More than other types of post-acute providers, home health agencies stand to benefit financially from patients who need consecutive episodes of care, according to findings shared at the recent meeting of the Medicare Payment Advisory Commission (MedPAC).

MedPAC is tasked with analyzing the Medicare system and offering recommendations to Congress for how it can function more cost effectively. One of MedPAC’s ongoing efforts has been studying how to change the post-acute payment model so that reimbursements are “rationalized” across provider types.

In other words, if a home health agency, skilled nursing facility, and inpatient rehabilitation facility are all caring for a similar patient in a similar way and achieving similar outcomes, they should also be receiving similar Medicare payments.

As part of this work related to post-acute payment reform,  the commission reviewed the issue of sequential stays at its most recent meeting, which took place earlier this month in Washington, D.C.

Sequential stays occur when a person leaves a post-acute setting and then reenters post-acute care shortly thereafter. For instance, a person might have a home health care episode and then experience an exacerbation and go into a skilled nursing facility for a period of time. A sequential stay could also refer to multiple consecutive home health episodes.

Current home health policy includes payment adjustments for sequential stays, so this is not a “novel idea,” said Carol Carter, a MedPAC principal policy analyst, in her briefing to the commissioners on this issue at the meeting. Specifically, there are different reimbursement rates for home health episodes deemed “early” versus “late.”

However, sequential stays would need to be considered in any move to a unified post-acute payment system, given that there are significant differences in sequential stay patterns for home health versus other provider types.

One of the primary issues is that the cost of delivering care can change as a patient’s needs change. Someone coming out of the hospital and entering home health care might have acute conditions and need intensive services during an initial 60-day care episode. That patient’s condition might then improve but still call for ongoing home health care, so the subsequent episode would be more profitable to the provider even if Medicare continues paying the same amount. This could incentivize providers to keep patients unnecessarily, to juice the bottom line.

This holds particularly true for home health versus other post-acute settings, according to Carter.

“For home health stays, [costs for] later stays were between 16% and 26% lower than earlier stays, and the differences were larger for longer sequences,” she said. “For institutional PAC stays, later stays had costs that were between 7% and 12% lower than the first stays.”

In addition, two consecutive home health episodes comprise the most common multi-stay sequence in post-acute care, according to the 2013 data that Carter analyzed.

People receiving sequences of home health care tend to dual-eligible, disabled, less complex, and more likely to be treated by for-profit providers, Carter found.

Due to these factors, a unified post-acute payment system might need to include an adjustment for later home health stays, she proposed to the commissioners.

There are numerous complicating factors that the commission members discussed. For instance, changes to the existing home health payment framework—written into the budget act passed earlier this year—will shorten home health episodes to 30 days. Presumably, this will increase the number of multiple stays, noted MedPAC Commissioner Jack Hoadley.

Another consideration is that long sequences of home health care might be something to incentivize rather than penalize, if the care is keeping people from needing more expensive hospital or facility-based services. Several commissioners expressed interest in moving more toward episodic or bundled systems of paying for post-acute care, which would place a “convener” entity in charge of managing the spend in the most appropriate manner.

Written by Tim Mullaney