Contemplating Home Health PPS: Current Patterns of Medicare Service Use

Implementing a per-episode prospective payment system (PPS) for home health services is one option for Medicare policy makers facing rapid increases in service use and expenditures. Analysis of data on recent episodes of Medicare home health care identified systematic differences in service patterns across provider types; these indicate potential differences in the capacity of agencies of different types to adjust to PPS. The second phase of a national demonstration, which is about to be implemented, will provide information on the extent to which the agency practices that generate much of the observed variation (such as the number of visits provided per episode) are susceptible to management decisions; and whether managers can and do respond to the incentives of per-episode prospective payment.