Home Health Chains and Practice Patterns: Evidence of 2008 Medicare Reimbursement Revision

Home health agencies (HHAs) are known to exploit the Medicare reimbursement schedule by targeting a specific number of therapy visits. These targeting behaviors cause unnecessary medical spending. The Centers for Medicare & Medicaid Services estimates that during fiscal year 2015, Medicare made more than $10 billion in improper payments to HHAs. Better understanding of heterogeneous gaming behaviors among HHAs can inform policy makers to more effectively oversee the home health care industry. This article aims to study how home health chains adjust and adopt new targeting behaviors as compared to independent agencies under the new reimbursement schedule. The analytic data are constructed from: (1) 5% randomly sampled Medicare home health claim data, and (2) HHA chain information extracted from the Medicare Cost Report. The study period spans from 2007 to 2010, and the sample includes 7800 unique HHAs and 380,118 treatment episodes. A multivariate regression model is used to determine whether chain and independent agencies change their practice patterns and adopt different targeting strategies after the revision of the reimbursement schedule in 2008. This study finds that independent agencies are more likely to target 6 and 14 visits, while chain agencies are more likely to target 20 visits. Such a change of practice patterns is more significant among for-profit HHAs. The authors expect these findings to inform policy makers that organizational structures, especially the combination of for-profit status and chain affiliation, should be taken into the consideration when detecting medical fraud and designing the reimbursement schedule.