Factors Associated with Home Health Agency Cost in Connecticut

Date of Submission


Document Type


Degree Name

Doctor of Science in Management Systems (Sc.D.)




Steven Shapiro

Committee Member

Lynn Ellis

Committee Member

Louis Mottola

LC Subject Headings

Home care services--Connecticut--Costs, Medical care--Cost effectiveness

Call No. at the Univ. of New Haven Library

AS 36 .N290 Mgmt. Syst. 1995 no.2


Home Health Agencies (HHAs) need a better understanding of their costs in order to make effective decisions and manage efficiently. Therefore, the intent of this research was to identify the important factors associated with HHA costs, especially in the areas of regulated pricing and cost based reimbursement, in order to develop a Home Health Agency (HHA) cost model. Development of such a model allows HHAs to better identify those business areas where significant costs are incurred. The subsystem of cost was examined in relation to the various factors associated with cost. Interaction of the cost subsystem with other subsystems was also discussed. Once cost factors were identified, an organizational subsystem relative to cost control could be implemented by managers in order to achieve improvement in business effectiveness and efficiency.

To achieve this goal, HHA Cost Reports (HCFA Form 1728-86) for Connecticut licensed agencies were examined to collect most of the data for a five year period. These Cost Reports were on file with the State of Connecticut, Commission on Hospitals and Health Care. To supplement the Cost Report information a qualitative questionnaire was mailed to those agencies which were listed as licensed for fiscal year 1991-1992 (approximately 106). A summary of the findings was sent to questionnaire respondents.

A total of 488 observations were collected which resulted in a pooled data set (combination of cross section and time series data). Two empirical multiple regression models were developed to test hypotheses related to economies of scale (efficiency) and economies of scope (effectiveness). The remainder of the hypotheses were tested using correlation coefficients.

Findings suggest that there are both economies of scale and scope using non-linear and logarithmic functional forms (respectively). Both functional forms also support the presence of experience curve effects. Other factors related to total cost of home health agencies in Connecticut were found to be: percentage of medicare patients, whether the agencies are located in urban and non-urban settings, the number of functional areas computerized, and whether firms are for profit or not for profit. Findings in these areas can assist home health agency managers with the functions of planning and control. Insights gained from this research are extremely important in the formation and efficiency of home health agency management systems.