricting care in home health than in other care settings. 
METHODOLOGY 
We based our analysis on a database created from the OASIS and the 
National Claims History (NCH) file.  The NCH file incorporates   
100 percent of home health claims, 100 percent of inpatient hospital 
claims, and 100 percent of outpatient hospital claims. 
We identified all beneficiaries who began a new home health episode 
during a consistent 3-month period (April 1 through June 30) for each 
year (2000 through 2003).  The 2000 data serve as our pre-PPS baseline. 
To qualify as a new home health episode, beneficiaries must have had 
no home health services billed to Medicare in the 60 days prior to the 
episode start date.  After we identified these episodes, we used inpatient 
claims to limit the dataset to beneficiaries who had been discharged 
from hospitals within the 30 days prior to starting home health care.   
For each episode, we used claims data to determine if the beneficiary 
had a readmission or an emergency department visit.  We considered a 
readmission or emergency department visit to be associated with the 
episode if (1) it occurred during the initial 60-day home health episode 
of care, or (2) it occurred within 30 days after the initial episode.  We 
extended the length of time to capture any beneficiary whose hospital  
readmission or emergency department visit occurred in the month 
immediately following the conclusion of his or her home health services. 
OEI-01-04-00160  THE EFFECT OF THE HOME HEALTH PROSPECTIVE PAYMENT SYSTEM ON THE QUALITY OF HOME HEALTH CARE  3  We analyzed only the first readmission and/or emergency department 
visit for each home health episode. However, we calculated the 
readmission rate separately from the emergency department visit rate.  
Thus, if a beneficiary had both a readmission and an emergency 
department visit, we included each in the rate calculations. 
For each year, we calculated hospital readmission and emergency 
department rates by dividing the number of beneficiaries who were 
discharged from the hospital and received home health services and who 
were readmitted to hospitals or visited emergency departments by the 
total number of beneficiaries receiving home health services.  
We identified the primary diagnosis associated with each readmission 
and emergency department visit.  We then calculated the percentage of 
those beneficiaries who had at-risk diagnoses12 and the percentage who 
were readmitted and/or visited an emergency department due to 
preventable adverse events.  To enable us to compare over time, we used 
the same International Classification of Diseases (ICD-9) and Diagnosis 
Related Groups (DRG) codes used in the 2000 OIG inspection.  That 
report looked at numerous studies that analyzed the effects of the IPS 
and the adequacy of home health care to identify diagnoses and patient 
types that could have been at risk of receiving inadequate care.13 
To parallel our previous inspection, we limited our analysis to Medicare 
beneficiaries who received home health services following 
hospitalization.  During the period of our analysis, this population 
ranged from 64 to 66 percent of the universe of beneficiaries receiving 
home health services.14  Medicare has no prior hospitalization 
requirement for home health services, and beneficiaries come from 
nursing homes and the community as well as from hospitals.   
We also limited our analysis to describing how the rates of hospital 
readmission and emergency department visits for Medicare 
beneficiaries who received home health services changed since 
implementation of the PPS.  Our analysis does not address the cause of 
any changes. 
We conducted this review in accordance with the Quality Standards for 
Inspections issued by the Presidents Council on Integrity and 
Efficiency and the Executive Council on Integrity and Efficiency. 
OEI-01-04-00160  THE EFFECT OF THE HOME HEALTH PROSPECTIVE PAYMENT SYSTEM ON THE QUALITY OF HOME HEALTH CARE  4    F I N D I N G S

Hospital Readmission Rates  Overall hospital readmission rates for Medicare 
Remained Unchanged  beneficiaries discharged from hospitals who 
received home health services remained 
unchanged from 2000 to 2003.  In 2000, hospital readmission rates 
under IPS were about 47 percent.  The readmission rates held steady 
from 2001 to 2003 after PPS replaced IPS.  (See Table 1.)  
Table 1 
Hospital Readmission Rates for Medicare Home Health Beneficiaries 
IPS  PPS 
Difference 
2000  2001  2002  2003  20002003 
Percentage of Medicare 
home health beneficiaries  47%  47%  47%  47%  0%
readmitted to the hospital 
 Source:  OIG analysis of National Claims History file data, 2005. 
No consistent trend in hospital readmission rates by beneficiary diagnosis 
Based on a previous OIG report that examined the effects of IPS and the 
adequacy of home health care,15 we included Medicare beneficiaries 
with the eight initial hospital diagnoses listed in Table 2 as at risk for 
receiving inadequate care. Our analysis showed no consistent trend in 
hospital readmission rates for beneficiaries with at-risk diagnoses from 
2000 through 2003.16  While multiple sclerosis and pulmonary disease 
each showed 5 percentage point increases, diabetes and Alzheimers 
remained the same and dementia decreased by 1 percentage point. 
Table 2 
Percentage of At-Risk Medicare Home Health Beneficiaries 
Readmitted to the Hospital 
IPS  PPS  Difference 
Diagnosis and ICD-9 Code  
2000  2001  2002  2003  20002003 
Dementia  294   19%  18%  17%  18%  -1% 
Renal failure  586   41%  46%  45%  45%  +4% 
Diabetes  250   27%  28%  28%  27%  0% 
Alzheimers  331  16%  17%  16%  16%  0% 
Heart failure  428   38%  38%  38%  38%  0% 
Multiple sclerosis  340   7%  12%  11%  12%  +5% 
Pulmonary disease  494  31%  33%  35%  36%  +5% 
Quadriplegia  344   20%  19%  22%  18%  -2% 
Source: OIG analysis of National Claims History file data, 2005. 
OEI-01-04-00160  THE EFFECT OF THE HOME HEALTH PROSPECTIVE PAYMENT SYSTEM ON THE QUALITY OF HOME HEALTH CARE  5  F I N D I N G S  
We examined the five most common DRGs associated with Medicare 
beneficiaries who were readmitted to the hospital.  The ranking of the 
five most common initial hospital DRGs for Medicare home health 
beneficiaries remained the same from 2000 through 2003.  (See Table 3.) 
In addition, the rates of readmission for beneficiaries with those 
diagnoses remained stable. 
Table 3 
Highest Volume Diagnosis Related Groups for Medicare Home Health 
Beneficiaries Readmitted to Hospitals 
IPS  PPS  Difference 
Initial Hospital Diagnosis and DRG* 
2000  2001  2002  2003  20002003 
Heart failure and shock  127  8%  8%  7%  7%  -1% 
Rehabilitation  462  6%  7%  7%  7%  +1% 
Simple pneumonia and pleurisy  089  4%  4%  4%  4%  0% 
Chronic obstructive pulmonary disease  088  4%  4%  4%  4%  0% 
Major joint and limb reattachment  209  4%  4%  4%  4%  0%
 * Refers to DRG for the first hospital admission. 
Source:  OIG analysis of National Claims History file data, 2005. 
Stability in readmission rates for preventable adverse events 
The OASIS dataset captures information on whether beneficiaries 
readmitted to the hospital needed care because of one of four adverse 
events:  (1) improper medication administration, medication side effects, 
toxicity, and anaphylaxis; (2) injury caused by fall or accident at home; 
(3) wound infection, deteriorating wound status, and new lesion/ulcer; 
and (4) hypo/hyperglycemia or diabetes out of control.  The readmission 
rate for wound infection is about 2 percent, and the rate for the other 
three adverse events is less than 1 percent.  Readmission rates for two 
of the four adverse events remained the same and the other two 
changed by less than 0.2 percent from 2000 to 2003. 
OEI-01-04-00160  THE EFFECT OF THE HOME HEALTH PROSPECTIVE PAYMENT SYSTEM ON THE QUALITY OF HOME HEALTH CARE  6  F I N D I N G S  
Minimal Changes in Emergency Department  The rate of emergency department 
Visit Rates  visits for Medicare home health
beneficiaries discharged from 
hospitals increased slightly from 2000 to 2003.  When Medicare 
reimbursed home health agencies under IPS in 2000, 29 percent of 
home health beneficiaries had an emergency department visit.  After 
the PPS took effect, the percentage stayed the same in 2001 and 2002, 
but increased to 30 percent in 2003.  (See Table 4.) 
Table 4 
Emergency Department Visit Rates for Medicare Home Health Beneficiaries 
IPS  PPS 
Difference 
2000  2001  2002  2003 
20002003 
Percentage of Medicare home 
29%  29%  29%  30%  +1%
health beneficiaries with visits to 
emergency department 
 Source: OIG analysis of National Claims History file data, 2005. 
Little change in rates of emergency department visits by beneficiary 
diagnosis 
The percentages of home health beneficiaries with at-risk diagnoses 
who had an emergency department visit increased slightly from 2000 to 
2003. Table 5 shows that four of the eight diagnoses increased by as 
little as 1 percent.  Beneficiaries with renal failure had the largest 
increase, from 22 percent to 26 percent.  
Table 5 
Percentage of At-Risk Medicare Home Health Beneficiaries Who Made 
Emergency Department Visits 
IPS  PPS 
Diagnosis and ICD-9 Code  Difference 
2000  2001  2002  2003 
20002003 
Dementia  294   13%  14%  13%  14%  +1% 
Renal failure  586   22%  28%  28%  26%  +4% 
Diabetes  250   18%  19%  19%  20%  +2% 
Alzheimers  331  11%  13%  12%  12%  +1% 
Heart failure  428   19%  22%  22%  22%  +3% 
Multiple sclerosis  340   9%  10%  9%  10%  +1% 
Pulmonary disease  494  19%  19%  20%  20%  +1% 
Quadriplegia  344   13%  15%  15%  15%  +2%
 Source: OIG analysis of National Claims History file data, 2005. 
OEI-01-04-00160  THE EFFECT OF THE HOME HEALTH PROSPECTIVE PAYMENT SYSTEM ON THE QUALITY OF HOME HEALTH CARE  7  F I N D I N G S  
We examined the five most common DRGs associated with Medicare 
beneficiaries who visited the emergency department.  The ranking of 
the five most common initial hospital diagnoses for Medicare home 
health beneficiaries changed slightly before and after the 
implementation of the PPS.  The top four diagnoses remained the same. 
Specific cerebrovascular disorders (DRG 014) had the fifth-highest 
volume in 2000, although it dropped to sixth by 2003.  In addition, the 
rates of emergency department visits for beneficiaries in the five 
diagnoses listed remained stable. (See Table 6.)   
Table 6 
Highest Volume DRGs for Medicare Home Health 
Beneficiaries With Emergency Department Visits 
IPS  PPS  Difference 
Initial Hospital Diagnosis and DRG* 
2000  2001  2002  2003  20002003 
Rehabilitation  462  7%  7%  7%  8%  +1% 
Heart failure and shock  127  7%  6%  6%  6%  -1% 
Major joint and limb reattachment  209  4%  5%  5%  5%  +1% 
Simple pneumonia and pleurisy  089  4%  4%  4%  4%  0% 
Chronic obstructive pulmonary disease  088  3%  4%  3%  4%  +1% 
* Refers to DRG for the first hospital admission  
Source:  OIG analysis of National Claims History file data, 2005. 
Stability in emergency department visit rates for preventable adverse events 
The rates for emergency department visits due to the four measured 
preventable adverse events for home health beneficiaries remained 
stable from 2000 to 2003.  The emergency department visit rates for all 
four adverse events were less than 1 percent.  Emergency department 
visit rates for home health beneficiaries for two of the adverse events 
(wound infection and hypo/hyperglycemia) increased 0.1 percent in 
4 years, while emergency department visit rates for the other two 
(improper medication administration and injury caused by fall or 
accident at home) remained the same. 
OEI-01-04-00160  THE EFFECT OF THE HOME HEALTH PROSPECTIVE PAYMENT SYSTEM ON THE QUALITY OF HOME HEALTH CARE  8    C O N C L U S I O N  

Our analysis shows little overall change in hospital readmission rates 
and emergency department visit rates following the implementation of 
the home health PPS for beneficiaries discharged from hospitals.  This 
result suggests that the change in payment systems has not led to 
increased use of hospital and emergency services. 
At the same time, however, our analysis shows that beneficiaries with 
certain diagnoses are being readmitted to hospitals and visiting 
emergency departments to a greater extent than prior to the PPS.  Most 
notably, beneficiaries with a primary diagnosis of renal failure showed 
increases in readmission rates and use of emergency departments. 
Beneficiaries with a primary diagnosis of pulmonary disease or multiple 
sclerosis also showed increased hospital readmission rates and, to a 
lesser degree, increased rates of emergency department usage. 
Consequently, it would be prudent to monitor indicators of quality in 
home health care, such as readmission rates and use of emergency 
departments, on an ongoing basis. 
AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 
RESPONSE 
In its comments to the draft report, CMS agreed with our findings that 
there has been little change in hospital readmission rates and 
emergency department visit rates following the implementation of PPS. 
The agency also agreed with our observation that it would be prudent to 
continue monitoring indicators of quality in home health care in light of 
our analysis that showed that beneficiaries with certain diagnoses had 
higher hospital readmission rates and more visits to emergency 
departments than other beneficiaries.  CMS stated that the results 
presented in the report will assist it in measuring and reporting on the 
performance of home health care. 
We clarified the report background based on technical comments that 
CMS provided.  The full text of CMSs comments is included as 
Appendix A. 
OEI-01-04-00160  THE EFFECT OF THE HOME HEALTH PROSPECTIVE PAYMENT SYSTEM ON THE QUALITY OF HOME HEALTH CARE  9    E N D N O T E S  

1 Centers for Medicare & Medicaid Services, Health Care Financing 
Review: Medicare and Medicaid Statistical Supplement:  2001. 
2  P. L. 105-33. 
3 Centers for Medicare & Medicaid Services, Health Care Financing 
Review: Medicare and Medicaid Statistical Supplement:  2001. 
4 http://www.nahc.org/NAHC/LegReg/Crisis/hhasbystate.html. 
5 Centers for Medicare & Medicaid Services, Health Care Financing 
Review: Medicare and Medicaid Statistical Supplement:  2001. 
6 42 CFR 484.55(a)(1) and (2) Condition of Participation:  Comprehensive 
assessment of patients. 
7 These events and intervals are the start of care, end of each 60-day 
home health episode, time of a transfer to an inpatient facility, 
resumption of home health services after a hospitalization, hospital 
discharge, and death at home.   
8 Department of Health and Human Services, Office of Inspector General, 
Final Report, Medicare Beneficiary Access to Home Health Agencies, 
OEI-02-99-00530, October 1999. 
9 Department of Health and Human Services, Office of Inspector General, 
Final Report, Adequacy of Home Health Services:  Hospital      
Re-Admissions and Emergency Room Visits, OEI-02-99-00531, 
September 2000. 
10 www.medicare.gov/HHCompare/Home.asp, accessed August 1, 2005. 
11 Centers for Medicare & Medicaid Services PPS concerns found in the 
agencys comments to the Department of Health and Human Services, 
Office of Inspector Generals Final Report, Adequacy of Home Health 
Services:  Hospital Re-Admissions and Emergency Room Visits, 
OEI-02-99-00531, September 2000, p. 19. 
OEI-01-04-00160  THE EFFECT OF THE HOME HEALTH PROSPECTIVE PAYMENT SYSTEM ON THE QUALITY OF HOME HEALTH CARE  10     Government Accountability Offices PPS concerns found in Medicare 
Home Health:  Prospective Payment System Will Need Refinement as 
Data Become Available, No. HEHS-00-9, April 2000. 
   Medicare Prospective Payment Assessment Commissions PPS concerns 
found in Report to the Congress:  Medicare Payment Policy, March 
2004. 
12 A previous OIG report identified eight initial hospital diagnoses as at 
risk for receiving inadequate care (dementia, renal failure, diabetes, 
Alzheimers, heart failure, multiple sclerosis, pulmonary disease, 
quadriplegia). 
13 Department of Health and Human Services, Office of Inspector 
General, Final Report, Medicare Beneficiary Access to Home Health 
Agencies, OEI-02-99-00530, October 1999. 
Government Accountability Office, Interim Payment System for 
Home Health Agencies, No. HEHS-98-234, August 6, 1998. 

Government Accountability Office, Closures Continue, With Little

Evidence Beneficiary Access Is Impaired, No. HEHS-99-120,       

May 1999. 

Medicare Prospective Payment Assessment Commission, Report to

the Congress:  Post-Acute Care Providers:  Moving Toward Prospective

Payment, March 1999. 

14 Department of Health and Human Services, Office of Inspector 
General, analysis of National Claims History file data 2004.        
(2000:  64%, 2001: 66%, 2002: 65%, 2003: 64%) 
15 Department of Health and Human Services, Office of Inspector 
General, Final Report, Adequacy of Home Health Services:  Hospital 
Re-Admissions and Emergency Room Visits, OEI-02-99-00531, 
September 2000. 
16 The ICD-9 codes from many of the beneficiaries in our 2000 data were 
missing.  These omissions may explain some of the immediate changes 
in the percentages from the IPS in 2000 to PPS in 2001. 
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 A G E N C Y   C O M M E N T S

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This report was prepared under the direction of Joyce M. Greenleaf, 
Regional Inspector General for Evaluation and Inspections in the 
Boston regional office, and Russell W. Hereford, Assistant Regional 
Inspector General.  Other principal Office of Evaluation and Inspections 
staff who contributed include: 
Danielle Fletcher, Project Leader 
Sandy Khoury, Program Specialist 
Tricia Davis, Director, Medicare and Medicaid Branch 
Technical Assistance  
Scott Horning, Program Analyst 
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