Value. Quality. Innovation.

Sign Up for Updates:

Papers Show Home Health Saves Money Compared To Other Post-Acute Settings

Published by Inside Health Policy
John Wilkerson
April 4, 2012

When patients are sent home from hospitals to recover with the help of home health-care services, Medicare saves a significant amount of money on average compared to other post-acute settings, according to a industry funded study released Thursday (April 5). Although there are clinical reasons for patients to be sent to more expensive facilities, the study shows that often patients who need similar care are sent to different settings, and industry representatives say they hope policymakers will use the research to steer more patients toward the lower-cost home-care services both during post-acute care and for patients with chronic illnesses to avoid hospitalizations in the first place.

Teresa Lee, executive director of the Alliance for Home Health Quality Innovation, said the papers show that policy makers, lawmakers and physicians should consider using home care more as an element to efforts by CMS and states to reform health care delivery in a way that improves care and reduces costs. For example, CMS is testing bundled payments and other care-delivery reforms such as Accountable Care Organizations that receive lump-sum payments for episodes of care. States also are looking to managed care to save money and improve care, especially for residents who are eligible for both Medicare and Medicaid.

The Alliance for Home Health Quality Innovation commissioned Dobson DaVanzo & Associates to do the reports. Dobson DaVanzo on Thursday (April 5) released the first two papers in a four-part series. The two papers detail the frequency of services provided across care settings for similar clinical conditions. They also provide comparative baseline statistics for three key areas Medicare considers in its reimbursement methodology: episode frequency; patient diagnosis; and Medicare payments by episode types for MS-DRGs and select chronic conditions.

Across all Medicare Severity-Diagnosis Related Groups (MS-DRGs), home care is the first care setting for nearly 40 percent of post-acute care episodes in which patients are sent to formal care settings following hospital stays, according to the reports. But this care represents only 27.8 percent of post-acute care episode spending.

“Since many patients with any given MS-DRG can receive care in multiple settings, the data suggest that home healthcare can generate significant savings across multiple clinical conditions,” according to a statement by the Alliance for Home Health Quality Innovation, which commissioned the report. “While average Medicare episode payments largely vary across post-acute care settings by MS-DRG, home healthcare costs are consistently lower than those in other settings.”

For example, Medicare pays $5,411 less per patient on average when patients recover from joint replacements at home with the help of home care services, compared to the average cost of $23,479 across post-acute settings for joint replacements. Patients may move among settings during the post-acute timeframe that was studied. The episode payments are based on the first care setting to which patients are sent. Thus, patients might begin their recover with home care services and move to inpatient rehabilitation facilities once they are able for physical therapy.

The joint replace example is not trivial, Dobson DaVanzo's Joan Davanzo said, because Medicare spends more on joint replacements in post-acute care than any other MS-DRG. Joint replacements also are the number-one money maker for nursing homes, inpatient rehabilitation facilities and home health agencies, which demonstrates the overlap among those settings, according to Davanzo.

Dobson DaVanzo also studied the “pre-acute” care period and community-based care. Lee said the results show that home care also is likely underused in caring for people with chronic conditions, such as COPD and diabetes. Were home care used more, many of these people would likely avoid costly hospitalizations.

Pre-acute care is defined by patients being admitted to hospitals after at least 15 days of not being at any facility. But the period pre-acute period measured was 60 days so often patients had been briefly admitted hospital, visited doctors' offices or used other facilities during that time. Thus, during the pre-acute period, hospitals accounted for three-quarters of Medicare episode payments and doctor office visits accounted for 17 percent. Conversely, home care services accounted for less than half of 1 percent.