Study Reveals Cost, Care Gaps in For-Profit Vs. Non-Profit Home Health

When compared to nonprofit home care agencies, for-profit entities bill Medicare at higher costs for less quality of care, according to a study published this month in the journal Health Affairs.

For-profts had an overall cost per patient of $4,827, which was 18% higher than not-for-profit agencies’ $4,075, noted researchers from the City University of New York School of Public Health (CUNY).

CUNY researchers analyzed Cost Reports filed with Medicare of 7,165 home health agencies in 2010-2011, along with data for 22 quality measures from Medicare’s Home Health Compare database measuring 9,128 agencies.

Despite the higher costs, researchers found that for-profit agencies scored slightly, but significantly, worse on overall quality indicators compared to nonprofits—77.18% versus 78.71%, respectively.

Notably, for-profit agencies scored lower than their nonprofit counterparts on avoiding hospitalizations, 71.64% compared to 73.53%.

In 2011, Medicare spent approximately $18.4 billion on home health services, according to report published by the Medicare Payment Advisory Commission (MedPAC) last year. Then, the number of home health agencies participating in the federal program reached 12,199.

“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, professor of public health at CUNY’s Hunter College and one of the study’s authors. “Letting for-profit companies into Medicare was a huge mistake that Congress needs to correct.”

Those in the home health space, such as the National Association for Home Care & Hospice (NAHC) which represents both nonprofits and for-profit companies, beg to differ.

While the study provides insight into Medicare home health services, its suggestion that Medicare should consider a return to a ban on proprietary home health agencies would deprive millions of beneficiaries access to home care, especially as most cities, towns and rural areas have few nonprofit agencies, said NAHC Vice President for Law William Dombi to HHCN.

“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,” Dombi said in an email. “With respect to the study, it has a few, but significant data weaknesses that may explain its suggested findings.”

One of those weaknesses is that the study does not adjust for the wide case mix differences between home health agencies (HHAs), both locally and regionally—a factor Dombi urges is essential for reliability in understanding the costs of care.

Additionally, the study relies on cost report data on patient numbers and administrative costs that are also unreliable—data not used by MedPAC and the Centers for Medicare & Medicaid Services in the manner and capacity as used in the study, he added.

“The conclusion that for-profit HHAs are more costly and more profitable is irrationally inconsistent,” Dombi said. “Nonprofit HHAs cannot be both less costly and less profitable unless the metrics compared are inconsistent.”

Since 2010, the data year used in the study, Medicare has undergone several reforms, including changing the hospitalization avoidance rankings measure.

“Much has changed since 2010,” Dombi said. “Medicare has significantly changed the reimbursement model, claim and quality oversight has increased, and the quality of care measures have been reformed.”

View an abstract of the study “For-Profit Medicare Home Health Agencies’ Costs Appear Higher and Quality Appears Lower Compared to Nonprofit Agencies.”

Written by Jason Oliva

Jason Oliva

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