Hospital At Home Is Not Just For Hospitals

A health care worker helps a patient at their home.

Hospital at Home programs deliver needed services to appropriate patients in their homes and can effectively serve patients, payers, and providers. The programs provide physician visits, drugs, monitoring, nursing services, diagnostics, and other services at a level typically reserved for patients in inpatient settings. A typical Hospital at Home patient has features that make home care preferable, for example, they may present to an emergency department with uncomplicated, simple pneumonia, have no significant comorbidities, and live with a partner who can provide basic care, such as preparing meals. Studies have shown these programs have lower readmission rates, lower payer costs, and higher patient satisfaction. Patients prefer their homes, payers prefer having patients get care in the least acute setting possible, and hospital providers want to have beds available for patients who need them.

While Hospital at Home programs have been studied since the 1970s, adoption had been slow until the COVID-19 public health emergency (PHE) prompted the Centers for Medicare and Medicaid Services (CMS) to waive the Medicare Hospital Conditions of Participation to enable the use of this care delivery model for Medicare beneficiaries. In 2020, CMS implemented the Acute Hospital Care at Home Waiver, which establishes Medicare payment for home hospitalizations. The combination of the PHE and CMS’s regulatory response has generated huge demand for Hospital at Home. By July 2021, eight months after the Acute Hospital Care at Home Waiver program was established, more than 140 hospitals across 66 health systems were approved by CMS to provide hospital services in a home setting. Because of COVID-19, patients and providers have quickly embraced telehealth, and that “stay at home” attitude may bring Hospital at Home into the mainstream. In 2019, the Medicare population had more than 800,000 hospitalizations, which could have qualified for Hospital at Home. As the care delivery model grows in the post-PHE, some important questions remain, such as how insurers will reimburse providers for Hospital at Home services and the types of provider organizations that will embrace this novel care delivery model.

Top-Down And Bottom-Up Payment Approaches

Medicare currently pays for Hospital at Home using a top-down (hospital-centered) payment—the payment is made to hospitals, and the amount is based on Medicare’s payment system for acute inpatient admissions. An alternative, bottom-up approach could generate a payment amount on the basis of existing home-based care payment systems, with additions for the expanded services needed for the more acute patients in a Hospital at Home model. Because home care providers are typically reimbursed at lower rates, this approach to payment would be less expensive and could capitalize on the existing in-home care expertise these providers have, while expanding their reach to a higher-acuity patient population. The co-authors have compared payment options for home hospitalization programs under both the top-down and bottom-up approaches.

Transformation Challenges

The Hospital at Home delivery model faces three significant and related challenges to expansion—generating a sufficient volume of patients to keep local programs in business, achieving cost efficiencies, and defining appropriate patients (not so sick that the patients will fail to heal or be in danger but not so healthy that they don’t need Hospital at Home).

Any health care innovation needs patient volume to be viable. A Hospital at Home program requires teams that can immediately access and deliver all needed care, including diagnostics, monitoring, pharmaceuticals, and nursing services. It also requires physicians adept at working with home-based patients while coordinating all aspects of care. Patient intake and discharge must be handled promptly, including care plans for the patient during their Hospital at Home “stay” and transitioning the patient to their regular providers after the acute phase. Much, but not all, of this infrastructure exists in home health agencies, but Hospital at Home patients typically have more time-sensitive and intense needs than the usual home health patient, which will require some staff expansion by a home health agency seeking to run a Hospital at Home program. A few patients a day will not likely generate enough revenue to maintain the staff expertise or the infrastructure needed to deliver all the different services Hospital at Home patients need.

While it might seem logical that Hospital at Home programs would be sponsored and operated by individual hospitals, many hospitals would not generate sufficient volume to support their own program. In 2019, the national average discharge rate per hospital bed was about 33 per year, and about half were Medicare beneficiaries. A large hospital with 1,000 beds might have 15,000 Medicare discharges per year. On average, we found about 5 percent of Medicare discharges would be eligible for Hospital at Home—only about 15 per week for a 1,000-bed hospital. A program sponsored by a particular hospital might not receive referral patients from competing hospitals because the competing hospitals would be losing patient volume and revenue, and except for extremely large hospital systems, most hospitals would not generate sufficient volume to support the program. A program that serves multiple hospitals will likely have advantages of scale.

When it comes to cost, hospital-based services are well-known to bear facility overhead expenses, which can make hospital-based services more expensive than services delivered from other sites. Medicare pays for hospital inpatient services mostly using diagnosis-related groups. Medicare pays a pre-set amount for each kind of admission, regardless of the actual cost accrued by the provider for a particular patient. But as our analysis shows, starting with Medicare’s home care reimbursement saves the payer more than 50 percent of an acute patient stay, when considering all facility, professional, and ancillary services. Of course, the lower price is appealing to a payer, such as a Medicare Advantage plan, but it could also save a patient money in reduced cost sharing.

Identifying the right patients for medical interventions has been a challenge for decades. The goal is to strike the right balance: avoiding unnecessary care but not skimping on needed care. To promote efficiency and outcomes, private payers and Medicare apply utilization management reviews and quality monitoring. Even for patients appropriate for Hospital at Home, hospitals may dislike the programs, as they fail to see the value of home-based care delivery in the face of many unfilled inpatient beds. On the other hand, home health agency-based Hospital at Home programs could see financial gains and tend to over-use such programs. All of this must be balanced with patient perceptions and acceptance of such programs. Participants who have piloted both top-down and bottom-up models have found substantially higher patient acceptance in models that allow entry to a Hospital at Home admission without an emergency department visit, which is typically required of top-down models. Clearly, use and quality management programs will be needed to achieve the right balance of these competing interests, and value based programs can help align incentives as well.

Bottom Line

Most research and proposals for implementing home hospitalization programs assume they are an extension of hospital operations and assume hospital costs and reimbursement. But there are cost and other advantages to building home hospitalization on the foundation of home-based care providers, whose expertise includes keeping patients safe and healthy at home. Policy makers who design reimbursement for home hospitalization programs and set conditions for providers to participate in them should consider whether home-based care providers should be eligible to manage, or play a foundational role in, these programs. This could simultaneously save payers money, create operational efficiencies, and increase patient access. Physicians and hospitals sponsoring these programs should similarly consider the roles home-based care providers could play within current home hospitalization programs. Simply extending the reach of hospitals into patients’ homes is unlikely to allow the promising scale or cost savings stakeholders hope for from home hospitalization programs. Each year, hundreds of thousands of Medicare patients could benefit.

Authors’ Note

Bruce Pyenson and Pamela Pelizzari are employees of Milliman, Inc., and Matthew Emery was an employee of Milliman, Inc., at the time of writing this article. Milliman received consulting fees from AccentCare to support this research. Anna Loengard owns equity in Signify Health and AccentCare. Milliman, Inc., as an independent actuarial firm has no relevant memberships to disclose. AccentCare has membership in NAHC as well as the Partnership for Quality Home Healthcare.