In a report issued by the Office of Inspector General (“OIG”) of the United States Department of Health and Human Services (“DHHS”) earlier this year, the OIG suggests that Medicare beneficiaries with certain diseases have experienced higher rates of hospital readmission and more hospital emergency department visits since the implementation of the prospective payment system (“PPS”) as a method of reimbursing home health agencies.

The PPS reimburses home health agencies by “units of payment” for 60-day episodes of care, paying a flat amount, as opposed to any cost-based amount. The prior method for reimbursing home health agencies was to reimburse them for their “allowable” costs under a cost reporting mechanism. PPS was implemented in the home health environment because of fast growth in the amount of overall reimbursement the Medicare program was making for home health services via the cost reporting system. One issue that can arise from a system such as PPS is whether it might lead to reduced quality of care because PPS could create a financial incentive to provide less care for the PPS payment.

The OIG determined that while overall hospital readmissions for home health beneficiaries has remained at about the same level and the overall rate of emergency department visits has increased only slightly, there apparently has been an increase of up to five (5%) percent in readmission rates for beneficiaries with the diagnoses of renal failure, multiple sclerosis and pulmonary diseases. For Medicare beneficiaries with these same diagnoses, the rates of emergency department visits has increased by four (4%) percent.

From these findings, the OIG has suggested that there is a need for continual monitoring of home health care quality. After receiving the report from OIG, the Centers for Medicare and Medicaid Services (“CMS”) agreed with the findings and noted its own plans to use the results to assist it in monitoring home health care quality.

From this report and the comments related thereto, home health agencies should be prepared to defend their quality of care of beneficiaries with these diagnoses and might want to make this specific subject matter part of their compliance program, if the agencies have implemented one.

For more information, please contact Linda G. Rodrigue at 225.382.3439 or