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Objective. To assess initial changes in home health patient outcomes under Medicare’s home health Prospective Payment System (PPS), implemented by the Centers for Medicare and Medicaid Services (CMS) in October 2000.

Data Sources/Study Setting. Pre-PPS and early PPS data were obtained from CMS Outcome and Assessment Information Set (OASIS) and Medicare claims files.

Study Design., Regression analysis was applied to national random samples (n=164,810) to estimate pre-PPS/PPS outcome and visit-per-episode changes.

Data Collection/Extraction Methods. Outcome episodes were constructed from OASIS data and linked with Medicare claims data on visits.

Principal Findings. Outcome changes (risk adjusted) were mixed and generally modest. Favorable changes included higher improvement rates under PPS for functioning and dyspnea, higher community discharge rates, and lower hospitalization and emergent care rates. Most stabilization (nonworsening) outcome rates also increased. However, improvement rates were lower under PPS for wounds, incontinence, and cognitive and emotional/behavioral outcomes. Total visits per episode (case-mix adjusted) declined 16.6 percent although therapy visits increased by 8.4 percent.

Conclusions. The outcome and visit results suggest improved system efficiency under PPS (fewer visits, similar outcomes). However, declines in several improvement rates merit ongoing monitoring, as do subsequent (posthome health) hospitalization and emergent care use. Since only the early PPS period was examined, longer-term analyses are needed.