Medicare Home Health: Differences in Service Use by HMO and
Fee-for-Service Providers (Letter Report, 10/21/97, GAO/HEHS-98-8).

GAO provided information on home health services provided by Medicare
health maintenance organizations (HMO), focusing on: (1) how Medicare
HMOs provide and manage home health services, as compared to
fee-for-service providers; and (2) what is known about the
appropriateness of home health services provided to HMO enrollees,
especially to vulnerable populations.

GAO noted that: (1) since the late 1980s, when the Congress and the
courts liberalized Medicare coverage of home health services, the
contrasting financial incentives of HMO and fee-for-service providers
have led to some divergence in the use of these services; (2)
fee-for-service providers generally have responded to the increased
latitude in the home health benefit by providing more patients with more
services for longer periods, in some cases providing excessive services;
(3) in contrast, home health agencies and HMOs tend to emphasize
shorter-term recuperation and rehabilitation goals--much as
fee-for-service provider did prior to the changes in coverage
guidelines; (4) differences between HMO and fee-for-service providers
are most apparent in the use of home health aides; (5) in the
fee-for-service program, the use of home health aides to provide
long-term care for patients with chronic conditions is growing, whereas
the six HMOs GAO visited report that they do not provide aide services
on a long-term basis; (6) typically, Medicare HMOs manage home health
care much more actively than the fee-for-service program; (7) in
contrast, the fee-for-service program has less effective controls for
preventing unnecessary and noncovered services; (8) home health
utilization differs between HMO and fee-for-service patients; (9) the
greater emphasis on short-term goals and the more active management of
care by HMOs likely contribute to shorter episodes of care and the use
of fewer home health visits, especially by home health aides; (10) in
addition, data from one managed care market suggest utilization
differences are more pronounced for longer-term home health patients;
(11) given the approach to home health care by some Medicare HMOs,
including a greater focus on post-acute needs, Medicare beneficiaries
with long-term care needs and chronic illnesses enrolled in HMOs may not
receive the same services as they would in fee-for-service Medicare;
(12) although there are these differences in utilization, the Health
Care Financing Administration (HCFA) does not have the information it
needs to evaluate the home health care patients receive in either the
HMO or fee-for-service program; (13) HCFA does not review home health
care during monitoring visits to HMOs; and (14) HCFA plans to collect
some outcomes information, but it will not be available for some time.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  HEHS-98-8
     TITLE:  Medicare Home Health: Differences in Service Use by HMO and 
             Fee-for-Service Providers
      DATE:  10/21/97
   SUBJECT:  Home health care services
             Health care cost control
             Elderly persons
             Health maintenance organizations
             Patient care services
             Quality assurance
             Health care personnel
             Comparative analysis
             Health care programs
IDENTIFIER:  Medicare Program
             
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Cover
================================================================ COVER


Report to the Chairman, Special Committee on Aging, U.S.  Senate

October 1997

MEDICARE HOME HEALTH - DIFFERENCES
IN SERVICE USE BY HMO AND
FEE-FOR-SERVICE PROVIDERS

GAO/HEHS-98-8

Home Health Services by Medicare HMOs

(101500)


Abbreviations
=============================================================== ABBREV

  CHDR - Center for Health Dispute Resolution
  HCFA - Health Care Financing Administration
  HCPP - health care prepayment plan
  HMO - health maintenance organization
  HHS - Department of Health and Human Services
  IPA - independent practice association
  OASIS - Outcomes and Assessment Information Set

Letter
=============================================================== LETTER


B-271479

October 21, 1997

The Honorable Charles E.  Grassley
Chairman, Special Committee on Aging
United States Senate

Dear Mr.  Chairman: 

In an effort to contain health care spending while preserving access
to services and quality of care found in Medicare fee-for-service,
the Congress authorized the use of risk-contract health maintenance
organizations (HMO)\1 in the Medicare program.  Unlike
fee-for-service, where Medicare usually makes a separate payment for
each service provided, Medicare pays risk-contract HMOs a
capitated--or fixed per patient--payment to cover all health
services.  Medicare HMO enrollment is growing by more than 100,000
beneficiaries per month.  More than 12 percent, or almost 4.9
million, of the approximately 38 million Medicare beneficiaries are
now enrolled in risk-contract HMOs.  Proponents of managed care state
that HMOs offer the potential to coordinate all the services needed
to treat a patient and to ensure the appropriate use of services. 
Critics, however, argue that Medicare HMOs may withhold necessary
services to save money. 

Given the increasingly important role of managed care in Medicare and
your interest in the ability of HMOs to meet the needs of vulnerable
populations, you asked us to examine home health services provided by
Medicare HMOs.  In the fee-for-service program, home health services
are used intensively by some of Medicare's sickest and most
functionally impaired beneficiaries.  In contrast, relatively little
is known about the use of home health services by Medicare HMO
enrollees.  Therefore, you asked us (1) to examine how Medicare HMOs
provide and manage home health services, as compared to
fee-for-service providers, and (2) what is known about the
appropriateness of home health services provided to HMO enrollees,
especially to vulnerable populations. 

To address these questions, we visited six Medicare HMOs, which
together account for about 10 percent of all Medicare beneficiaries
enrolled in risk-contract HMOs.  At these HMOs, we interviewed
utilization review and quality assurance staff and gathered documents
relating to these areas.  We also interviewed staff from eight home
health agencies that contract with these HMOs.  Most of these
agencies also provide services to Medicare fee-for-service patients
and thus were able to describe their experiences with home health
under both the HMO and fee-for-service programs.  We also interviewed
officials from the Health Care Financing Administration (HCFA), which
manages the Medicare program; reviewed a sample of appeals from
Medicare HMO enrollees who were denied home health services; and
reviewed pertinent laws, regulations, HCFA policies, and research by
others.  Details on our scope and methodology are provided in the
appendix. 


--------------------
\1 Our use of the term HMO in this report includes both HMOs and
competitive medical plans holding Medicare risk contracts for prepaid
care.  Competitive medical plans are subject to regulatory
requirements similar to those for HMOs, but they have more
flexibility in how they set premiums and services for commercial
members. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

Since the late 1980s, when the Congress and the courts liberalized
Medicare coverage of home health services, the contrasting financial
incentives of HMO and fee-for-service providers have led to some
divergence in the use of these services.  Fee-for-service providers
generally have responded to the increased latitude in the home health
benefit by providing more patients with more services for longer
periods, in some cases providing excessive services.  In contrast,
home health agencies and HMOs in our study reported that HMOs tend to
emphasize shorter-term recuperation and rehabilitation goals--much as
fee-for-service providers did prior to the changes in coverage
guidelines.  Differences between HMO and fee-for-service providers
are most apparent in the use of home health aides.  In the
fee-for-service program, the use of home health aides to provide
long-term care for patients with chronic conditions is growing,
whereas the six HMOs we visited report that they do not provide aide
services on a long-term basis. 

Typically, Medicare HMOs manage home health care much more actively
than the fee-for-service program.  For example, the Medicare HMOs we
visited use case managers, preservice authorization, and selective
contracting with home health agencies to manage home health services
and avoid providing unnecessary care.  In contrast, the
fee-for-service program has less effective controls for preventing
unnecessary and noncovered services, such as care provided to
patients who are not homebound. 

Our interviews and recent studies also indicate that home health
utilization differs between HMO and fee-for-service patients.  The
greater emphasis on short-term goals and the more active management
of care by HMOs likely contribute to shorter episodes of care and the
use of fewer home health visits, especially by home health aides.  In
addition, data from one managed care market suggest utilization
differences are more pronounced for longer-term home health patients. 
Given the approach to home health care by some Medicare HMOs,
including a greater focus on post-acute needs, Medicare beneficiaries
with long-term care needs and chronic illnesses enrolled in HMOs may
not receive the same services as they would in fee-for-service
Medicare. 

Although there are these differences in utilization, HCFA does not
have the information it needs to evaluate the home health care
patients receive in either the HMO or fee-for-service program.  HCFA
does not collect data on the services provided to HMO enrollees, as
it does for fee-for-service beneficiaries, and therefore cannot
identify outlier HMOs or beneficiary groups for further review.  In
addition, HCFA does not specifically review home health care during
biannual monitoring visits to HMOs.  Patient assessment information
and outcomes data could assist HCFA in determining whether
differences in home health utilization under HMOs and under
fee-for-service are appropriate.  HCFA plans to collect some outcomes
information, but it will not be available for some time. 


   BACKGROUND
------------------------------------------------------------ Letter :2

Medicare is a health insurance program available to almost all people
65 years of age and older and to certain disabled people.  The
program provides protection under two parts.  Part A, the hospital
insurance program, covers inpatient hospital, skilled nursing
facility, home health, and hospice services.  Part B, the
supplementary medical insurance program, primarily covers physician
services but also covers home health care for beneficiaries not
covered under part A.\2 Although most of the 38 million Medicare
beneficiaries receive their health care from fee-for-service
providers, the nearly 5 million beneficiaries enrolled in HMOs
participating in Medicare's risk-contract program receive home health
care through their HMOs. 


--------------------
\2 The Balanced Budget Act of 1997 (P.L.  105-33) revised which of
the two parts of the Medicare program pays for home health services
but not the extent of benefits received.  Beginning in January 1998,
part B will pay for any visits in excess of 100 following a hospital
stay and for all visits not related to hospitalization, unless the
beneficiary is not enrolled in part B.  In cases where a beneficiary
is only enrolled in one part of Medicare, that part will pay for all
covered home health visits. 


      MEDICARE FEE-FOR-SERVICE
      HOME HEALTH PROGRAM
---------------------------------------------------------- Letter :2.1

To qualify for home health care, a Medicare beneficiary must be
homebound, that is confined to his or her residence; require
intermittent skilled nursing, physical therapy, or speech therapy;
and be under the care of a physician.  In addition, the services must
be furnished under a plan of care that is prescribed and reviewed at
least every 62 days by a physician.  If these conditions are met,
Medicare will pay for skilled nursing; physical, occupational, and
speech therapies; medical social services; home health aide visits;
and durable medical equipment and medical supplies.  As long as the
care is reasonable and necessary and meets the above criteria, there
are no limits on the number of home health visits or length of
coverage. 

The home health benefit is one of the fastest growing components of
Medicare fee-for-service spending.  From 1989 to 1996, part A
fee-for-service expenditures for home health increased more than 600
percent--from $2.4 billion to $17.7 billion.  The number of
beneficiaries receiving home health care more than doubled, from 1.7
million in 1989 to about 3.9 million in 1996.  While the Congress
liberalized the Medicare home health benefit in 1980, the dramatic
growth in these services is primarily the result of changes to HCFA's
home health guidelines made in 1989.  HCFA was ordered by a federal
court to make these changes in response to a court decision that
invalidated HCFA's interpretation of the coverage requirements.\3 The
1980 statutory amendments removed the requirements that home health
visits under part A be preceded by a hospital stay of at least 3 days
and be for a condition related to the hospitalization.  The
amendments also abolished the 100-home-health-visit limitation under
parts A and B.  The new guidelines issued in 1989 allowed home health
agencies to increase the frequency of visits by clarifying the
definition of "part-time" or "intermittent" care, making it easier to
qualify for skilled care, and increasing the standard of review
before payment for services could be denied.  These changes made the
home health benefit available to more beneficiaries, for less acute
conditions, and for longer periods of time. 

Under Medicare fee-for-service, providers are paid for each home
health visit and, except for durable medical equipment, beneficiaries
do not share in the cost.  Therefore, neither providers nor
beneficiaries has financial incentives to control the number of
services used.\4 At the same time that home health expenditures have
been growing rapidly, funding for program safeguards, such as
reviewing claims, decreased sharply.  The recent enactment of the
Health Insurance Portability and Accountability Act of 1996 (P.L. 
104-191) has increased future funding for program safeguards.  After
adjusting for inflation, however, per-claim expenditures for program
safeguards will remain below the 1989 level.  HCFA has recently taken
several steps to address the growing problem of home health fraud,
such as a temporary moratorium on the entry of new home health
agencies into Medicare while the agency reviews its requirements for
home health agencies to enter and remain in the program. 


--------------------
\3 Duggan v.  Bowen, 691 F.  Supp.  1487 (D.  D.C.  1988). 

\4 The Balanced Budget Act of 1997 mandates a prospective payment
system for all fee-for-service home health services beginning on or
after October 1, 1999.  Under this system, home health agencies will
receive a set payment for each unit of service they provide (not yet
defined), adjusted for patient case mix and area wages.  This system
will replace the reasonable-cost payment method, which pays home
health agencies based on their costs, subject to certain limits. 
Until the prospective payment system is established, the Balanced
Budget Act established an interim payment system to help control the
cost and utilization of services.  Prospective payments for home
health services will alter the financial incentives fee-for-service
providers face. 


      MEDICARE HMO PROGRAM
---------------------------------------------------------- Letter :2.2

Medicare risk-contract HMOs are paid a fixed amount per month per
beneficiary under a payment method known as capitation.\5 This method
places HMOs at risk for health costs that exceed this capitated
amount, giving them a financial incentive to provide fewer services,
emphasize preventive care, and avoid unnecessary care.  As of August
1, 1997, almost 4.9 million Medicare beneficiaries, or more than 12
percent, were enrolled in risk-contract HMOs. 

Medicare HMOs are required to provide the complete health benefit
package available under the fee-for-service program, but they can
choose to provide more services.  For instance, while Medicare
fee-for-service requires that patients be homebound to qualify for
home health services, Medicare HMOs can waive this restriction.  In
addition, HCFA guidance states that the HMO is allowed to direct the
delivery of care.  In contrast, a patient in fee-for-service may, in
consultation with a physician, seek home health services without
obtaining authorization from a third-party--a requirement most HMOs
impose. 

Medicare patients may appeal an HMO refusal to provide health
services they believe are covered or medically necessary.  If a
patient appeals such a denial, the HMO must reconsider its initial
decision.  If the HMO's reconsideration is not fully favorable to the
patient, the HMO must forward the appeal for independent review by a
HCFA contractor--the Center for Health Dispute Resolution, formerly
the Network Design Group--which makes the final reconsideration
decision.  If dissatisfied with this decision and the amount in
dispute is $100 or more, HMO patients can take their appeals to an
administrative law judge, as can fee-for-service patients. 


--------------------
\5 Almost 90 percent of Medicare beneficiaries now in managed care
are enrolled in risk-contract HMOs.  The remaining beneficiaries are
enrolled in cost HMOs, health care prepayment plans (HCPP), or
demonstration plans.  Cost HMOs do not restrict provider choice but
require beneficiary payments for care received outside the HMO
network.  These HMOs are reimbursed by HCFA for the cost of providing
covered Medicare services.  HCPPs do not operate like risk-contract
or cost HMOs.  For example, HCPPs may cover only Medicare part B
services and may have restrictive enrollment policies.  Demonstration
plans include other types of managed care plans, such as
provider-sponsored networks and preferred provider organizations. 


   ROLE OF HOME HEALTH SERVICES
   VARIES BETWEEN HMO AND
   FEE-FOR-SERVICE PROVIDERS
------------------------------------------------------------ Letter :3

Contrasting financial incentives and different interpretations of the
Medicare home health benefit have led to some divergence in the way
home health services are used by HMO and fee-for-service providers. 
Staff at the six HMOs and the eight home health agencies we reviewed
described different approaches for home health services used by HMO
and fee-for-service providers.  The reports from the two groups
suggest that these HMOs emphasize shorter-term, rehabilitation goals,
while fee-for-service providers may give more emphasis to social and
environmental factors affecting service needs, especially in their
use of home health aides.  The coverage criteria for Medicare's home
health benefit allow providers enough latitude to interpret the
criteria in a manner that favors their financial interests.  While
HMOs control services more closely than fee-for-service providers,
home health agencies that serve both HMO and fee-for-service patients
told us they were generally able to obtain approval to provide
services they considered sufficient to HMO enrollees.  Some home
health agency staff did express concerns about the HMOs' approaches
to home health care; however, home health agency staff also
acknowledged that fee-for-service patients sometimes receive
unnecessary services. 


      HMOS EMPHASIZE DIFFERENT
      GOALS FOR HOME HEALTH
      SERVICES
---------------------------------------------------------- Letter :3.1

Home health agency staff described HMOs as having a somewhat
different approach to home health than fee-for-service providers. 
They told us that HMOs tend to focus more on shorter-term goals that
allow the HMO to discontinue services as soon as possible.  Staff at
several HMOs we visited reported that their goal for home health
services is to help patients function independently and not rely on
home health care.  To do so, they establish specific rehabilitation
goals focused on a patient's needs.  For instance, if a patient needs
to climb six stairs to reach the bathroom at home, then the home
health therapist will focus on this goal.  Once the patient attains
the specific goal, HMOs may terminate home health services if the
patient does not require any other skilled nursing or skilled therapy
care. 

Home health agencies also seek to achieve independence for their
fee-for-service patients.  However, in contrast to HMOs, some home
health agencies reported taking a broader approach to patient
functioning, providing additional services--especially supportive or
aide services--that take into consideration the patient's overall
condition and environment.  With fee-for-service patients, home
health agency staff said they tend to provide services over a longer
period to ensure patients are fully healed and knowledgeable about
the medical condition involved.  In contrast, they said an HMO may
authorize the home health agency only a certain number of visits to
teach a patient about his or her other medical condition, even if
environmental factors, such as family stress, suggest that the
patient may have difficulty absorbing the information within the
HMO's time frame. 

A nurse manager in one home health agency explained that under
managed care, home health agencies are learning to focus on the
problem at hand rather than trying to give patients services for
unrelated or other chronic conditions.  She explained that in
fee-for-service, the home health agency's goal has been to resolve
every condition that a patient had.  For instance, if home health
services were initiated because a diabetic patient had a wound that
required skilled nursing care, a home health agency might review
educational materials about diabetes with the patient, even if the
patient had had diabetes for a number of years.  In contrast, HMOs
tend to focus on the specific condition that initiated the home
health episode. 


      FINANCIAL INCENTIVES AND
      INTERPRETATION OF COVERAGE
      CRITERIA INFLUENCE USE OF
      HOME HEALTH SERVICES
---------------------------------------------------------- Letter :3.2

Because HMOs are at risk for service costs that exceed the capitated
payment, they generally seek to provide enough services to maintain
or restore patient health and prevent the need for more expensive
care, while not providing more care than necessary.  While there are
financial incentives to limit services, discontinuing services too
soon could become more costly if patient conditions worsen. 
Balancing these financial and health interests can influence the use
of home health services.  For example, an HMO may not believe it
necessary for a home health nurse to continue to visit a wound
patient until the wound is completely healed, while a fee-for-service
provider may. 

Applying the definitions of skilled services is not always
straightforward and is based on clinical judgment in many cases.  For
example, the management of a care plan is considered a skilled
service if it requires the skills of a nurse or therapist to ensure
the patient's medical safety and recovery--even if all other services
in the care plan are unskilled.  Since such criteria are based on
judgment and are open to interpretation, providers faced with
borderline cases may make decisions that favor their financial
interests.  The executive director of one home health agency noted
that the definitions for certain types of skilled nursing and therapy
services are vague and inconsistently interpreted in fee-for-service. 
The director for admissions at another home health agency said that
there are always gray areas in the coverage guidelines and that
fee-for-service providers tend to provide more services, while HMOs
tend to provide fewer. 

HMOs report that they use their flexibility to provide additional
benefits or waive Medicare requirements for their Medicare enrollees
to provide more cost-effective care.  In general, the Medicare HMOs
we visited reported that they occasionally covered more benefits than
patients are entitled to in the Medicare fee-for-service program. 
For example, one HMO did not require that patients be homebound to
receive home health services.  Four other HMOs reported that while
they formally required patients to be homebound, they would make
exceptions if it would be cost-effective for the HMO and beneficial
for the patient.  In addition, two HMOs reported that if a patient
had no skilled need, but could not be at home without assistance,
they would, in rare cases, provide aide services for a short period
until other arrangements could be made. 


      USE OF HOME HEALTH AIDES
      DIFFERS
---------------------------------------------------------- Letter :3.3

HMO and fee-for-service providers also differ in their use of home
health aides.  While custodial care--personal care that does not
require the continued attention of trained professional staff--is
generally excluded from Medicare coverage, Medicare can cover a home
health aide to provide ongoing personal care services if the home
care patient also requires intermittent skilled nursing or therapy
services.  Prior to the 1980 statutory changes and the 1989
court-ordered coverage guideline changes, the part A home health
benefit had been used primarily for acute conditions following a
hospitalization and not for chronic care.  Many Medicare
fee-for-service patients still receive home health services following
hospitalization, but a growing number are receiving home care and
aide services for long-term, chronic conditions not related to an
acute episode.  In a recent briefing, we reported that in the
fee-for-service program, aide visits accounted for almost half the
total of home health visits in 1994 and that the percentage of
patients receiving more than 90 visits tripled between 1989 to 1993,
from 6 to 18 percent. 

In contrast, HMO staff told us they believe that Medicare home health
services should not be expected to be used as long-term care for
patients.  Staff at many of the HMOs we visited expressed the belief
that patients can become dependent on the assistance provided by
aides and expect such services indefinitely.  In their view, the
fee-for-service system sometimes blurs the line between skilled and
custodial care, creating unrealistic patient expectations about
eligibility for Medicare home health services.  In addition, some HMO
and HCFA staff expressed the belief that home health aides are
sometimes provided in the fee-for-service program as much for social
reasons as for health reasons.  A study of Medicare home health
claims from 1993 also suggested that many fee-for-service aide visits
may be for social and custodial care and only tangentially related to
medical care.\6

While the HMOs we visited generally do not provide home health aides
for custodial purposes, most had a social service department or
designated staff that would try to arrange for community services. 
Several HMOs also had special programs that provided supportive
social services not directly related to health.  For example, one HMO
provided a respite benefit to full-time caregivers in the home to
prevent caregiver burnout.  Another HMO received a grant from a
health care foundation to create a service credit bank, where
enrollees who provide assistance, such as meal preparation and
transportation, to frail enrollees are given credits that can be used
to purchase similar assistance when needed.  The same HMO also helps
enrollees access a friendly visitor program and a telephone
reassurance program to provide social interaction and support.  While
these alternative services do offer some assistance to patients, they
are unlikely to completely replace all of the personal care services
that a home health aide can provide, such as assistance with bathing
and dressing. 


--------------------
\6 H.  G.  Welch, D.  E.  Wennberg, and W.  P.  Welch, "The Use of
Medicare Home Health Care Services," New England Journal of Medicine,
Vol.  335, No.  5 (1996), pp.  324-29. 


      HMO PRACTICES INFLUENCE
      DELIVERY OF CARE, CAUSING
      CONCERN TO SOME HOME HEALTH
      AGENCIES
---------------------------------------------------------- Letter :3.4

Staff from several home health agencies noted that they have changed
the way they treat fee-for-service patients by adopting an approach
more compatible with that used by HMOs.  They explained that they do
not want to treat patients differently based solely on health
insurance status and acknowledged that under fee-for-service, some
patients may receive unnecessary care.  One home health agency noted
that it now puts more emphasis on patient education, while another
reported that it no longer seeks to attain maximum functional levels
for patients before they are discharged from home health care.  The
latter also noted that it now provides services for shorter periods
and it looks for community resources to provide assistance if a
patient needs long-term assistance with some tasks, such as preparing
insulin shots. 

Home health agency staff also told us that although they were usually
able to negotiate acceptable levels of service with HMOs, HMOs
occasionally "push the envelope" in terms of providing the fewest
possible services.  Some were concerned that HMOs occasionally have
unrealistic expectations about how quickly certain patients can
function independently and may lead the patient to do more than he or
she is able to do.  For example, one home health agency reported that
a local Medicare HMO, which was not part of our sample, may expect
too much from the elderly population.  The HMO has recommended
clinical guidelines for coronary artery bypass surgery that call for
patients to be discharged 4 days after surgery and only authorizes
one home health agency visit following discharge.  Because these
patients generally are overwhelmed by the surgery and recovery, few
can absorb all the necessary self-care information provided in this
one visit.  As a result, home health agency staff said that they have
begun doing follow-up calls to these patients on their own
initiative.  Other home health agencies noted that some HMOs may
require certain wound care patients to provide their own wound care
before they are able to. 

At the same time, some home health agencies noted beneficial changes
in patient management that they believe arose from the influence of
managed care.  The director of one home health agency said that
working with HMOs has taught her staff to develop reasonable,
measurable goals and to focus their care on those goals.  She
believes that as a result, the quality of care provided has improved. 
The patient care coordinator at another home health agency noted that
the agency is now more focused on functional outcomes and patient
education. 


   HMOS CONTROL HOME HEALTH USE
   THROUGH MORE ACTIVE MANAGEMENT
------------------------------------------------------------ Letter :4

The six Medicare HMOs we visited frequently review each home health
patient's condition and progress; four also require preauthorization
for home health services.  This close management is intended to
monitor both the cost and quality of care provided.  In contrast,
only a small percentage of claims in the fee-for-service program are
actually reviewed by Medicare to assess whether they are reasonable
and necessary.  Moreover, these reviews are primarily paper reviews,
which yield insufficient information to determine if the services
provided are appropriate and meet Medicare criteria.  Many
fee-for-service home health agencies seek to manage patient care
appropriately and cost effectively, but others may provide
unnecessary services.  As we reported in March 1996, inadequate
controls make it nearly impossible to know whether a patient
receiving home health care qualifies for the benefit, needs the care
being delivered, or even receives the services being billed to
Medicare.\7

To more actively manage home health services, the HMOs we visited use
case management and preauthorization strategies, utilization reviews,
and selective contracting. 


--------------------
\7 See Medicare:  Home Health Utilization Expands While Program
Controls Deteriorate (GAO/HEHS-96-16, Mar.  27, 1996). 


      CASE MANAGEMENT AND
      PREAUTHORIZATION HELP HMOS
      CURB INAPPROPRIATE
      UTILIZATION
---------------------------------------------------------- Letter :4.1

Each of the six HMOs that we visited use nurse case managers to
follow each patient's progress and to determine when services can be
discontinued.  At two of the HMOs, the case managers operate out of a
central office separate from the physician offices.  The managers
receive patient information, collaborate with physicians as needed by
phone, and approve or disapprove requested services.  At two other
HMOs, the case managers work within the physician offices and make
decisions about services to be provided in collaboration with the
primary care physician.  The case managers at the two remaining HMOs
coordinate services but are not responsible for approving service
levels because these HMOS do not have a preauthorization requirement. 

Staff from the home health agencies report that the HMO case managers
review patient care plans much more frequently than the home health
agencies review plans for their fee-for-service patients.  At each
HMO we visited, case managers generally review patient cases every
few days to 2 weeks, depending on the patient's condition, to
determine how much more care is needed.  In the Medicare
fee-for-service program, home health care plans must be reviewed by a
physician at least every 62 days.  While some home health agencies
may develop shorter care plans, others routinely develop 62-day care
plans for their fee-for-service patients.  Moreover, when the initial
62-day period ends and a new care plan is written, the Medicare
contractors who process fee-for-service home health claims do not
routinely review the updated plans. 

HMO staff reported that their closer scrutiny of each patient is
intended to both prevent the unnecessary utilization of services and
improve the quality of care.  However, contracted home health
agencies also noted that the scrutiny can sometimes be excessive and
believe that it would save providers time and effort if they did not
have to seek approval for care after two or three visits when it is
obvious that certain patients, such as stroke patients, need
additional visits.  At one home health agency, a staff member noted
that there is a difference between managing utilization and actually
managing care.  She noted that some HMOs focus more on managing
utilization and have no direct contact with patients, which precludes
them from assessing the individual needs of patients. 

Medicare HMOs vary in terms of their organization, payment mechanisms
for physicians and home health agencies, and authorization processes. 
These factors also influence the utilization levels and management of
home health services.  For example, some HMOs employ their own
physicians and nurses and have no preauthorization requirements for
home health services; however, many HMOs contract with large numbers
of independent physicians and have more restrictive preapproval
processes to control the use of services.  Similarly, an HMO that
pays for home health services on a capitated basis may have fewer
controls on the use of services than an HMO that pays for each home
health visit provided. 


      UTILIZATION REVIEWS HELP
      HMOS MONITOR QUALITY
      AND USE
---------------------------------------------------------- Letter :4.2

In addition to using case managers to review and approve care, HMOs
sometimes review aggregate data--such as utilization statistics,
patient satisfaction survey data, or rehospitalization data--to
monitor quality and identify possible aberrant utilization patterns. 
For example, one HMO monitors its contracted physician groups for
underutilization and overutilization of services, using established
benchmarks or HMO averages.  The HMO identified one medical group
with low utilization of home health services compared to the HMO
average and asked the group to explain the disparity and provide any
available information on patient satisfaction or patient outcomes. 
Another HMO has established screens, such as dehydration or
readmission to a hospital, to identify instances of poor patient
outcomes.  If a provider has five or more instances during a 3-month
period (for instance, five patients suffering from dehydration), the
HMO will review the provider to determine if there are quality of
care problems.  However, if immediate action appears warranted, a
physician may review cases sooner. 


      SELECTIVE CONTRACTING HELPS
      HMOS COORDINATE OVERSIGHT OF
      PATIENT CARE
---------------------------------------------------------- Letter :4.3

HMOs also manage home health care more closely by restricting the
number of home health agencies they use or by having common corporate
ownership of agencies used.  Two of the HMOs we visited share common
corporate ownership with one or more home health agencies that
provide services almost exclusively to the HMOs' enrollees.  This
arrangement allows HMO and home health agency staff to work closely
with each other to provide active oversight of the care provided. 
Two other HMOs are in the process of shrinking their home health
agency networks to allow their staff to spend more time on site at
these facilities, provide closer oversight of the care provided, and
work with the contractors to manage enrollee care.  One HMO reduced
the number of home health agencies it contracted with from over 80 to
only 2.  Most of the HMOs also are establishing formal processes for
credentialing home health contractors. 


   DIFFERENT GOALS AND MANAGEMENT
   APPROACHES CONTRIBUTE TO
   DIFFERENT UTILIZATION PATTERNS
------------------------------------------------------------ Letter :5

Three recently published studies on home health use and our review of
selected home health agencies provide evidence that Medicare HMO
patients receive fewer home health visits than Medicare
fee-for-service patients.  These differences in utilization likely
stem from HMOs' more active management of home health services and
greater emphasis on rehabilitation and acute care, along with a lack
of controls in the fee-for-service program and reported problems with
overutilization.  Underlying differences in the health status of the
two populations may also contribute to these differences.  Several
studies suggest that, on average, Medicare beneficiaries who enroll
in HMOs may be healthier than patients who remain in the Medicare
fee-for-service program and, consequently, use fewer services.\8

One study, which compared the use of home health services by frail
elderly Medicare patients in HMOs and fee-for-service, found
that--after adjusting for differences in demographic, physical,
mental, and functional status--HMO patients were just as likely to
have home health episodes as fee-for-service patients but received 71
percent fewer visits.\9 A second study, conducted by the Department
of Health and Human Services' (HHS) Office of the Inspector General,
found substantially fewer home health visits provided to Medicare HMO
enrollees in 1994; however, the study did not adjust for differences
in patient health and demographic status.\10 A third study, funded by
HCFA, found that Medicare HMO and fee-for-service patients received
home health services for similar lengths of time; however, HMO
patients averaged 13 visits per episode of care, while
fee-for-service patients averaged 20 visits.\11 Further analysis
indicated that HMO patients received fewer home health services than
similar fee-for-service patients, even after adjusting for
differences in functional status, medical condition, and demographic
factors. 

Home health agency staff generally agreed with these findings. 
Virtually all said that their HMO patients overall receive fewer
services than fee-for-service patients.  In particular, they
described sizable differences in the use of home health aides.  Some
home health agency staff also said HMO patients may receive less
skilled care services, such as therapy services.  In some cases, they
attributed lower utilization of aides to earlier termination of home
health services by HMOs. 

One large urban home health agency compared its 1996 Medicare
fee-for-service and Medicare HMO patients and found statistically
significant differences in use.\12 When fee-for-service patients were
matched with HMO patients for age and gender, the HMO group had fewer
total visits and fewer visits for most service types--including
physical therapy and skilled nursing--as well as shorter episodes of
care, fewer comorbidities, and somewhat different diagnostic
groupings.  (See table 1.) Because the number of visits per week by
service type were generally similar for the two groups, these overall
utilization differences likely stem from the fact that HMO patients
generally received services over a shorter period relative to
fee-for-service patients. 



                                Table 1
                
                  Average Home Health Utilization for
                    Medicare HMO and Fee-for-Service
                Patients in One Large Urban Home Health
                              Agency, 1996

                                                      Matched fee-for-
                                      HMO patients    service patients
------------------------------  ------------------  ------------------
Episode of care
----------------------------------------------------------------------
Less than 31 days                            1,830               5,108
                                           (53.7%)             (33.9%)
31-120 days                                  1,457               8,480
                                           (42.8%)             (56.4%)
More than 120 days                             121               1,458
                                            (3.6%)              (9.7%)
Total                                        3,408              15,046
                                            (100%)              (100%)

Average service utilization
----------------------------------------------------------------------
Nursing visits                                 9.8                17.4
Physical therapy visits                        8.8                13.1
Home health aide visits                       23.6                38.8
Home health aide hours                        98.5               151.6
----------------------------------------------------------------------
Note:  All diagnoses; fee-for-service patients matched to HMO gender
and age distribution. 

When the analysis was restricted to patients with a primary diagnosis
involving the circulatory system,\13 the home health agency found
that differences in the total number of visits increased with the
length of the care episode.  (See tables 2 and 3 for a summary of
this comparison.) HMO patients were almost twice as likely to have a
shorter episode of care.  For the shortest episodes of care (under 31
days), there were relatively small, and not statistically
significant, differences in the number of home health services
between the fee-for-service and HMO patients.  Greater differences,
especially in the use of aides, were found for patients with longer
episodes of home health care. 



                                Table 2
                
                Length of Home Health Care Episodes for
                    Medicare Fee-for-Service and HMO
                    Patients With Circulatory System
                Diagnoses in One Large Urban Home Health
                              Agency, 1996

                                                      Matched fee-for-
                                      HMO patients    service patients
------------------------------  ------------------  ------------------
Episode of care
----------------------------------------------------------------------
Less than 31 days                              610               1,230
                                           (55.2%)             (31.1%)
31-120 days                                    468               2,340
                                           (42.3%)              (59.3)
More than 120 days                              28                 379
                                            (2.5%)              (9.6%)
Total                                        1,106               3,949
                                            (100%)              (100%)
----------------------------------------------------------------------
Note:  Fee-for-service patients matched to HMO gender and comorbidity
distribution. 



                                     Table 3
                     
                       Average Home Health Utilization for
                         Medicare HMO and Fee-for-Service
                         Patients With Circulatory System
                     Diagnoses in One Large Urban Home Health
                                   Agency, 1996

                                    Age 65-74       Age 75-84        Age 85+
                                  --------------  --------------  --------------
                                    Fee-            Fee-            Fee-
                                    for-            for-            for-
                                  servic          servic          servic
                                       e     HMO       e     HMO       e     HMO
                                  patien  patien  patien  patien  patien  patien
                                      ts      ts      ts      ts      ts      ts
--------------------------------  ------  ------  ------  ------  ------  ------
Episodes of care less than 31 days
--------------------------------------------------------------------------------
Nursing visits                     5.2\a   4.5\a     5.0     4.0   4.6\a   4.1\a
Physical therapy visits            3.8\a   3.7\a   3.5\a   3.8\a   3.2\a   4.1\a
Home health aide visits            9.1\a   7.3\a   8.6\a   7.5\a   9.4\a   8.7\a
Home health aide hours            37.3\a  28.1\a  33.5\a  28.6\a  34.9\a  33.4\a

Episodes of care 31-120 days
--------------------------------------------------------------------------------
Nursing visits                      15.1    11.3    15.2    12.6    15.3     8.3
Physical therapy visits             12.9    10.3    12.4    10.1  11.5\a   9.9\a
Home health aide visits             33.1    27.4    33.7    24.1    35.3    22.2
Home health aide hours             128.7   105.8   129.7    93.6   134.5    95.0

Episodes of care more than 120 days
--------------------------------------------------------------------------------
All services\b                        NA      NA      NA      NA      NA      NA
--------------------------------------------------------------------------------
Note:  Fee-for-service patients matched to gender and comorbidity
distribution of HMO patients. 

\a The differences for these variables were not statistically
significant at the .05 level. 

\b There were not enough cases of patients with episodes of care more
than 120 days to allow for this analysis.  See table 2 for the number
of cases involved. 

A recent analysis by the Kaiser Family Foundation indicated that many
Medicare fee-for-service home health patients are sick and
functionally impaired and increasingly rely on home health services
to fulfill long-term care or complex medical needs.  The analysis
found only about one-third of fee-for-service home health users were
receiving home health services after hospital discharge to meet a
short-term, post-acute need.\14 The remaining two-thirds received
more visits over a longer period.  Half of this group were seriously
ill, had complex medical problems, and used more hospital care than
other fee-for-service home health users.  The other half were
medically stable but functionally impaired and used home health care,
especially aide services, to meet long-term care needs.  Information
is not available on either the prevalence of chronically ill
beneficiaries who enroll in HMOs or their receipt of services. 
Therefore, the effect of HMOs' emphasizing short-term rehabilitation
and functional improvement on service utilization by chronically ill
beneficiaries is unknown. 


--------------------
\8 A 1996 study published in HCFA's Health Care Financing Review
(Vol.  17, No.  4) estimated that HMO enrollees' costs were 12
percent lower than average, and a 1996 Physician Payment Review
Commission study estimated that enrollees' costs were 37 percent
lower than those for comparable fee-for-service patients.  See also
Medicare HMOs:  HCFA Can Promptly Eliminate Hundreds of Millions in
Excess Payments (GAO-HEHS-97-16, Apr.  25, 1997), which reported that
HMO enrollees in California are healthier than fee-for-service
beneficiaries. 

\9 B.  Experton and others, "The Impact of Payor/Provider Type on
Health Care Use and Expenditures Among the Frail Elderly, American
Journal of Public Health, Vol.  87, No.  2 (1997), pp.  210-16. 

\10 HHS, Office of the Inspector General, How HMOs Manage Home Health
Services, OEI-04-95-00080 (Washington, D.C.:  HHS, Sept.  1997). 

\11 R.  E.  Schlenker, P.  W.  Shaughnessy, and D.  F.  Hittle,
"Patient-Level Cost of Home Health Care Under Capitated and
Fee-for-Service Payment," Inquiry, Vol.  32 (1995), pp.  252-70. 

\12 Patients dually eligible for Medicare and Medicaid were excluded
from the analysis. 

\13 Diseases of the circulatory system include hypertension, acute
myocardial infarction, heart failure, angina, phlebitis, and varicose
veins. 

\14 J.  Leon, P.  Neuman, and S.  Parente, Understanding the Growth
in Medicare's Home Health Expenditures (Washington D.C.:  The Henry
J.  Kaiser Foundation, 1997). 


   HCFA HAS LIMITED DATA TO
   EVALUATE HMO HOME HEALTH
   SERVICES
------------------------------------------------------------ Letter :6

Currently, HCFA has little data on home health services provided by
HMOs to Medicare enrollees.  Without information on the care
provided, HCFA cannot target plans or patient groups for further
review.  Home health agency and HCFA staff told us that it is
difficult to evaluate the significance of home health care
utilization differences between managed care and fee-for-service
settings without comparative data on patient outcomes--information
that links the care provided to the patient's health status.  HCFA
has initiatives under way to collect some information on patient
outcomes from home health services, but that data will not be
available for some time.  In their absence, we reviewed a sample of
appeals cases to see if these data reveal any systemwide issues
regarding access to care.  However, because of the low numbers of
appeals and their focus on administrative rather than clinical
issues, these data offered little insight regarding HMOs' provision
of home health care. 


      HCFA COLLECTS LIMITED DATA
      ON HMO SERVICES
---------------------------------------------------------- Letter :6.1

HCFA has little information about how much or what types of home
health care HMO enrollees are receiving.  Therefore, HCFA cannot use
indicators, such as low utilization levels, to target patient groups
or plans for more detailed review.  Because HMOs are paid on a
capitated basis to provide all Medicare-covered services to
enrollees, HCFA does not receive claims for the services provided. 
In addition, HMOs are not required to provide data on utilization
levels for home health services.  While HCFA reviews Medicare HMO
performance at least every 2 years, these reviews do not specifically
target home health care.  As we noted in 1995, HCFA's routine reviews
focus on whether the HMO has capable staff and appropriate procedures
for quality assurance and utilization management, rather than whether
the quality assurance and utilization management systems actually
operate effectively and ensure that HMOs make appropriate care
decisions.\15 At the same time, there are currently few, if any,
generally accepted standards for home health care, which could be
useful in evaluating any utilization data or other information about
care provided to Medicare enrollees. 


--------------------
\15 Medicare:  Increased HMO Oversight Could Improve Quality and
Access to Care (GAO/HEHS-95-155, Aug.  3, 1995). 


      INFORMATION SOURCES TO
      EVALUATE HOME HEALTH
      SERVICES
---------------------------------------------------------- Letter :6.2

Although HCFA and home health agency staff told us that it would be
impossible to evaluate the significance of utilization differences
without data on patient outcomes, comparative information on
utilization levels could be a useful monitoring tool.  Utilization
data can be used to identify home health agencies, HMOs, or patient
groups whose atypical utilization may indicate quality of care
problems and thus enable HCFA to target potential problem providers
for further review and analysis.  For example, at least two state
Medicaid programs use encounter data as an indicator of potential
under- or overutilization of services.  In the Medicare
fee-for-service program, this technique has been used successfully to
identify providers with fraudulent or abusive billing practices. 
HCFA is currently collecting encounter data in one state as a pilot
project but has no definitive plan to collect these data on a
nationwide basis.\16

To date, research comparing the health outcomes of HMO and
fee-for-service patients has been limited, partly because of the
difficulty in defining and measuring an array of health outcomes that
consider both skilled and unskilled services.  The 1995 HCFA-funded
study comparing home health utilization of Medicare HMO and
fee-for-service patients was the only study we identified that
attempted to measure patient outcomes.  The results suggest that HMO
patients may experience slightly worse outcomes than fee-for-service
patients.  However, because the study includes only patients who were
beginning a home health episode and only followed them for 12 weeks,
it may not include many patients receiving home health services for
chronic conditions. 

HCFA recently announced that within the next few years it plans to
collect some outcomes data from all home health agencies that provide
care to Medicare HMO or fee-for-service patients through a
standardized patient assessment data set, known as OASIS (Outcomes
and Assessment Information Set).  The OASIS data set will collect
information on a number of health status measures, such as ability to
walk after hip replacement surgery; mental status; and ability to
perform activities of daily living, like bathing or eating.  HCFA may
use OASIS data to monitor HMOs and the effectiveness of home care
they provide.  Patients with chronic illnesses and conditions,
however, may not experience the types of substantial improvements or
restoration of functions that can be measured easily through such
outcomes data.  The needs of the chronically ill for ongoing
assistance to maintain health status and functional ability may also
conflict with medical necessity standards used by some managed care
plans that focus on rehabilitation.  Some state Medicaid programs
have recognized similar concerns in contracting with managed care
plans for disabled recipients.  They have included an explicit
definition of medical necessity in HMO contracts that includes
services necessary to maintain a patient's existing level of
functioning. 


--------------------
\16 HHS has had broad authority to require HMOs to develop and
provide pertinent data needed to administer and oversee HMOs for a
long time.  However, the Balanced Budget Act of 1997 provides HCFA
the specific authority to require entities participating under the
new Medicare Choices program, including HMOs, to provide information
on services in order to facilitate HCFA's development of
risk-adjustment factors for payment rates. 


      APPEALS PROVIDE LITTLE
      INFORMATION
---------------------------------------------------------- Letter :6.3

Data on the number and results of appeals filed by Medicare patients
who are dissatisfied with HMO care decisions are one of the few
currently available indicators that might be useful in evaluating HMO
home health care.  We reviewed 48 home health appeals filed by
Medicare HMO patients during a 2-1/2-year period and found that
HCFA's appeals contractor upheld most of the HMOs' denials.  However,
the usefulness of such data as an indicator of patient satisfaction
may be limited by several factors.  First, the small number of home
health appeals limit their reliability as an indicator.  In 1996,
HCFA's appeals contractor received only 165 appeals involving home
health services from the approximately 4 million Medicare
beneficiaries enrolled in risk-contract HMOs.\17 Second, in 60
percent of the cases we reviewed, the HMO appeals contractor decided
the case based on whether the HMO and the patient followed correct
administrative procedures, rather than the appropriateness of the
HMO's clinical decision or the sufficiency of the services provided. 
Finally, because of weaknesses in the appeals system--including
incomplete HMO compliance with the appeals process, limited enrollee
awareness of appeal rights, and beneficiaries' ability to disenroll
rather than appeal a denial--not all enrollee concerns about access
to home health care reach the appeals contractor. 


--------------------
\17 As of August 28, 1997, HCFA required Medicare HMOs to review
requests for reconsideration within 72 hours, if the standard 60-day
time frame for issuing determinations could jeopardize the life or
health of an enrollee or the enrollee's ability to regain maximum
function.  These new requirements for an expedited appeals process
also clarified that decisions to discontinue services, such as
physical therapy, are appealable determinations.  This new process
may increase the number of appeals received by the Center for Health
Dispute Resolution for review. 


   CONCLUSIONS
------------------------------------------------------------ Letter :7

HMOs' more active management of home health services and their focus
on shorter-term rehabilitation likely contribute to their Medicare
enrollees receiving fewer services than their fee-for-service
counterparts.  Currently, however, HCFA has little data available to
evaluate if differences in home health care utilization are
appropriate.  Given the growth in Medicare HMO enrollment, ensuring
that HMOs meet the home health needs of all enrollees, particularly
those with chronic conditions, will become increasingly important. 
HCFA plans to collect outcomes data for home health services;
however, this information will not be available for several years and
may provide only a partial picture of the care provided by HMOs. 
Still, without such data, it is difficult to determine to what extent
utilization differences are appropriate or represent unnecessary
services provided in fee-for-service or insufficient services
provided by HMOs.  In the meantime, HCFA cannot determine whether the
needs of particularly vulnerable beneficiaries--such as those with
medically complex needs and chronic conditions--are being met in
HMOs. 

While there are no generally accepted standards regarding the
appropriate level of services for home health patients, identifying
and reviewing HMOs and patient groups with aberrant utilization
patterns could help focus oversight on potential problems--a
technique that has been used successfully in the Medicare
fee-for-service program.  In addition, recognizing the unique needs
of chronically ill enrollees and defining expectations for their care
may assist beneficiaries with chronic conditions in deciding whether
to enroll in an HMO, as well as facilitate HCFA's oversight of the
care provided these enrollees. 


   AGENCY COMMENTS AND OUR
   EVALUATION
------------------------------------------------------------ Letter :8

We provided a draft of this report to HCFA officials, who suggested
that we clarify that HCFA's 1989 changes to its home health coverage
regulations were made in response to statutory changes and court
order.  We have clarified those sections of the report and made other
technical changes recommended by HCFA officials. 

In addition, we provided a draft of this report to each of the HMOs
we visited, the Center for Health Dispute Resolution, the National
Association for Home Care, the American Association of Health Plans,
and two of the home health agencies we interviewed.  Most provided
technical or clarifying comments, which we incorporated as
appropriate. 

The National Association for Home Care expressed concern that some
HMOs use restrictive policies that conflict with what Medicare
beneficiaries are entitled to receive under the Medicare home health
benefit.  The limited scope of our study precluded us from addressing
this issue.  While we did note some differences in the provision of
home health services by HMO and fee-for-service providers, we did not
collect information that would allow us to comment on the
appropriateness of care offered to the two groups of patients. 

As agreed with your office, unless you release its contents earlier,
we plan no further distribution of this letter for 30 days.  At that
time, we will send copies to other interested parties and make copies
available to others on request. 

This report was prepared by Sara Galantowicz and Michelle St. 
Pierre, under the direction of William Reis, Assistant Director. 
Please call me at (202) 512-7114 or Mr.  Reis at (617) 565-7488 if
you or your staff have any questions about the information in this
report. 

Sincerely yours,

William J.  Scanlon
Director, Health Financing
 and Systems


SCOPE AND METHODOLOGY
==================================================== Appendix Appendix

To collect information on how Medicare HMOs manage home health
services, we visited six Medicare HMOs, conducted phone interviews
with home health agencies that contracted with these HMOs to provide
home health services, and reviewed appeals from Medicare HMO
enrollees who were denied home health services.  We interviewed staff
from HCFA's central office and several of its regional offices.  We
also reviewed pertinent laws, regulations, HCFA policies, and
research comparing utilization and outcomes between Medicare HMO and
fee-for-service patients.  We conducted our study from March 1996 to
July 1997 in accordance with generally accepted government auditing
standards; however, we did not independently verify the utilization
data obtained from one home health agency. 

The 6 HMOs we visited accounted for about 10 percent of all Medicare
enrollees in the 292 risk-contract Medicare HMOs as of August 1,
1997.  We chose the specific HMOs to include a variety of HMO models
and a variety of contracting relationships with home health agencies,
but they should not be considered representative of all Medicare
risk-contract HMOs.  Three of the six HMOs were nonprofit and three
were for-profit.  Two were group/staff model HMOs, two were
independent practice association (IPA) models, and two represented
mixed IPA/group models.  Two HMOs shared common corporate ownership
with the home health agencies that provided essentially all home
health services for the HMOs' Medicare enrollees.  The remaining HMOs
contracted with a variety of independent home health agencies.  In
selecting HMOs, we also sought some geographic diversity--three of
the HMOs are on the East Coast and three are on the West Coast. 
Given the number and diversity of HMOs and home health agencies that
participate in the Medicare program, we cannot generalize from the
small number that we visited. 

At each HMO we interviewed case managers, utilization review staff,
quality assurance staff, and other knowledgeable staff about how the
HMO manages home health services.  At one HMO, which capitates
payments to its physician groups and delegates the utilization
management function to the physicians, we also interviewed case
managers at two of the contracted physician groups.  We also
interviewed staff at 10 home health agencies that provide services to
the HMOs we visited to discuss the management of Medicare HMO home
health patients compared to Medicare fee-for-service patients; 8 of
the 10 provided services to both.\18 In most cases, we interviewed at
least two home health agencies that contracted with the HMOs we
visited--some of which contracted with more than one of the HMOs. 

Finally, we reviewed a sample of appeals filed by Medicare HMO
patients and decided by HCFA's HMO appeals contractor, the Center for
Health Dispute Resolution (CHDR).  The Medicare HMO appeals process
is a two-step process, in which the HMO itself first reconsiders its
original denial.  If the HMO's reconsideration is not fully favorable
to the beneficiary, the HMO is required to forward the appeal to CHDR
to make the final reconsideration decision.  We did not review
HMO-level appeals because HCFA does not maintain data on appeals at
that level, making it impossible to identify the universe of appeals
and to draw a sample.  However, the six plans we visited reported
that nearly all appeals in the past year involving home health
services were forwarded to CHDR. 

From a universe of 254 home health appeals decided by CHDR between
January 1, 1994, and August 23, 1996, we selected a random sample of
48 cases, or 18.9 percent of the 254 cases involving home health. 
The appeals came from all Medicare HMOs, not just the six we visited. 
While this sample is representative of all CHDR-level appeals cases
decided during the sample time frame, it should be noted that the
appeals that reach CHDR represent only a fraction of all disputes
because not all initial HMO denials are appealed or even recognized,
and others may be overturned at the plan level.  As noted in the body
of this report, HMO patients may choose not to appeal an HMO denial,
either because they are not aware of their appeal rights or because
they choose to disenroll from the HMO.  Also, Medicare HMOs do not
always forward appropriate appeals to HCFA's contractor, as reported
in a recent HHS, Office of the Inspector General study.\19

RELATED GAO PRODUCTS

Medicare Home Health Agencies:  Certification Process Is Ineffective
in Excluding Problem Agencies (GAO/T-HEHS-97-180, July 28, 1997). 

Medicare:  Need to Hold Home Health Agencies More Accountable for
Inappropriate Billings (GAO/HEHS-97-108, June 13, 1997). 

Medicare HMOs:  HCFA Can Promptly Eliminate Hundreds of Millions in
Excess Payments (GAO/HEHS-97-16, Apr.  25, 1997). 

Medicare:  Home Health Cost Growth and Administration's Proposal for
Prospective Payment (GAO/T-HEHS-97-92, Mar.  5, 1997). 

Medicare:  Home Health Utilization Expands While Program Controls
Deteriorate (GAO/HEHS-96-16, Mar.  27, 1996). 

Medicare:  Increased HMO Oversight Could Improve Quality and Access
to Care (GAO/HEHS-95-155, Aug.  3, 1995). 


--------------------
\18 The other two home health agencies provided care almost
exclusively for patients from two of the HMOs we visited and,
therefore, could not compare the management of fee-for-service and
HMO patients. 

\19 HHS, Office of the Inspector General, Medicare HMO Appeal and
Grievance Processes, OEI-07-94-00280 (Washington, D.C.:  HHS, Dec. 
1996). 


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