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Study Finds More Medicare Savings In Home Health Than Other Post-Acute Care

Published by Bloomberg BNA
Nathaniel Weixel
April 6, 2012

Home health care is the most cost effective post-acute care setting when it is used as the first setting for post-acute care, a study released April 5 found.

The study was published in two working papers, the first in a series of four that will be released as part of the Clinically Appropriate and Cost-Effective Placement (CACEP) Project. The study was conducted by consulting group Dobson DaVanzo and Associates on behalf of the Alliance for Home Health Quality and Innovation.

The alliance said the study was conducted to determine how the Medicare home health benefit can better meet beneficiary needs and improve the quality and efficiency of care provided within the U.S. health care system.

The alliance said the four working papers will culminate in the release of a final report in September, which will explore the future of the Medicare payment system and how home health care can help the Medicare program make care more effective and efficient.

Using Home Health First

Using claims data for a common Medicare Severity—Diagnosis Related Group (MS-DRG) for major joint replacement, the study concluded that those patients save Medicare $5,411 each when compared with the average Medicare post-acute care episode payment if home health is used as the first post-acute care setting.

In the Medicare program, patients who have similar clinical characteristics and similar costs are assigned to an MS-DRG. The MS-DRG is linked to a fixed payment amount based on the average cost of patients in the group.
The study's findings, among others in the papers, suggest that home health care is an efficient post-acute care provider and that it can be leveraged to significantly reduce health care costs, the alliance said.
“As we seek to foster improved coordination of care and reduce cost, these data are critical,” Teresa Lee, executive director of the Alliance, said in a statement. “The data bears out what we have known for a long time—home health care can play a leading role in producing greater efficiency in care delivery and reducing overall health care spending.”

Payments Vary Across Sectors

Medicare patients with similar clinical needs are receiving care for major joint replacements in multiple settings, including skilled nursing facilities (SNF), inpatient rehabilitation facilities (IRF) and long-term care hospitals (LTCH). The study found that the cost of providing care for the same condition varies greatly depending on the site of care, but home health first setting episodes are the least costly.

Although the average episode payment across settings for major joint replacement is $23,479, the average home health episode payment is $5,411 lower than the overall average. As many patients within any given MS-DRG can receive care in multiple settings, the study found that home health care can generate significant savings across multiple clinical conditions.

The variation in Medicare episode payments that exists across different first care settings is attributable to both the first setting and subsequent care that is used, the study found.
The Medicare payment for acute care hospitalizations and physician services received during the hospital stay is relatively similar across a given condition; the Medicare episode payments to the first setting and subsequent care settings have the greatest variation, the study found.

More Stays, Less Spending

Across all Medicare diagnosis conditions where beneficiaries go to a formal care setting following an acute hospital stay, nearly 40 percent of all Medicare post-acute care episodes use home health care as the first setting after discharge, the study concluded. However, the care in those episodes represent only 27.8 percent of all post-acute care episode spending.

Within pre-acute care episodes, the study indicated that 92 percent of episode payments were for hospital or physician services and that many of those patients have multiple chronic conditions.

“This indicates that there is great opportunity for investments that improve the way we manage patients with chronic conditions,” the study found. It said the data suggest that chronically ill Medicare beneficiaries may be managed effectively and efficiently in the home health setting to prevent unnecessary hospitalizations.

“As policymakers and the broader health care community explore new models for health care delivery, the data presented in the Working Papers provide a unique perspective on how the clinically appropriate use of different care settings across the Medicare program can result in greater efficiency and reduced healthcare spending,” especially as they consider new payment approaches such as bundling and shared saving, the study concluded.