oversight

Medicare Home Health Agencies: Closures Continue, With Little Evidence Beneficiary Access Is Impaired

Published by the Government Accountability Office on 1999-05-26.

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

                  United States General Accounting Office

GAO               Report to Congressional Requesters




May 1999
                  MEDICARE HOME
                  HEALTH AGENCIES
                  Closures Continue,
                  With Little Evidence
                  Beneficiary Access Is
                  Impaired




GAO/HEHS-99-120
      United States
GAO   General Accounting Office
      Washington, D.C. 20548

      Health, Education, and
      Human Services Division

      B-282147

      May 26, 1999

      The Honorable William V. Roth, Jr.
      Chairman
      The Honorable Daniel Patrick Moynihan
      Ranking Minority Member
      Committee on Finance
      United States Senate

      The Honorable Thomas J. Bliley, Jr.
      Chairman
      The Honorable John D. Dingell
      Ranking Minority Member
      Committee on Commerce
      House of Representatives

      The Honorable William M. Thomas
      Chairman
      The Honorable Fortney H. (Pete) Stark
      Ranking Minority Member
      Subcommittee on Health
      Committee on Ways and Means
      House of Representatives

      Until 1998, home health care was one of Medicare’s fastest growing
      benefits. Dramatically rising expenditures resulted in home health care
      consuming about $1 of every $12 of Medicare outlays in fiscal year 1997
      compared with $1 of every $40 in 1989. This growth was primarily due to
      more beneficiaries receiving services and more home health visits being
      provided to each user. While changes in practice patterns and in the need
      for home health care contributed to this increased utilization, the
      inappropriate delivery of services as well as fraudulent billing practices
      also added to Medicare’s spending.

      Concerns about rising spending, fraud and abuse, and inadequate
      oversight led the Congress and the administration to implement a number
      of initiatives to better control Medicare’s home health care costs. In
      particular, the Balanced Budget Act of 1997 (BBA) mandated major changes
      to the home health benefit.1 To slow spending, for example, the act
      required the Health Care Financing Administration (HCFA), the agency
      responsible for administering the Medicare program, to move away from a

      1
       P.L. 105-33, title IV, chapter I, 111 Stat. 251, 466.



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cost-based method of payment and implement a prospective payment
system (PPS) of fixed, predetermined rates for home health services. Until
that system is developed, home health agencies (HHA) are using an interim
payment system (IPS), which imposes limits on agencies’ cost-based
payments.2 The limits give HHAs incentives to control per-visit costs and
the number and mix of visits provided to users.

Since its implementation on October 1, 1997, concerns have been raised
about the IPS.3 Industry representatives have claimed that the system’s cost
limits are too stringent, causing some HHAs to close, which in turn has
reduced access to home health services. We reported to you last
September that neither agency closures through June 1998 nor the IPS had
significantly affected the industry’s capacity to provide services.4 Although
we found that HHA closures had accelerated, the rapid growth in the
number of agencies over the past several years overshadowed the recent
retrenchments. Furthermore, the number of Medicare-certified HHAs alone
is a poor measure of capacity. Remaining agencies are often able to absorb
the patients and staff of closing HHAs so that beneficiary access is not
impaired. Since we issued that report, the industry has continued to
express concern about the impact of closures on beneficiary access. In
response to this sustained concern, you asked us to (1) update our
September analysis on closures, paying particular attention to the
distribution of closures across urban and rural counties and to the
characteristics of closed agencies, and (2) assess the effect of closures on
beneficiary access to home health services.5 We analyzed HCFA data on
changes in the number and characteristics of Medicare-certified HHAs
through January 1, 1999. We also examined beneficiary utilization during
the first quarter of 1998, the most recent data available, and compared it
with similar periods in 1994 and 1996. To complement this analysis, we
interviewed stakeholders during February 1999 in a sample of primarily
rural counties that had experienced significant closures. These
stakeholders are parties with an interest in or knowledge of these issues
and included HHA managers, hospital discharge planners, advocacy groups,
and others. Our work was completed in accordance with generally

2
 BBA mandated that the PPS for HHAs be implemented in fiscal year 2000. The Omnibus Consolidated
and Emergency Supplemental Appropriations Act, 1999 (P.L. 105-277, sec. 5101(c), 112 Stat. 2681,
2681-914.) postponed implementation until fiscal year 2001.
3
IPS implementation was phased in according to HHAs’ cost reporting year. Sixty-one percent of the
HHAs came under the IPS by January 1, 1998, and the remainder by September 30, 1998.
4
 Medicare Home Health Benefit: Impact of Interim Payment System and Agency Closures on Access to
Services (GAO/HEHS-98-238, Sept. 9, 1998).
5
 The term “county” encompasses parishes (Louisiana), some census areas (Alaska), and certain
independent cities (such as Baltimore, Md.).



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                   accepted government auditing standards between January and April 1999.
                   (For a detailed discussion of our scope and methodology, see app. I.)


                   Prior to the HHA closures that have attracted widespread attention, both
Results in Brief   the number of HHAs and utilization of home health services had grown
                   considerably. Although 14 percent of agencies closed between October 1,
                   1997, and January 1, 1999, beneficiaries are still served by over 9,000 HHAs,
                   approximately the same number that were available in 1996. Forty percent
                   of the closures were concentrated in three states that had experienced
                   considerable growth in the number of HHAs and had utilization rates (that
                   is, visits per user as well as users per thousand fee-for-service
                   beneficiaries) well above the national average. Furthermore, the majority
                   of closures occurred in urban areas that still have a large number of
                   agencies to provide services. The pattern of HHA closures suggests a
                   response to the IPS. The IPS revenue caps would prove particularly
                   stringent for agencies that provided more visits per user, for smaller
                   agencies, and for those with less ability to recruit low-cost patients. For
                   example, agencies that closed had provided over 40 percent more services
                   per user than agencies that remained open. Closing agencies were also
                   about half the size of agencies that remained open, and they had been
                   losing patients before the implementation of IPS.

                   Attention has been focused on the number of Medicare-certified HHAs
                   available to provide home health care, but the more important issue is
                   whether beneficiaries have access to Medicare-covered home health
                   services. Evidence shows that overall home health utilization in the first 3
                   months of 1998 had declined since 1996, but it was about the same as a
                   comparable period in 1994—the year that serves as the base for IPS limits.
                   Moreover, the sizeable variation in utilization between counties with high
                   and low use has narrowed. These changes are consistent with IPS
                   incentives to control utilization. In counties without an HHA, both the
                   proportion of beneficiaries served and the visits per user declined slightly
                   during the first 3 months of 1998 compared with a similar period in 1994,
                   but these counties’ levels of utilization remained above the national
                   average. Our interviews in 34 primarily rural counties with substantial
                   closures indicate that beneficiaries continue to have access to services.
                   Overall, the 130 stakeholders we interviewed in 34 counties with
                   significant closures or declines in utilization reported few access
                   problems. However, those interviews also suggest that as HHAs change
                   their operations in response to the IPS, beneficiaries who are likely to be
                   costlier than average to treat may have increased difficulty obtaining home



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                            health care. Confusion about eligibility for services also contributed to the
                            perception that there were access problems. Some of this reduced
                            utilization, particularly for services that do not meet Medicare coverage
                            criteria, could be shifted to and paid for by Medicaid.


                            The Medicare home health benefit consists of skilled nursing, therapy, and
Background                  related services furnished by a Medicare-certified HHA.6 To qualify for
                            services, a beneficiary must be homebound and require skilled nursing
                            care or physical or speech therapy on a part-time or intermittent basis.7
                            The services must be furnished under a plan of care prescribed and
                            periodically reviewed by a physician. If these criteria are met, Medicare
                            will pay for home health visits provided by

                        •   a registered nurse or a physical, occupational, or speech therapist (or a
                            person under their supervision);
                        •   social workers necessary to resolve social or emotional problems that are
                            impediments to a beneficiary’s recovery; and
                        •   a home health aide who delivers hands-on personal care.8

                            Medicare will pay for home health care as long as it is reasonable and
                            necessary for the management of a beneficiary’s illness or injury. There
                            are no limits on the number of visits or length of coverage, and no
                            copayments or deductibles apply. A beneficiary with no need for skilled
                            care and who only requires custodial or personal care, however, does not
                            qualify for the Medicare home health benefit.


Growth in Home Health       During much of the 1990s, home health care was one of Medicare’s fastest
Utilization                 growing benefits. Expenditures rose from 3.2 percent ($3.7 billion) of total
                            Medicare spending in 1990 to 9 percent ($17.8 billion) in 1997. This
                            translates into an average annual growth rate of 25.2 percent, compared
                            with 8 percent for the overall program. The number of Medicare home


                            6
                             These services include physical, speech, and occupational therapy; medical social services; and home
                            health aide services.
                            7
                             A beneficiary is homebound when he or she has a condition that results in a routine inability to leave
                            home except with considerable and taxing effort, and when absences from home are infrequent or of
                            relatively short duration, or are attributable to receiving medical treatment. “Part-time or
                            intermittent” means that the services are needed on fewer than 7 days each week, or for fewer than 8
                            hours per day for periods of 21 days or less.
                            8
                             Home health aide services include (1) personal care services, such as assistance with eating, bathing,
                            and toileting; (2) simple surgical dressing changes; (3) assistance with some medications; (4) activities
                            to support skilled therapy services; and (5) routine care of prosthetic and orthotic devices.



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health users per 1,000 beneficiaries increased from 57 to 109 over the 1990
to 1997 period, and the average number of visits per user went from 36 to
73.9 Concomitant with this stepped-up use was the almost doubling in the
number of Medicare-certified HHAs to 10,524 in 1997.

This growth can be attributed to many factors, but the relaxation of
coverage guidelines is one of the most notable. At Medicare’s inception,
home health care was a posthospital benefit with an annual limit on the
number of visits covered for each beneficiary. The limitation on visits was
removed by the Omnibus Reconciliation Act of 1980,10 but utilization did
not increase appreciably because of HCFA’s relatively stringent
interpretation of the coverage and eligibility criteria. A court case in 1988
challenged HCFA’s interpretation, and the decision led to modification of
HCFA’s coverage guidelines.11 To accommodate the court decision, the
benefit was transformed from one focused on patients needing short-term
care after a hospitalization to one that serves chronic, long-term-care
patients as well.

Also contributing to the historical rise in spending were a payment method
that provided few incentives for efficiency and lax Medicare oversight of
claims for reimbursement. The substantial geographic variation in the
provision of home health care suggests that at least some visits may be of
marginal value. For example, in 1996, the average number of visits per user
in the West South Central region (which includes Arkansas, Louisiana,
Oklahoma, and Texas) was 129 compared with 47 in the Middle Atlantic
region (New York, New Jersey, and Pennsylvania).12 (See app. II.)
Agencies could boost revenues by providing more services to more
beneficiaries, a strategy that could actually help HHAs avoid Medicare’s
limits on payments per visit. Finally, Medicare oversight declined at the
same time that spending mounted. The proportion of claims that were
reviewed dropped sharply, from about 12 percent in 1989 to 2 percent in
1995, while the volume of claims almost tripled.13



9
 These numbers reflect Medicare fee-for-service beneficiaries only.
10
    P.L. 96-499, sec. 930, 94 Stat. 2599, 2631.
11
    Duggan v. Bowen, 691 F. Supp. 1487 (D.D.C. 1988).
12
 This geographic variation was evident when controlling for diagnoses. Medicare: Home Health
Utilization Expands While Program Controls Deteriorate (GAO/HEHS-96-16, Mar. 27, 1996).
13
 Our 1997 analysis of a small sample of high-dollar claims found that over 40 percent of these claims
should not have been paid by the program. See Medicare: Need to Hold Home Health Agencies More
Accountable for Inappropriate Billings (GAO/HEHS-97-108, June 13, 1997.)



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Efforts to Control Home   Beginning in 1995, the Congress and the administration implemented
Health Expenditures       several initiatives to curb home health spending by constraining fraud and
                          abuse and modifying payment methods.

                          Fraud and Abuse. A major anti-fraud campaign known as Operation
                          Restore Trust (ORT) was launched in 1995 and is credited with contributing
                          to the recent slowdown in Medicare home health spending.14 ORT
                          employed a number of approaches to uncovering fraud, including the use
                          of interdisciplinary teams to review individual HHAs providing an unusually
                          large number of Medicare services. The Health Insurance Portability and
                          Accountability Act of 1996 (HIPAA) also contained measures to control
                          fraud and abuse by HHAs.15 For example, it provided that any physician
                          who falsely certifies a patient as eligible for home health care services is
                          liable for a civil monetary penalty. HIPAA also provided more funding for
                          claims review by Medicare’s claims processing contractors, including the
                          five regional home health intermediaries (RHHI) that process and pay
                          claims and review and audit cost reports.

                          Several changes to the participation rules designed to screen out problem
                          providers were initiated in 1997. These included heightened reporting
                          requirements for owners and increased standards for providers. The
                          administration imposed a capitalization requirement for home health
                          providers enrolling on or after January 1, 1998, and required that an HHA
                          serve at least 10 patients before seeking Medicare certification. This
                          contrasts with the previous requirement that only a single patient had to
                          have been served. HCFA also clarified that HHA branches must generally be
                          located sufficiently close to the parent agency—approximately 1-1/2-hours
                          driving time—so that administration, supervision, and services are
                          provided in a manner that makes it unnecessary for the branch to be
                          independently certified as an autonomous organization.16

                          Payment Limits. Before the BBA, HHAs were paid on the basis of their costs,
                          up to preestablished limits. The limits were set for each type of visit but


                          14
                           In 1997, the rate of increase for home health care expenditures was lower than in previous years.
                          Although final data are not yet available for 1998, HCFA expects expenditures to actually decrease for
                          1998 compared with 1997.
                          15
                            P.L. 104-191, title II, 110 Stat. 1936.
                          16
                            HHAs are characterized as either parents, subunits, or branches. A parent develops and maintains
                          administrative controls of subunits and branches and also delivers services. A subunit is a
                          semiautonomous organization serving patients in a geographic area different from the parent and must
                          independently meet the conditions of participation and be certified. A branch is not an autonomous
                          unit, but shares administration, supervision, and services with the parent and does not have to be
                          independently certified.



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were applied in the aggregate; that is, costs above the limit for one type of
visit would still be paid if costs were sufficiently below the limit for other
types of visits. In order to slow spending, the BBA mandated key changes to
Medicare’s method of paying for home health services. Most importantly,
HCFA is required to establish a PPS by October 2000—a fixed, predetermined
payment per unit of service, adjusted for patient characteristics that affect
the cost of care. Until that time, HHAs are paid under the IPS. The IPS
lowered the visit payment limit and subjects HHAs to a Medicare revenue
cap that is based on an aggregate per-beneficiary amount.17 For agencies
that had a full 12-month cost report for the fiscal year ending October 1,
1994, the aggregate “per-beneficiary” amount is calculated as 98 percent
of a blend of 75 percent of its own fiscal year 1994 per-beneficiary
payments and 25 percent of the comparable regional average.18 For new
agencies—those that had not participated in Medicare for a full year by
October 1994–the per-beneficiary amount is based on the national median
of these amounts for established agencies. Thus, utilization and spending
are constrained to 1994 patterns. Finally, the BBA will further constrain
payments with the PPS. PPS rates will be set so that Medicare expenditures
are equivalent to what would have been spent under the IPS, with limits
reduced by 15 percent from those in effect on September 30, 2000.

Through the application of the payment limits, the IPS attempts to control
the costs and amount of services provided to beneficiaries. The per-visit
limit controls the cost per visit. The aggregate revenue cap reins in the
growth in the number of visits provided to beneficiaries and constrains the
average cost of the services provided to users. Agencies can use several
methods to keep costs below the revenue cap. These include balancing
their mix of low- and high-cost patients, reducing their costs overall,
increasing the proportion of low-cost patients they treat, or some
combination of these activities. These limits will prove more of a
constraint for agencies that have provided more visits or have higher costs
than the average. Low-volume agencies with few low-cost patients or with
costly treatment patterns may also find the limits particularly stringent.



17
  Under the IPS, the per-visit limit was based on 105 percent of the national median per-visit cost. The
IPS was revised by section 5101(b) of the Omnibus Consolidated and Emergency Supplemental
Appropriations Act, 1999 (P.L. 105-277, 112 Stat. 2681, 2681-914), which increased the per-visit limit to
106 percent of the national median cost.
18
 The Omnibus Consolidated and Emergency Supplemental Appropriations Act, 1999 (P.L. 105-277, sec.
5101(a), 112 Stat. 2681, 2681-913) made several changes to the revenue cap. For HHAs with
per-beneficiary amounts less than the national median, limits were increased by one-third of the
difference between their amount and the national median. The cap for new HHAs (as classified by the
BBA) was increased from 98 percent to 100 percent of the national median. Further, HHAs that opened
after October 1, 1998, have per-beneficiary limits equal to 75 percent of the wage-adjusted national
median, reduced by 2 percent.


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                        Substantial growth in the number of HHAs between 1990 and 1997 has been
Pattern of HHA          followed by the closure of about 14 percent of HHAs between October 1997
Closures Suggests       and January 1999. Agencies that closed shared many of the characteristics
Response to New         of agencies that opened in the 1990s—they were disproportionately urban,
                        freestanding, and for profit.19 However, agencies that closed also tended to
Financial Incentives    be newer, treated a smaller number of beneficiaries, and provided more
                        services per user than agencies that remained open. Such agencies are the
                        types of HHAs that would have difficulty adjusting to the revenue caps in
                        the IPS, suggesting that the system is reducing the number of
                        high-utilization, low-volume HHAs. The recent spate of closures has been
                        concentrated in a few states that had the most growth in HHAs and that had
                        utilization experience above the national average. All of the closures
                        occurred in 555 counties—about 23 percent of the counties that had an
                        HHA. The majority of counties with HHAs experienced no net reduction in
                        the number of agencies, and the number of counties with one or two
                        agencies remained fairly constant.


Following a Decade of   The home health industry experienced tremendous growth from 1990
High Industry Growth,   through 1997. During this period, the number of Medicare-certified HHAs
HHA Closures Have       almost doubled to 10,524. The expansion was concentrated in particular
                        geographic areas and among certain types of HHAs. Most notably,
Accelerated             freestanding and urban agencies doubled, while the number of proprietary
                        agencies tripled. (See table 1 and app. II.)




                        19
                          HHAs may be either freestanding (not part of a facility) or facility based, that is, operated as part of
                        an acute-care hospital, a rehabilitation facility, or a skilled nursing facility. Ownership of HHAs is
                        classified as government, voluntary (not for profit), or proprietary (for profit.)



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Table 1: Medicare-Certified HHAs, 1990
and 1997                                                                   Number of HHAs,         Number of HHAs,               Percentage
                                                                               Oct. 1, 1990            Oct. 1, 1997          growth, 1990-97
                                         All HHAs                                         5,642                 10,524                          87
                                         Type
                                         Freestanding                                     3,675                   7,607
                                                                                            (65%)                   (72%)                   107
                                         Facility based                                   1,967                   2,917
                                                                                            (35%)                   (28%)                       48
                                         Control
                                         Proprietary (for profit)                         2,038                   6,119
                                                                                            (36%)                   (58%)                   200
                                         Government and voluntary                         3,604                   4,405
                                         (not for profit)                                   (64%)                   (42%)                       22
                                         Location
                                         Urban                                            3,442                   7,038
                                                                                            (61%)                   (67%)                   105
                                         Rural                                            2,200                   3,486
                                                                                            (39%)                   (33%)                       59
                                         Source: GAO analysis of HCFA’s On-Line Survey, Certification, and Reporting system (OSCAR)
                                         data.



                                         Between October 1, 1997, and January 1, 1999, 1,436 Medicare-certified
                                         HHAs stopped serving Medicare beneficiaries.20 However, because of
                                         growth in the industry since 1990, there were still 9,263 Medicare-certified
                                         HHAs in January 1999—500 fewer agencies than in October 1996. While
                                         HHAs closed in the past, closures were not as numerous and were obscured
                                         by the number of new entrants.21 In contrast, recent closures are now
                                         being accompanied by relatively few openings. (See fig. 1.)




                                         20
                                           Throughout this report we use the term “closure” to identify HHAs that either no longer participate in
                                         the Medicare program or have merged with another Medicare-certified agency.
                                         21
                                          For example, a total of 797 Medicare-certified HHAs closed in fiscal years 1996 and 1997, while the
                                         number of certified agencies increased by 2,392.



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Figure 1: Change in Number of
Medicare-Certified HHAs, October 1,             October                        October           October             October                 January
1995 Through January 1, 1999          11,000 1995                              1996              1997                1998                    1999

                                                                                                 10,524
                                      10,500

                                      10,000
                                                                       9,770
                                                                                                                     9,513
                                       9,500
                                                                                                                                             9,263
                                       9,000
                                                8,929

                                       8,500

                                       8,000

                                       2,000

                                      1,500
                                                        1,179                     1,213
                                      1,000

                                        500
                                                                                                     117
                                                                                                                         58
                                          0
                                                                -338                                                            -308
                                       -500                                               -459

                                      -1,000
                                                                                                            -1,128
                                      -1,500

                                      -2,000
                                                          FY 96                     FY 97                 FY 98              FY 99
                                                                                                                             (1st Quarter)
                                                Active HHAs

                                                Openings

                                                Closures




                                      Source: GAO analysis of HCFA’s OSCAR data.




                                      Closures have occurred disproportionately in the very segments of the
                                      home health industry that experienced the greatest growth during the
                                      1990s. (See table 2.) For example, the number of proprietary agencies
                                      tripled between 1990 and 1997, representing 84 percent of the new
                                      agencies. They also made up 83 percent of the closures from October 1997
                                      through January 1, 1999. Similarly, freestanding agencies increased
                                      107 percent from 1990 to 1997 to constitute 81 percent of the new



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                                    agencies. In the period that followed, they represented 86 percent of the
                                    closures. Although three-quarters of the agencies that closed between
                                    October 1, 1997, and January 1, 1999, were located in urban areas, urban
                                    beneficiaries continued to be served by 6,088 HHAs.

Table 2: Comparison of Active and
Closed HHAs, October 1, 1997,                                                                                 HHAs closed
Through January 1, 1999                                                                                     between Oct. 1,
                                                                 Share of industry      Active HHAs on     1997, and Jan. 1,
                                                                  growth, 1990-97           Oct. 1, 1997               1999
                                    All agencies                                 100% Number = 10,524       Number = 1,436
                                    Type
                                    Freestanding                                  81%                72%                 86%
                                    Facility based                                19%                28%                 14%
                                    Control
                                    Proprietary                                   84%                58%                 83%
                                    Government and voluntary                      16%                42%                 17%
                                    Location
                                    Urban                                         74%                67%                 74%
                                    Rural                                         26%                33%                 26%
                                    Tenure in Medicare
                                    New (under 5 years)                           75%                48%                 64%
                                    Established (5+ years)                        25%                52%                 36%
                                    Source: GAO analysis of HCFA’s OSCAR data.



                                    Most of the HHAs that stopped serving Medicare beneficiaries had been in
                                    operation for fewer than 5 years. Moreover, agencies that closed were
                                    much smaller—serving less than half the number of beneficiaries—and
                                    getting smaller. Finally, they were providing more visits to each user than
                                    remaining agencies. Compared with the average of 479 beneficiaries
                                    served by their counterparts that remained open, closed agencies served
                                    only 216 beneficiaries while providing 44 percent more visits per
                                    beneficiary (see table 3). Furthermore, closed agencies had experienced
                                    an 8-percent decline in the number of beneficiaries served compared with
                                    the previous year.




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Table 3: Volume and Utilization Rates
of Active and Closed Home Health                                               Average number of
Agencies, Calendar Years 1996 and                                                beneficiaries                 Visits per beneficiary
1997                                    Agencies                                    1996            1997             1996             1997
                                        Active agencies on or before
                                        Jan. 1, 1996, and still in
                                        business                                     487              479               66               64
                                        Agencies closed during
                                        calendar year 1998                           235              216               95               92
                                        Source: GAO analysis of HCFA’s Standard Analytical File, claims data for home health services,
                                        1996 and 1997.



                                        The profile of closed agencies is consistent with the incentives created by
                                        the IPS to control the volume of services provided to beneficiaries. The
                                        revenue cap is applied to an agency’s total Medicare payments; it does not
                                        limit payments for any specific beneficiary. HHAs need to average costs
                                        over all beneficiaries to stay within the cap. Low-volume agencies may
                                        have less ability to stay below their caps: a few high-cost patients can
                                        affect them more because they have a smaller pool of beneficiaries over
                                        which to average their costs. Similarly, agencies that provide a higher
                                        number of visits per user would face the IPS constraints because of their
                                        higher average costs. Agencies that typically provide greater than the
                                        average number of services per user will need to change their service
                                        patterns or mix of beneficiaries. These changes could be challenging for
                                        small agencies that may have less flexibility or experience in managing
                                        service use.

                                        Finally, new agencies may face tighter payment restrictions than their
                                        established counterparts because their payment limits are based on
                                        average national utilization rather than their own experience. Agencies
                                        that opened after October 1994, and provide more services per beneficiary,
                                        may be constrained under the IPS, particularly if they are located in a
                                        region where utilization exceeds the national average.


Closures Are Concentrated               About 40 percent of agency closures since October 1997 were in three
in Three High-Utilization,              states—Louisiana, Oklahoma, and Texas.22 These states had 2,286 HHAs in
High-Growth States                      January 1999—about 25 percent of the remaining agencies nationwide—to

                                        22
                                          In contrast, some states such as Alabama, Kentucky, New Jersey, and Washington had fewer than
                                        four closures between October 1997 and January 1999. No closures occurred in Georgia. Each of these
                                        states had HHAs serving more Medicare fee-for-service beneficiaries than the national average—that
                                        is, they had fewer HHAs per Medicare fee-for-service beneficiary. (App. III contains the number of
                                        active and closed HHAs and the number of Medicare fee-for-service enrollees per remaining HHA by
                                        state.)



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                                           serve 9 percent of Medicare’s fee-for-service beneficiaries. In each of these
                                           states, the number of HHAs per Medicare beneficiary far exceeded the
                                           national average of one agency per 3,509 beneficiaries.23 For example,
                                           Texas had about three agencies serving that number of beneficiaries.

                                           Utilization in these three states was not only higher than the national
                                           average in 1994 but grew considerably between then and the
                                           implementation of the IPS. For example, in each of these states, visits per
                                           user rose between 1994 and 1997 at rates more than double the national
                                           average (ranging from 28 percent to almost 45 percent, compared with the
                                           10.5-percent increase nationwide). Furthermore, by 1997, HHAs in these
                                           states served 20 percent more users per 1,000 fee-for-service beneficiaries
                                           and provided twice the number of visits per user compared with the
                                           national average. (See table 4.)


Table 4: Decline in HHAs and Utilization in Three High-Use States
                                                                     People served per 1,000
                                           HHA closures as           Medicare fee-for-service
                            Number of       a percentage of                 enrollees                             Visits per user
                     Medicare-certified     active agencies                              Percentage                             Percentage
                     HHAs, Jan. 1, 1999    as of Oct. 1, 1997      1994      1997            change       1994      1997           change
Nationwide                         9,263                –14.0      94.2     109.2                15.9      66.0      72.9                 10.5
Louisiana                            407                –21.6     138.6     157.3                13.5     125.8    161.0                  28.0
Oklahoma                             299                –23.2     108.9     131.9                21.1     105.7    147.0                  39.1
Texas                              1,580                –20.1     106.9     133.7                25.1      97.4    141.0                  44.8
                                           Sources: GAO analysis of HCFA’s OSCAR data and Medicare enrollment data.




Majority of Closures                       HHA closures were concentrated in 23 percent of the counties (555) that
Occurred in Urban                          had agencies as of October 1, 1997. Even fewer counties experienced
Counties                                   significant reductions—that is, five or more agencies (primarily urban
                                           counties) or 50 percent or more of their agencies (primarily rural
                                           counties). The 205 counties are widely scattered across the country (see
                                           fig. 2). Because of the concentration of closures, the majority of counties
                                           (77 percent) that had agencies experienced no reduction in the number of
                                           HHAs. Furthermore, only a 4-percent increase occurred in the number of
                                           counties with only one or two agencies. (See app. IV.)




                                           23
                                            We report the number of Medicare fee-for-service enrollees because HCFA data on service use
                                           exclude those enrolled in managed care plans.



                                           Page 13                                                  GAO/HEHS-99-120 Home Health Access
                                          B-282147




Figure 2: Counties With Significant Reductions in HHAs Between October 1, 1997, and January 1, 1999




                                          Page 14                                        GAO/HEHS-99-120 Home Health Access
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                      (Figure notes on next page)



Page 15    GAO/HEHS-99-120 Home Health Access
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                      Note: Counties that lost five or more HHAs tended to be urban, while those losing 50 percent or
                      more were predominately rural. Three counties that met both criteria were classified in the latter
                      category.

                      Source: GAO analysis of HCFA’s OSCAR data for October 1, 1997, through January 1, 1999.




                      Closures in urban areas accounted for 74 percent of the reduction in HHAs.
                      Nevertheless, because of the concentration of HHAs in urban areas,
                      beneficiaries still generally have a choice of agencies. California’s
                      experience is illustrative. Between October 1, 1997, and January 1, 1999,
                      California lost 145 HHAs, primarily in seven urban counties—Los Angeles,
                      San Diego, San Francisco, and four adjacent counties (see app. V).
                      However, even after these closures, the seven counties still had 450
                      Medicare-certified HHAs. The California home health association told us
                      that, in reality, much of what appeared to be closures were actually
                      mergers or consolidations of HHAs, and capacity may not have actually
                      decreased. California’s experience is not unique. For example, about
                      68 percent of the net reduction in HHAs in Texas occurred in 14 primarily
                      urban counties.


                      Although attention has been focused on the number of HHAs that have
Medicare              closed, a more important issue is whether beneficiaries have access to
Beneficiaries         home health care services. Our analysis of the limited utilization data
Continue to Receive   available for 1998 (the first 3 months) indicates that a slightly larger share
                      of beneficiaries received home health services and users received about
Home Health Care      the same number of services as in 1994, the base year for the IPS.
Services              Utilization, both in terms of beneficiaries served and visits per user were
                      below the peak levels reached in 1996. In addition, a large variation
                      continued in utilization rates across areas, but the range narrowed. Indeed,
                      utilization in low-use counties actually increased above 1994 levels.
                      Together these patterns suggest that the IPS design is producing the
                      desired result—controlling utilization and reducing its extreme variation.
                      Unfortunately, it is not possible to tell from the aggregate picture whether
                      only visits of marginal value or those that were inappropriate were
                      forgone.

                      Our interviews with officials at seven state survey agencies responsible for
                      certifying HHAs that serve Medicare beneficiaries and operating beneficiary
                      hotlines suggest that closures are a market correction. Moreover, survey
                      agency hotlines in these same states have received few beneficiary




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                              complaints. In 34 primarily rural counties of these seven states—counties
                              that have experienced significant HHA closures—most hospital discharge
                              planners reported having little difficulty placing beneficiaries compared
                              with previous years. Similarly, most HHA managers told us that they were
                              unaware of access problems in their counties. In response to IPS and other
                              initiatives, however, HHAs told us that they are changing how they operate.
                              Some of these changes may create future access barriers for beneficiaries
                              who need intensive or long-term skilled care.


Utilization Has Returned to   There has been a substantial decline in utilization nationwide since 1996,
1994 Levels                   and visits per beneficiary have now returned to about the same level as
                              1994, the base year for the IPS revenue caps. Home health use had been
                              growing steadily since 1988, so 1994 represents a relatively high level of
                              use, though not the peak.24 The decline in visits per user between 1996 and
                              1998 is consistent with IPS incentives and does not necessarily imply a
                              beneficiary access problem. Furthermore, variation in utilization between
                              high- and low-use counties has narrowed.

                              The percentage of fee-for-service beneficiaries receiving home health care
                              nationwide increased 22 percent between 1994 and 1996 and then declined
                              13 percent between 1996 and 1998. Despite this recent decline, the
                              proportion of beneficiaries receiving services was 7 percent higher in 1998
                              than in 1994 (see table 5). Visits per user followed a similar pattern of
                              growth and decline, but by 1998 they were essentially at the 1994
                              levels—30.8 and 30.5 visits, respectively. We cannot determine whether the
                              reductions involved visits that were of marginal value, were for services
                              that did not meet home health coverage criteria, or were indeed valuable
                              services. These patterns are consistent, however, with the IPS incentives to
                              constrain the costs of care for each beneficiary, but not necessarily the
                              number of users.25

                              The difference in visits per user between high- and low- utilization
                              counties narrowed over this period, but it is still substantial. From 1994 to
                              1998, high-utilization counties showed a small decrease in both the
                              percentage of fee-for-service beneficiaries served (a decline of 1.5 percent)
                              and the number of visits per beneficiary (a 2.2-percent decline). In
                              contrast, HHAs in low-utilization counties served more beneficiaries

                              24
                               Medicare Payment Advisory Commission, Report to Congress: Context for a Changing Medicare
                              Program (Washington, D.C.: Medicare Payment Advisory Commission, June 1998), p. 108.
                              25
                                While the IPS does not create incentives to control the number of home health users, the various
                              fraud and abuse initiatives may have the effect of reducing the number.



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                                           (11 percent more) and provided more visits per beneficiary (15.9 percent
                                           more) over this same time period. In 1998, visits per beneficiary still varied
                                           widely, from an average of 19 visits in low-utilization counties to over 44 in
                                           high-utilization counties. The difference, however, has narrowed. The
                                           precise reasons for this historical variation are not known, but there is no
                                           reason to assume that it was warranted. The drop in visits per user in
                                           high-utilization areas suggests that practice patterns are changing in
                                           response to the IPS incentives.


Table 5: Changes in Utilization of Home Health Services Among Low-, Middle-, and High-Utilization Counties, First Quarters
of 1994, 1996, and 1998
                                                Percentage of fee-for-service
                                                     beneficiaries served                 Visits per person served
                                                     First         First          First         First         First         First      Percentage
                                   Number of       quarter       quarter        quarter       quarter       quarter       quarter         change,
                                    counties         1994          1996           1998          1994          1996          1998          1994-98
Nationwidea                             3,141            4.6           5.6           4.9          30.8          35.1          30.5                –1.0
Low-utilization countiesb                 624            3.5           4.3           3.9          16.4          20.0          19.0                15.9
Middle counties                         1,870            4.3           5.2           4.7          27.5          31.1          27.5                  0
High-utilization countiesb                624            6.8           8.2           6.7          45.4          52.0          44.4                –2.2
                                           a
                                           Includes 23 counties where beneficiaries received no services in 1994.
                                           b
                                            Low-utilization counties are those with the lowest 20-percent utilization for the first 3 months of
                                           1994 while high-utilization counties have the highest 20-percent utilization for the same time
                                           period. The middle counties are the remaining 60 percent.

                                           Source: GAO analysis of HCFA’s Standard Analytical File, claims data for home health services,
                                           1994, 1996, and 1998.




State Representatives                      We interviewed officials at state survey agencies in seven states about
Generally Viewed HHA                       potential closure-related access problems and beneficiary complaints.
Capacity as Adequate                       Each of these states had counties that experienced significant
                                           reductions—that is, five or more agencies or 50 percent or more of their
                                           agencies. In general, few access problems were identified. The small
                                           number of complaints received by state hotlines appears to suggest that
                                           most beneficiaries were not having difficulty accessing Medicare home
                                           health care, despite significant HHA closures in certain counties.

                                           Most of the state survey agency representatives we interviewed told us
                                           that adequate capacity exists despite HHA closures. Only Texas
                                           representatives were unable to comment. A representative of Oregon’s
                                           state survey agency said that areas with closures still have sufficient



                                           Page 18                                                       GAO/HEHS-99-120 Home Health Access
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options for beneficiaries to obtain home health services, as did a
representative from Indiana. California’s representative was not aware of
any beneficiary access problems resulting from closures. A few state
survey agencies went so far as to characterize closures as a market
correction in response to an oversupply of HHAs. For example, Colorado’s
survey agency told us that, with the exception of the home health
association, most stakeholders believed there had been too many HHAs
chasing too few eligible beneficiaries. Missouri’s state survey agency
pointed out that there were no access problems before the sharp increase
in HHAs in the last 3 years and that, despite the closures, Missouri now has
the same number of HHAs that it had 3 years ago. A survey of state
association members appears to support the Missouri state survey
agency’s perspective: eighty percent of members responded that capacity
was still sufficient in areas that had experienced closures.

State survey agencies are required to operate hotlines that field beneficiary
complaints. Hotlines in the seven states have received few complaints
about access to Medicare home health care. Officials we interviewed in
five of the seven states had a total of four complaints. In three
states—Indiana, Missouri, and Oregon—no complaints were registered by
consumers about Medicare home health care. California’s state survey
agency had one confirmed complaint about premature discharge from a
Medicare-certified HHA. Colorado’s state survey agency generally attributed
three complaints about home health to “BBA changes.”

State officials in Florida were not always able to distinguish access
complaints received by the hotline from other types of complaints about
home health care. Florida’s state survey agency reported 14 confirmed
complaints about inappropriate discharges from HHAs. However, these
were not necessarily problems with Medicare coverage, because the
agencies in question also served other clients. In Texas, because of the
broad categories used to classify complaints, officials were unable to
distinguish complaints related to home health access.

We inquired about whether reductions in Medicare utilization are actually
a transfer to other payers, particularly Medicaid. Beneficiaries who are
eligible for both Medicare and Medicaid services, for example, may receive
more Medicaid-funded services as Medicare home health expenditures are
constrained. Medicaid officials from two study states told us that they
believed their programs were experiencing such shifts; other states
expected, but had not yet seen, an impact. Some state officials we talked
with had not collected data to substantiate these trends.



Page 19                                     GAO/HEHS-99-120 Home Health Access
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Beneficiaries in More           Closures in rural areas can be a major concern because of the small
Vulnerable Rural Counties       number of HHAs located there and the potential for closures to drastically
Also Not Experiencing           reduce capacity. Although rural counties lost only about 9 percent of their
                                agencies, 32 rural counties lost their only HHA and an additional 97 lost
HHA Access Problems             50 percent or more of their agencies.26 Our interviews in 34 primarily rural
                                counties, however, generated little evidence that access had been impaired
                                by closures. In those counties that lost their only HHA, hospital discharge
                                planner supervisors as well as managers of nearby HHAs told us that access
                                is not a problem because services are available from HHAs in neighboring
                                counties or from branch offices located in the county. The results from our
                                analysis of utilization data for counties that had no HHA are consistent with
                                the information collected from the stakeholders we interviewed in seven
                                counties with no HHA.

                                Our interviews underscore the limitations of using the presence or
                                absence of an HHA as an access indicator. Six of the 34 primarily rural
                                counties in our sample had recently lost their only HHA, according to HCFA
                                tracking data. A seventh county had never had an HHA. Hospital
                                representatives and HHA managers in all seven counties told us that
                                beneficiaries had access to services from either a branch27 or an agency in
                                an adjacent county. HCFA data on closures track parent agencies and not
                                the branch agencies that served many of these counties. The following
                                information describes the counties identified in HCFA tracking data as
                                having no HHAs and the reported availability of HHAs according to
                                information we received during interviews.

                            •   Wright County, Missouri: Three HHAs had offices located in the county, and
                                at least three more from outside the county were serving county
                                beneficiaries.
                            •   Montezuma County, Colorado: Two HHAs had offices located in the county,
                                and one to two were serving beneficiaries from outside the county.
                            •   Modoc County, California; Hamilton County, Florida; and Clay County,
                                Indiana: Each county had one HHA office located in the county.
                            •   Columbia County, Oregon: No HHA was located in the county, but five HHAs
                                were serving beneficiaries from outside the county.
                            •   Trinity County, Texas: No HHA located in the county, but four HHAs in
                                adjacent counties serve beneficiaries.



                                26
                                  Rural counties account for 2,290 of the 3,141 counties in the United States.
                                27
                                  In a few instances, we were told that the agency was a parent agency not reflected in the HCFA
                                tracking data. We did not attempt to verify these assertions.



                                Page 20                                                      GAO/HEHS-99-120 Home Health Access
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                                           We also examined utilization data for 715 primarily rural counties
                                           identified as having no HHA between October 1997 and January 1999.28
                                           About 1.7 million fee-for-service Medicare beneficiaries (or 5.4 percent of
                                           all fee-for-service beneficiaries) lived in those counties. Beneficiaries in all
                                           but 16 of these counties used home health services in 1998. Although
                                           counties with no HHA experienced a larger decline in visits than the
                                           national average, a higher proportion of beneficiaries continued to be
                                           served and to be provided slightly more services than the national average.
                                           (See tables 5 and 6.)



Table 6: Changes in Utilization of Home Health Services in Counties Without an HHA, First Quarters of 1994, 1996, and 1998
                                                Percentage of fee-for-service
                                                     beneficiaries served          Visits per person served
                                                     First         First         First         First         First         First      Percentage
                                   Number of       quarter       quarter       quarter       quarter       quarter       quarter          change
                                    counties         1994          1996          1998          1994          1996          1998         (1996-98)
Nationwide                              3,141           4.6            5.6           4.9         30.8          35.1          30.5              –1.0
Counties that had no HHAs
during the Oct. 1, 1997-Jan. 1,
1999, period                              715           5.5            6.5           5.4         33.3          36.1          31.1              –6.6
                                           Source: GAO analysis of HCFA’s Standard Analytical File, claims data for home health services,
                                           1994, 1996, and 1998.



                                           According to hospital discharge supervisors and HHA managers in the
                                           majority of the other 27 counties in our sample, most beneficiaries eligible
                                           for Medicare home health care are not experiencing difficulty accessing
                                           services. The majority of hospital representatives told us that they were
                                           not having difficulty finding home health care for Medicare beneficiaries
                                           compared with their experience before the IPS. Hospitals in two of the
                                           three California counties and one of the seven Missouri counties reported
                                           recent problems placing Medicare beneficiaries in home health care. Two
                                           of these three hospitals operated their own HHA. In addition, in all but 3 of
                                           the 27 counties, HHAs reported no access problems. Of the six HHAs in three
                                           counties reporting access difficulties, four were in an urban county and
                                           cited problems for patients with diabetes or wounds. The remaining two
                                           HHAs were in rural counties and cited rural issues, such as distance or the
                                           lack of informal caregivers nearby.


                                           28
                                             On October 1, 1997, 732 counties lacked HHAs. By January 1, 1999, new HHAs had opened in 17 of
                                           those counties. In addition, 42 other counties lost all of their agencies; consequently, by January 1,
                                           1999, a total of 757 counties had no HHAs.



                                           Page 21                                                      GAO/HEHS-99-120 Home Health Access
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Changes in the Way HHAs       According to HHAs, IPS and other federal initiatives or requirements have
Operate Could Create          changed the way HHAs operate. (See app. VII.) Managers of HHAs we
Future Access Problems        interviewed told us that they are trying to lower their operating costs by
                              cutting staff, reducing supply and overhead costs, and providing more
for High-Cost Beneficiaries   education to staff about the implications of the revenue caps. However,
                              other operational changes are more focused on beneficiary receipt of
                              services and may reduce visits or admissions, particularly for beneficiaries
                              with an intense or long-term need for skilled nursing services. Four
                              national advocacy groups told us that they have received complaints about
                              access to home health services from such beneficiaries, but these
                              complaints are hard to evaluate.

                              Although most HHAs told us that they have not officially changed their
                              admission or discharge policies, they have made operational changes. In
                              admitting beneficiaries, they (1) screen them more carefully to determine
                              eligibility and the amount of care needed (2) assess whether the HHA has
                              the capacity to provide that care, and (3) monitor patients’ needs during
                              treatment to ensure that they are discharged when appropriate. Frequent
                              comments from HHAs that they compare patient need and agency capacity
                              may reflect that HHAs are trying to manage their average costs per
                              beneficiary to stay within the revenue caps. This balancing act could entail
                              ensuring that they have enough short-term patients to adequately reduce
                              average costs to compensate for any higher-cost patients served. Indeed,
                              10 HHAs volunteered that they balance their low- and high-cost patients to
                              stay within their revenue limits. HHAs also told us that they educate
                              beneficiaries or families in self-care sooner and make a greater effort to
                              use community resources, including Medicaid services.

                              While many HHAs indicated that they continue to accept all Medicare-
                              eligible beneficiaries, they acknowledged that they are more careful about
                              accepting expensive, long-term patients. This comment may indicate a
                              potential access problem for these types of beneficiaries. HHAs most
                              frequently mentioned wound patients and diabetics unable to administer
                              insulin themselves as types of beneficiaries they are careful about
                              accepting or reluctant to accept. Most HHAs told us they continue to treat
                              patients who need more services than originally estimated and continue to
                              treat long-term patients for whom they cannot find another alternative,
                              such as care provided informally by family or neighbors.

                              Four of the five national advocacy groups we interviewed have received
                              access complaints focused on individuals with chronic illnesses or
                              conditions such as Alzheimer’s disease, multiple sclerosis, and



                              Page 22                                     GAO/HEHS-99-120 Home Health Access
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              quadriplegia. Similarly, the Area Agencies on Aging we interviewed
              reported that beneficiaries in need of long-term care were having difficulty
              obtaining Medicare-covered home health care. These access complaints,
              however, may reflect uncertainty about who is eligible for the Medicare
              home health care benefit. It is not clear that the types of individuals cited
              by advocacy groups actually required skilled care and therefore were
              eligible for Medicare home health. Some advocacy groups we interviewed
              believed that home health care should be a long-term-care benefit
              available to any beneficiary with chronic conditions, regardless of the
              specific eligibility criteria in the statute. In the past, some beneficiaries
              who received home health services were not really eligible for Medicare
              coverage, and others are no longer eligible because of recent changes in
              the benefit. In five of the seven states we studied, one or more HHAs
              reported that referrals from closing agencies included beneficiaries who
              were ineligible for Medicare home health care. In one state, an HHA
              manager told us that only 4 of 78 referrals were eligible. Thus, reported
              access problems may actually reflect appropriate targeting of services,
              given Medicare’s coverage criteria.


              Although approximately 14 percent of HHAs have closed and the number of
Conclusions   visits provided to Medicare beneficiaries has declined since 1997, we
              found little evidence that appropriate access to Medicare’s home health
              benefit has been impaired. The substantial increases in the number of HHA
              beneficiaries using this benefit and visits per user over the past several
              years have outstripped the recent reductions. As a result, the number of
              remaining agencies as of January 1, 1999, and utilization as of March 1998
              mirror patterns in 1994, the year designated as the basis of the IPS HHA
              revenue caps. Our interviews with key stakeholders in areas most affected
              by the HHA closures confirmed the overall impression that the recent spate
              of HHA closures has not impaired beneficiary access. Moreover,
              information we gathered indicates that beneficiaries who are not eligible
              for Medicare home health care because they do not need skilled care may
              have been the likeliest candidates for service reductions.

              The changes in the number of HHAs and home health utilization are
              consistent with the incentives of the IPS. That the majority of closures
              occurred in areas with many HHAs and were smaller agencies indicates that
              beneficiaries still have access to services. The declines in visits per
              beneficiary signal HHAs’ response to the IPS incentives to reduce the
              average costs of caring for their patients. Following years of substantial
              increases in home health visits, the IPS has curbed the growth in home



              Page 23                                     GAO/HEHS-99-120 Home Health Access
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                      health spending. Whether services will be reduced to inappropriately low
                      levels or access will be limited for beneficiaries who are likely to require
                      more visits than the average is not known, but we found little evidence
                      that this is occurring now. Furthermore, the pending implementation of
                      the PPS, which will adjust payments to account for costlier patients, could
                      ameliorate any future access problems. However, it is critical that the
                      payments under the PPS be adequate and appropriately account for
                      variation in patient resource needs. Thus, we will continue to monitor
                      beneficiary access to home health care through the IPS and, as payments
                      are changed, under the PPS.


                      In its comments on a draft of this report, HCFA agreed with our findings
Agency and Industry   that HHA closures have continued with little evidence of impaired
Comments              beneficiary access. HCFA also provided technical comments, which we
                      incorporated in the final report as appropriate. HCFA’s written comments
                      are included as appendix VIII.

                      We also obtained oral comments on a draft of this report from home
                      health care industry representatives, including the American Association
                      of Homes and Services for the Aging, American Federation of Home Care
                      Providers, American Hospital Association, Home Health Services and
                      Staffing Association, National Association for Home Care, and Visiting
                      Nurses Association of America. In general, industry representatives agreed
                      with our finding that beneficiaries who are likely to be costlier than
                      average to treat are most at risk under the IPS. They stressed the need to
                      quickly implement a PPS that adjusts payments to account for costlier
                      patients to ameliorate any future access problems. Industry
                      representatives did not dispute our findings on changes in home health
                      utilization but pointed out that the only available utilization data since
                      implementation of the IPS is already a year old and may not reflect more
                      recent experience. Furthermore, they stated that it is not possible to
                      determine if 1994 utilization levels were appropriate or inappropriate.
                      Although the most recent data only account for the first 3 months of 1998,
                      we did conduct interviews in February 1999 to complement the analysis
                      and found little evidence of impaired beneficiary access. As soon as more
                      complete data for 1998 are available, we plan to update our utilization
                      analysis. We agree that available data do not permit the establishment of a
                      baseline of appropriate use of home health care, especially in light of the
                      fraud and abuse identified in the program. Finally, industry representatives
                      suggested that the few complaints by beneficiaries may reflect a lack of
                      awareness of Medicare home health coverage and their right to appeal



                      Page 24                                     GAO/HEHS-99-120 Home Health Access
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decisions. We agree that there is confusion about eligibility for the home
health benefit. However, many HHA managers told us that they are helping
to better educate beneficiaries and their families about qualifying for
services.


We will send copies of this report to the Honorable Donna E. Shalala,
Secretary of Health and Human Services; the Honorable Nancy-Ann Min
DeParle, Administrator of HCFA; appropriate congressional committees;
and other interested parties. We will also make copies available to others
upon request.

If you or your staffs have any questions, please call me or Laura Dummit,
Associate Director, at (202) 512-7114. Other major contributors to this
report include Carol Carter, Roger Hultgren, Sally Kaplan, Walter Ochinko,
Carmen Rivera-Lowitt, and Shari Sitron.




William J. Scanlon
Director, Health Financing and
  Public Health Issues




Page 25                                    GAO/HEHS-99-120 Home Health Access
Contents



Letter                                                            1


Appendix I                                                       30
Scope and
Methodology
Appendix II                                                      34
Use of Home Health
Services by State,
Calendar Years 1994
and 1997
Appendix III                                                     36
Medicare-Certified
HHAs and Medicare
Fee-for-Service
Enrollees per HHA, by
State, for Selected
Periods
Appendix IV                                                      38
Counties With
Medicare-Certified
HHAs, October 1,
1997, and January 1,
1999




                        Page 26   GAO/HEHS-99-120 Home Health Access
                        Contents




Appendix V                                                                                      39
California Counties
With Significant
Decline in Number of
HHAs Between
October 1, 1997, and
January 1, 1999
Appendix VI                                                                                     40
Counties With No
HHAs on January 1,
1999
Appendix VII                                                                                    41
Other Policies Have
Affected HHA Costs
and Revenues
Appendix VIII                                                                                   44
Comments From the
Health Care Financing
Administration
Tables                  Table 1: Medicare-Certified HHAs, 1990 and 1997                          9
                        Table 2: Comparison of Active and Closed HHAs, October 1, 1997,         11
                          Through January 1, 1999
                        Table 3: Volume and Utilization Rates of Active and Closed Home         12
                          Health Agencies, Calendar Years 1996 and 1997
                        Table 4: Decline in HHAs and Utilization in Three High-Use States       13
                        Table 5: Changes in Utilization of Home Health Services Among           18
                          low-, Middle-, and High-Utilization Counties, First Quarters of
                          1994, 1996, and 1998
                        Table 6: Changes in Utilization of Home Health Services in              21
                          Counties Without an HHA, First Quarters of 1994, 1996, and 1998




                        Page 27                                  GAO/HEHS-99-120 Home Health Access
          Contents




          Table I.1: Characteristics of States in Interview Sample                   32
          Table 1.2: Counties Selected for In-Depth Analyses                         33


Figures   Figure 1: Change in Number of Medicare-Certified HHAs, October             10
            1, 1995 Through January 1, 1999
          Figure 2: Counties With Significant Reductions in HHAs Between             14
            October 1, 1997, and January 1, 1999




          Abbreviations

          BBA        Balanced Budget Act of 1997
          HCFA       Health Care Financing Administration
          HCIS       HCFA’s Customer Information System
          HHA        home health agency
          HIPAA      Health Insurance Portability and Accountability Act of 1996
          IPS        interim payment system
          OASIS      Outcome and Assessment Information Set
          ORT        Operation Restore Trust
          OSCAR      On-Line Survey, Certification, and Reporting system
          PPS        prospective payment system
          RHHI       regional home health intermediary


          Page 28                                     GAO/HEHS-99-120 Home Health Access
Page 29   GAO/HEHS-99-120 Home Health Access
Appendix I

Scope and Methodology


             We analyzed data from the Health Care Financing Administration’s (HCFA)
             On-Line Survey, Certification, and Reporting system (OSCAR) on the growth
             in HHAs since 1990, the characteristics of agencies that opened and closed
             during this period, and the number of closed and active agencies through
             January 1, 1999. To assess the effect of closures on beneficiary access, we
             analyzed the limited data available on beneficiary utilization since the
             implementation of the interim payment system (IPS) and conducted
             in-depth interviews with stakeholders in areas that had a substantial
             number of HHA closures since October 1997.

             We compared utilization in the first 3 months of 1998 with comparable
             periods in 1994 and 1996 using HCFA’s Standard Analytical File (version G).
             We selected 1994 as a point of comparison because the IPS revenue caps
             were based on the cost and utilization experience from that year. We
             looked at how many beneficiaries received services (the percentage of
             fee-for-service beneficiaries served) and how many services they received
             (the number of visits per user.) It is important to note that many Medicare
             home health care users receive services for considerable periods so visits
             per user based on 3 months of data significantly understate the actual use
             for the average user. Moreover, agencies may not have responded to the
             revenue cap until they had more information on their own long-term users.
             Finally, since IPS was phased in, not all agencies were under the new
             payment system during the first 3 months of 1998. Sixty-one percent of
             agencies were under the IPS by January 1, 1998. HCFA is concerned that
             changes in billing requirements that took effect later in the year may have
             affected data for the first quarter of 1998 as well.29 In addition, these data
             do not reflect the full effect of closures reported here because the majority
             occurred after March 1998. Nonetheless, these are the most complete
             current utilization data available and we believe they provide an accurate
             picture of use at that time.

             We used OSCAR data to identify counties that had lost 40 percent or more of
             their Medicare-certified HHAs between October 1, 1997, and January 1,
             1999. We further focused on county-level analyses in seven states that had
             counties that met these closure criteria and that varied along several
             dimensions, including geographic area, home health utilization experience,
             and approaches to controlling the number of agencies providing services
             (see table I.1). Our sample consisted primarily of rural counties because
             the number of HHAs in urban counties remained high even in those
             counties with many closures. To examine the potential impact of HHA

             29
              Although changes in billing requirements went into effect after the first quarter of 1998, HCFA
             expressed concern that these data could be affected.



             Page 30                                                    GAO/HEHS-99-120 Home Health Access
Appendix I
Scope and Methodology




closures on beneficiaries’ utilization of services, we used data from HCFA’s
Customer Information System (HCIS) to select an additional six counties.
These 6 counties were among the 100 counties nationwide with the
greatest percentage decline in visits per user from 1996 to 1998 and with
Medicare populations of more than 50 and less than 10,000. Table I.2 lists
the 34 counties and the number of HHAs in these counties.

We conducted structured interviews with stakeholders in a sample of
seven states (California, Colorado, Florida, Indiana, Missouri, Oregon, and
Texas). These interviews were conducted in a sample of 34 counties—28
were primarily rural counties that had experienced a substantial reduction
in the number of HHAs (one of these counties had never had an HHA). We
augmented this sample with six counties in which home health visits had
declined notably between the first 3 months of 1996 and a comparable
period in 1998.

In each sample state, we interviewed officials at (1) state Medicaid
agencies; (2) state home health associations; (3) state agencies responsible
for the survey and certification of HHAs serving Medicare beneficiaries and
for maintaining hotlines that collect data on beneficiary complaints; and
(4) beneficiary advocacy groups such as local Area Agencies on Aging and
chapters of the American Association of Retired Persons. In each county,
we interviewed hospital discharge planner supervisors and HHA managers.
Overall, we interviewed representatives of 54 HHAs, 40 hospitals, and 42
advocacy groups.30 At the national level, we also spoke with officials at six
home health associations and five advocacy groups.

Finally, because representatives of the home health industry question the
accuracy of the OSCAR data, we attempted to verify the number of closures
in our state sample with personnel from state survey and certification
offices and health care providers. However, we were told in most cases
that the state survey and certification data were no more up to date than
the OSCAR data we were using.




30
  We interviewed representatives from 54 HHAs, because when we made contacts in the counties
selected, we found operating HHAs or branches of HHAs in some counties where OSCAR data told us
there were no HHAs.



Page 31                                                GAO/HEHS-99-120 Home Health Access
                                            Appendix I
                                            Scope and Methodology




Table I.1: Characteristics of States in Interview Sample
                                                                          Characteristics
                                                                 How new
                                                                 agency             Ratio of
                                                                 revenue limits     Medicare
                                                                 compare with       beneficiaries                         Does state
                                                                 those for          per HHA to                            restrict
                                                Average visits   established        national                              number of
State                       Region              per user, 1997   agencies           average            ORTa state?        HHAs?
California                  West                Low              Above              Average            Yes                No
Colorado                    West                Medium           About the same Low                    Yes                No
Florida                     South               Medium           Below              High               Yes                Yes
Indiana                     Midwest             Medium           About the same Average                No                 No
Missouri                    Midwest             Low              Above              Average            Yes                No
Oregon                      West                Low              Above              High               No                 No
Texas                       South               High             Below              Low                Yes                No
                                            a
                                             Operation Restore Trust (ORT) is HCFA’s antifraud campaign.

                                            Sources: GAO analyses of data from various sources, including HCFA’s OSCAR; Medicare
                                            beneficiary enrollment data; Department of Health and Human Services, ORT; and the National
                                            Association for Home Care.




                                            Page 32                                                 GAO/HEHS-99-120 Home Health Access
                                   Appendix I
                                   Scope and Methodology




Table 1.2: Counties Selected for
In-Depth Analyses                                                                                    Number of HHAs on
                                   State                           Counties selected                       Jan. 1, 1999
                                   California                      Amador                                              1
                                                                   Modoc                                               0
                                                                   San Mateo                                           6
                                   Colorado                        Chaffee                                             1
                                                                   Douglas                                             1
                                                                   Huerfano                                            2
                                                                   Las Animas                                          1
                                                                   Montezuma                                           0
                                   Florida                         Gulf                                                2
                                                                   Hamilton                                            0
                                                                   Okeechobee                                          1
                                                                   Suwannee                                            1
                                                                   Walton                                              1
                                   Indiana                         Clay                                                0
                                                                   Daviess                                             1
                                                                   Fayette                                             1
                                                                   Greene                                              1
                                                                   Noble                                               1
                                   Missouri                        Howard                                              1
                                                                   Iron                                                1
                                                                   Jefferson                                           2
                                                                   Laclede                                             1
                                                                   St. Francois                                        3
                                                                   Washington                                          1
                                                                   Wright                                              0
                                   Oregon                          Columbia                                            0
                                                                   Curry                                               1
                                                                   Lane                                                5
                                                                   Washington                                          3
                                   Texas                           Jasper                                              5
                                                                   Polk                                                1
                                                                   Potter                                              5
                                                                   Trinity                                             0
                                                                   Winkler                                             1
                                   Source: GAO’s analysis of HCFA’s January 1999 OSCAR data.




                                   Page 33                                             GAO/HEHS-99-120 Home Health Access
Appendix II

Use of Home Health Services by State,
Calendar Years 1994 and 1997


                                      Medicare home health users
                                       per 1,000 fee-for-service
                                               enrollees              Visits per person served
                                                      Percentage                       Percentage
               State                    1994     1997     change      1994     1997        change
               Alabama                 119.4    128.1          7.3%   113.4    120.7             6.4%
               Alaska                   61.8     71.0        14.9      43.4     45.7             5.3
               Arizona                  66.7     79.3        18.9      56.2     58.8             4.6
               Arkansas                 98.9    106.5          7.7     76.0     77.2             1.6
               California              100.1    109.5          9.4     46.1     48.7             5.6
               Colorado                 93.7    104.1        11.1      59.8     67.4         12.7
               Connecticut             107.4    128.4        19.6      72.9     81.2         11.4
               Delaware                 90.8     93.4          2.9     43.4     49.8         14.7
               District of Columbia     77.7     94.8        22.0      42.1     52.9         25.7
               Florida                 118.0    124.6          5.6     75.9     74.7         –1.6
               Georgia                 109.2    109.5          0.3    102.1     98.9         –3.1
               Hawaii                   39.0     47.8        22.6      41.0     38.8         –5.4
               Idaho                    84.1     99.8        18.7      54.2     59.9         10.5
               Illinois                 91.7    107.1        16.8      51.9     50.3         –3.1
               Indiana                  80.4     95.6        18.9      72.5     71.7         –1.1
               Iowa                     70.3     83.3        18.5      46.4     49.0             5.6
               Kansas                   71.0     88.4        24.5      55.8     63.5         13.8
               Kentucky                 92.1    116.4        26.4      64.8     73.7         13.7
               Louisiana               138.6    157.3        13.5     125.8    161.0         28.0
               Maine                    96.2    119.6        24.3      64.1     68.2             6.4
               Maryland                 78.3     92.0        17.5      37.1     37.4             0.8
               Massachusetts           127.9    152.2        19.0      87.0     96.5         10.9
               Michigan                 87.8    104.0        18.5      44.7     50.1         12.1
               Minnesota                55.7     72.2        29.6      37.8     47.1         24.6
               Mississippi             140.8    153.3          8.9    113.5    119.7             5.5
               Missouri                107.2    120.2        12.1      49.5     53.5             8.1
               Montana                  70.9     87.0        22.7      51.6     52.2             1.2
               Nebraska                 66.3     84.9        28.1      40.9     45.2         10.5
               Nevada                   72.8     87.2        19.8      68.1     63.2         –7.2
               New Hampshire           105.8    122.1        15.4      56.8     63.6         12.0
               New Jersey               77.4     96.6        24.8      39.7     43.2             8.8
               New Mexico               79.1     99.0        25.2      56.0     74.4         32.9
               New York                 75.8     93.9        23.9      44.6     52.6         17.9
               North Carolina           86.3    104.9        21.6      57.3     54.8         –4.4
               North Dakota             69.6     81.6        17.2      41.5     43.4             4.6
                                                                                       (continued)


               Page 34                                         GAO/HEHS-99-120 Home Health Access
Appendix II
Use of Home Health Services by State,
Calendar Years 1994 and 1997




                        Medicare home health users
                         per 1,000 fee-for-service
                                 enrollees                       Visits per person served
                                           Percentage                               Percentage
State                      1994       1997     change            1994       1997        change
Ohio                       79.5        96.4           21.3       50.7        50.4            –0.6
Oklahoma                  108.9      131.9            21.1      105.7      147.0             39.1
Oregon                     79.7        94.4           18.4       39.7        33.7           –15.1
Pennsylvania              104.3      125.1            19.9       43.0        47.0             9.3
Rhode Island              109.9      143.6            30.7       60.7        71.6            18.0
South Carolina             84.6        99.4           17.5       66.8        63.2            –5.4
South Dakota               61.2        78.3           27.9       39.2        48.4            23.5
Tennessee                 134.4      132.4            –1.5      116.4      108.7             –6.6
Texas                     106.9      133.7            25.1       97.4      141.0             44.8
Utah                      102.9      103.4             0.5       98.4      115.1             17.0
Vermont                   134.0      144.4             7.8       61.4        68.1            10.9
Virginia                   79.6        96.9           21.7       49.0        57.1            16.5
Washington                 72.7        80.9           11.3       38.4        32.4           –15.6
West Virginia              86.9      106.0            22.0       51.0        59.9            17.5
Wisconsin                  59.7        68.8           15.2       41.6        43.1             3.6
Wyoming                    89.0        92.5            3.9       77.0        71.7            –6.9
Nationwide                 94.2      109.2            15.9%      66.0        72.9            10.5%

Source: HCFA, Office of Information Services. Data are from the Medicare Decision Support
System and data developed by the Office of Strategic Planning for calendar years 1994 and
1997.




Page 35                                                 GAO/HEHS-99-120 Home Health Access
Appendix III

Medicare-Certified HHAs and Medicare
Fee-for-Service Enrollees per HHA, by State,
for Selected Periods

                                   Number of                                   Number of Medicare
                                Medicare-certified       Changes, Oct. 1,         fee-for-service
                                     HHAs              1997, to Jan. 1, 1999    enrollees per HHA
                                 Oct. 1,     Jan. 1,                New          Oct. 1,       Jan. 1,
               State              1997         1999    Closures openings          1997           1999
               Alabama              183         181            2           0      3,541         3,548
               Alaska                 27         18            9           0      1,181         1,874
               Arizona              131         112           22           3      3,163         3,640
               Arkansas             205         195           11           1      2,112         2,207
               California           848         703          165          20      2,805         3,394
               Colorado             200         161           42           3      1,615         1,934
               Connecticut          116         101           17           2      4,016         4,159
               Delaware               21         18            3           0      4,736         6,004
               District of
               Columbia               21         22            1           2      3,409         3,247
               Florida              398         365           47          14      5,271         5,654
               Georgia                97        103            0           6      9,009         8,461
               Hawaii                 28         21            7           0      3,953         5,247
               Idaho                  77         62           16           1      1,982         2,436
               Illinois             393         362           35           4      3,873         4,149
               Indiana              292         248           49           5      2,852         3,367
               Iowa                 211         195           19           3      2,234         2,412
               Kansas               221         187           34           0      1,702         1,992
               Kentucky             111         116            2           7      5,375         5,178
               Louisiana            519         407          112           0      1,040         1,255
               Maine                  52         46            9           3      4,125         4,708
               Maryland               81         78            3           0      6,894         7,235
               Massachusetts        199         183           18           2      3,950         4,097
               Michigan             230         223           11           4      5,993         6,104
               Minnesota            266         262            9           5      2,053         2,184
               Mississippi            70         69            1           0      5,992         6,115
               Missouri             273         221           56           4      2,866         3,443
               Montana                62         60            4           2      2,194         2,266
               Nebraska               83         76            8           1      2,962         3,213
               Nevada                 54         41           14           1      2,827         3,817
               New Hampshire          46         43            3           0      3,420         3,576
               New Jersey             57         55            3           1     18,780        18,795
               New Mexico           118          95           23           0      1,586         2,000
               New York             227         223            5           1     10,276        10,218
               North Carolina       162         174            6          18      6,708         6,287
                                                                                           (continued)


               Page 36                                        GAO/HEHS-99-120 Home Health Access
Appendix III
Medicare-Certified HHAs and Medicare
Fee-for-Service Enrollees per HHA, by State,
for Selected Periods




                          Number of                                         Number of Medicare
                       Medicare-certified          Changes, Oct. 1,            fee-for-service
                            HHAs                 1997, to Jan. 1, 1999       enrollees per HHA
                         Oct. 1,       Jan. 1,                New              Oct. 1,      Jan. 1,
State                     1997           1999    Closures openings              1997          1999
North Dakota                  35            35             1            1       2,989         2,989
Ohio                         465          426            43             4       3,302         3,409
Oklahoma                     388          299            90             1       1,226         1,570
Oregon                        91            74           18             1       3,418         4,237
Pennsylvania                 381          370            22            11       4,438         4,292
Rhode Island                  30            29             5            4       4,830         4,089
South Carolina                82            77             5            0       6,656         7,335
South Dakota                  57            53             5            1       2,121         2,292
Tennessee                    232          206            26             0       3,486         3,889
Texas                      1,948        1,580           392            24       1,001         1,209
Utah                          89            72           19             2       1,945         2,753
Vermont                       13            13             0            0       6,682         6,737
Virginia                     233          226            15             8       3,585         3,722
Washington                    68            66             3            1       8,154         8,406
West Virginia                 92            91             4            3       3,442         3,514
Wisconsin                    176          164            13             1       4,344         4,637
Wyoming                       65            56             9            0          966        1,144
Nationwide               10,524         9,263         1,436          175        3,133         3,509

Note: The count of HHAs includes only those agencies with Medicare provider numbers.
Therefore, it includes parents or home offices and subunits but does not include branch offices.
Numbers of Medicare fee-for-service enrollees per HHA are based on Medicare enrollment data
as of September 1997 and December 1998 and the number of HHAs within the states as of
October 1, 1997, and January 1, 1999.

Sources: GAO analysis of HCFA’s OSCAR data and Medicare enrollment data for 1997 and 1999.




Page 37                                                   GAO/HEHS-99-120 Home Health Access
Appendix IV

Counties With Medicare-Certified HHAs,
October 1, 1997, and January 1, 1999


                                                                                               Percentage
                                                                                                change in
                                                                                                number of
                                                                          Percentage of          counties,
              Number of       Number of counties with HHAs                    counties,        Oct. 1997 to
              HHAs per county   Oct. 1, 1997    Jan. 1, 1999                Jan. 1, 1999         Jan. 1999
              0                                732                757                  24%                 3%
              1                                956              1,005                  32                  5
              2                                548                558                  18                  2
              3                                304                288                   9                 –5
              4                                153                147                   5                 –4
              5                                  98                 91                  3                 –7
              6                                  60                 52                  2                –13
              7                                  52                 47                  1                –10
              8                                  31                 26                  1                –16
              9                                  32                 20                  1                –38
              10                                 16                 11                  0                –31
              11-15                              60                 52                  2                –13
              16-20                              26                 23                  1                –12
              21-50                              56                 54                  2                 –4
              51-100                             11                  6                  0                –45
              101-150                             2                  1                  0                –50
              151-200                             1                  0                  0               –100
              Over 200                            3                  3                  0                  0
              Total no. of
              counties                       3,141              3,141              100.0%
              Number of HHAs                10,524              9,263
              Source: GAO analysis of HCFA’s OSCAR data for October 1, 1997, through January 1, 1999.




              Page 38                                               GAO/HEHS-99-120 Home Health Access
Appendix V

California Counties With Significant Decline
in Number of HHAs Between October 1,
1997, and January 1, 1999




               Note: Numbers indicate HHA closures.

               Source: GAO analysis of HCFA’s OSCAR data for October 1, 1997, through January 1, 1999.




               Page 39                                               GAO/HEHS-99-120 Home Health Access
Appendix VI

Counties With No HHAs on January 1, 1999




              Source: GAO analysis of HCFA’s OSCAR data for October 1, 1997, through January 1, 1999.




              Page 40                                               GAO/HEHS-99-120 Home Health Access
Appendix VII

Other Policies Have Affected HHA Costs
and Revenues

                   During interviews with industry representatives in seven states, we were
                   consistently told that closures are not only due to the IPS but also to policy
                   changes that may have decreased utilization and thus affected HHA
                   revenues or increased their operating costs. According to stakeholders,
                   the concurrent changes increased pressure on many HHAs at the same time
                   they were adjusting to the IPS, that is, attempting to manage their costs to
                   their new revenue limits. We did not attempt to verify these assertions.


                   During our interviews, we were told that two developments have affected
Factors Cited as   HHAs’ caseloads—a drop in physician referrals and a change in coverage of
Reducing HHA       venipuncture (drawing blood).31 The Health Insurance Portability and
Revenues           Accountability Act of 1996 (HIPAA) imposed a civil monetary penalty on
                   physicians falsely certifying patients as eligible for home health care.32 In a
                   fraud alert dated January 1999 and sent to medical societies, trade
                   associations, and HCFA, the Office of the Inspector General, Department of
                   Health and Human Services, reminded providers about the penalty.
                   Another factor reportedly reducing home health care is the BBA change in
                   Medicare home health coverage: venipuncture is no longer considered a
                   qualifying skilled nursing service, that is, the need only for venipuncture
                   does not qualify a beneficiary for home health services. HHAs in six of the
                   seven states reported that patient volume had dropped significantly as a
                   result of the change, especially in rural areas. However, there are no
                   readily available estimates of the number of beneficiaries affected by the
                   venipuncture change.

                   In addition to the impact of fewer patient referrals on revenue, we were
                   told that the combination of increased claim reviews and changes in billing
                   have impeded the cash flow of some HHAs. More frequent regional home
                   health intermediary (RHHI) requests for additional documentation to
                   support claims have created a growing backlog of unpaid bills. This
                   increased scrutiny is a result of concern about fraud and abuse and
                   additional funding for claims review provided by HIPAA.

                   Another policy change may have reduced revenues for some HHAs. The BBA
                   changed the billing rules so that the location of the beneficiary, not the HHA

                   31
                     Section 4615 of the Balanced Budget Act (BBA) (111 Stat. 251, 475) eliminated venipuncture as a
                   qualifying service for home health care when it is the only skilled service provided. According to
                   HCFA, Operation Restore Trust (ORT) had found that physicians were using this procedure as the only
                   skilled service to enable beneficiaries to obtain home health aide services, resulting in numerous visits
                   for individuals who would not otherwise qualify for Medicare home health.
                   32
                     The law imposed a fine of the greater of $5,000 or 3 times the amount of Medicare payments made as
                   a result of the false certification (P.L. 104-191, sec. 232, 110 Stat. 1936, 2015).



                   Page 41                                                     GAO/HEHS-99-120 Home Health Access
                         Appendix VII
                         Other Policies Have Affected HHA Costs
                         and Revenues




                         billing office, determined the wage adjustment applied to the Medicare
                         payment to adjust for differences in labor costs across locations.33 This
                         may have reduced the incentive for HHAs to operate branches. Previously,
                         it may have been financially advantageous for an agency to use a parent
                         office, located in an urban area with high wage costs, for Medicare billing
                         purposes, but to actually provide services out of a branch office in a
                         low-wage area.

                         HCFA fiscal intermediary officials maintain that delays in implementing the
                         IPSrevenue caps have increased overpayments to HHAs. As a result, more
                         HHAs have had to reimburse Medicare for payments that were too high.
                         Some contend that the repayment of these overpayments has placed
                         hardships on some agencies and contributed to closures.34 Although
                         Medicare overpayments to HHAs are not unusual, both HCFA and RHHI
                         representatives expected overpayments for fiscal year 1998 to be both
                         more frequent and higher than in previous years. The category of
                         overpayments most likely to be IPS-related has grown compared with 1996,
                         both in the number of HHAs with overpayments and the amount owed. The
                         extent to which the repayment of overpayments has contributed to
                         closures, however, is not known.


                         According to our interviews, new Medicare requirements, such as surety
Factors Cited as         bonds and the Outcome and Assessment Information Set (OASIS), will also
Increasing the Cost of   place additional administrative and financial obligations on HHAs. National
Doing Business           and state associations criticized any increased financial demands given the
                         IPS reduction in revenues for HHAs. Although the details have not yet been
                         announced, agencies will be obligated to purchase a surety bond in 1999.35
                         We were told that the newly required OASIS, including its electronic
                         transmission to HCFA, necessitates that agencies train employees, in some
                         cases purchase new computer hardware, and conduct 1- to 2-hour patient

                         33
                           Sec. 4604, 111 Stat. 251, 472.
                         34
                           During each fiscal year, HHAs receive interim payments based on their projected per-visit cost and,
                         in some instances, the projected volume of services for Medicare beneficiaries. At the end of the year,
                         an HHA submits a report on its costs and the services provided, and the amount the HHA should have
                         been paid is calculated. If the HHA has been overpaid, it must return the excess to Medicare.
                         Otherwise, the program makes a supplemental payment to the agency to make up the difference
                         between the earned reimbursement and the interim payments. HHAs with overpayments as a result of
                         the IPS will have a longer period in which to repay Medicare. According to HCFA, HHAs must obtain
                         permission from the RHHI to have 1 year to repay their overpayments resulting from the IPS without
                         incurring interest. They can obtain an additional 2-year extension with permission from the HCFA
                         regional office, but interest is charged on the unpaid balance at a legally required rate, currently
                         13.75 percent per year. HCFA executives at headquarters must approve longer extensions.
                         35
                          Medicare Home Health Agencies: Role of Surety Bonds in Increasing Scrutiny and Reducing
                         Overpayments (GAO/HEHS-99-23, Jan. 29, 1999).



                         Page 42                                                     GAO/HEHS-99-120 Home Health Access
Appendix VII
Other Policies Have Affected HHA Costs
and Revenues




assessments. It is not clear, however, if these requirements will represent a
major new cost. First, conducting patient assessments is not a new
requirement. Second, HCFA officials told us that OASIS simplifies and
systematizes the collection of data on patient characteristics and
conditions and, in the long run, will lower agency assessment costs per
claim. Indeed, some agencies have already made the necessary
investments. Finally, we were told that the change in the definition of
branch offices has increased the operating costs for those agencies that no
longer qualify as a branch and must operate independently as a parent
agency.




Page 43                                     GAO/HEHS-99-120 Home Health Access
Appendix VIII

Comments From the Health Care Financing
Administration




(101795)        Page 44      GAO/HEHS-99-120 Home Health Access
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