Interim Payment System Research Articles

The mortality effects of changing public funding for home health care: An empirical analysis of Medicare home health care in the United States

In light of population aging, it is important to understand whether limiting public in-kind transfers to the elderly affects elderly mortality. I focus on home health care-a popular in-kind transfer-and I exploit variation in the Medicare home health care reimbursement that arose in 1997 in the United States to study whether cuts to government coverage of home health care affected elderly mortality. Under the identifying assumptions of the DID model, I find that the cuts affected total mortality for some men but not women, suggesting that changes in home health care can affect elderly mortality and differences in mortality between men and women. For men aged between 65 and 74, the Interim Payment System was associated with an increase in mortality equal to 0.6%, an effect in absolute value comparable to the mortality response to a one percentage point change in unemployment rates and within the range of other estimates of the impact of health insurance on elderly mortality.

High-Value Home Health Care for Patients With Heart Failure: An Opportunity to Optimize Transitions From Hospital to Home.

In recent years, public reporting, targeted financial penalties, and incentives to develop alternative payment models that include the assumption of financial risk have compelled hospitals to focus on reducing readmission rates for high-cost conditions such as heart failure (HF). When older patients with multiple medical conditions including HF are discharged from the hospital, they are vulnerable to adverse events, which may result in recurrent hospitalization (the post-hospital syndrome).1 In theory, providing home health nursing and therapy could promote recovery in vulnerable HF patients with post-hospital syndrome and potentially reduce readmissions. Within the United States, home health care (HHC) referrals after acute care hospitalization increased by 65% to 3.7 million between 2001 and 2012.2,3 Patients discharged from US hospitals with a primary diagnosis of HF had the highest number of HHC referrals during this time, with ≈200 000 post-acute HHC referrals in 2012.2 In addition, HHC surpassed skilled nursing facilities as the most frequently used post-acute care among Medicare beneficiaries with HF in 2012 (unpublished HCUPnet data). Such an increase in HHC use for patients with HF is likely related to multiple factors, including decreasing length of stay for patients with HF4 and more recent pressures to improve readmission rates for HF after adoption of the Affordable Care Act in 2010, which included the Hospital Readmissions Reduction Program that was implemented in 2012.5,6 Despite substantial growth in post-acute HHC referrals for patients with HF,2 it is unclear whether HHC delivered in real-world settings consistently provides high-value care. Understanding the characteristics of effective post-acute HHC for patients with HF will inform best practices, optimal outcomes for cost, and ultimately high-value care. Because most patients referred for skilled HHC are Medicare beneficiaries, Medicare eligibility and payment policies have important implications for HHC. Patients who …

Medicare Home Health Care Patient Case-Mix Before and After the Balanced Budget Act of 1997: Effect on Dual Eligible Beneficiaries

The Balanced Budget Act (BBA) of 1997 changed the payment system for Medicare home health care (HHC) from cost-based to prospective reimbursement. We used Medical Expenditure Panel Survey data to assess the impact of the BBA on Medicare HHC patient case-mix measured by the Centers for Medicare and Medicaid Services Hierarchical Condition Categories (CMS-HCC) model. There was a significant increase in Medicare HHC patient case-mix between the pre-BBA and Prospective Payment System (PPS) periods. The increase in the standardized-predicted risk score from the Interim Payment System period to PPS was nearly 4 times greater for the dual eligibles (Medicare-Medicaid) than for the Medicare-only population. This significantly greater rise in the HHC resources required by dual eligibles as compared to nonduals could be due to a shift in HHC payers from Medicare only to Medicaid rather than be an actual increase in case-mix per se.

Effects of Medicare payment reform: Evidence from the home health interim and prospective payment systems

Medicare continues to implement payment reforms that shift reimbursement from fee-for-service toward episode-based payment, affecting average and marginal payment. We contrast the effects of two reforms for home health agencies. The home health interim payment system in 1997 lowered both types of payment; our conceptual model predicts a decline in the likelihood of use and costs, both of which we find. The home health prospective payment system in 2000 raised average but lowered marginal payment with theoretically ambiguous effects; we find a modest increase in use and costs. We find little substantive effect of either policy on readmissions or mortality.

Effects of Medicare Payment Reform: Evidence from the Home Health Interim and Prospective Payment Systems

Medicare continues to implement payment reforms that shift reimbursement from fee-for-service towards episode-based payment, affecting average and marginal reimbursement. We contrast the effects of two reforms for home health agencies. The Home Health Interim Payment System in 1997 lowered both types of reimbursement; our conceptual model predicts a decline in the likelihood of use and costs, both of which we find. The Home Health Prospective Payment System in 2000 raised average but lowered marginal reimbursement with theoretically ambiguous effects; we find a modest increase in use and costs. We find little substantive effect of either policy on readmissions or mortality.

Changes in the Medicare Home Health Care Market

The Balanced Budget Act of 1997 introduced 2 new reimbursement structures, the Interim Payment System (IPS, 1997-2000) and the Prospective Payment System (PPS, begun October 2000) for Medicare home health agencies (HHAs) under the fee-for-service program. This article describes and compares the impact of these changes on the Medicare home health market from a period before the BBA through the IPS and PPS in relation to agency characteristics. A secondary analysis of 1996, 1999, and 2002 Provider of Services data was conducted on all Medicare-certified HHAs. Frequencies and rates of change were calculated by agency characteristics to describe changes in the number of active agencies through those years. Logistic regression models were used to compare factors associated with market exits under different payment systems. The results indicate dramatic but disproportional changes in response to the IPS and the PPS among Medicare home health care agencies. Agency closures were greater and market entries fewer during the IPS, but more branch offices/subunits were closed during the PPS. Proprietary and freestanding agencies experienced greater volatility throughout, with the greatest number of closures seen in Region VI (Dallas). These results demonstrate the direct impact of policy changes on the home health care market and highlight the need to evaluate policy changes to understand both intended and unintended impacts on health markets. Future research should analyze the effect of these policy changes on other healthcare providers and systems and their impact on health outcomes for Medicare beneficiaries.

The Differential Impact of Medicare Home Health Care Policy on Impaired Beneficiaries

ABSTRACT The Balanced Budget Act of 1997 (BBA'97) dramatically decreased reimbursements in the Medicare home health program. The first phase of BBA'97, the Interim Payment System (IPS), slashed reimbursements to 1993 levels and established a new capitated reimbursement. To identify potential moderating influences of these changes on the relationship between patient impairment and home care use, we compared 1996 and 1998 Medicare Current Beneficiary Survey data. Using multivariate regressions controlling for health/functional, predisposing and enabling characteristics, we demonstrate dramatic decreases in home health use post IPS by persons with ADL, health, and memory impairments. The IPS encouraged agencies to cut services to more impaired patients who might exhaust the per-beneficiary cap. Similar policies may be adopted for other health systems. Thus, it is critical to understand the differential impact of sweeping changes on vulnerable populations.

The Impact of Policy on Nursing and Allied Health Services: Lessons from the Medicare Home Health Benefit

This article analyzes changes in Medicare home health staffing and service delivery patterns across three different reimbursement methods: cost based (1996), interim payment system (IPS) (1999), and the prospective payment system (PPS) (2002). This study combined secondary analysis of existing data (Provider of Services File and Statistical Supplement) with qualitative interviews of 22 home health agency directors to understand agency responses to policy changes created under the Balanced Budget Act of 1997. Cuts in staff and visits were greater under the IPS than they were under the PPS. Agencies cut staff and visits more dramatically for nonskilled services across both time periods. As a proportion of total services and visits, nursing and therapy services increased the most. Directors used various strategies to sustain the agency financially during these dramatic cuts in reimbursements, including eliminating staff, shifting staff roles, training staff on reimbursement methods, increasing use of telephone monitoring, increasing patient and family education and self-care, and cutting services to patients. Directors expressed concerns about staff stress related to the changes and the need to increase productivity without increasing staff. However, directors also believed the agency's position would improve under the PPS. Additional research is needed to determine whether increased staff stress, work demands, and fewer resources for patients will affect the quality of care delivered and, thus, patient outcomes under the PPS.

Impact of Changes in Medicare Home Health Care Reimbursement on Month-to-Month Home Health Utilization Between 1996 and 2001 for a National Sample of Patients Undergoing Orthopedic Procedures

Beginning October 1, 1997, Medicare implemented a series of major changes to the Home Health (HH) reimbursement system. Reimbursements were first significantly reduced under the Interim Payment System (IPS) and then relaxed slightly until implementation of the HH Prospective Payment System (PPS) on October 1, 2000. The objective of this study was to examine the impact of reimbursement policy on HH care utilization. We postulated that in response to the initial changes, there would be reductions in both the probability of any HH use and the number of HH visits per HH user. Under PPS, we postulated there would be further reduction in number of HH visits. We tested whether the policy response differed by HH agency structure and whether subgroups of patients were differentially affected. An interrupted time-series analysis was conducted to examine month-to-month probability of HH selection and the number of HH visits among users. A 100% sample of all Medicare recipients undergoing either elective joint replacement (1.6 million hospital discharges) or surgical management of hip fracture (1.2 million hospital discharges) between January 1996 and December 2001 was selected. Under the IPS, the probability of any HH use and number of visits per episode of HH care fell until the IPS was refined in October 1998. With implementation of the PPS, HH visits fell commensurately. Differentially larger reductions in care were noted at for-profit HH agencies, for the elderly, women, patients receiving state assistance, and patients first discharged to skilled nursing facility or rehabilitation hospitals. Changes in month-to-month utilization of HH services were sharp and well correlated with policy implementation dates, strengthening the evidence for a causal association between policy and patient care in the midst of a sea of concurrent policy changes. Greater reductions in HH visits were noted for vulnerable groups.

Agency and Market Area Factors Affecting Home Health Agency Supply Changes

To use the natural experiment created by the Medicare interim payment system (IPS) to study supply change behavior of home health agencies (HHAs) in local market areas. One hundred percent Medicare home health claims for 1996 and 1999, linked with Medicare Provider of Service and Denominator files, and the Area Resource File. Medicare home health care (HHC) claims data were used to distinguish HHAs that changed the local market supply of Medicare HHC by their market exit or by significant expansion or contraction of their geographic service area between 1996 and 1999 from other HHAs. Multinomial logit models were estimated to analyze how characteristics of agencies and the market areas in which they served were associated with these different agency-level supply changes. Changes in local HHA supply stemming from geographic service area expansions and contractions rivaled those owing to agency closures and market entries. Agencies at greater risk of closure and service area contraction tended to be smaller, newer, freestanding agencies, operating with more visit-intensive practice styles in markets with more competitor agencies. Except for having much less visit-intensive practice styles, similar attributes characterized agencies that increased local supply through service area expansion. Supply changes by HHAs largely reflected rational market responses by agencies to significant changes in financial incentives associated with the Medicare IPS. Recently certified agencies were among the most dynamic providers. Supply changes were more likely among agencies operating in more competitive market environments.

The Influence of Medicare Home Health Payment Incentives: Does Payer Source Matter?

During the late 1990s, the U.S. government instituted an interim payment system (IPS) to constrain Medicare home health care expenditures. Previous research has focused largely on the implications of the IPS for Medicare patients; this study broadens the analysis to consider patients with other payer sources. Using the National Home and Hospice Care Survey, we found similar effects of the IPS across payer types. Specifically, the IPS was associated with a decrease in care for the sickest patients, less agency assistance with activities of daily living, and shorter length of use. However, these changes did not translate into worse discharge outcomes.

Changes in the Use of Postacute Care during the Initial Medicare Payment Reforms

To examine changes in postacute care (PAC) use during the initial Medicare payment reforms enacted by the Balanced Budget Act of 1997. We used claims data from the 5 percent Medicare beneficiary sample in 1996, 1998, and 2000. Linked data from the Denominator file, Provider of Service file, and Area Resource File provided additional patient, hospital, and market-area characteristics. Six disease groups with high PAC use were selected for analysis. We used multinomial logit regression to examine how PAC use differed by year of service, controlling for patient, hospital, and market-area characteristics. There were major changes in PAC use, and a portion of services shifted to settings where reimbursement remained cost-based. During the first reform, the home health agency interim payment system, home health use decreased consistently across disease groups. This decrease was accompanied by increased use in skilled nursing facilities (SNFs). Following the implementation of the prospective payment system for SNFs, the use of inpatient rehabilitation facilities increased. The shift in usage among settings occurred in two stages that corresponded to the timing of payment reforms for home health agencies and SNFs. Evidence strongly suggests the substitutability between PAC settings. Financial incentives, in addition to clinical needs and individual preferences, play a major role in PAC use.

Impact of the Medicare Interim Payment System on Length of Use in Home Care Among Patients with Medicare-Only Payment Source

ABSTRACT Using data from the 1996 and 2000 National Home and Hospice Care Surveys (N = 2455), we examined length of use in home care among patients with Medicare-only payment source before and during the Medicare interim payment system (IPS). Logistic regression analyses revealed that patients were 2.9 times more likely to be discharged within 60 days during IPS than before IPS. The impact of Medicare IPS on length of use in home care among patients with Medicare only was stronger than what the existing literature indicates, which combines Medicare patients with multiple payment sources and patients with Medicare-only together.

The Financial Impact of Interim and Prospective Payment Systems on Home Health Providers in Rural Communities

The objective of the study was to examine the financial impact of the interim payment system and prospective payment system (PPS) on home health agencies (HHAs) in rural communities. Data sources used included a survey of administrators in all rural HHAs in Pennsylvania and financial and utilization data provided by 10 rural HHAs in Northwest Pennsylvania. The results of survey showed that, under the PPS, 40% of the HHAs reported financial vulnerability and 24% expressed concern that the fiscal uncertainties arising from the PPS threatened their continued operation. Two prospective analyses were conducted to examine how HHAs would be further affected by payment rate changes implemented in October 2002 and April 2003. The Medicare margin in rural Pennsylvania was 23.3% during the period from October 2000 to June 2002. This margin was slightly higher than the free-standing home health Medicare margin (21.6%) reported in analyses conducted by the Medicare Payment Advisory Commission (MedPac). However, this Medicare margin did not include hospital-based HHAs. The payment rate changes implemented in 2002 and 2003 would increase the proportion of care episodes that incur financial losses, assuming service provision remains constant. As of April 2003, the proportion of all episodes with loss would rise to 46.9%, the proportion of low-utilization payment adjustment (LUPA) episodes with loss would rise to 91.1%, and the proportion of non-LUPA episodes with loss would rise to 40.2%. New payment mechanisms are profoundly affecting the finances of rural HHAs and the use of home health services by Medicare beneficiaries.

Payment Source and Length of Use Among Home Health Agency Discharges

Our study compared (1) length of use among home health care (HHC) discharges with Medicare, Medicaid, or private health insurance between 1991 and 2000 and (2) factors associated with length of HHC use among discharges with Medicare, Medicaid, or private health insurance. Data were obtained from the 1992, 1994, 1996, 1998, and 2000 National Home and Hospice Care Surveys (n = 18,416). Logistic regressions and stratified analyses by primary payment source were applied. After adjusting for covariates, Medicare HHC patients were from 0.52 to 0.75 times less likely to be discharged within 30 days in 1991-1996 than in 1997-1998. Medicaid patients were 0.37 times less likely to be discharged within 30 days in 1991-1992 than in 1997-1998. Patients with private insurance were 2.05 times more likely to be discharged within 30 days in 1993-1994 than in 1997-1998. No significant difference in length of use was found at the multivariate level between 1997-1998 and 1999-2000 among HHC patients with Medicare, Medicaid, or private health insurance. Results for being discharged within 60 days were similar to these described above. Our study shows that length of HHC use among Medicare discharges decreased after the implementation of the Medicare interim payment system. We did not find a spillover effect of the Medicare interim payment system on length of HHC use among discharges with Medicaid or private health insurance. Our results can help health professionals and policy makers better understand the dynamic associations between payment systems and length of use of HHC services.

Job Satisfaction of Home Health Social Workers in the Environment of Cost Containment

This national survey examined the job satisfaction of 228 home health social workers in the restrictive reimbursement environment of the Medicare interim payment system. Administrators' helpfulness in resolving ethical conflicts between patient access to services and agency financial priorities contributed significantly to greater satisfaction in regression analysis. Supervisors' helpfulness in resolving the conflict moderated the difficulty of resolving the conflict. The frequency with which workers believed they had to compromise professional ethics contributed significantly to less satisfaction. Implications for practitioners, supervisors, administrators, and educators are discussed.

Patient-Level Home Health Care Outcomes Secondary to the Balanced Budget Act of 1997

The National Association for Home Care estimated 26% of all home health agencies (HHAs) have gone out of business since October 1997 when Medicare began to change the funding structure for home health care reimbursement. This study aims to answer two questions: Did HHAs that went out of business abandon patients? and Are HHAs that remained in business providing less-than-adequate services? Telephone interviews were conducted with 64 randomly selected elders receiving home care services during the funding transition from fee-for-service to an interim payment system. The findings indicate that HHAs that closed down primarily transferred their patients to other agencies and that 22% of patients experienced an increase in the number of hospital admissions following the funding structure transition. These preliminary results indicate that no substantial ill-effects have come to this sample of home health care patients as a result of the Balanced Budget Act of 1997.

The five most frequently answered questions about private duty home care.

Where are the growth opportunities in home care? How can I reduce my dependency on Medicare? What can I do to improve the bottom line? These are some of the questions being asked by successful home care leaders as they work to recover from the effects of the Balanced Budget Act and the Interim Payment System and prepare for the Prospective Payment System.

Client characteristics and the cost of home care in the prospective payment system.

There has been much speculation in the literature about the effect of the prospective payment system (PPS) on the home care industry but few reports of systematic investigation. Clearly, comprehension of client characteristics is essential for categorizing home care clients into the correct Home Health Resource Groups, for allocating resources appropriately, and for implementing necessary organizational changes to accommodate clients who require variations in the amount of resources predicted by the PPS. The purposes of this study were to compare the characteristics of home health clients that resulted in a financial gain or a financial loss for one agency under the PPS with those of the interim payment system. A secondary data analysis of 140 cases compiled by one not-for-profit hospital-affiliated home care organization was completed. Results suggested that client characteristics of the projected loss group had more recertifications on admission and at the end of the 60-day episode, a longer stay (3 weeks), and more visits, particularly from skilled nursing. Comprehension of client characteristics and the subsequent ability to adjust for the proper case mix will be crucial if home care agencies are to remain financially viable under the PPS. Replication of this project needs to be done using more variables and multiple sites.

Effects of the Home Health Care Interim Payment System on Access to Home Health Care for People on Medicare

In the Balanced Budget Act of 1997 (the BBA), Congress established an Interim Payment System (IPS), effective October 1, 1997, and directed the Health Care Financing Administration (HCFA) to promulgate a Prospective Payment System (PPS) to pay for home health care by October 1, 1999. Since the inception of IPS, the Medicare Rights Center,1 through our work with people on Medicare across the country, has seen a marked increase in the number of people who are eligible for the home health benefit, but who are unable to access it. In particular, we have found that the reduced reimbursement to home health agencies under IPS has meant that agencies have increasingly refused, reduced or terminated care to people with costly, complex or chronic illness. Because establishment of PPS has been delayed until October 2000, we recommend immediate reforms to constrain or reverse the pernicious effect of IPS on the frailest and sickest people on Medicare. MEDICARE HOME HEALTH CARE BENEFIT: BACKGROUND The Medicare home health benefit consists of skilled nursing, therapy, and related services provided by a Medicare-certified home health agency (HHA). To qualify for Medicare home health services, the patient must be homebound and require skilled nursing care or physical, speech or occupational therapy on a part-time or intermittent basis or need daily skilled services for a finite and predictable period of time.2 The services must be furnished under a plan of care prescribed and periodically reviewed by a doctor. If all of these criteria are met, Medicare will pay for home health visits provided by a registered nurse, a physical, occupational, or speech therapist, a social worker, and a home health aide. Medicare regulations do not impose limits on the length of time a patient may continue to receive home health benefits. Medicare will pay for home health care as long as the patient meets Medicare eligibility criteria (see Note 2) and home health care is reasonable and necessary for the treatment or management of a patient's illness or injury. There are no limits on the number of visits or length of coverage, and there are no copayments or deductibles for the benefit. Today, approximately 3 million acutely and chronically ill seniors and people with disabilities on Medicare depend on home health care as part of their medical care (Smith, 1999). Because patients must be homebound in order to qualify for the benefit, they are typically the sickest and the oldest people on Medicare. They are disproportionately female and 85 years of age or older. About 70 percent have incomes of $15,000 or less (Smith, 1999). Home health care has been one of Medicare's fastest growing benefits over the last 15 years. In 1990, the Medicare home health benefit was used by 57 out of every 1,000 people on Medicare. By 1997,109 out of every 1,000 were using the benefit. In the same time period, the average number of visits per user in Original Medicare, the government-run fee-for-service program, went from 36 to 73. 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 to an average annual growth rate of 25.2 percent, compared with 8 percent for the Medicare program as a whole (GAO, May 1999). While some of this growth was attributable to fraud and abuse on the part of disreputable home health providers, much of it came as a result of improved access to the benefit by people who needed home health care and the shift in common health care practices toward an emphasis on outpatient care and managing serious illnesses at home. The United States General Accounting Office (GAO) and other researchers attribute the following factors to the rise in home health care costs over the past 10 years (GAO, May 1999, Komisar, 1998): 1. Change of home health care coverage guidelines to include patients with chronic healthcare needs as a result of a 1988 lawsuit. …