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 OIG’s 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. 

OEI’s 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 person’s 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 

nation’s 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 feefor-service system. The average was 11 visits for HMOs and 58 visits for fee-forservice. 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 

THE NUMBER OF VISlTS AUTHORIZED BY HMOs 

About 56 percent of the home health contractors we surveyed 

number of visits authorized by $IMOs was adequate. However, 

contractors said HMO beneficiaries are disadvantaged in terms 

care, when compared to fee-for-service beneficiaries. 

AGENCY COMMENTS 

The HCFA had no comments on this report. 

-. -. 

ON ADEQUACY OF 

expressed views that the 

51 percent of the 

of overall home health 

ii 
TABLE OF CONTENTS 

PAGE 

EXECUTIVESUMMARY 

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

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

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

Contractors ................................................... 5 

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

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

costs ....................................................... 14 

ADEQUACY OF CARE ........................................... 15 

APPENDIX 

Analysis of Respondents vs. Non-Respondents ....................... A-l 
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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 person’s 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-forservice 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 
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Growth of Home Health Care 

Medicare expenditures for’home health care increased dramatically in recent years. 

To illustrate, between 1990 and 1995 Medicare expenditures for home health care 

grew from $3.7 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 nation’s 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-forservice2. 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 
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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 President’s 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 

nation’s Medicare and Medicaid beneficiaries and program expenditures. 

We conducted this inspection in accordance with the Quaky Stundardrifor Inspections 

issued by the President’s 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 to’HHAs 

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 forselectinghomehealthconmcmm 

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. 
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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-forservice 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 beneficiary’s 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-forservice 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 CONTIMCTOR’S 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 feefor-service system, that person would likely receive 2 to 4 months of visits. During 

those visits, the contractor would provide care for all the beneficiary’s 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-forservice 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 feefor-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-forservice. 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 beneficiary’s 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 beneficiary’s 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 CONTRACI’OR 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 

contractor’s 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-Forservice 

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 beneficiary’s 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-Forservice 

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 feefor-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