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For-profit home health agencies blasted in new analysis

For-profit home health agencies had higher Medicare costs per patient while scoring lower in quality performance when compared with not-for-profit firms, a new analysis finds.

For-profit home healthcare agencies had an average cost per patient of $4,827, 18% higher than not-for-profit firms’ $4,075, according to the report, published Monday in the journal Health Affairs.

The report analyzed cost reports filed by more than 7,000 home health agencies to Medicare in 2010-11 and data for 22 quality measures from Medicare’s Home Health Compare database.

Operating costs at for-profits were found to be 18% higher than at not-for-profit agencies. Administrative costs accounted for $476 more toward the overall cost per patient, while profits represented $463 in cost difference.

At the same time, the article concludes that for-profit home health agencies scored slightly lower than not-for-profits in meeting various care-quality measures, reaching each standard around 77% of the time compared with 78% for not-for-profit firms.

For-profit home health firms also were found to have a higher frequency of hospital readmissions among their patients at 28% compared with not-for-profits whose rate was 24%.

“Overall, it appears that proprietary (for-profit) home-care agencies deliver slightly lower-quality care at a substantially higher cost, belying claims that for-profit incentives increase efficiency,” the analysis concluded.

The article goes further, posing the question of whether for-profit home health agencies should be allowed to continue receiving payments under Medicare; before 1980 they couldn’t be paid through Medicare.

Medicare spent more than $18 billion on home healthcare services in 2011, serving around 3.4 million beneficiaries. according to a 2103 report by the Medicare Payment Advisory Commission (PDF).

There were more than 12,000 home health agencies in 2011, according to MedPAC, a number that’s up by 62% compared with 7,528 agencies in 2000. Before that year, the industry was in a steady decline, with the number of home health companies falling by 31% between 1997 and 2000. The total number of agencies participating in Medicare has increased by an average of more than 500 a year since 2002, according to MedPAC.

Experts believe the growth of the for-profit industry, which makes up about 62% of all home health care, came about after the implementation in 2000 of the risk-based prospective payment reimbursement model that is still used.

“Home health margins for free-standing HHAs (home health agencies) have been very high since the PPS (prospective payment) system) was implemented, as Medicare margins averaged 17.7% between 2001 and 2010,” according to the MedPAC study.

“For-profit home care agencies are bleeding Medicare; they raise costs by $3.3 billion each year and lower the quality of care for frail seniors,” said Dr. Steffie Woolhandler, a professor at the City University of New York’s School of Public Health and senior author of the Health Affairs analysis. “Letting for-profit companies into Medicare was a huge mistake that Congress needs to correct.”

William Dombi, vice president for law with the National Association for Home Care and Hospice, an industry group that represents 6,000 not-for-profit, for-profit, hospital-based, and government-controlled home health agencies across the U.S., disputed the validity of the analysis, stating the cost-report data used to justify its findings was not reliable, adding that neither MedPAC nor CMS used that information in the manner it was used in the analysis.

The article’s “suggestion that Medicare should consider a return to a ban on proprietary home health agencies would deprive millions of Medicare beneficiaries access to home care as most cities, towns and rural areas have few, if any, nonprofit agencies,” Dombi wrote in an e-mail response. “We have found that the tax status of a home health agency is not the determinant of its quality of care or cost of operation.”

Follow Steven Ross Johnson on Twitter: @MHsjohnson


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