For-profit home health agencies are far costlier for Medicare than nonprofit agencies, according to a nationwide study published in the journal Health Affairs. Overall cost per patient was $1,215 higher at for-profits, with operating costs accounting for $752 of the difference and excess profits for $463. Yet the quality of care was actually worse at for-profit agencies, and more of their patients required repeat hospitalizations.
Researchers at the City University of New York School of Public Health analyzed detailed Cost Reports filed with Medicare by 7,165 home health agencies in 2010-2011, as well as data for 22 quality measures from Medicare's Home Health Compare database covering 9,128 agencies.
Compared to nonprofits, operating costs at for-profit agencies were 18 percent higher, with excess administration (at $476 per patient) accounting for nearly two-thirds of the $752 difference in operating costs. For-profits also did many more speech, physical and occupational therapy visits, which are often highly profitable under the complex Medicare payment formula. In addition, profits at for-profit agencies added 15 percent on top of operating costs vs. a 6.4 percent surplus at nonprofit agencies.