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ContractNo.: 500-94-0062 MPRReferenceNo.: 8246-126 CMSLibrary 91 C2-07-13 Ba7l5t0i0moSriee,cuMriDty2Bl1v2d4.4 EffectsofPer-Episode ProspectivePaymentfor MedicareHomeHealth CareonPatientSelection andRetention FinalReport June7,2000 Author: ChristopherA.Trenholm Programmers: DinaKirschenbaum AmyZambrowski Submittedto: Submittedby: HealthCareFinancingAdministrjjj^ MathematicaPolicyResearch,Inc. 7500SecurityBoulevard(C-3-21-06) P.O.Box2393 Baltimore,MD21244-1850 | Princeton,NJ 08543-2393 (609)799-3535 ProjectOfficer: ProjectDirector: AnnMeadow ValerieCheh PrincipalInvestigators: ValerieCheh RandallBrown BarbaraPhillips ACKNOWLEDGMENTS Inpreparingthisreport,Ireceivedsupportandassistancefrommanycolleagues,forwhichIam grateful. ValerieChehandRandallBrowncontributedtheirpolicyexpertiseandofferedthoughtful commentsthroughouttheresearch;LyleNelsonprovidedanexcellentcriticalreview;Barbara Phillips,ValerieCheh,andJenniferSchorecontributedtothebackgroundchaptersthroughprevious work;CindyMcClure adeptlyproducedthereport;andRoyGrishamprovidedskillededitorial supportwithhelpfromPatriciaCiaccio. AimMeadowatHCFAprovidedveryusefulcomments toanearlierdraftofthereport. Anyerrorsoromissionsinthisreportaremyown. iii CONTENTS Chapter Page EXECUTIVESUMMARY xi I THEPER-EPISODEHOMEHEALTHDEMONSTRATION ANDEVALUATION 1 A. THEMEDICAREHOMEHEALTHBENEFIT 2 B. THEPER-EPISODEDEMONSTRATION 4 1. DemonstrationPaymentandIncentives 6 2. OtherDemonstrationProcedures 9 C. GUIDETOTHERESTOFTHISREPORTANDOTHER EVALUATIONREPORTS 12 II DATA 13 A. THEMAINDATAFILE 15 1. CreatingPatientRecords 15 2. AvailableVariables 15 B. SAMPLETOSTUDYSELECTIONBASEDONEXPECTED SERVICEUSE(VISITS) 19 1. CreationoftheAnalysisSample 19 2. OutcomeVariables 24 3. ControlVariables 26 C. SAMPLETOSTUDYSELECTIONBASEDONEXPECTED PER-VISITCOSTS 29 1. CreatingtheAnalysisSample 29 2. OutcomeVariables 30 3. ControlVariables 33 D. SAMPLETOSTUDYRETENTION 34 1. CreatingtheAnalysisSample 34 2. OutcomeVariables 35 3. ControlVariables 41 V CONTENTS(continued) Chapter Page II E. SUMMARY 44 (continued) III METHODS 45 A. ESTIMATINGOVERALLIMPACTSONPATIENT SELECTION 45 1. RegressionModelstoInvestigateSelectionBasedonExpected ServiceUse 45 2. PotentialLimitationsoftheAnalysisonUseSelection 47 3. RegressionModelstoInvestigateSelectionbyExpected Per-VisitCosts 50 4. PotentialLimitationsoftheAnalysisonCostSelection 52 B. ESTIMATINGOVERALLIMPACTSONPATIENT RETENTION 53 1. ChoosingtheProperUnitofAnalysis 53 2. RegressionModels 55 3. PotentialLimitationsoftheAnalysisonPatientRetention 56 C. ESTIMATINGSUBGROUP IMPACTS 57 D. ROBUSTNESSTESTS 59 1. ComparingImpactsBetweenDemonstrationYears 60 2. SampleWeights 61 3. Outliers 62 E. STATISTICALPRECISIONANDOTHERMEASUREMENT ISSUES 63 21.. HDyepsoitghneEsfifsecTtesstsfortheImpactEstimates 6634 3. Weighting 65 IV IMPACTOFPROSPECTIVEPAYMENTONPATIENT SELECTIONANDRETENTION 67 A. EXPECTEDEFFECTS 67 vi CONTENTS(continued) Chapter Page IV B. IMPACTSONPATIENTSELECTION 70 (continued) C. IMPACTSONPATIENTRETENTION 78 D. ROBUSTNESS 81 1. Findings 82 2. Overview 86 V SUBGROUPIMPACTS 87 A. EXPECTEDIMPACTS 88 B. ESTIMATEDIMPACTSAMONGSUBGROUPS 90 C. SUMMARY 98 VI CONCLUSIONS 99 A. KEYFINDINGS 99 B. LIMITATIONSOFTHEANALYSIS 101 C. POLICYIMPLICATIONS 103 REFERENCES 105 APPENDIXA: SUMMARYOFCASE-MIXADJUSTMENT FORPAYMENTSDURINGTHE DEMONSTRATION 107 APPENDIXB SUMMARYOFTHEVARIABLEUSED : TOACCOUNTFORPREEXISTINGDIFFERENCES INAGENCYPRACTICEPATTERNS 113 APPENDIXC: VARIABLECONSTRUCTIONFORTHE ANALYSISOFSELECTIONBASED ONEXPECTEDSERVICEUSE 117 APPENDIXD: DETAILEDSUBGROUPTABLES 125 vii TABLES Table Page II.1 SELECTEDVARIABLESAVAILABLEFORTHEANALYSIS OFPATIENTSELECTIONANDRETENTION 16 11.2 DISTRIBUTIONOFTHEUSESELECTIONSAMPLE,BYEPISODE COUNTANDDEMONSTRATIONYEAR 22 11.3 DISTRIBUTIONOFUSESELECTIONSAMPLEACROSS AGENCIES,BYTREATMENTSTATUS 23 11.4 OUTCOMEVARIABLESTOEXAMINEUSESELECTION 25 11.5 WEIGHTEDMEANS,ANDTESTSFORDIFFERENCESAMONG TREATMENTANDCONTROLGROUPS,FORTHE EXPLANATORYVARIABLESINTHEUSESELECTION ANALYSISREGRESSIONMODELS 27 11.6 COSTSELECTIONSAMPLE:DISTRIBUTIONOFADMISSIONS (EPISODESTARTS)ONWHICHAGENCY-LEVELVARIABLES AREBASED,BYTREATMENTSTATUS 31 11.7 OUTCOMEVARIABLESTOEXAMINECOSTSELECTION 32 11.8 DISTRIBUTIONOFTHERETENTIONSAMPLEACROSS AGENCIES,BYTREATMENTSTATUS 36 11.9 OUTCOMEVARIABLESTOEXAMINEPATIENT RETENTION 38 II.1 WEIGHTEDMEANS,ANDTESTSFORDIFFERENCESAMONG TREATMENTANDCONTROLGROUPS,FORTHE EXPLANATORYVARIABLESINTHERETENTION-ANALYSIS REGRESSIONMODELS 39 IV.1 PERCENTAGEOFPATIENTSADMITTEDWITH SELECTEDCHARACTERISTICSTHATPREDICTASIGNIFICANT CHANGEINSERVICEUSEDURINGTHEAT-RISKPERIOD 71 IV.2 PREDICTEDLEVELOFHOMEHEALTHUTILIZATIONDURING THEAT-RISKPERIOD,BASEDONPATIENTCHARACTERISTICS OBSERVEDATADMISSION 73 ix TABLES(continued) Table Page IV.3 PREDICTEDLEVELOFHOMEHEALTHUTILIZATIONWITHIN THEMAJORCASE-MIXCATEGORIES 76 IV.4 CHANGE INTHEPROPORTION OFPATIENTSSERVED WITHPOTENTIALLYHIGHPER-VISITCOSTS(FROMTHE PREDEMONSTRATIONTOTHE DEMONSTRATION) 77 IV.5 CUMULATIVERATEOFTRANSFERDURINGTHEYEAR AFTERADMISSION 79 IV.6 RATEOFTRANSFERANDOTHERAGENCYINVOLVEMENT BYONEYEARAFTERADMISSION,UNDERALTERNATIVE MEASURES 80 IV.7 COMPARISONOFIMPACTSONKEYPATIENTSELECTION ANDRETENTIONMEASURESUNDERALTERNATIVE EMPIRICALSPECIFICATIONS 83 IV.8 COMPARISONOFIMPACTSONKEYPATIENTSELECTION AND RETENTIONMEASURESBETWEENYEAR1ANDYEAR 2OFTHEDEMONSTRATION 84 V.1 IPAMTPIAECNTTOSFEPLEERC-TEIPOINSOADNEDPRREOTSEPNETCITOINVEMPEAASYUMREENST,OBNYKEY WHETHERTHEAGENCYISFOR-PROFITORNONPROFIT 91 V.2 IMPACTOFPER-EPISODEPROSPECTIVEPAYMENTONKEY PATIENTSELECTIONANDRETENTIONMEASURES,BY WHETHERTHEAGENCYISHOSPITAL-BASEDORFREESTANDING ...92 V.3 IMPACTOFPER-EPISODEPROSPECTIVEPAYMENTONKEY PATIENTSELECTIONANDRETENTIONMEASURES,BY WHETHERTHEAGENCYISSMALLORLARGE 95 V.4 IMPACTOFPER-EPISODEPROSPECTIVEPAYMENTONKEY PATIENTSELECTIONANDRETENTIONMEASURES,BY WHETHERTHEAGENCYHASAHIGH-USEORLOW-USE PRACTICEPATTERN ^6 V.5 IMPACTOFPER-EPISODEPROSPECTIVEPAYMENTONKEY PATIENTSELECTIONANDRETENTIONMEASURES,BY WHETHERTHEAGENCYISACHAINMEMBER 97 X EXECUTIVESUMMARY Aspartofitsongoingefforttostudymethodsofprovidingmorecost-effectivecare,theHeahh CareFinancingAdministration(HCFA)implementedthePer-EpisodeHomeHeahhProspective PaymentDemonstration. Underthedemonstration,homeheahhagenciesreceivedafixed,lump- sumpaymentforthefirst120daysofeachepisodeofcareprovidedtoMedicarebeneficiariesand apredeterminedrateforeachvisitthereafter. Byallowingagenciestoretainmostofanysurplus paymentsovercost,prospectivepaymentgivesagenciesafinancialincentivetoprovidehomehealth careinamorecost-efficientmannerthanundertraditionalcost-basedreimbursement. Inthisreport,weexaminedatafi-omthefirsttwoyearsofthedemonstrationtoestimatethe possibleeffectsofprospectivepaymentonagencies'selectionandretentionofhomehealthpatients. Ourkeyfindingisthatprospectivepayment(asdefinedbydemonstrationrules)didnotsignificantly altertheselectionorretentionofpatientsrelativetoasystemofcost-basedreimbursement. Prospectivelypaidagenciesadmittedpatientswithsimilarlevelsofexpectedserviceuseandwith similartypesofmedicalconditionsandothercharacteristicshighlypredictiveoffutureservice needs.Inaddition,theirratesoftransferweresimilarandquitelow;byoneyearafteradmission, prospectivelypaidagencieshadtransferredonlyaboutthreepercentoftheirpatientstoanother agency. DEMONSTRATIONOVERVIEW Ninety-oneagenciesinfivestatesenteredthethree-yeardemonstrationatthestartoftheir1996 fiscalyears. Priortothestartofthedemonstration,theparticipatingagencieswererandomly assignedtoeitherthetreatmentorthecontrolgroup. Agenciesassignedtothetreatmentgroupwere reimbursedunderthedemonstration'sprospectivepaymentmethod,whilethoseassignedtothe controlgroupcontinuedtobereimbursedundercost-basedreimbursement(thepaymentmethod Medicareusedforallhomehealthagencieswhenthedemonstrationbegan). Foreachpatientadmittedtohomehealthcare,treatmentgroupagenciesreceivedalump-sum paymentforthefirst120daysofhomehealthcare,regardlessofthenumberofvisitsprovidedor theircost. (Durablemedicalequipment,nonroutinemedicalsupplies,andPartBambulatory servicescontinuedtobereimbursedatcost.) Theamountoftheper-episodepaymentwasbasedon eachagency'sowncostsinthefiscalyearimmediatelyprecedingitsentryintothedemonstration, adjustedforchangesinitscasemixandforinflation. Anagencycouldreceiveanewper-episode paymentforagivenMedicarebeneficiaryonlyafterthe120-day"at-risk"periodhadendedanda 45-daygapinserviceshadtakenplace. Foreachvisitaftertheat-riskperiodthatdidnotbegina newepisode,treatmentagenciesreceivedafixedpaymentthatvariedbytypeofvisitandwasagain basedontheagency'sownpredemonstrationcosts. xi HYPOTHESESANDMETHODS Ourbasichypothesiswasthatagenciesreceivingprospectivepaymentwouldtrytoobtaina lower-costpatientmixinordertobringtheirepisodecostsbelowtheper-episodepayment.Two particularchangesinpatientselectionwerehypothesized. Thefirstwasthatagencieswouldreduce theirshareofadmissionsexpectedtobehighutilizersofcare;thesecondwasthattheywouldreduce theshareofadmissionsexpectedtohaverelativelyhighper-visitcosts. Withrespecttopatient retention,wehypothesizedthatprospectivelypaidagencieswouldraisetheirtransferratesinan efforttodischargehigh-costpatientsmorequickly. Dataforouranalysiscomefromseveralsources. Medicareclaimsdataallowedforthecreation ofa"mainfile"ofpatient-levelrecordsforeachepisodeofcarebegunbetweenanagency'sstartin thedemonstrationandAugust1997. Thesedataalsoprovidedextensiveinformationonthetiming andnatureofpatients'serviceuse,whichwasusedinconstructingoutcomevariablesthatmeasured agencyretentionrates andpatientselectionpatterns. Datafromthedemonstration'squality assurancecontractorprovidednurses' assessmentsofpatientsathomehealthadmission. In conjunctionwiththeserviceusedatafromMedicareclaims,theseassessmentswereusedtocreate ouroutcomevariables,whichmeasuredagencyselectionpatterns.Additionaldatasourcesprovided extensiveinformationonagencyandareacharacteristics,usedprincipallytoconstructcontrol variablesforourregressionmodelsanddefinekeysubgroups. Thesesourcesincludedagencycost reportsforboththepredemonstrationanddemonstrationperiods,datafromtheAreaResourceFile, andselecteddatafromthedemonstration'simplementationcontractor. Ouranalysisusedthreesamples,eachderivedfromthemainfileofpatientrecords. These samplesvariedconsiderablyinsizeandcompositionduetoacombinationofmissingdataand differencesindatarequirements. Totheextentthatwecouldexaminewhetherourfindingswere sensitivetothesemissingdata,theyappeartobehighlyrobust.Ourfirstsamplewasusedtoanalyze whethertreatmentagencies selectedpatientsbased ontheirexpectedserviceuse. This"use selection"sampleincluded54,353observations(episodestartsduringthedemonstration)in84 agencies. Weusedthesecondselectionsampletoanalyzewhethertreatmentagenciesselected patientsbasedontheirexpectedcostspervisit. This"costselection"sampleincluded109,594 observationsin87agencies. Finally,the"retenfion"sample,whichweusedtoexaminewhether treatmentagenciesweremore likelytotransferpatients, included 86,448 observationsin79 agencies. Mostoftheanalysisofretentionfocusedonasubsample of52,133 observations correspondingtoadmissionsindemonstrationyear 1 becauseofalimitedobservationperiod (postadmission)inyear2. Ordinary least squaresmodels and logitmodels were usedto estimate programeffects, controllingforpreexistingdifferencesbetweentreatmentandcontrolagencies. Observationswere weightedsothateachagencywasrepresentedequallyintheanalysis. Standarderrorsofimpact estimateswerecalculatedusingspecialsoftwaredesignedtoaccountfortheeffectsofsample clusteringandweighting,soastoavoidoverstatingtheprecisionoftheestimates. Sensitivitytesting ofourregressionestimatesshowedthattheywerenotsensitivetotheweightingschemeortooutlier values.Theimpactestimatesalsodisplayednochangebetweenthefirstandsecondyearsofthe demonstration. xii FINDINGS NoSignificantChangeinAccessforHigh-CostPatients Per-episodeprospectivepaymentdidnotleadagenciestoavoidpatientsexpectedtobehigh utiHzersofcare. Treatmentagenciesw^erenolesslikelytoadmitapatientwithaseriousmedical condition,limitationsinactivitiesofdailyliving,orotherconditionspredictiveofhigher-than- averageserviceneeds. Inaddition,basedontheirobservedcharacteristicsatthestartofanepisode, theaveragepatientinatreatmentagencywaspredictedtousealmostexactlythesamelevelof servicesduringtheat-riskperiodastheaveragepatientinacontrolagency(seeFigure1). Wealsofindnoevidencethatthedemonstrationaffectedtheadmissionofpatientsexpected tohaverelativelyhighcostspervisit. Forexample,thedemonstrationhadnosignificanteffecton theproportionofpatientsadmittedfromhighlyruralareasorfromareaswithahighpercentageof non-English-speakinghouseholds. PossibilityofSlightFavorableSelectionAmongReadmissions Amongtheroughly1in10patientswithmultipleepisodesofcareinthesameagency,those readmittedtotreatmentagencieswerefoundtohaveslightlylowerpredictedserviceuse(on average)thanthosereadmittedtocontrolagencies. Whileconsistentwiththeincentivestoselect a lower-cost patient mix under the demonstration, this difference appears to be due to an underestimateofpredictedserviceuseamongthetreatmentgroupratherthanachangeinselection practicesontheirpart. Nevertheless,wecannotrejectthepossibilitythatasmalldegreeof favorableselectiontookplaceamongreadmissionstothetreatmentgroup,particularlysincethey aresuchanattractivetargetfortheseefforts. TransferRatesRemainedLowandUnchanged Agenciesalsodisplayednogreaterpropensitytotransferhigh-usepatientsaftertheywere admitted. Ineachmonthafteradmission,theratesofpatientswitchingfi-omdemonstrationagencies toanotherdemonstrationagencywerelowandnearlyidenticalfortreatmentandcontrolagencies. Byoneyearafteradmission,forexample,3.2percentofpatientshadbeentransferredfromcontrol agencies,comparedto2.9percentfromtreatmentagencies(Figure1). FindingsWereRobustAcrossDifferentAgencyTypes Impact estimates for selected agency subgroups underscore the main finding that the demonstrationhadno adverseeffectsonaccessto care forhigher-costpatients. Forthe 10 subgroups investigated, mostoftheestimated impactsonpatientselectionorretentionwere insignificant. Moreover,amongthesetofsignificantimpacts,nonewereconsistentwiththe incentivestoselectorretainalower-costpatientmix. xiii