Medicare Payment Policy

tABLe
9–2
of services. The review also examines quality of care,
access to capital, and the relationship between Medicare’s
payments and providers’ costs. Overall, the Medicare
payment adequacy indicators for HHAs are positive.
Beneficiaries’ access to care: Almost all
beneficiaries live in an area served by home
health care
Supply and volume indicators show that almost all
beneficiaries have access to home health services. In 2011,
almost all beneficiaries (99.5 percent) lived in a ZIP code
served by at least one HHA, 98 percent lived in a ZIP code
served by two or more HHAs, and over 80 percent lived in
a ZIP code served by five or more agencies. These findings
are consistent with our review of access from prior years. 4
Capacity and supply of providers: Agency
supply surpasses previous peak
In 2011, there were 12,199 HHAs participating in
Medicare, a net increase of about 512 agencies compared
with the previous year. Most new agencies in 2011 were
for-profit agencies. The number of agencies exceeded
the previous record of the 1990s when supply exceeded
10,900 agencies. The high rate of growth is a particular
concern, as the new agencies appear to be concentrated in
areas with fraud issues, including California, Florida, and
Texas. These states, like most, do not have state certificateof-need
laws for home health care, which can limit the
entry of new providers. 5
Since 2004, when 99 percent of beneficiaries lived in a
ZIP code served by an HHA, the number of agencies per
10,000 FFS beneficiaries has risen 60 percent, from 2.0 to
194 Home health care services: Assessing payment adequacy and updating payments
number of home health agencies continues to rise
Average annual
percent change
2002 2004 2006 2008 2010 2011 2002–2010 2010–2011
Number of agencies 7,057 7,804 8,955 10,040 11,654 12,199 6.5% 4.6%
Agencies that opened 399 656 828 780 831 730 9.8 –14.0
Agencies that closed
Number of agencies per
277 183 176 167 181 218 –4.6 15.0
10,000 beneficiaries 2.0 2.1 2.5 2.8 3.3 3.4 6.1 3.7
Note: Agencies’ census includes all agencies operating during a year, including agencies that closed or opened.
Source: CMS’s Providing Data Quickly database and 2012 annual report of the Boards of Trustees of the Medicare trust funds.
3.4 (Table 9-2). Some of this growth is due to a decrease
in the number of FFS enrollees as more beneficiaries
enroll in Medicare Advantage, but even when managed
care beneficiaries are included with FFS, the number
of agencies per beneficiary has increased by about 35
percent since 2004. Supply can vary significantly among
states. In 2010, Texas averaged 9.6 agencies per 10,000
beneficiaries, whereas New Jersey averaged 0.4 agency
per 10,000 beneficiaries. Some of this variation in supply
is likely due to certificate-of-need laws, as New Jersey has
certificate-of-need laws and Texas does not. The extreme
variation demonstrates that the number of providers is a
limited measure of capacity, as agencies can vary in size
and capability. Also, because home health care is not
provided in a medical facility, agencies can adjust their
service areas as local conditions change. Even the number
of employees may not be an effective metric, because
agencies can use contract staff to meet their patients’
needs.
growth in episode volume slows after many
years of rapid growth
In 2011, total spending for home health care dropped by
about 5 percent, and most of this reduction was due to a
decline in the home health episode base rate. 6 The average
payment per episode declined by about 5 percent, while
the number of episodes and beneficiaries using home
health care held steady between 2010 and 2011 (Table
9-3). This steady level of utilization is in sharp contrast
to the utilization trends in prior years. Between 2002 and
2010, the number of episodes increased by 66 percent,
from 4.1 million to 6.8 million episodes. Between 2002
and 2010, the share of beneficiaries using home health