Health Economics Program

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1 Health Economics Program Issue Paper July 2000 Home Care Provider Trends in Minnesota: Background Minnesota has an interesting history with regard to home care trends. Although Medicare beneficiaries in Minnesota have better access to Medicare-covered home health services (measured by the number of Medicare certified home health agencies per elderly person) than beneficiaries in most of the rest of the country, Medicare picks up less of the home health bill in Minnesota than in other states. 1 This reflects the combined effects of fewer Medicare beneficiaries receiving home health benefits and those that do receive benefits getting fewer visits. Specifically, in 1992, Minnesota ranked 48th in the proportion of Medicare beneficiaries receiving home health benefits and, in 1994, ranked 50th in the number of home health visits per person served. In 1996, the State Legislature responded to this by mandating the Medicare Maximization Initiative which hopes to maximize Medicare payments for home care and hospice services by ensuring that, when appropriate, Medicare pays for these services. By 1997, Minnesota had risen in the ranks to 38th in home health visits per person served. Through Medical Assistance home health and personal care benefits, as well as home and communitybased services waivers, Minnesota has sought to expand options in the community for low-income persons. Indeed, the growth in spending in this area has averaged 6.6% over the last four years, when all other Medical Assistance service areas have declined. 2 Even with this growth, the results are somewhat marginal with only a small fraction less than 8 percent of Medical Assistance long-term care expenditures for the elderly going towards home and community-based care. Understanding home care provider trends in the State is important for a number of reasons. First, there has always been a general concern that the quality of and access to home care be adequate. Second, at the same time the State is trying to maximize Medicare reimbursement, the U.S. Congress passed reimbursement and coverage policy changes to reign in Medicare home care spending. How these dynamics effect the capacity to deliver high quality care to those who need it is something policymakers and other stakeholders should understand. Finally, the strong economy has produced a state-wide staffing crisis over the last couple years for which the impact on home care providers is uncertain and may be hard to separate from other effects. The purpose of this Issue Paper is to discuss home care provider trends for the period of 1994 to 1999 with an eye towards these kinds of policy questions. This is done using data from the Minnesota Department of Health s Facility and Provider Compliance Division. Types of licensed home care providers To deliver health-related or supportive services to persons in their homes, providers must be licensed by the Minnesota Department of Health. There are seven different categories of home care licensure in Minnesota Department of Health

2 Minnesota which vary by type of service provided and whether these services are provided in individual homes or housing-with-services settings. (See the box on page 2.) They are: professional home care agency (a subset of which are also Medicare certified home health agencies), paraprofessional agency, individual paraprofessional, hospice, assisted living program, home management services, and assisted living home care providers. Table 1 provides an overview of the services and settings for various licensed home care entities. Types of licensed home care providers Class A (Professional home care agency): A traditional home health agency that serves the community as well as housing with services (HWS) settings. A subset of Class A providers are also Medicare certified. They also may provide professional nursing services, therapies, nutritional services, medical social services, home health aide tasks, and provide medical supplies and equipment when accompanied by the provision of home care service. Class B (Paraprofessional agency): The Class B paraprofessional agency serves both the community and HWS settings. They may provide home care aide tasks (stand-by assistance with dressing, grooming and bathing, reminders, housekeeping), and home management tasks, but no delegated nursing services. Class C (Individual paraprofessional): Individual paraprofessionals provide services in the community and in HWS settings. They may provide home health aide tasks (e.g. routine delegated medical or nursing services, assigned therapy services, administration of medications), home care aide tasks, and home management tasks. Class D (Hospice): Under this license, a provider may provide hospice services in the home. Class E (Assisted living program): These providers can only serve clients in HWS settings or residential centers. They may provide home care aide tasks or home management tasks. The services can be provided by the assisted living management or under a contract with that management. Class M (Home management services): A certificate of registration for home management can be obtained if the services provided include at least two of the following: housekeeping, meal, preparation, and shopping, and are provided to a person who is unable to perform these activities due to illness, disability or physical condition. Assisted Living Home Care Provider: These providers can only serve clients in HWS settings, may provide professional services, home health aide tasks (e.g. delegated nursing services), home care aide tasks, and central storage of medicine.* *The Assisted Living Home Care Provider category was effective August 1999; consequently, they do not appear in the trends presented here. Table 1: Overview of services and settings for certain licensed home care providers 2

3 Figure 1 shows that, in 1999, about two-thirds of home care providers were licensed as Class A (certified home health agencies and other professional home care agencies). Over half of these were certified by Medicare. Individual paraprofessionals (or Class C) represent the second largest type of licensed home care provider, followed closely by hospice providers. Table 2: Licensed home care providers in Minnesota: Figure 1 Licensed home care providers by type, 1999 State-wide trends The total number of licensed home care providers has grown from 587 in 1994 to 679 in 1999 an average annual change of 2.5 percent (Table 2). Consistent, steady growth has been seen among professional, hospice and home management providers. The number of Class E (assisted living) providers increased quickly in the early part of the period, and then declined rapidly later. As expected, the most erratic patterns are among individual paraprofessional, where year-to-year changes are significant despite the fact that change over the five-year period was relatively small. There are a number of possible shortcomings that may exist with the data presented in Table 2. First, the table shows state-wide information and might obscure regional, urban/rural or other market differences. Second, because these are net numbers, it is possible that from year to year there is more volatility than these number show. For example, between 1994 and 1995, the net increase in Medicare certified home health agencies was 22. We can not tell from this data whether 22 new home health agencies opened in Minnesota, or 50 new agencies opened and 28 existing agencies went out of business that year for a net result of 22. Depending on the public policy question one is trying to answer with the data, this may or may not matter. If the public policy question concerns continuity of care, this data may not yield valuable insight. If the question is about overall access to care, it will. The remaining analyses helps to address some of these aggregate data shortcomings. Trends by Economic Development Region To understand regional differences, trends were analyzed by Economic Development Region. Table 3 shows that the 7-county metropolitan area has the 3

4 largest share of licensed home care providers a percentage that actually grew somewhat over the five year time period from 37% to 41%. Two of the thirteen regions (Region 6 and Region11)showed an overall loss in total licensed home care providers. Table 3: Total licensed home care providers in Minnesota: by Economic Development Region interim payment system Recapturing savings from an OBRA 1993 freeze on payment increases Basing payments on location of service rather than location of billing office Clarification of part-time and intermittent nursing care Authority to make payment denials based on normative standards No benefits when drawing blood is the only service provided In Region 6, this was a slow steady decline of providers. In Region 11, the dramatic loss seen between 1994 and 1995 is entirely accounted for by individual paraprofessional providers (Class C). In neither region is the observed loss found among Class A professional licenses or Medicare certified providers. The Balanced Budget Relief Act of 1999 delayed by two years both implementation of the interim payment system (from October 1997 until October 1999) and implementation of the savings from the prospective payment system (from October 1999 until October 2001). However, the coverage changes are already in effect. Table 4 shows that the large anticipated losses in Medicare certified home health agencies have not occurred. Moreover, with these delays, it is unlikely that any major losses, if they happen at all, will be seen before Between 1994 and 1999, only two regions saw any decline in Medicare certified home health agencies and, in both instances, it was by only one agency. More importantly, in no Minnesota county are there fewer than two Medicare certified home health agencies offering services (data not shown) 3 The Balanced Budget Act of 1997 One important public policy question to be considered is how the payment and coverage changes from the Balanced Budget Act of 1997 have effected Medicare certified home health providers. These changes include: Establishing a prospective payment system Reducing per visit cost limits through an 4

5 Table 4: Medicare certified home health agencies in Minnesota: by Economic Development Region Figure 2: Total and Medicare certified home care providers: Rural and urban, Rural Urban Rural vs. Urban Differences Figure 2 shows trends between urban providers (defined as those in a metropolitan statistical area) and rural providers. The most notable difference between urban and rural areas is that a larger proportion (3/4 versus 1/2) of total home care providers in rural areas are Medicare certified home health agencies. Otherwise, the trends of total home care providers and Medicare certified providers track pretty closely in rural and urban areas over the period. Changes in Medicare certified home health agencies Finally, to gain a better understanding of the dynamics of the Medicare certified home health market in both rural and urban areas, Figure 3 shows the gains and losses between 1994 and Total gains outnumber total losses in every period except the most recent one (1998-9). This was true in both rural and urban areas and results in net total gains. Between 1998 and 1999, urban areas gained two Medicare certified home health agencies but lost seven. The five new Medicare certified home health agencies in rural 5

6 areas were exactly offset by the loss of five. Again, with the delays in Medicare payment policy resulting from the Balanced Budget Relief Act of 1999, the effects of the Balanced Budget Act of 1997 are not yet expected. Figure 3 Changes in certified home health agencies: Rural and urban 1Access to Medicare home health services was measured by Medicare certified home health agencies/elderly in 1995, 1996, and Data from: American Association of Retired Persons (1999), Reforming the Health Care System: State Profiles: 1999, Washington, DC: AARP. Wiener, J.M, and Stevenson, D.G. (1998), Long-Term Care for the Elderly: Profiles of Thirteen States, Washington, D.C.: The Urban Institute. American Association of Retired Persons (1996), Reforming the Health Care System: State Profiles: 1996, Washington, DC: AARP. American Association of Retired Persons (1994), Across the States: Profiles of Long-Term Care Systems, Washington, DC: AARP. 2Minnesota Department of Health, Developing a Comprehensive Set of Services to Supplement Medicare: Options for Low-Income Minnesotans, Report to the Legislature, January Unpublished estimates based on Minnesota Department of Health, Facility and Provider Compliance data. Conclusions There are a number of reasons why it is important to understand home care provider trends in the State. As mentioned earlier, quality measured by continuity of care, and access to care are both important considerations for state policymakers. As Minnesota tries to maximize Medicare payments for home care and hospice services and to shift its provision of Medical Assistance long-term care services from institutional settings to community alternatives, it is necessary to understand if the state-wide capacity for these activities exists. This Issue Paper takes the first step in understanding these dynamics. Future analysis should look more carefully at regional trends and work to capture the effects from the delayed Medicare payment changes. The Health Economics Program conducts research and applied policy analysis to monitor changes in the health care marketplace; to understand factors influencing health care cost, quality and access; and to provide technical assistance in the development of state health care policy. For more information, contact the Health Economics Program at (651) This issue brief, as well as other Health Economics Program publications, can be found on our website at: Minnesota Department of Health Health Economics Program 121 East Seventh Place, P.O. Box St. Paul, MN (651) Upon request, this information will be made available in alternative format; for example, large print, Braille, or cassette tape. Printed with a minimum of 30% post-consumer materials. Please recycle.

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