WASHINGTON – The Centers for Medicare & Medicaid Services is sharing more than $15 million in savings with 166 home health agencies based on their performance during the first year of the Medicare Home Health Pay for Performance demonstration.

The two-year demonstration, which began in January 2008 and ended in December 2009, was undertaken to show the impact of financial incentives on the quality of care provided to home health patients in traditional fee-for-service Medicare programs and on their overall Medicare costs.

CMS is sharing savings generated by the program with agencies that either maintained high levels of quality or made significant improvements in quality of care.

The demonstration is part of CMS' value-based purchasing initiative to improve the quality and efficiency of care furnished to Medicare beneficiaries.

All Medicare-certified home health agencies in seven states representing four U.S. census regions were invited to participate in the demonstration. The Northeast region included HHAs in Connecticut and Massachusetts; the South included HHAs in Alabama, Georgia and Tennessee; and the Midwest and West regions included HHAs in Illinois and California, respectively.

HHAs that volunteered were randomly assigned to either an intervention or control group. Performance was measured using seven home health quality measures that are computed from the outcome-based quality Improvement data set and are publicly reported on the CMS Home Health Compare Web site.

Each measure evaluated the performance of the HHAs for the quality and efficiency of care provided to traditional Medicare patients. Each HHA in the intervention group was compared only to other intervention agencies within the same state. For each measure, HHAs that ranked by performance in the top 20 percent in their state, as well as those demonstrating the greatest degree of quality improvement, were eligible to share in Medicare savings generated in their region.

CMS determined savings for the demonstration by comparing total Medicare costs for beneficiaries receiving care from the intervention group's HHAs with the costs for beneficiaries served by the control groups' HHAs in the same region.

The costs include Medicare payments for home health care, inpatient hospital care, nursing home and rehabilitation facility care, outpatient care, physician care, durable medical equipment and hospice care.

If no savings were generated in a region, no incentive payments were made in that region. Results for calendar year 2008 indicated an aggregate Medicare savings of $15.4 million for three of the four regions; the Midwest region did not achieve any savings.

CMS is making year one incentive payments to 59 percent of the HHAs in the intervention group, based on their performance and improvement on the seven various quality measures. In addition to the number of quality measures for which they qualify for an incentive payment, the amount of the incentive paid to an individual HHA is also based on the total number of Medicare patient days associated with that HHA.

CMS will calculate savings and determine which HHAs are eligible for incentive payments for the second year of the demonstration, calendar year 2009, later this year. In addition, the demonstration is still being evaluated, with results expected later in 2010.