Increasing home health service referrals, boon or bane?

Discharges to home health services (HHS) increased dramatically for the elderly after Medicare's prospective payment system (PPS) was enacted in October 1983. A longitudinal study of fourth quarter South Carolina discharge abstracts from 68 of 71 short term acute care hospitals in the state were analyzed to appraise hospital responses to implementation of this significant change in Medicare's reimbursement system. PPS caused shifts in hospital practices as financial incentives radically changed from a cost-based system that encourages expenditures to a PPS that evokes conservation of resources within a hospital stay. In so doing, the "output" (i.e., discharge) changed. One of those changes observed was an increase in referrals to HHS. Apparently, capping the amount reimbursed for a particular diagnosis left the more resource-intensive patient vulnerable and in want of care on discharge. Demand for HHS rose significantly (+47% in 1983; +234% by 1985). Though a HHS referral may be appropriate during the recuperative phase of an illness, questions arise as to hospital motivation. The HHS referral represented the most resource-intensive, but arguably unprofitable segment. Had hospitals sought earlier discharges to "protect their bottom line" as reimbursement essentially was capped? Was a referral to HHS appropriate to meet the existing patient-care needs that remained? Did HHS offer a more cost-effective substitution for care formerly provided the patient in the hospital? What provider and consumer characteristics are at risk and why? Both consumer and provider concerns need to be addressed. Answers to these questions are most critical to future health care reform. Allocation decisions of scarce resources need to be grounded in realistic expectations drawn from appraisals of what does and does not work in the health care market.