Department of Health and Human Services 

OFFICE OF 

INSPECTOR GENERAL 

JUNE GIBBS BROWN 

Inspector General 

OCTOBER 1999 

OEI-02-99-00530 

Medicare Beneficiary Access 

to Home Health Agencies 
OFFICE OF INSPECTOR 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, 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 Evaluation and Inspections 

The Office of Evaluation and Inspections (OEI) is one of several components of the Office of 

Inspector General. It 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 New York regional office prepared this report under the direction of John I. Molnar, 

Regional Inspector General, and Renee C. Dunn, Deputy Regional Inspector General. Principal 

OEI staff included: 

REGION 

Demetra Arapakos, Project Leader

Lucille Cop

Miriam Gareau

Vincent Greiber

Ellen Vinkey

HEADQUARTERS 

Tricia Davis, Program Specialist

Scott Horning

Linda Moscoe

Brian Ritchie

To obtain copies of this report, please call the New York Regional Office at (212) 264-2000. 

Reports are also available on the World Wide Web at our home page address: 

http://www.dhhs.gov/progorg/oei 
SUMMARY 

This inspection assesses how the interim payment system (IPS) for home health agencies is affecting 

Medicare beneficiaries’ access to home health care for patients discharged from hospitals. Our 

analysis is based on a telephone survey of a national random sample of 181 discharge planners and 

Medicare home health data. We found that 85 percent of discharge planners report that Medicare 

patients are able to obtain home health care when they need it, three quarters of the discharge 

planners need to contact only one home health care agency on average to obtain care for their 

patients, and 83 percent say home health care agencies either never or infrequently refuse to take 

Medicare patients. We also learned that home health agencies have changed their admissions 

practices over the past two years by requiring more information before accepting a prospective 

patient. Those discharge planners who indicate that they had problems in placing some home health 

care patients attribute it to Medicare eligibility requirements as well as the interim payment rate. 

PURPOSE 

To assess how the interim payment system (IPS) for home health agencies is affecting 

Medicare beneficiaries’ access to home health care, primarily for patients discharged from 

hospitals. 

BACKGROUND 

The Health Care Financing Administration (HCFA) asked the Office of Inspector General 

(OIG) to assess if the interim payment system for home health agencies is causing access 

problems for Medicare beneficiaries. In addition, HCFA also asked the OIG to examine 

home health payment error rates, repeating its 1997 audit of error rates in California, 

Illinois, New York, and Texas. The home health industry as well as beneficiary advocates 

have raised concerns that the IPS is adversely affecting Medicare beneficiaries’ access to 

home health care. 

Medicare Home Health Care Home health care consists of skilled nursing, therapy 

(physical, occupational, and speech) and certain related services including aide services 

furnished in a patient’s home. Services are typically provided by registered nurses, 

therapists, social workers, and home health aides employed by a home health agency 

(HHA). These agencies can be freestanding or facility-based and classified as not-forprofit, proprietary, or governmental. Studies have suggested that most high users of home 

health care have long-term care needs. More than nine in ten high users have limitations in 

activities of daily living, and most have multiple, complex medical needs. 

Medicare will pay for home health care only if it is reasonable and necessary for the 

treatment of a patient’s illness or injury. In order to be eligible for the Medicare home 

health benefit, beneficiaries must be homebound and require intermittent skilled nursing or 

physical or speech therapy; he or she must also be under the care of a physician. 

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Beneficiaries can receive any number of home health visits if these visits are certified as 

necessary by a physician and are furnished under a prescribed plan of care that is 

periodically reviewed by the physician. 

Until recently, Medicare payments for home health services were growing rapidly. From 

1990 to 1996, Medicare payments grew from $3.7 billion to $16.9 billion. This expansion 

was concentrated in certain regions of the country, such as the South and Southwest, and 

among certain types of HHAs. Freestanding and urban agencies doubled, while the 

number of proprietary agencies tripled. The duration of home health care services also 

increased; while 14 percent of all home health episodes lasted 166 days or longer in 1990, 

about 20 percent of all episodes lasted this long in 1995. 

Beginning in 1995, several initiatives were implemented to address concerns about fraud 

and abuse and to control the costs of Medicare home health. These included the creation 

of an anti-fraud campaign entitled Operation Restore Trust, changes to Medicare 

participation rules designed to screen out problem providers, and payment limits created 

by the Balanced Budget Act of 1997 (BBA) . 

The Balanced Budget Act and Interim Payment System The BBA changed the way 

Medicare pays for home health care. The law requires a payment change from a costbased method to a prospective payment system (PPS) of fixed, predetermined rates for 

home health services. Until this PPS is developed, however, home health agencies are 

reimbursed under an interim payment system (IPS) which imposes payment limits on their 

services. The IPS was implemented on October 1, 1997, and will continue to be in place 

until the PPS begins on October 1, 2000. 

The IPS is intended to control the aggregate costs of services provided to beneficiaries. In 

addition to reducing the per-visit limit, it subjects Medicare HHAs to a new payment limit 

that is based on an aggregate per-beneficiary amount; this cap is applied to an agency’s 

total Medicare payments and does not limit payments for specific beneficiaries. The IPS is 

based on fiscal year 1994 expenditures and is updated annually for inflation. Agencies that 

were Medicare certified for the fiscal year ending October 1, 1994 and had filed a full 12-

month cost report for that period have an aggregate per-beneficiary amount calculated as 

98 percent of a blend of 75 percent of its own fiscal year 1994 per-beneficiary payment 

and 25 percent of the regional median average. For agencies that were not Medicare 

certified in fiscal year 1994 or did not have a full 12-month cost report for that year, the 

aggregate amount is based on the national median. The Omnibus Consolidated and 

Emergency Supplemental Appropriations Act of 1999 made several changes to the 

payment limits, including increasing the per-visit limits for all agencies and increasing the 

aggregate beneficiary limit for certain agencies. Agencies can use several methods to keep 

costs below their payment limits, including balancing their mix of low and high cost 

patients, reducing their costs overall, and increasing their proportion of low-cost patients. 

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The IPS does appear to be having some impact. The number of beneficiaries served and 

the number of visits per user are below peak 1996 levels. The decline in visits per user 

over the past two years appears to be consistent with IPS incentives and may or may not 

imply problems with access. Also, 14 percent of agencies have closed between October 1, 

1997, and January 1, 1999. About 40 percent of these closures were in three States -

Louisiana, Oklahoma, and Texas. In all three States, however, the number of HHAs per 

Medicare beneficiary exceeded the national average. Most agencies that stopped serving 

Medicare beneficiaries were also more likely to be high-utilization, low-volume agencies. 

It is, however, difficult to differentiate the effects of IPS from other BBA reforms and 

improved program integrity efforts. 

Access Concerns The home health industry has expressed concerns that payment limits 

established under IPS are restricting access to care for the sickest and most expensive 

Medicare populations. The industry also believes that these limits are too stringent and 

have caused some agencies to close, which has decreased access to home health for some 

patients. 

Several reports have been released this year that discuss home health care access. A 

General Accounting Office (GAO) report found that overall beneficiary access was not 

affected by recent agency closures but did suggest that as agencies change their operations 

in response to IPS, beneficiaries whose treatment costs are higher than average may have 

increased difficulty in obtaining home health care. Also, the Medicare Payment Advisory 

Commission (MEDPAC) reported a decline in agency supply and concerns about impaired 

access for patients with expensive care needs; it does not, however, directly attribute all of 

these changes to IPS. Finally, a George Washington University study reported that 

agencies are altering admissions standards and reducing care for patients with severe 

chronic illness, especially diabetics. 

Additionally, some advocacy groups have voiced concerns about access. Four of the five 

national advocacy groups interviewed for the GAO report reported receiving access 

complaints about individuals with chronic illnesses or conditions such as Alzheimer’s 

disease and multiple sclerosis. 

Discharge Planners Each hospital is required to have a discharge planning process in 

place. Patients may be discharged to a variety of settings. These include a patient's home, 

with or without services from a home health agency, or a nursing home. Data show that 

in 1998, most Medicare discharges (60 percent) were to homes, while 15 percent were to 

skilled nursing facilities, 10 percent were to home health, 3 percent to intermediate care, 

and the remaining 13 percent to some other entity. 

There appears to be no single model for a hospital discharge planning process. Definitions 

of what discharge planning involves and the organizational structures of the departments 

and professional credentials of the discharge planning staff vary from hospital to hospital. 

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The social work or nursing department often has the primary responsibility for discharge 

planning, generally with input from other healthcare team members. The responsibility is 

sometimes in the case management or utilization review department. 

Effective discharge planning identifies the patient's post-hospital needs early to ensure 

discharge to a safe environment with the appropriate level of services. Once a 

determination has been made that a patient needs discharge planning, the discharge 

planner conducts a psycho-social assessment and meets with utilization review staff, the 

patient's nurses and physicians, or other relevant interdisciplinary team members, to 

discuss the patient's care plan. Early on, the discharge planner solicits the patient's 

preferences and concerns, and reaches out to the family or other potential care givers to 

get their input and cooperation. As the discharge planner gains a clearer understanding of 

the level of care that the patient needs after discharge, he/she analyzes the patient's 

insurance coverage in an effort to match the patient's needs for services with those for 

which they are eligible. 

METHODOLOGY 

We combined two methods for this inspection: telephone interviews with hospital 

discharge planners and analysis of HCFA home health data. From a national random 

sample of 200 hospitals, we completed interviews with 181 discharge planners during a 

two week period from September 13 to September 24, 1999. The remaining 19 either did 

not discharge Medicare beneficiaries with home health agencies or could not be reached. 

In addition, we conducted follow-up interviews with 24 of 28 discharge planners who 

reported not always being able to get home health care for Medicare patients who need it. 

(We were unable to reach the other four.) Where appropriate and possible, we analyzed 

HCFA home health claims data to supplement discharge planner perspectives. 

There are several limitations to our methodology. First, by obtaining the perspectives of 

hospital discharge planners, we are only able to discuss home health beneficiaries with 

prior hospitalizations; approximately one-third of Medicare beneficiaries have been 

hospitalized prior to receiving home health care. Second, we report 1999 Medicare home 

health data for the first 6 months of the year, due to time lags in claims submission this 

data may not be complete. 

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FINDINGS 

Most discharge planners believe Medicare beneficiaries are able to obtain home 

health care upon hospital discharge, but they note changes and raise concerns 

Access 

< Most discharge planners (85 percent) report that Medicare patients are able to obtain 

home health care when they need it, but 15 percent say home health care is not always 

available. No difference is noted between discharge planners from urban and rural 

hospitals, or from hospitals with a financial interest in an HHA and those without one. 

< Most discharge planners (83 percent) report that it is either not difficult or only minimally 

difficult to place Medicare patients with home health agencies. 

< Three-quarters of discharge planners report needing to contact only 1 home health agency 

on average to obtain care for their Medicare patients, and 83 percent say home health 

agencies either never or infrequently refuse to take Medicare patients. 

< According to HCFA Medicare data, hospital discharges to home health care appear to 

remain constant. The proportion of Medicare discharges to home health care was 11 

percent in the first 6 months of 1997 and 10.9 percent in the first 6 months of 1999. 

< The 15 percent of discharge planners (28 of 181) who report that they are not always able 

to place Medicare beneficiaries with home health care cite two main causes. 

Medicare Coverage- Thirteen of 24 discharge planners note that Medicare does 

not cover home health care if the patient does not require skilled care or is not 

homebound or state that Medicare no longer always pays for IV medication or 

considers venipuncture a skilled need. (Seven of those who cite Medicare 

coverage say this access problem has not changed in the past 2 years.) 

Interim Payment System- Ten of these 24 discharge planners believe that the new 

reimbursement system has had the effect of making agencies more selective of the 

patients they accept, reducing HHA staff, or contributing to a decrease in the 

number of HHAs. 

The remaining discharge planner cites being in a rural area with limited access to HHAs as 

the primary reason for being unable to place beneficiaries. 

< Of the 24 discharge planners who report that Medicare beneficiaries are not always able to 

obtain home health care, 11 say they were unable to place 5 percent or less of their home 

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health patients, 4 report a 10 percent problem, and 9 estimate being unable to place 

between 20 and 50 percent of these patients. 

< Discharge planners who report that Medicare beneficiaries are unable to obtain home 

health care say that these beneficiaries most typically go to a nursing facility, have 

extended hospital stays, or are discharged home under the care of family and friends. 

Changes 

< A majority of all discharge planners (61 percent) report that home health agencies in their 

area have changed their admissions practices over the past 2 years. The primary change 

they report is that agencies are requiring more information about prospective patients 

before accepting them. 

< Supporting this, 60 percent of discharge planners who are familiar with IPS believe this 

system has made the process of placing Medicare patients with home health agencies more 

difficult. They report needing to provide more information on prospective patients in 

order for agencies to evaluate Medicare eligibility, to assess service needs and related 

costs, or to better manage their case mix. 

< More than half of the discharge planners report that each of the following subgroups of 

patients has become more difficult to place: patients with chronic health care needs; IV 

care; high cost care; and intensive care. More than half also note that patients diagnosed 

with Alzheimer/dementia and renal failure (dialysis) patients are more difficult to place. 

Concerns 

< Just over one-quarter of discharge planners volunteer during our interviews their concern 

that some Medicare patients may not be receiving the length of care or the adequacy of 

services they need. These discharge planners, for example, cite higher hospital readmission rates and increasing use of hospital emergency rooms as indications that 

patients may not be getting the home health care they need. 

COMMENTS 

The Health Care Financing Administration provided comments to both the audit report on 

payment error rates and this report. They were grateful for the information and happy to 

note that the overwhelming majority of Medicare beneficiaries are receiving the home 

health care they need. At the same time, they requested us to continue our work in this 

area. This work is currently underway. 

The full comments from HCFA are attached. 

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