The home health care in the United States was developed in the year 1796. Thus, two changes in Medicare reimbursement have provided the greatest incentive for growth of home care services. First, passage of the Medicare and Medicaid. Amendments to the Social security act of 1965 allowed for limited reimbursement of home therapies including respiratory therapy, physical therapy, and home total parenteral nutrition (TPN) solutions.
Second, Medicare’s implementation of the prospective payment reimbursement system for inpatients in 1983 with reimbursement based on diagnosis related groups (DRGs) created pressures to reduce patient length of stay in prompted many hospitals to develop home care programs. As a result, in 1985 the home health care market was described as the fastest growing segment of the health industry.
The success of early hospital- based home infusion service lead to the development of more hospital-based service in private for profit home infusion vendors (including community pharmacy based franchises) as well as the development of services provided out of the offices of the private physician. Home infusions therapy in particular grew out of a need treatment option other than inpatient care for patients chronic acute conditions such as Crohn’s disease and cystic fibrosis.
In the 1990s, changes in Medicare reimbursement again had the most significant effect on home care practice as introduction of the balanced budget act of 1997(BBA) changed reimbursement for home health services (but not infusion therapy) from a traditional fee-for-service system to prospective payment.
This change resulted in multiple acquisitions, merges, and bankruptcies of home care programs as they tried to stay in business under significant decreases in reimbursement payments and, thus, drastically decrease the total number of home health agencies and home infusion providers in the United States. At its peak in 1997, more than 10,000 Medicare-certified HHAs were in Business: however, with the implementation of prospective payment for home care services, the number of HHAs declined around 7,000 and seems to be remaining steady around this number.
As a result of the BBA, 30-40% of the total number of HHAs in the United States closed during in the late 1990s alone. Finally, the implementation of Medicare benefits is expected tom stimulate another significant increase in the home infusion market beginning in 2006 because reimbursement for home infusion by Medicare no longer be tied to the use of durable medical equipment, such as infusion pump.