HealtH Care FinanCing review/Spring 2007/Volume 28, Number 3 77 Risk Adjustment and Public Reporting on Home

Risk adjustment is a critical tool in public reporting of quality measures. Its aim is to level the playing field so that providers serv-ing different patients can be meaningfully compared. We used a theory and evidence-based approach to develop risk-adjustment models for the 10 publicly reported home health quality measures and compared their performance with current models developed using a data-driven stepwise approach. Over-all, the quality ratings for most agencies were similar regardless of approach. Theory and evidence-based models have the potential to simplify risk adjustment, and thereby improve provider and consumer understanding and confidence in public reporting. intrODUCtiOn Medicare is the single largest payer for home health care with expenditures exceeding $10 billion in 2003 (Centers for Medicare & Medicaid Services, 2005). The benefit covers part-time or intermit-tent skilled nursing and therapy services provided to eligible homebound beneficia-ries under the direction of a physician. It also covers, for individuals qualifying for the home health benefit, part-time or inter-mittent home health aide services that are needed to maintain the beneficiary’s health or to facilitate treatment. Over 7,000 home health agencies (HHAs) were certified to participate in the Medicare Program in 2003 with 7.5 percent of all beneficia-ries (2.7 million persons) receiving home health services. These individuals were predominantly female, over age 75, and had a wide range of acute and chronic con-ditions (Centers for Medicare & Medicaid Services, 2005). DHHS has two key initiatives devel-oped and implemented by CMS to assess, improve, and report on the quality of home health care. The Outcome-Based Quality Improvement (OBQI) program provides reports to all Medicare-certified HHAs on their patients ’ outcomes so that agencies can identify potential quality problems and devise appropriate strategies to address them (Shaughnessy et al., 2002). The Home Health Quality Initiative (HHQI) uses a sub-set of the OBQI quality measures for publi