Our Take: Landmark study finds greater savings with home health care versus skilled nursing
Mar 18, 2019
Home health care agencies save Medicare millions of dollars compared with skilled nursing facilities, despite higher readmission rates, according to a new study published online March 11 in JAMA Internal Medicine.
Researchers used Medicare claims data from 2010 through 2016 to compare the results of more than 17 million hospitalizations, where 39% were discharged to home health and 61% to skilled nursing. The group discharged to the home had a 5.6% higher 30-day readmission rate as compared with those discharged to skilled nursing. However, within the first 60 days after admission, costs per beneficiary were $4,514 lower in the home health group as compared with the skilled nursing group.
No significant differences were observed between the two groups in functional outcomes or mortality.
Our Take: This massive study—17 million cases over a seven-year period—demonstrates the enormous potential value home health care can bring to Medicare and other payers.
Linking home health care payments to quality performance
In 2016, CMS launched the five-year Home Health Value-Based Reimbursement (HHVBR) pilot program in nine states. At the time, we saw HHVBR as an opportunity for home health to step up to the plate and innovate like never before. We also saw the program as a move by CMS to squeeze out mom-and-pop home health agencies that wouldn’t be able to keep up with the data requirements and financial commitments. (See Reinventing Home Health for one viewpoint from 2015.)
It’s too early to tell whether HHVBR is saving money or resulting in better care. The first-year performance evaluation is available, but researchers are reporting “mixed results” across the board.
Notably, we haven’t seen any mass casualties of home health agencies, although there have been steeper reductions in HHVBR states. Specifically, at the end of 2018 there were 11,385 Medicare-certified home health agencies, compared with 12,324 in 2015, an 8.2% decline. Among the nine HHVBR states, there were 2,358 agencies in 2015 and 2,058 at the end of 2018, a 14.6% decline. For comparison, the number of agencies in non-HHVBR states declined by 6.9% over the same period.
An outstanding value proposition for Medicare and other payers
Given the option, most people would prefer to receive care at home. And, home health care isn’t just for patients who’ve been hospitalized. In fact, these days the majority of recipients are “community-admitted” older adults, some with chronic conditions or dementia.
While home health care might be more comfortable for the patient, in certain situations a nursing facility may be the better choice—such as when there’s no support network in the home, or when a patient requires more care than a home health practitioner can manage.
But, in situations where home-based care is appropriate—post-op recovery, for example—home health outcomes are just as good as those in other settings. And, per day, home health care is a third of the cost of a skilled nursing bed and less than a 10th of the cost of a hospital stay.
Yet, CMS has slashed home health reimbursement rates every year since 2009. According to the National Association for Home Care & Hospice, home health has had more rate cuts than any other health care sector in the Medicare program. CMS reversed course in October 2018 when it authorized a 2.2% Medicare payment rate hike for the first time in nearly a decade.
MedPAC: Blinders or bias?
The Medicare Payment Advisory Commission, or MedPAC, is an independent agency that makes reimbursement recommendations to Congress. Of note, MedPAC consists of academics and health system executives; home health isn’t represented on the panel.
In January, MedPAC recommended a 5% reduction in the Medicare base payment rate for home health agencies in 2020, which would range from $750 million to $2 billion. In fact, every MedPAC report we’ve seen on home health recommends dialing back the spend. For context, the Medicare home health business is about an $18 billion industry.
In contrast, MedPAC just announced that it was recommending a 2.8% increase in payments for acute care hospitals. Skilled nursing payments will remain about the same. MedPAC’s argument, essentially, is that hospitals are losing money on Medicare patients (about a 2% net loss) and home health agencies are making too much money (about a 15% net profit). In effect, MedPAC—the commission that’s stuffed with hospital executives—is penalizing home health care for being profitable.
Intermountain sets an example
Intermountain is one integrated health system that recognizes the value of home health care, perhaps because it’s responsible for the care continuum—and the risk. The health system recently announced an expanded home care program for its most complex and chronically ill patients. The new service, Intermountain at Home, is using technology and a range of caregivers to keep people healthier and out of the hospital. The program offers post-acute, palliative and hospice care, as well as virtual urgent care visits through a “virtual hospital.”
“Intermountain at Home will help us care for patients with the same high levels of attention, safety, quality and coordination we deliver in our traditional settings—all at a much lower cost,” said Rajesh Shrestha, Intermountain’s chief operating officer of community-based care. “This will be one of the nation’s most comprehensive models for providing care upstream and meeting patient preferences.”
Intermountain is making a smart investment. CMS should look to do the same.
What else you need to know
The House Committee on Energy and Commerce launched an investigation into 12 companies, including UnitedHealth Group and Anthem, that sell “junk” health insurance plans—short-term health plans that provide less coverage than is required under the Affordable Care Act (ACA). The plans offer lower premiums, but they may also leave consumers at risk for potentially devastating out-of-pocket costs. The committee will look into denials of coverage, how the plans are marketed, commission structures and whether underwriting occurs after claims are filed. More here.
Rite Aid Corp. announced a restructuring plan that will include the departure of several top executives, including CEO John Standley, who will stay until a successor has been appointed. The company is consolidating some senior positions and has promoted from within to fill others. Overall, about 400 full-time positions will be eliminated companywide. The restructuring is being undertaken to reduce costs and “better align” the company’s structure with its operations; the pharmacy chain expects to save $55 million per year. According to Becker’s Hospital Review, Rite Aid has lost more than half of its market value in the last year.
UnitedHealthcare and OptumRx are expanding their point-of-sale prescription drug discount programs. Starting in January 2020, new self-funded employer plans will have to pass point-of-sale discounts, or rebates, on to members when they have prescriptions filled. Agreements with current employer clients, including those set to begin on Jan. 1, will be grandfathered. The expansion builds on programs that took effect at the start of this year. More here.
Geisinger and Highmark have finalized their clinical joint venture, they announced on Tuesday. The agreement creates a new, not-for-profit health care organization that will encompass existing Geisinger locations in Pennsylvania and New Jersey, as well as planned new facilities in a four-county region. “Geisinger and Highmark are committing more than $100 million to improve existing clinical facilities, develop new ones, expand services and improve access to care across the region,” said Dr. Jaewon Ryu, Geisinger’s interim president and CEO. The joint venture will serve members of Highmark Health Plan, Geisinger Health Plan and members of other insurance plans.
Providence St. Joseph Health and Cedars-Sinai agreed to form a joint venture to own and operate Providence Tarzana Medical Center in California’s San Fernando Valley. The medical center will be renamed Providence Cedars-Sinai Tarzana Medical Center. Providence will retain controlling interest, according to a press release.
Dr. Ned Sharpless will serve as acting head of the FDA until a permanent replacement is found for Dr. Scott Gottlieb, who announced earlier this month that he would be departing within the next few weeks. Dr. Sharpless is currently the director of the National Cancer Institute; Dr. Douglas Lowy, the NCI’s deputy director, will serve as acting director during his absence.
Dr. Patrick Conway, president and CEO of Blue Cross Blue Shield of North Carolina (BCBSNC), will keep his current roles and become the CEO of Cambia Health Solutions, the parent company of more than 20 health care companies—including four other Blue plans in Oregon, Washington, Idaho and Utah. BCBSNC and Cambia announced a strategic affiliation to lower health care expenses and improve quality; together, they will cover more than 6 million people and have estimated revenue of $16 billion. The five Blue plans will maintain their separate identities but will share management, administrative and operational services under the Cambia name. The agreement is subject to state regulatory approval.
Dr. Larry Goodman, CEO of Rush University System for Health (RUSH) and Rush University Medical Center in Chicago, will retire within the next several months, according to a press statement. He has been CEO of the medical center for 17 years. Dr. Ranga Krishnan, the current dean of Rush Medical College and senior vice president of the medical center, will become CEO of RUSH. Dr. Omar Lateef, who currently serves as chief medical officer for RUSH and the medical center, will become CEO of the medical center.