Home Health Dramatically Shifts Away from Post-Hospital Care

While home health agencies are crucial post-hospital care providers, they have seen a huge uptick in patients who are not coming out of that setting, recently released Medicare data shows.

Between 2001 and 2012, the number of home health episodes not preceded by a hospitalization or a stay in a post-acute setting increased by 116%, according to figures from the Medicare Payment Advisory Commission (MedPAC). The commission is an expert panel that advises the U.S. Congress on how the Medicare program can be more efficiently administered, but legislators are not obligated to act on its recommendations.

During that same 11-year time period, the number of home health episodes that were preceded by a hospitalization of PAC stay increased by 23%, according to MedPAC’s 2015 Data Book on Health Care Spending and the Medicare Program

Beneficiaries who were admitted to home health care straight from the community were more likely to have dementia or Alzheimer’s disease and tended to be older than those admitted from a hospital or post-acute stay. They community-admitted patients also were more likely to be dually eligible both for Medicare and Medicaid, and they had more episodes with a high share of home health aide services.

The overall number of Medicare-certified home health agencies declined slightly in 2014 after years of substantial growth, the report states. The decline was concentrated mostly in Texas and Florida. 

Due to a high potential for waste, fraud and abuse in certain areas, the Centers for Medicare & Medicaid Services in 2013 enacted a moratorium on new agencies in certain geographic areas. These include Miami-Dade and Broward counties in Florida, and Dallas and Harris counties in Texas.

In terms of profit margins, freestanding home health agencies had an aggregate margin of 12.7% in 2013, according to the report. For-profit agencies posted an average margin of 13.7% that year, and nonprofits posted an average margin of 10.0%.

HHAs have criticized these numbers in the past, noting that they reflect the Medicare margin only and not a provider’s overall margin, which can be dramatically lower. In fact, home health agency profit margins have been plummeting in recent years, averaging 2.4% for the largest national providers as of 2014, according to a recent Avalere Health analysis.

As for overall Medicare spending on home health care, it has risen rapidly since 2001 but has held relatively steady for the past few years. Home health accounted for 18.3% of total Medicare expenditures in 2013, down from a 19.6% high in 2010.

The Data Book is a compendium on Medicare spending and other information, such as beneficiary demographics. MedPAC began producing it at the request Congressional staff, and it contains some information that also is included in the commission’s March and June reports to Congress.

Written by Tim Mullaney