Patient-level cost of home health care under capitated and fee-for-service payment

This article examines costs for a national sample of 1,260 Medicare patients receiving home health care from 38 home health agencies. It uses data from a study that compares home health care provided to Medicare beneficiaries in health maintenance organizations (HMOs) and the traditional fee-for-service (FFS) system. The major findings indicate significantly lower costs, based on fewer home health visits, for HMO patients compared to FFS patients, even after adjustment for case mix and other factors. However, FFS patients also attain better outcomes, suggesting that HMOs may provide too few visits to home health patients. At the same time, the number of visits to FFS patients may be greater than is necessary to achieve the better FFS outcomes.