Metrics Matter: Hospital-Based Home Health Agencies – Market Share by State
Do hospital-based home health agencies play a significant role in the delivery of Medicare home health services? To help answer that question, this month’s metric takes a look at the Medicare reimbursement for hospital-based home health agencies compared to freestanding agencies on a statewide basis.
Hospital-Based Versus Freestanding Home Health Agencies
Hospital-based (HB) agencies are home health providers whose cost report data is included as part of a hospital’s overall cost report. Practically speaking, many of these agencies operate as departments of hospitals, not as independent businesses. As a result, freestanding (FS) agencies complain their HB counterparts have an “unfair advantage,” because of their “inside track” in garnering referrals from parent institutions.
Most industry observers agree that there are clear differences between HB and FS agencies in both management style and focus. Hospital senior management has traditionally considered an agency’s primary role as facilitating the discharge of patients from the hospital, for example, caring little about the chronic, community-based patient. This is one important way the prevalence of HB agencies in a market impacts the competitive framework of that market.
By looking at Healthcare Market Resources’ data of the Medicare reimbursement for HB home health agencies compared to FS agencies on a state level – based on Medicare 2006 Home Health Claims Data – we can conclude the following:
- Based on their percentage of Medicare reimbursement, HB agencies are the dominant type of home health provider in the following 5 states: North Dakota, South Dakota, Oregon, Alaska and Arkansas.
- In North Dakota, for example, HB agencies account for more than 85% of the state’s Medicare reimbursement.
- While in Florida, Louisiana, Texas, Utah and Vermont, the role of HB agencies is exceedingly limited, accounting for less than 5% of industry Medicare revenues.
Hospital-Based Agencies: A Meaningful Factor in Medicare Home Health Services Delivery
As you can see from the metric chart, hospital-based agencies are a meaningful factor in the delivery of Medicare home health services. Yet the Medicare Payment Advisory Commission (MedPAC) – the independent Congressional agency established to advise the U.S. Congress on issues affecting the Medicare program – has chosen to exclude these agencies’ data from their calculation of industry profitability, because they consider them “inefficient producers.” As a result, the National Association of Home Care and Hospice (NAHC) has complained for years that this approach unfairly overstates industry profitability.
At the upcoming NAHC Policy Conference, I will speak about research that Healthcare Market Resources has conducted in conjunction with NAHC on the differences between HB and FS agencies. The presentation will show that the differences in profitability between these types of providers is not due solely to the ineffectiveness of one, but rather – at least in part – to differences in the types of patients that they each accept.
Click here or call us at 215-657-7373 to learn more about this metric, as well as ways Healthcare Market Resources industry data can be used to help your agency succeed in today’s competitive marketplace.