August 4, 2014; EurekAlert

According to a national study published yesterday in the journal Health Affairs, “For-Profit Medicare Home Health Agencies’ Costs Appear Higher And Quality Lower When Compared To Nonprofit Agencies,” not only do for-profit home health agencies charge more than nonprofits to Medicare, but their quality of care is worse, causing a higher level of repeat hospitalizations.

Researchers at the City University of New York School of Public Health came to their conclusions after examining the Medicare Cost Reports of 7,165 home health agencies in 2010-2011 and the quality rankings from Medicare’s Home Health Compare database, which measures 9,128 agencies.

Specifically, the researchers found that the operating costs at for-profit agencies were 18 percent higher, with two-thirds of the difference being charged to administration. The profits at for-profit agencies added 15 percent on top of operating costs, compared to a 6.4 percent surplus at nonprofit agencies.

On the other hand, for-profits met each quality standard only 77.2 percent of the time, vs. 78.7 percent for nonprofits, and rehospitalizations occurred more frequently with clients of the for-profits—28.4 percent vs. 26.5 percent at nonprofits.

In the South, where for-profit firms provide the overwhelming majority of care, the differences were even more extreme. Despite the fact that they do worse for more with a very vulnerable population, an astounding 88 percent of home healthcare agencies are for-profit businesses and they care for 81 percent of Medicare home care patients.

Dr. Steffie Woolhandler, an author of the study, writes that “for-profit home care agencies are bleeding Medicare; they raise costs by $3.3 billion each year and lower the quality of care for frail seniors.”

“Letting for-profit companies into Medicare was a huge mistake,” she continued, “that Congress needs to correct.”

William Cabin, the study’s lead author, added, “While our study is the first to show that profit-making has trumped patient care in Medicare’s home health program, that’s no surprise. A large body of research on hospitals, nursing homes, dialysis facilities, and HMOs has shown that for-profits deliver inferior care at inflated prices…. Our findings show once again that the free-market, private-sector managed care model has failed.”

Cabin believes that the industry might better serve the public if it were restricted only to nonprofits, as it was prior to 1980.—Ruth McCambridge