MedPAC: Home Health Increasingly Not a Post-Hospital Service

In an ongoing and dramatic shift from the early 2000s, the vast majority of home health episodes are no longer preceded by a hospitalization or skilled nursing facility stay.

That’s according to the latest round of federal health care spending data insights compiled by the Medicare Payment Advisory Commission (MedPAC), a nonpartisan legislative branch agency that provides Congress with analysis and policy advice related to the Medicare program. Released on July 20, MedPAC’s data roundup highlights information on beneficiary demographics, quality of care, payer liability and various provider settings, including the home health and hospice spaces.

In 2001, the 3.9 million home health episodes that occurred were split roughly evenly between those preceded by a hospitalization or post-acute care stay and those that did not.


Of the 6.5 million home health episodes that took place in 2016, in comparison, only one-third were preceded by a hospitalization or post-acute care stay. Instead, patients were far more likely to have been community-admitted users, typically older adults with few chronic conditions and possibly Alzheimer’s disease or dementia.

Overall, the number of home health episodes not preceded by a hospitalization or post-acute care stay increased by almost 110%, according to MedPAC.

Although the ongoing trend of providers focusing more on the community and less on the post-acute world appears to be strong, it’s one that may be in for a big change. Under proposed payment reform from the Centers for Medicare & Medicaid Services (CMS), providers would likely be reimbursed more for care directed toward patients admitted from institutional settings than those from the community.


The average resource use is $2,171 for institutional-admitted patients and $1,363.11 for community-admitted patients, according to CMS.

Number of HHAs down, spending and hospital admissions up 

The number of home health agencies operating inside the United States seems to be steadily dwindling.

During the past five years, the tally of agencies has dropped from about 12,600 to about 11,800, according to MedPAC. Agency decline has been most prominent in Texas and Florida. Major metropolitan areas in both states have for years been subject to a CMS-imposed moratorium on new agencies opening.

The average number of visits per home health episode is on its way down, too, though that’s offset by the fact patients are experiencing more episodes on an individual basis than in the past.

The rise in the average number of episodes per beneficiary coincides with the ongoing shift away from using home health care as a post-acute care service, according to MedPAC.

Despite targeted initiatives to keep patients away from hospitals and inside their homes, hospital admissions and emergency department utilization have both increased slightly. The average risk-adjusted rate of hospitalization for home health stays increased from 15.6% in 2013 to 16.2% in 2016, while the rate for emergency department care climbed from 11.7% to 12.2%.

Medicare started testing out a value-based purchasing program for home health agencies in nine states in 2018. Agencies in those demonstration states may receive bonuses or penalties of up to 3% depending on their performance on several measures, including ones tied to hospitalizations and ER trips.

One of the most prominent increases revealed by MedPAC in its data dump is the overarching spike in home health Medicare spending that’s taken place throughout this decade.

Medicare spending for home health services was about $9.1 billion in 2001.

In 2016, that figure skyrocketed to about $18.1 billion.

In October 2000, the prospective payment system (PPS) replaced the previous Medicare payment system for home health care, which was a cost-based system that tied payment to the number of visits provided and per beneficiary spending limitations. Home health care spending initially rose rapidly under the PPS, peaking in 2010 and remaining relatively flat ever since, according to MedPAC.

For-profit home health agencies in 2016 had an average margin of 16.6%. MedPAC considers only agencies’ Medicare margin.

MedPAC data details Medicare hospice spending 

In addition to highlighting home health, MedPAC also revealed several interesting data findings related to the rise of the hospice industry, which has seen a sixfold bump in funding.

Medicare payments to hospice totaled $2.9 billion in 2000.

They checked in at nearly $17 billion two years ago.

Currently, to meet Medicare eligibility requirements, patients need to have their hospice doctor and primary care physician certify that they have six months or fewer to live.

Nonetheless, Medicare hospice spending on patients with stays exceeding 180 days was about $9.5 billion in 2016, more than half of all Medicare hospice spending that year.

Similarly, about $3.3 billion—or about 20%—of Medicare hospice spending in 2016 was on hospice care for patients who had already received at least one year of services.

More than 1.4 million beneficiaries utilized hospice services in 2016, compared to about 530,000 at the start of the decade. Medicare decedents who were older, white, female, Medicare Advantage enrollees and not dual eligible or living in an urban area are the likeliest to use hospice, according to MedPAC.

The most common primary diagnoses among Medicare hospice patients are cancer and neurological conditions such as Alzheimer’s disease, nervous system disorders and organic psychosis.

Written by Robert Holly