Policy and its impact on the Medicare home health market

The Balanced Budget Act of 1997 introduced two new reimbursement structures, the interim payment (IPS, 1997-2000) and Prospective payment system (PPS, begun October 2000), for Medicare home health agencies under the fee-for-service program. This paper summarizes findings on the impact of these changes on the Medicare home health market. The study consisted of a secondary analysis of the Provider of Services file for the years 1996, 1999 and 2002. Between 1996 and 1999 the total number of active agencies decreased by 20% and an additional 11% through 2002. Agencies also dramatically reduced the number of branch offices by 20% through 1999 and by 39% between 1999 and 2002. The number of agencies leaving the program increased by 373% between 1996 and 1999 but agency terminations declined between 2000 and 2002. The number of new agencies decreased between 1996 and 1999 by over 85% but this pattern reversed after the PPS when new agencies increased by 61% in 2001. Proprietary and freestanding agencies experienced greater volatility in all three time periods. Greater decreases were seen in the following regions VI, IX, VIII, VII. The following agency characteristics were associated with a greater likelihood to leave the Medicare program, affilation, tax status and CMS region. Agency staffing patterns also changed after the BBA with fewer RNs, LPNs, physical therapists, aides and social workers employed between 1996 and 1999 but only fewer aides employed between 1999 and 2002. Implications for access to home health services will be discussed.