oversight

Medicare Home Health: Differences in Service Use by HMO and Fee-for-Service Providers

Published by the Government Accountability Office on 1997-10-21.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                United States General Accounting Office

GAO             Report to the Chairman, Special
                Committee on Aging, U.S. Senate



October 1997
                MEDICARE HOME
                HEALTH
                Differences in Service
                Use by HMO and
                Fee-for-Service
                Providers




GAO/HEHS-98-8
      United States
GAO   General Accounting Office
      Washington, D.C. 20548

      Health, Education, and
      Human Services Division

      B-271479

      October 21, 1997

      The Honorable Charles E. Grassley
      Chairman, Special Committee on Aging
      United States Senate

      Dear Mr. Chairman:

      In an effort to contain health care spending while preserving access to
      services and quality of care found in Medicare fee-for-service, the
      Congress authorized the use of risk-contract health maintenance
      organizations (HMO)1 in the Medicare program. Unlike fee-for-service,
      where Medicare usually makes a separate payment for each service
      provided, Medicare pays risk-contract HMOs a capitated—or fixed per
      patient—payment to cover all health services. Medicare HMO enrollment is
      growing by more than 100,000 beneficiaries per month. More than 12
      percent, or almost 4.9 million, of the approximately 38 million Medicare
      beneficiaries are now enrolled in risk-contract HMOs. Proponents of
      managed care state that HMOs offer the potential to coordinate all the
      services needed to treat a patient and to ensure the appropriate use of
      services. Critics, however, argue that Medicare HMOs may withhold
      necessary services to save money.

      Given the increasingly important role of managed care in Medicare and
      your interest in the ability of HMOs to meet the needs of vulnerable
      populations, you asked us to examine home health services provided by
      Medicare HMOs. In the fee-for-service program, home health services are
      used intensively by some of Medicare’s sickest and most functionally
      impaired beneficiaries. In contrast, relatively little is known about the use
      of home health services by Medicare HMO enrollees. Therefore, you asked
      us (1) to examine how Medicare HMOs provide and manage home health
      services, as compared to fee-for-service providers, and (2) what is known
      about the appropriateness of home health services provided to HMO
      enrollees, especially to vulnerable populations.

      To address these questions, we visited six Medicare HMOs, which together
      account for about 10 percent of all Medicare beneficiaries enrolled in
      risk-contract HMOs. At these HMOs, we interviewed utilization review and
      quality assurance staff and gathered documents relating to these areas. We

      1
       Our use of the term HMO in this report includes both HMOs and competitive medical plans holding
      Medicare risk contracts for prepaid care. Competitive medical plans are subject to regulatory
      requirements similar to those for HMOs, but they have more flexibility in how they set premiums and
      services for commercial members.



      Page 1                                GAO/HEHS-98-8 Home Health Services by Medicare HMOs
                   B-271479




                   also interviewed staff from eight home health agencies that contract with
                   these HMOs. Most of these agencies also provide services to Medicare
                   fee-for-service patients and thus were able to describe their experiences
                   with home health under both the HMO and fee-for-service programs. We
                   also interviewed officials from the Health Care Financing Administration
                   (HCFA), which manages the Medicare program; reviewed a sample of
                   appeals from Medicare HMO enrollees who were denied home health
                   services; and reviewed pertinent laws, regulations, HCFA policies, and
                   research by others. Details on our scope and methodology are provided in
                   the appendix.


                   Since the late 1980s, when the Congress and the courts liberalized
Results in Brief   Medicare coverage of home health services, the contrasting financial
                   incentives of HMO and fee-for-service providers have led to some
                   divergence in the use of these services. Fee-for-service providers generally
                   have responded to the increased latitude in the home health benefit by
                   providing more patients with more services for longer periods, in some
                   cases providing excessive services. In contrast, home health agencies and
                   HMOs in our study reported that HMOs tend to emphasize shorter-term
                   recuperation and rehabilitation goals—much as fee-for-service providers
                   did prior to the changes in coverage guidelines. Differences between HMO
                   and fee-for-service providers are most apparent in the use of home health
                   aides. In the fee-for-service program, the use of home health aides to
                   provide long-term care for patients with chronic conditions is growing,
                   whereas the six HMOs we visited report that they do not provide aide
                   services on a long-term basis.

                   Typically, Medicare HMOs manage home health care much more actively
                   than the fee-for-service program. For example, the Medicare HMOs we
                   visited use case managers, preservice authorization, and selective
                   contracting with home health agencies to manage home health services
                   and avoid providing unnecessary care. In contrast, the fee-for-service
                   program has less effective controls for preventing unnecessary and
                   noncovered services, such as care provided to patients who are not
                   homebound.

                   Our interviews and recent studies also indicate that home health
                   utilization differs between HMO and fee-for-service patients. The greater
                   emphasis on short-term goals and the more active management of care by
                   HMOs likely contribute to shorter episodes of care and the use of fewer
                   home health visits, especially by home health aides. In addition, data from



                   Page 2                      GAO/HEHS-98-8 Home Health Services by Medicare HMOs
                           B-271479




                           one managed care market suggest utilization differences are more
                           pronounced for longer-term home health patients. Given the approach to
                           home health care by some Medicare HMOs, including a greater focus on
                           post-acute needs, Medicare beneficiaries with long-term care needs and
                           chronic illnesses enrolled in HMOs may not receive the same services as
                           they would in fee-for-service Medicare.

                           Although there are these differences in utilization, HCFA does not have the
                           information it needs to evaluate the home health care patients receive in
                           either the HMO or fee-for-service program. HCFA does not collect data on the
                           services provided to HMO enrollees, as it does for fee-for-service
                           beneficiaries, and therefore cannot identify outlier HMOs or beneficiary
                           groups for further review. In addition, HCFA does not specifically review
                           home health care during biannual monitoring visits to HMOs. Patient
                           assessment information and outcomes data could assist HCFA in
                           determining whether differences in home health utilization under HMOs
                           and under fee-for-service are appropriate. HCFA plans to collect some
                           outcomes information, but it will not be available for some time.


                           Medicare is a health insurance program available to almost all people 65
Background                 years of age and older and to certain disabled people. The program
                           provides protection under two parts. Part A, the hospital insurance
                           program, covers inpatient hospital, skilled nursing facility, home health,
                           and hospice services. Part B, the supplementary medical insurance
                           program, primarily covers physician services but also covers home health
                           care for beneficiaries not covered under part A.2 Although most of the
                           38 million Medicare beneficiaries receive their health care from
                           fee-for-service providers, the nearly 5 million beneficiaries enrolled in
                           HMOs participating in Medicare’s risk-contract program receive home
                           health care through their HMOs.


Medicare Fee-for-Service   To qualify for home health care, a Medicare beneficiary must be
Home Health Program        homebound, that is confined to his or her residence; require intermittent
                           skilled nursing, physical therapy, or speech therapy; and be under the care
                           of a physician. In addition, the services must be furnished under a plan of


                           2
                            The Balanced Budget Act of 1997 (P.L. 105-33) revised which of the two parts of the Medicare
                           program pays for home health services but not the extent of benefits received. Beginning in
                           January 1998, part B will pay for any visits in excess of 100 following a hospital stay and for all visits
                           not related to hospitalization, unless the beneficiary is not enrolled in part B. In cases where a
                           beneficiary is only enrolled in one part of Medicare, that part will pay for all covered home health
                           visits.



                           Page 3                                   GAO/HEHS-98-8 Home Health Services by Medicare HMOs
B-271479




care that is prescribed and reviewed at least every 62 days by a physician.
If these conditions are met, Medicare will pay for skilled nursing; physical,
occupational, and speech therapies; medical social services; home health
aide visits; and durable medical equipment and medical supplies. As long
as the care is reasonable and necessary and meets the above criteria, there
are no limits on the number of home health visits or length of coverage.

The home health benefit is one of the fastest growing components of
Medicare fee-for-service spending. From 1989 to 1996, part A
fee-for-service expenditures for home health increased more than 600
percent—from $2.4 billion to $17.7 billion. The number of beneficiaries
receiving home health care more than doubled, from 1.7 million in 1989 to
about 3.9 million in 1996. While the Congress liberalized the Medicare
home health benefit in 1980, the dramatic growth in these services is
primarily the result of changes to HCFA’s home health guidelines made in
1989. HCFA was ordered by a federal court to make these changes in
response to a court decision that invalidated HCFA’s interpretation of the
coverage requirements.3 The 1980 statutory amendments removed the
requirements that home health visits under part A be preceded by a
hospital stay of at least 3 days and be for a condition related to the
hospitalization. The amendments also abolished the 100-home-health-visit
limitation under parts A and B. The new guidelines issued in 1989 allowed
home health agencies to increase the frequency of visits by clarifying the
definition of “part-time” or “intermittent” care, making it easier to qualify
for skilled care, and increasing the standard of review before payment for
services could be denied. These changes made the home health benefit
available to more beneficiaries, for less acute conditions, and for longer
periods of time.

Under Medicare fee-for-service, providers are paid for each home health
visit and, except for durable medical equipment, beneficiaries do not share
in the cost. Therefore, neither providers nor beneficiaries has financial
incentives to control the number of services used.4 At the same time that
home health expenditures have been growing rapidly, funding for program
safeguards, such as reviewing claims, decreased sharply. The recent

3
 Duggan v. Bowen, 691 F. Supp. 1487 (D. D.C. 1988).
4
 The Balanced Budget Act of 1997 mandates a prospective payment system for all fee-for-service home
health services beginning on or after October 1, 1999. Under this system, home health agencies will
receive a set payment for each unit of service they provide (not yet defined), adjusted for patient case
mix and area wages. This system will replace the reasonable-cost payment method, which pays home
health agencies based on their costs, subject to certain limits. Until the prospective payment system is
established, the Balanced Budget Act established an interim payment system to help control the cost
and utilization of services. Prospective payments for home health services will alter the financial
incentives fee-for-service providers face.



Page 4                                 GAO/HEHS-98-8 Home Health Services by Medicare HMOs
                       B-271479




                       enactment of the Health Insurance Portability and Accountability Act of
                       1996 (P.L. 104-191) has increased future funding for program safeguards.
                       After adjusting for inflation, however, per-claim expenditures for program
                       safeguards will remain below the 1989 level. HCFA has recently taken
                       several steps to address the growing problem of home health fraud, such
                       as a temporary moratorium on the entry of new home health agencies into
                       Medicare while the agency reviews its requirements for home health
                       agencies to enter and remain in the program.


Medicare HMO Program   Medicare risk-contract HMOs are paid a fixed amount per month per
                       beneficiary under a payment method known as capitation.5 This method
                       places HMOs at risk for health costs that exceed this capitated amount,
                       giving them a financial incentive to provide fewer services, emphasize
                       preventive care, and avoid unnecessary care. As of August 1, 1997, almost
                       4.9 million Medicare beneficiaries, or more than 12 percent, were enrolled
                       in risk-contract HMOs.

                       Medicare HMOs are required to provide the complete health benefit
                       package available under the fee-for-service program, but they can choose
                       to provide more services. For instance, while Medicare fee-for-service
                       requires that patients be homebound to qualify for home health services,
                       Medicare HMOs can waive this restriction. In addition, HCFA guidance states
                       that the HMO is allowed to direct the delivery of care. In contrast, a patient
                       in fee-for-service may, in consultation with a physician, seek home health
                       services without obtaining authorization from a third-party—a
                       requirement most HMOs impose.

                       Medicare patients may appeal an HMO refusal to provide health services
                       they believe are covered or medically necessary. If a patient appeals such
                       a denial, the HMO must reconsider its initial decision. If the HMO’s
                       reconsideration is not fully favorable to the patient, the HMO must forward
                       the appeal for independent review by a HCFA contractor—the Center for
                       Health Dispute Resolution, formerly the Network Design Group—which
                       makes the final reconsideration decision. If dissatisfied with this decision


                       5
                        Almost 90 percent of Medicare beneficiaries now in managed care are enrolled in risk-contract HMOs.
                       The remaining beneficiaries are enrolled in cost HMOs, health care prepayment plans (HCPP), or
                       demonstration plans. Cost HMOs do not restrict provider choice but require beneficiary payments for
                       care received outside the HMO network. These HMOs are reimbursed by HCFA for the cost of
                       providing covered Medicare services. HCPPs do not operate like risk-contract or cost HMOs. For
                       example, HCPPs may cover only Medicare part B services and may have restrictive enrollment
                       policies. Demonstration plans include other types of managed care plans, such as provider-sponsored
                       networks and preferred provider organizations.



                       Page 5                               GAO/HEHS-98-8 Home Health Services by Medicare HMOs
                           B-271479




                           and the amount in dispute is $100 or more, HMO patients can take their
                           appeals to an administrative law judge, as can fee-for-service patients.


                           Contrasting financial incentives and different interpretations of the
Role of Home Health        Medicare home health benefit have led to some divergence in the way
Services Varies            home health services are used by HMO and fee-for-service providers. Staff
Between HMO and            at the six HMOs and the eight home health agencies we reviewed described
                           different approaches for home health services used by HMO and
Fee-for-Service            fee-for-service providers. The reports from the two groups suggest that
Providers                  these HMOs emphasize shorter-term, rehabilitation goals, while
                           fee-for-service providers may give more emphasis to social and
                           environmental factors affecting service needs, especially in their use of
                           home health aides. The coverage criteria for Medicare’s home health
                           benefit allow providers enough latitude to interpret the criteria in a
                           manner that favors their financial interests. While HMOs control services
                           more closely than fee-for-service providers, home health agencies that
                           serve both HMO and fee-for-service patients told us they were generally
                           able to obtain approval to provide services they considered sufficient to
                           HMO enrollees. Some home health agency staff did express concerns about
                           the HMOs’ approaches to home health care; however, home health agency
                           staff also acknowledged that fee-for-service patients sometimes receive
                           unnecessary services.


HMOs Emphasize Different   Home health agency staff described HMOs as having a somewhat different
Goals for Home Health      approach to home health than fee-for-service providers. They told us that
                           HMOs tend to focus more on shorter-term goals that allow the HMO to
Services
                           discontinue services as soon as possible. Staff at several HMOs we visited
                           reported that their goal for home health services is to help patients
                           function independently and not rely on home health care. To do so, they
                           establish specific rehabilitation goals focused on a patient’s needs. For
                           instance, if a patient needs to climb six stairs to reach the bathroom at
                           home, then the home health therapist will focus on this goal. Once the
                           patient attains the specific goal, HMOs may terminate home health services
                           if the patient does not require any other skilled nursing or skilled therapy
                           care.

                           Home health agencies also seek to achieve independence for their
                           fee-for-service patients. However, in contrast to HMOs, some home health
                           agencies reported taking a broader approach to patient functioning,
                           providing additional services—especially supportive or aide services—that



                           Page 6                       GAO/HEHS-98-8 Home Health Services by Medicare HMOs
                             B-271479




                             take into consideration the patient’s overall condition and environment.
                             With fee-for-service patients, home health agency staff said they tend to
                             provide services over a longer period to ensure patients are fully healed
                             and knowledgeable about the medical condition involved. In contrast, they
                             said an HMO may authorize the home health agency only a certain number
                             of visits to teach a patient about his or her other medical condition, even if
                             environmental factors, such as family stress, suggest that the patient may
                             have difficulty absorbing the information within the HMO’s time frame.

                             A nurse manager in one home health agency explained that under
                             managed care, home health agencies are learning to focus on the problem
                             at hand rather than trying to give patients services for unrelated or other
                             chronic conditions. She explained that in fee-for-service, the home health
                             agency’s goal has been to resolve every condition that a patient had. For
                             instance, if home health services were initiated because a diabetic patient
                             had a wound that required skilled nursing care, a home health agency
                             might review educational materials about diabetes with the patient, even if
                             the patient had had diabetes for a number of years. In contrast, HMOs tend
                             to focus on the specific condition that initiated the home health episode.


Financial Incentives and     Because HMOs are at risk for service costs that exceed the capitated
Interpretation of Coverage   payment, they generally seek to provide enough services to maintain or
Criteria Influence Use of    restore patient health and prevent the need for more expensive care, while
                             not providing more care than necessary. While there are financial
Home Health Services         incentives to limit services, discontinuing services too soon could become
                             more costly if patient conditions worsen. Balancing these financial and
                             health interests can influence the use of home health services. For
                             example, an HMO may not believe it necessary for a home health nurse to
                             continue to visit a wound patient until the wound is completely healed,
                             while a fee-for-service provider may.

                             Applying the definitions of skilled services is not always straightforward
                             and is based on clinical judgment in many cases. For example, the
                             management of a care plan is considered a skilled service if it requires the
                             skills of a nurse or therapist to ensure the patient’s medical safety and
                             recovery—even if all other services in the care plan are unskilled. Since
                             such criteria are based on judgment and are open to interpretation,
                             providers faced with borderline cases may make decisions that favor their
                             financial interests. The executive director of one home health agency
                             noted that the definitions for certain types of skilled nursing and therapy
                             services are vague and inconsistently interpreted in fee-for-service. The



                             Page 7                       GAO/HEHS-98-8 Home Health Services by Medicare HMOs
                           B-271479




                           director for admissions at another home health agency said that there are
                           always gray areas in the coverage guidelines and that fee-for-service
                           providers tend to provide more services, while HMOs tend to provide fewer.

                           HMOs report that they use their flexibility to provide additional benefits or
                           waive Medicare requirements for their Medicare enrollees to provide more
                           cost-effective care. In general, the Medicare HMOs we visited reported that
                           they occasionally covered more benefits than patients are entitled to in the
                           Medicare fee-for-service program. For example, one HMO did not require
                           that patients be homebound to receive home health services. Four other
                           HMOs reported that while they formally required patients to be homebound,
                           they would make exceptions if it would be cost-effective for the HMO and
                           beneficial for the patient. In addition, two HMOs reported that if a patient
                           had no skilled need, but could not be at home without assistance, they
                           would, in rare cases, provide aide services for a short period until other
                           arrangements could be made.


Use of Home Health Aides   HMO  and fee-for-service providers also differ in their use of home health
Differs                    aides. While custodial care—personal care that does not require the
                           continued attention of trained professional staff—is generally excluded
                           from Medicare coverage, Medicare can cover a home health aide to
                           provide ongoing personal care services if the home care patient also
                           requires intermittent skilled nursing or therapy services. Prior to the 1980
                           statutory changes and the 1989 court-ordered coverage guideline changes,
                           the part A home health benefit had been used primarily for acute
                           conditions following a hospitalization and not for chronic care. Many
                           Medicare fee-for-service patients still receive home health services
                           following hospitalization, but a growing number are receiving home care
                           and aide services for long-term, chronic conditions not related to an acute
                           episode. In a recent briefing, we reported that in the fee-for-service
                           program, aide visits accounted for almost half the total of home health
                           visits in 1994 and that the percentage of patients receiving more than 90
                           visits tripled between 1989 to 1993, from 6 to 18 percent.

                           In contrast, HMO staff told us they believe that Medicare home health
                           services should not be expected to be used as long-term care for patients.
                           Staff at many of the HMOs we visited expressed the belief that patients can
                           become dependent on the assistance provided by aides and expect such
                           services indefinitely. In their view, the fee-for-service system sometimes
                           blurs the line between skilled and custodial care, creating unrealistic
                           patient expectations about eligibility for Medicare home health services. In



                           Page 8                       GAO/HEHS-98-8 Home Health Services by Medicare HMOs
                            B-271479




                            addition, some HMO and HCFA staff expressed the belief that home health
                            aides are sometimes provided in the fee-for-service program as much for
                            social reasons as for health reasons. A study of Medicare home health
                            claims from 1993 also suggested that many fee-for-service aide visits may
                            be for social and custodial care and only tangentially related to medical
                            care.6

                            While the HMOs we visited generally do not provide home health aides for
                            custodial purposes, most had a social service department or designated
                            staff that would try to arrange for community services. Several HMOs also
                            had special programs that provided supportive social services not directly
                            related to health. For example, one HMO provided a respite benefit to
                            full-time caregivers in the home to prevent caregiver burnout. Another HMO
                            received a grant from a health care foundation to create a service credit
                            bank, where enrollees who provide assistance, such as meal preparation
                            and transportation, to frail enrollees are given credits that can be used to
                            purchase similar assistance when needed. The same HMO also helps
                            enrollees access a friendly visitor program and a telephone reassurance
                            program to provide social interaction and support. While these alternative
                            services do offer some assistance to patients, they are unlikely to
                            completely replace all of the personal care services that a home health
                            aide can provide, such as assistance with bathing and dressing.


HMO Practices Influence     Staff from several home health agencies noted that they have changed the
Delivery of Care, Causing   way they treat fee-for-service patients by adopting an approach more
Concern to Some Home        compatible with that used by HMOs. They explained that they do not want
                            to treat patients differently based solely on health insurance status and
Health Agencies             acknowledged that under fee-for-service, some patients may receive
                            unnecessary care. One home health agency noted that it now puts more
                            emphasis on patient education, while another reported that it no longer
                            seeks to attain maximum functional levels for patients before they are
                            discharged from home health care. The latter also noted that it now
                            provides services for shorter periods and it looks for community resources
                            to provide assistance if a patient needs long-term assistance with some
                            tasks, such as preparing insulin shots.

                            Home health agency staff also told us that although they were usually able
                            to negotiate acceptable levels of service with HMOs, HMOs occasionally
                            “push the envelope” in terms of providing the fewest possible services.


                            6
                            H. G. Welch, D. E. Wennberg, and W. P. Welch, “The Use of Medicare Home Health Care Services,”
                            New England Journal of Medicine, Vol. 335, No. 5 (1996), pp. 324-29.



                            Page 9                              GAO/HEHS-98-8 Home Health Services by Medicare HMOs
                     B-271479




                     Some were concerned that HMOs occasionally have unrealistic
                     expectations about how quickly certain patients can function
                     independently and may lead the patient to do more than he or she is able
                     to do. For example, one home health agency reported that a local
                     Medicare HMO, which was not part of our sample, may expect too much
                     from the elderly population. The HMO has recommended clinical guidelines
                     for coronary artery bypass surgery that call for patients to be discharged 4
                     days after surgery and only authorizes one home health agency visit
                     following discharge. Because these patients generally are overwhelmed by
                     the surgery and recovery, few can absorb all the necessary self-care
                     information provided in this one visit. As a result, home health agency staff
                     said that they have begun doing follow-up calls to these patients on their
                     own initiative. Other home health agencies noted that some HMOs may
                     require certain wound care patients to provide their own wound care
                     before they are able to.

                     At the same time, some home health agencies noted beneficial changes in
                     patient management that they believe arose from the influence of managed
                     care. The director of one home health agency said that working with HMOs
                     has taught her staff to develop reasonable, measurable goals and to focus
                     their care on those goals. She believes that as a result, the quality of care
                     provided has improved. The patient care coordinator at another home
                     health agency noted that the agency is now more focused on functional
                     outcomes and patient education.


                     The six Medicare HMOs we visited frequently review each home health
HMOs Control Home    patient’s condition and progress; four also require preauthorization for
Health Use Through   home health services. This close management is intended to monitor both
More Active          the cost and quality of care provided. In contrast, only a small percentage
                     of claims in the fee-for-service program are actually reviewed by Medicare
Management           to assess whether they are reasonable and necessary. Moreover, these
                     reviews are primarily paper reviews, which yield insufficient information
                     to determine if the services provided are appropriate and meet Medicare
                     criteria. Many fee-for-service home health agencies seek to manage patient
                     care appropriately and cost effectively, but others may provide
                     unnecessary services. As we reported in March 1996, inadequate controls
                     make it nearly impossible to know whether a patient receiving home
                     health care qualifies for the benefit, needs the care being delivered, or
                     even receives the services being billed to Medicare.7

                     7
                      See Medicare: Home Health Utilization Expands While Program Controls Deteriorate
                     (GAO/HEHS-96-16, Mar. 27, 1996).



                     Page 10                             GAO/HEHS-98-8 Home Health Services by Medicare HMOs
                          B-271479




                          To more actively manage home health services, the HMOs we visited use
                          case management and preauthorization strategies, utilization reviews, and
                          selective contracting.


Case Management and       Each of the six HMOs that we visited use nurse case managers to follow
Preauthorization Help     each patient’s progress and to determine when services can be
HMOs Curb Inappropriate   discontinued. At two of the HMOs, the case managers operate out of a
                          central office separate from the physician offices. The managers receive
Utilization               patient information, collaborate with physicians as needed by phone, and
                          approve or disapprove requested services. At two other HMOs, the case
                          managers work within the physician offices and make decisions about
                          services to be provided in collaboration with the primary care physician.
                          The case managers at the two remaining HMOs coordinate services but are
                          not responsible for approving service levels because these HMOs do not
                          have a preauthorization requirement.

                          Staff from the home health agencies report that the HMO case managers
                          review patient care plans much more frequently than the home health
                          agencies review plans for their fee-for-service patients. At each HMO we
                          visited, case managers generally review patient cases every few days to 2
                          weeks, depending on the patient’s condition, to determine how much more
                          care is needed. In the Medicare fee-for-service program, home health care
                          plans must be reviewed by a physician at least every 62 days. While some
                          home health agencies may develop shorter care plans, others routinely
                          develop 62-day care plans for their fee-for-service patients. Moreover,
                          when the initial 62-day period ends and a new care plan is written, the
                          Medicare contractors who process fee-for-service home health claims do
                          not routinely review the updated plans.

                          HMO  staff reported that their closer scrutiny of each patient is intended to
                          both prevent the unnecessary utilization of services and improve the
                          quality of care. However, contracted home health agencies also noted that
                          the scrutiny can sometimes be excessive and believe that it would save
                          providers time and effort if they did not have to seek approval for care
                          after two or three visits when it is obvious that certain patients, such as
                          stroke patients, need additional visits. At one home health agency, a staff
                          member noted that there is a difference between managing utilization and
                          actually managing care. She noted that some HMOs focus more on
                          managing utilization and have no direct contact with patients, which
                          precludes them from assessing the individual needs of patients.




                          Page 11                      GAO/HEHS-98-8 Home Health Services by Medicare HMOs
                            B-271479




                            Medicare HMOs vary in terms of their organization, payment mechanisms
                            for physicians and home health agencies, and authorization processes.
                            These factors also influence the utilization levels and management of
                            home health services. For example, some HMOs employ their own
                            physicians and nurses and have no preauthorization requirements for
                            home health services; however, many HMOs contract with large numbers of
                            independent physicians and have more restrictive preapproval processes
                            to control the use of services. Similarly, an HMO that pays for home health
                            services on a capitated basis may have fewer controls on the use of
                            services than an HMO that pays for each home health visit provided.


Utilization Reviews Help    In addition to using case managers to review and approve care, HMOs
HMOs Monitor Quality        sometimes review aggregate data—such as utilization statistics, patient
and Use                     satisfaction survey data, or rehospitalization data—to monitor quality and
                            identify possible aberrant utilization patterns. For example, one HMO
                            monitors its contracted physician groups for underutilization and
                            overutilization of services, using established benchmarks or HMO averages.
                            The HMO identified one medical group with low utilization of home health
                            services compared to the HMO average and asked the group to explain the
                            disparity and provide any available information on patient satisfaction or
                            patient outcomes. Another HMO has established screens, such as
                            dehydration or readmission to a hospital, to identify instances of poor
                            patient outcomes. If a provider has five or more instances during a
                            3-month period (for instance, five patients suffering from dehydration), the
                            HMO will review the provider to determine if there are quality of care
                            problems. However, if immediate action appears warranted, a physician
                            may review cases sooner.


Selective Contracting       HMOs   also manage home health care more closely by restricting the
Helps HMOs Coordinate       number of home health agencies they use or by having common corporate
Oversight of Patient Care   ownership of agencies used. Two of the HMOs we visited share common
                            corporate ownership with one or more home health agencies that provide
                            services almost exclusively to the HMOs’ enrollees. This arrangement
                            allows HMO and home health agency staff to work closely with each other
                            to provide active oversight of the care provided. Two other HMOs are in the
                            process of shrinking their home health agency networks to allow their
                            staff to spend more time on site at these facilities, provide closer oversight
                            of the care provided, and work with the contractors to manage enrollee
                            care. One HMO reduced the number of home health agencies it contracted




                            Page 12                      GAO/HEHS-98-8 Home Health Services by Medicare HMOs
                        B-271479




                        with from over 80 to only 2. Most of the HMOs also are establishing formal
                        processes for credentialing home health contractors.


                        Three recently published studies on home health use and our review of
Different Goals and     selected home health agencies provide evidence that Medicare HMO
Management              patients receive fewer home health visits than Medicare fee-for-service
Approaches              patients. These differences in utilization likely stem from HMOs’ more
                        active management of home health services and greater emphasis on
Contribute to           rehabilitation and acute care, along with a lack of controls in the
Different Utilization   fee-for-service program and reported problems with overutilization.
                        Underlying differences in the health status of the two populations may
Patterns                also contribute to these differences. Several studies suggest that, on
                        average, Medicare beneficiaries who enroll in HMOs may be healthier than
                        patients who remain in the Medicare fee-for-service program and,
                        consequently, use fewer services.8

                        One study, which compared the use of home health services by frail
                        elderly Medicare patients in HMOs and fee-for-service, found that—after
                        adjusting for differences in demographic, physical, mental, and functional
                        status—HMO patients were just as likely to have home health episodes as
                        fee-for-service patients but received 71 percent fewer visits.9 A second
                        study, conducted by the Department of Health and Human Services’ (HHS)
                        Office of the Inspector General, found substantially fewer home health
                        visits provided to Medicare HMO enrollees in 1994; however, the study did
                        not adjust for differences in patient health and demographic status.10 A
                        third study, funded by HCFA, found that Medicare HMO and fee-for-service
                        patients received home health services for similar lengths of time;
                        however, HMO patients averaged 13 visits per episode of care, while
                        fee-for-service patients averaged 20 visits.11 Further analysis indicated that
                        HMO patients received fewer home health services than similar


                        8
                          A 1996 study published in HCFA’s Health Care Financing Review (Vol. 17, No. 4) estimated that HMO
                        enrollees’ costs were 12 percent lower than average, and a 1996 Physician Payment Review
                        Commission study estimated that enrollees’ costs were 37 percent lower than those for comparable
                        fee-for-service patients. See also Medicare HMOs: HCFA Can Promptly Eliminate Hundreds of Millions
                        in Excess Payments (GAO-HEHS-97-16, Apr. 25, 1997), which reported that HMO enrollees in
                        California are healthier than fee-for-service beneficiaries.
                        9
                        B. Experton and others, “The Impact of Payor/Provider Type on Health Care Use and Expenditures
                        Among the Frail Elderly, American Journal of Public Health, Vol. 87, No. 2 (1997), pp. 210-16.
                        10
                         HHS, Office of the Inspector General, How HMOs Manage Home Health Services, OEI-04-95-00080
                        (Washington, D.C.: HHS, Sept. 1997).
                        11
                         R. E. Schlenker, P. W. Shaughnessy, and D. F. Hittle, “Patient-Level Cost of Home Health Care Under
                        Capitated and Fee-for-Service Payment,” Inquiry, Vol. 32 (1995), pp. 252-70.



                        Page 13                               GAO/HEHS-98-8 Home Health Services by Medicare HMOs
                                        B-271479




                                        fee-for-service patients, even after adjusting for differences in functional
                                        status, medical condition, and demographic factors.

                                        Home health agency staff generally agreed with these findings. Virtually all
                                        said that their HMO patients overall receive fewer services than
                                        fee-for-service patients. In particular, they described sizable differences in
                                        the use of home health aides. Some home health agency staff also said HMO
                                        patients may receive less skilled care services, such as therapy services. In
                                        some cases, they attributed lower utilization of aides to earlier termination
                                        of home health services by HMOs.

                                        One large urban home health agency compared its 1996 Medicare
                                        fee-for-service and Medicare HMO patients and found statistically
                                        significant differences in use.12 When fee-for-service patients were
                                        matched with HMO patients for age and gender, the HMO group had fewer
                                        total visits and fewer visits for most service types—including physical
                                        therapy and skilled nursing—as well as shorter episodes of care, fewer
                                        comorbidities, and somewhat different diagnostic groupings. (See table 1.)
                                        Because the number of visits per week by service type were generally
                                        similar for the two groups, these overall utilization differences likely stem
                                        from the fact that HMO patients generally received services over a shorter
                                        period relative to fee-for-service patients.

Table 1: Average Home Health
Utilization for Medicare HMO and                                                                                  Matched fee-for-service
Fee-for-Service Patients in One Large                                                       HMO patients                         patients
Urban Home Health Agency, 1996          Episode of care
                                        Less than 31 days                                             1,830                          5,108
                                                                                                      (53.7%)                        (33.9%)
                                        31-120 days                                                   1,457                          8,480
                                                                                                      (42.8%)                        (56.4%)
                                        More than 120 days                                              121                          1,458
                                                                                                        (3.6%)                         (9.7%)
                                        Total                                                         3,408                         15,046
                                                                                                       (100%)                         (100%)
                                        Average service utilization
                                        Nursing visits                                                   9.8                          17.4
                                        Physical therapy visits                                          8.8                          13.1
                                        Home health aide visits                                        23.6                           38.8
                                        Home health aide hours                                         98.5                          151.6
                                        Note: All diagnoses; fee-for-service patients matched to HMO gender and age distribution.



                                        12
                                          Patients dually eligible for Medicare and Medicaid were excluded from the analysis.



                                        Page 14                                GAO/HEHS-98-8 Home Health Services by Medicare HMOs
                                        B-271479




                                        When the analysis was restricted to patients with a primary diagnosis
                                        involving the circulatory system,13 the home health agency found that
                                        differences in the total number of visits increased with the length of the
                                        care episode. (See tables 2 and 3 for a summary of this comparison.) HMO
                                        patients were almost twice as likely to have a shorter episode of care. For
                                        the shortest episodes of care (under 31 days), there were relatively small,
                                        and not statistically significant, differences in the number of home health
                                        services between the fee-for-service and HMO patients. Greater differences,
                                        especially in the use of aides, were found for patients with longer episodes
                                        of home health care.

Table 2: Length of Home Health Care
Episodes for Medicare Fee-for-Service                                                                             Matched fee-for-service
and HMO Patients With Circulatory                                                           HMO patients                         patients
System Diagnoses in One Large Urban     Episode of care
Home Health Agency, 1996
                                        Less than 31 days                                                610                             1,230
                                                                                                       (55.2%)                           (31.1%)
                                        31-120 days                                                      468                             2,340
                                                                                                       (42.3%)                           (59.3)
                                        More than 120 days                                                28                               379
                                                                                                        (2.5%)                             (9.6%)
                                        Total                                                         1,106                              3,949
                                                                                                       (100%)                             (100%)
                                        Note: Fee-for-service patients matched to HMO gender and comorbidity distribution.




                                        13
                                         Diseases of the circulatory system include hypertension, acute myocardial infarction, heart failure,
                                        angina, phlebitis, and varicose veins.



                                        Page 15                                GAO/HEHS-98-8 Home Health Services by Medicare HMOs
                                          B-271479




Table 3: Average Home Health Utilization for Medicare HMO and Fee-for-Service Patients With Circulatory System
Diagnoses in One Large Urban Home Health Agency, 1996
                                                          Age 65-74                Age 75-84                 Age 85+
                                                          Fee-for-                         Fee-for-                        Fee-for-
                                                           service            HMO           service           HMO           service          HMO
                                                          patients         patients        patients        patients        patients       patients
Episodes of care less than 31 days
Nursing visits                                                   5.2a            4.5a            5.0              4.0             4.6a         4.1a
                                                                     a               a               a               a                a
Physical therapy visits                                          3.8             3.7             3.5              3.8             3.2          4.1a
Home health aide visits                                          9.1a            7.3a            8.6a             7.5a            9.4a         8.7a
                                                                     a               a               a               a                a
Home health aide hours                                         37.3             28.1            33.5            28.6            34.9         33.4a
Episodes of care 31-120 days
Nursing visits                                                 15.1             11.3            15.2            12.6            15.3           8.3
                                                                                                                                      a
Physical therapy visits                                        12.9             10.3            12.4            10.1            11.5           9.9a
Home health aide visits                                        33.1             27.4            33.7            24.1            35.3         22.2
Home health aide hours                                        128.7           105.8           129.7             93.6           134.5         95.0
Episodes of care more than 120 days
All servicesb                                                    NA              NA              NA               NA              NA           NA
                                          Note: Fee-for-service patients matched to gender and comorbidity distribution of HMO patients.
                                          a
                                           The differences for these variables were not statistically significant at the .05 level.
                                          b
                                           There were not enough cases of patients with episodes of care more than 120 days to allow for
                                          this analysis. See table 2 for the number of cases involved.



                                          A recent analysis by the Kaiser Family Foundation indicated that many
                                          Medicare fee-for-service home health patients are sick and functionally
                                          impaired and increasingly rely on home health services to fulfill long-term
                                          care or complex medical needs. The analysis found only about one-third of
                                          fee-for-service home health users were receiving home health services
                                          after hospital discharge to meet a short-term, post-acute need.14 The
                                          remaining two-thirds received more visits over a longer period. Half of this
                                          group were seriously ill, had complex medical problems, and used more
                                          hospital care than other fee-for-service home health users. The other half
                                          were medically stable but functionally impaired and used home health
                                          care, especially aide services, to meet long-term care needs. Information is
                                          not available on either the prevalence of chronically ill beneficiaries who
                                          enroll in HMOs or their receipt of services. Therefore, the effect of HMOs’
                                          emphasizing short-term rehabilitation and functional improvement on
                                          service utilization by chronically ill beneficiaries is unknown.

                                          14
                                           J. Leon, P. Neuman, and S. Parente, Understanding the Growth in Medicare’s Home Health
                                          Expenditures (Washington D.C.: The Henry J. Kaiser Foundation, 1997).



                                          Page 16                                 GAO/HEHS-98-8 Home Health Services by Medicare HMOs
                         B-271479




                         Currently, HCFA has little data on home health services provided by HMOs to
HCFA Has Limited         Medicare enrollees. Without information on the care provided, HCFA
Data to Evaluate HMO     cannot target plans or patient groups for further review. Home health
Home Health Services     agency and HCFA staff told us that it is difficult to evaluate the significance
                         of home health care utilization differences between managed care and
                         fee-for-service settings without comparative data on patient
                         outcomes—information that links the care provided to the patient’s health
                         status. HCFA has initiatives under way to collect some information on
                         patient outcomes from home health services, but that data will not be
                         available for some time. In their absence, we reviewed a sample of appeals
                         cases to see if these data reveal any systemwide issues regarding access to
                         care. However, because of the low numbers of appeals and their focus on
                         administrative rather than clinical issues, these data offered little insight
                         regarding HMOs’ provision of home health care.


HCFA Collects Limited    HCFA  has little information about how much or what types of home health
Data on HMO Services     care HMO enrollees are receiving. Therefore, HCFA cannot use indicators,
                         such as low utilization levels, to target patient groups or plans for more
                         detailed review. Because HMOs are paid on a capitated basis to provide all
                         Medicare-covered services to enrollees, HCFA does not receive claims for
                         the services provided. In addition, HMOs are not required to provide data on
                         utilization levels for home health services. While HCFA reviews Medicare
                         HMO performance at least every 2 years, these reviews do not specifically
                         target home health care. As we noted in 1995, HCFA’s routine reviews focus
                         on whether the HMO has capable staff and appropriate procedures for
                         quality assurance and utilization management, rather than whether the
                         quality assurance and utilization management systems actually operate
                         effectively and ensure that HMOs make appropriate care decisions.15 At the
                         same time, there are currently few, if any, generally accepted standards for
                         home health care, which could be useful in evaluating any utilization data
                         or other information about care provided to Medicare enrollees.


Information Sources to   Although HCFA and home health agency staff told us that it would be
Evaluate Home Health     impossible to evaluate the significance of utilization differences without
Services                 data on patient outcomes, comparative information on utilization levels
                         could be a useful monitoring tool. Utilization data can be used to identify
                         home health agencies, HMOs, or patient groups whose atypical utilization
                         may indicate quality of care problems and thus enable HCFA to target

                         15
                          Medicare: Increased HMO Oversight Could Improve Quality and Access to Care (GAO/HEHS-95-155,
                         Aug. 3, 1995).



                         Page 17                            GAO/HEHS-98-8 Home Health Services by Medicare HMOs
B-271479




potential problem providers for further review and analysis. For example,
at least two state Medicaid programs use encounter data as an indicator of
potential under- or overutilization of services. In the Medicare
fee-for-service program, this technique has been used successfully to
identify providers with fraudulent or abusive billing practices. HCFA is
currently collecting encounter data in one state as a pilot project but has
no definitive plan to collect these data on a nationwide basis.16

To date, research comparing the health outcomes of HMO and
fee-for-service patients has been limited, partly because of the difficulty in
defining and measuring an array of health outcomes that consider both
skilled and unskilled services. The 1995 HCFA-funded study comparing
home health utilization of Medicare HMO and fee-for-service patients was
the only study we identified that attempted to measure patient outcomes.
The results suggest that HMO patients may experience slightly worse
outcomes than fee-for-service patients. However, because the study
includes only patients who were beginning a home health episode and only
followed them for 12 weeks, it may not include many patients receiving
home health services for chronic conditions.

HCFA recently announced that within the next few years it plans to collect
some outcomes data from all home health agencies that provide care to
Medicare HMO or fee-for-service patients through a standardized patient
assessment data set, known as OASIS (Outcomes and Assessment
Information Set). The OASIS data set will collect information on a number
of health status measures, such as ability to walk after hip replacement
surgery; mental status; and ability to perform activities of daily living, like
bathing or eating. HCFA may use OASIS data to monitor HMOs and the
effectiveness of home care they provide. Patients with chronic illnesses
and conditions, however, may not experience the types of substantial
improvements or restoration of functions that can be measured easily
through such outcomes data. The needs of the chronically ill for ongoing
assistance to maintain health status and functional ability may also
conflict with medical necessity standards used by some managed care
plans that focus on rehabilitation. Some state Medicaid programs have
recognized similar concerns in contracting with managed care plans for
disabled recipients. They have included an explicit definition of medical



16
  HHS has had broad authority to require HMOs to develop and provide pertinent data needed to
administer and oversee HMOs for a long time. However, the Balanced Budget Act of 1997 provides
HCFA the specific authority to require entities participating under the new Medicare Choices program,
including HMOs, to provide information on services in order to facilitate HCFA’s development of
risk-adjustment factors for payment rates.



Page 18                               GAO/HEHS-98-8 Home Health Services by Medicare HMOs
                         B-271479




                         necessity in HMO contracts that includes services necessary to maintain a
                         patient’s existing level of functioning.


Appeals Provide Little   Data on the number and results of appeals filed by Medicare patients who
Information              are dissatisfied with HMO care decisions are one of the few currently
                         available indicators that might be useful in evaluating HMO home health
                         care. We reviewed 48 home health appeals filed by Medicare HMO patients
                         during a 2-1/2-year period and found that HCFA’s appeals contractor upheld
                         most of the HMOs’ denials. However, the usefulness of such data as an
                         indicator of patient satisfaction may be limited by several factors. First,
                         the small number of home health appeals limit their reliability as an
                         indicator. In 1996, HCFA’s appeals contractor received only 165 appeals
                         involving home health services from the approximately 4 million Medicare
                         beneficiaries enrolled in risk-contract HMOs.17 Second, in 60 percent of the
                         cases we reviewed, the HMO appeals contractor decided the case based on
                         whether the HMO and the patient followed correct administrative
                         procedures, rather than the appropriateness of the HMO’s clinical decision
                         or the sufficiency of the services provided. Finally, because of weaknesses
                         in the appeals system—including incomplete HMO compliance with the
                         appeals process, limited enrollee awareness of appeal rights, and
                         beneficiaries’ ability to disenroll rather than appeal a denial—not all
                         enrollee concerns about access to home health care reach the appeals
                         contractor.


                         HMOs’   more active management of home health services and their focus on
Conclusions              shorter-term rehabilitation likely contribute to their Medicare enrollees
                         receiving fewer services than their fee-for-service counterparts. Currently,
                         however, HCFA has little data available to evaluate if differences in home
                         health care utilization are appropriate. Given the growth in Medicare HMO
                         enrollment, ensuring that HMOs meet the home health needs of all
                         enrollees, particularly those with chronic conditions, will become
                         increasingly important. HCFA plans to collect outcomes data for home
                         health services; however, this information will not be available for several
                         years and may provide only a partial picture of the care provided by HMOs.
                         Still, without such data, it is difficult to determine to what extent


                         17
                           As of August 28, 1997, HCFA required Medicare HMOs to review requests for reconsideration within
                         72 hours, if the standard 60-day time frame for issuing determinations could jeopardize the life or
                         health of an enrollee or the enrollee’s ability to regain maximum function. These new requirements for
                         an expedited appeals process also clarified that decisions to discontinue services, such as physical
                         therapy, are appealable determinations. This new process may increase the number of appeals
                         received by the Center for Health Dispute Resolution for review.



                         Page 19                               GAO/HEHS-98-8 Home Health Services by Medicare HMOs
                     B-271479




                     utilization differences are appropriate or represent unnecessary services
                     provided in fee-for-service or insufficient services provided by HMOs. In the
                     meantime, HCFA cannot determine whether the needs of particularly
                     vulnerable beneficiaries—such as those with medically complex needs
                     and chronic conditions—are being met in HMOs.

                     While there are no generally accepted standards regarding the appropriate
                     level of services for home health patients, identifying and reviewing HMOs
                     and patient groups with aberrant utilization patterns could help focus
                     oversight on potential problems—a technique that has been used
                     successfully in the Medicare fee-for-service program. In addition,
                     recognizing the unique needs of chronically ill enrollees and defining
                     expectations for their care may assist beneficiaries with chronic
                     conditions in deciding whether to enroll in an HMO, as well as facilitate
                     HCFA’s oversight of the care provided these enrollees.



                     We provided a draft of this report to HCFA officials, who suggested that we
Agency Comments      clarify that HCFA’s 1989 changes to its home health coverage regulations
and Our Evaluation   were made in response to statutory changes and court order. We have
                     clarified those sections of the report and made other technical changes
                     recommended by HCFA officials.

                     In addition, we provided a draft of this report to each of the HMOs we
                     visited, the Center for Health Dispute Resolution, the National Association
                     for Home Care, the American Association of Health Plans, and two of the
                     home health agencies we interviewed. Most provided technical or
                     clarifying comments, which we incorporated as appropriate.

                     The National Association for Home Care expressed concern that some
                     HMOs use restrictive policies that conflict with what Medicare beneficiaries
                     are entitled to receive under the Medicare home health benefit. The
                     limited scope of our study precluded us from addressing this issue. While
                     we did note some differences in the provision of home health services by
                     HMO and fee-for-service providers, we did not collect information that
                     would allow us to comment on the appropriateness of care offered to the
                     two groups of patients.




                     Page 20                      GAO/HEHS-98-8 Home Health Services by Medicare HMOs
B-271479




As agreed with your office, unless you release its contents earlier, we plan
no further distribution of this letter for 30 days. At that time, we will send
copies to other interested parties and make copies available to others on
request.

This report was prepared by Sara Galantowicz and Michelle St. Pierre,
under the direction of William Reis, Assistant Director. Please call me at
(202) 512-7114 or Mr. Reis at (617) 565-7488 if you or your staff have any
questions about the information in this report.

Sincerely yours,




William J. Scanlon
Director, Health Financing
  and Systems




Page 21                      GAO/HEHS-98-8 Home Health Services by Medicare HMOs
Contents



Letter                                                                                             1


Appendix                                                                                          24

Scope and
Methodology
Related GAO Products                                                                              28


Tables                 Table 1: Average Home Health Utilization for Medicare HMO and              14
                         Fee-for-Service Patients in One Large Urban Home Health
                         Agency, 1996
                       Table 2: Length of Home Health Care Episodes for Medicare                  15
                         Fee-for-Service and HMO Patients With Circulatory System
                         Diagnoses in One Large Urban Home Health Agency, 1996
                       Table 3: Average Home Health Utilization for Medicare HMO and              16
                         Fee-for-Service Patients With Circulatory System Diagnoses in
                         One Large Urban Home Health Agency, 1996




                       Abbreviations

                       CHDR      Center for Health Dispute Resolution
                       HCFA      Health Care Financing Administration
                       HCPP      health care prepayment plan
                       HMO       health maintenance organization
                       HHS       Department of Health and Human Services
                       IPA       independent practice association
                       OASIS     Outcomes and Assessment Information Set


                       Page 22                    GAO/HEHS-98-8 Home Health Services by Medicare HMOs
Page 23   GAO/HEHS-98-8 Home Health Services by Medicare HMOs
Appendix

Scope and Methodology


             To collect information on how Medicare HMOs manage home health
             services, we visited six Medicare HMOs, conducted phone interviews with
             home health agencies that contracted with these HMOs to provide home
             health services, and reviewed appeals from Medicare HMO enrollees who
             were denied home health services. We interviewed staff from HCFA’s
             central office and several of its regional offices. We also reviewed
             pertinent laws, regulations, HCFA policies, and research comparing
             utilization and outcomes between Medicare HMO and fee-for-service
             patients. We conducted our study from March 1996 to July 1997 in
             accordance with generally accepted government auditing standards;
             however, we did not independently verify the utilization data obtained
             from one home health agency.

             The 6 HMOs we visited accounted for about 10 percent of all Medicare
             enrollees in the 292 risk-contract Medicare HMOs as of August 1, 1997. We
             chose the specific HMOs to include a variety of HMO models and a variety of
             contracting relationships with home health agencies, but they should not
             be considered representative of all Medicare risk-contract HMOs. Three of
             the six HMOs were nonprofit and three were for-profit. Two were
             group/staff model HMOs, two were independent practice association (IPA)
             models, and two represented mixed IPA/group models. Two HMOs shared
             common corporate ownership with the home health agencies that
             provided essentially all home health services for the HMOs’ Medicare
             enrollees. The remaining HMOs contracted with a variety of independent
             home health agencies. In selecting HMOs, we also sought some geographic
             diversity—three of the HMOs are on the East Coast and three are on the
             West Coast. Given the number and diversity of HMOs and home health
             agencies that participate in the Medicare program, we cannot generalize
             from the small number that we visited.

             At each HMO we interviewed case managers, utilization review staff, quality
             assurance staff, and other knowledgeable staff about how the HMO
             manages home health services. At one HMO, which capitates payments to
             its physician groups and delegates the utilization management function to
             the physicians, we also interviewed case managers at two of the
             contracted physician groups. We also interviewed staff at 10 home health
             agencies that provide services to the HMOs we visited to discuss the
             management of Medicare HMO home health patients compared to Medicare
             fee-for-service patients; 8 of the 10 provided services to both.18 In most
             cases, we interviewed at least two home health agencies that contracted

             18
              The other two home health agencies provided care almost exclusively for patients from two of the
             HMOs we visited and, therefore, could not compare the management of fee-for-service and HMO
             patients.



             Page 24                              GAO/HEHS-98-8 Home Health Services by Medicare HMOs
Appendix
Scope and Methodology




with the HMOs we visited—some of which contracted with more than one
of the HMOs.

Finally, we reviewed a sample of appeals filed by Medicare HMO patients
and decided by HCFA’s HMO appeals contractor, the Center for Health
Dispute Resolution (CHDR). The Medicare HMO appeals process is a
two-step process, in which the HMO itself first reconsiders its original
denial. If the HMO’s reconsideration is not fully favorable to the beneficiary,
the HMO is required to forward the appeal to CHDR to make the final
reconsideration decision. We did not review HMO-level appeals because
HCFA does not maintain data on appeals at that level, making it impossible
to identify the universe of appeals and to draw a sample. However, the six
plans we visited reported that nearly all appeals in the past year involving
home health services were forwarded to CHDR.

From a universe of 254 home health appeals decided by CHDR between
January 1, 1994, and August 23, 1996, we selected a random sample of 48
cases, or 18.9 percent of the 254 cases involving home health. The appeals
came from all Medicare HMOs, not just the six we visited. While this sample
is representative of all CHDR-level appeals cases decided during the sample
time frame, it should be noted that the appeals that reach CHDR represent
only a fraction of all disputes because not all initial HMO denials are
appealed or even recognized, and others may be overturned at the plan
level. As noted in the body of this report, HMO patients may choose not to
appeal an HMO denial, either because they are not aware of their appeal
rights or because they choose to disenroll from the HMO. Also, Medicare
HMOs do not always forward appropriate appeals to HCFA’s contractor, as
reported in a recent HHS, Office of the Inspector General study.19




19
 HHS, Office of the Inspector General, Medicare HMO Appeal and Grievance Processes,
OEI-07-94-00280 (Washington, D.C.: HHS, Dec. 1996).



Page 25                             GAO/HEHS-98-8 Home Health Services by Medicare HMOs
Page 26   GAO/HEHS-98-8 Home Health Services by Medicare HMOs
Page 27   GAO/HEHS-98-8 Home Health Services by Medicare HMOs
Related GAO Products


              Medicare Home Health Agencies: Certification Process Is Ineffective in
              Excluding Problem Agencies (GAO/T-HEHS-97-180, July 28, 1997).

              Medicare: Need to Hold Home Health Agencies More Accountable for
              Inappropriate Billings (GAO/HEHS-97-108, June 13, 1997).

              Medicare HMOs: HCFA Can Promptly Eliminate Hundreds of Millions in
              Excess Payments (GAO/HEHS-97-16, Apr. 25, 1997).

              Medicare: Home Health Cost Growth and Administration’s Proposal for
              Prospective Payment (GAO/T-HEHS-97-92, Mar. 5, 1997).

              Medicare: Home Health Utilization Expands While Program Controls
              Deteriorate (GAO/HEHS-96-16, Mar. 27, 1996).

              Medicare: Increased HMO Oversight Could Improve Quality and Access to
              Care (GAO/HEHS-95-155, Aug. 3, 1995).




(101500)      Page 28                    GAO/HEHS-98-8 Home Health Services by Medicare HMOs
Ordering Information

The first copy of each GAO report and testimony is free.
Additional copies are $2 each. Orders should be sent to the
following address, accompanied by a check or money order
made out to the Superintendent of Documents, when
necessary. VISA and MasterCard credit cards are accepted, also.
Orders for 100 or more copies to be mailed to a single address
are discounted 25 percent.

Orders by mail:

U.S. General Accounting Office
P.O. Box 37050
Washington, DC 20013

or visit:

Room 1100
700 4th St. NW (corner of 4th and G Sts. NW)
U.S. General Accounting Office
Washington, DC

Orders may also be placed by calling (202) 512-6000
or by using fax number (202) 512-6061, or TDD (202) 512-2537.

Each day, GAO issues a list of newly available reports and
testimony. To receive facsimile copies of the daily list or any
list from the past 30 days, please call (202) 512-6000 using a
touchtone phone. A recorded menu will provide information on
how to obtain these lists.

For information on how to access GAO reports on the INTERNET,
send an e-mail message with "info" in the body to:

info@www.gao.gov

or visit GAO’s World Wide Web Home Page at:

http://www.gao.gov




PRINTED ON    RECYCLED PAPER
United States                       Bulk Rate
General Accounting Office      Postage & Fees Paid
Washington, D.C. 20548-0001           GAO
                                 Permit No. G100
Official Business
Penalty for Private Use $300

Address Correction Requested