GAO Says Home Health PPS Needs Refinement - General Accounting Office, prospective payment systems - Brief Article

Healthcare Financial Management, June, 2000

HCFA's design and testing of the home health prospective payment system (PPS) is littered with information gaps, according to the General Accounting Office (GAO). The GAO issued a report April 7 in which it noted that HCFA has not adequately tested certain key features of the PPS, including the case-mix adjustment and alternative levels of payments. This lack of adequate testing, coupled with substantial variation in the way home services are delivered and the lack of standards for what constitutes appropriate care, may have severely limited HCFA's ability to evaluate the effects of the PPS on home health agency service delivery. As a result, the home health PPS, which is scheduled for implementation on October 1, 2000, could have serious unintended adverse consequences.

The GAO is concerned that HCFA's case-mix adjustment method may not be capable of adequately grouping patients with similar resource needs and then appropriately adjusting payments for beneficiaries in each group. Moreover, the GAO notes that how a patient is classified and how much the home health agency is paid depend on the extent of therapy services provided. Without adequate design features, Medicare could overpay for unneeded services or underpay for required care. The GAO recommends that HCFA study home health agency practice patterns and provider responses to the PPS and modify the home health PPS design and implementation plan accordingly.

HCFA already has spent $27 million since 1987 conducting research to design the home health PPS. The agency acknowledges that such extensive research has been necessary given the current broad definition of who qualifies for Medicare home health coverage and the lack of standards for what constitutes appropriate home health care.

In its April 7 report, the GAO noted that HCFA'S challenge lies in defining the service unit that will be used for payment purposes and developing the case-mix adjustment method to vary payments for differences in patient needs. The GAO observed that how HCFA manages these and other system-design decisions will determine the extent to which Medicare beneficiaries are protected from inadequate care and home health agencies are rewarded for delivering care efficiently and providing only medically necessary care.