Hollander Logo
National Evaluation Logo
Centre on Aging Logo

Goals and outcomes
Full texts, fact sheets, and summaries
Media releases, news coverage, and announcements
#300 - 895 Fort Street
Victoria, BC, Canada
V8W 1H7
Tel: (250) 384-2776

Fax: (250) 389-0105

Overview of the National Evaluation of the Cost-Effectiveness of Home Care


Health reforms and the ongoing fiscal restraint of the 1990s led planners and policy makers to focus on home and community based services as alternatives to institutional care. Home care has come to be seen as a vehicle for achieving both policy goals by providing services "closer to home," and efficiency goals by lowering costs. National, provincial, and territorial governments, and regional health boards, recognize the importance of the role home care plays in our health care system.

The National Evaluation of the Cost-Effectiveness of Home Care was a major program of research which provided critical new information to policy makers about the cost-effectiveness of home care in Canada. It had a budget of $1.5 million and was comprised of 15 interrelated substudies, six on the cost-effectiveness of home care compared to care in long term care facilities and nine on the cost-effectiveness of home care as an alternative to care in acute care hospitals. Each substudy examines a particular issue or question that arises out of comparing home care to institutional care and, as such, is like an individual piece of a larger puzzle. The results of the 15 studies, when fitted together, provide a picture of the cost-effectiveness of home care in Canada.

Definition of Home Care

The term home care is generally used to refer to services provided in the home or in the community to individuals with functional disabilities and to their families. These services can range from home support, such as a few hours a week of simple housekeeping, to full nursing and medical care, such as administering intravenous medications which were previously done only in hospitals. Home care is also provided on a short-term basis to assist people who are discharged from acute care hospitals. In addition, home care can provide palliative care, respite care and other related services to those in need.

Costs of Home Care

Health Canada estimates that public home care expenditures were $2.1 billion, or 4% of public expenditures on health care, in the 1997/98 fiscal year. While the growth in the institutional sector was generally been restrained in the 1990s, expenditures on home care grew at almost 11% per year from the 1990/91 fiscal year to the 1997/98 fiscal year.[1] The amount of spending on home care by private individuals needing care, and their families, is not known at this time but may be substantial.

Current Evidence for Cost-Effectiveness

The move to home care has in large part been a response to the fiscal pressures of the 1990s. In the late 1990's, there was relatively little information on the cost-effectiveness of home care in Canada. There was a prevalent assumption that home care was not only cheaper but offered just as good, if not better care to the client. That assumption was, however, proven by scientific study. Thus, one could characterize the move to home care as occurring due to faith in home care's efficacy and due to the necessity of restraint.

The international literature on the cost-effectiveness of home care is mixed. Some researchers have reported that home care is cost-effective compared to acute care and others have reported that it is not. There is also considerable literature in the United States which argues that home care is not a cost-effective alternative to care in long term care facilities.[2] However, some Canadian writers have argued that home care may be a cost-effective alternative to residential care in a Canadian model of service delivery.[3]

Functions of Home Care

In Canada, home care is often divided into the following three functions or models:

  • The maintenance and preventive model, which serves people with health and/or functional deficits in the home setting, both maintaining their ability to live independently, and in many cases preventing health and functional breakdowns,and eventual institutionalization;
  • The long term care substitution model, where home care meets the needs of people who would otherwise require institutionalization; and
  • The acute care substitution model, where home care meets the needs of people who would otherwise have to remain in, or enter, acute care facilities.[4]

Goals and Objectives

While other researchers funded by the Health Transition Fund studied the maintenance and preventive model, the National Evaluation of the Cost-Effectiveness of Home Care addressed key issues in relation to the cost-effectiveness of the long term care substitution model of home care and the acute care substitution model of home care. The program's 15 interrelated substudies looked at the comparative costs of institutional and community based services in regard to the formal health care system and in relation to the costs borne by the client and his or her family (i.e., the costs of informal support). Administrative and policy blockages to cost-effective service delivery were also studied.

The proposed program of research has two major objectives:

  1. To directly evaluate the extent to which home care is a cost-effective substitute for care in long term care facilities, and under which conditions it is, or is not, a cost effective alternative; and
  2. To directly evaluate the extent to which home care is a cost-effective substitute for acute care, and under which conditions it is, or is not, a cost-effective alternative.

The Overall Approach

The cost-effectiveness of home care is a complex topic. The project designers believed that one large study would be insufficient to provide the information needed by policy makers. Thus, a series of interrelated studies were conducted along parallel tracks. The substudies were designed to fit together like pieces of a puzzle to produce a picture of the cost-effectiveness of home care in Canada.

Another aspect of the research approach was to build on unique circumstances or "natural experiments" across the country. There are differences in the organization of home care and the data that are available across jurisdictions. Some jurisdictions have unique data and/or a unique way of providing services which provide opportunities to study particular questions that cannot be studied in other jurisdictions. For example, British Columbia has over 10 years of unique data in which residential and home care clients have been classified using the same care level classification system. This allows for "apples to apples" comparisons of costs across residential care and home care as, within each level of care, clients have very similar care needs, irrespective of the site of care.

It is important to note that any evaluation of "cost-effectiveness" should not place an inordinate focus on the costs of services. One must not only ask "which is cheaper," but also which type of service provides the best outcomes for the amount of money spent.

The National Evaluation of the Cost-Effectiveness of Home Care was designed to be a program of applied, policy-relevant research. It was believed that the approach adopted would provide significant efficiencies in terms of costs and timeliness compared to the more traditional approach of conducting a series of discrete, separate studies done in a linear sequence. This project has raised further questions and, thus, should be seen as the beginning, rather than the end, of Canadian research in this area.

[1] Health Canada, Policy and Consultation Branch. (1998). Public Home Care Expenditures in Canada 1975-76 to 1997-98 (Fact Sheets, March). Ottawa: Minister of Public Works and Government Services.

[2] Weissert, W.G. (1985). Seven reasons why it is so difficult to make community-based long-term care cost-effective. Health Services Research, 20(4), 423-433.

[3] Hollander, M.J. (1994). The costs, and cost-effectiveness, of continuing care services in Canada. Ottawa: Queen's-University of Ottawa Economic Projects--Working Paper No. 94-10.

[4] Federal/Provincial/Territorial Subcommittee on Long Term Care. (1990). Report on Home Care. Ottawa: Health and Welfare Canada, p. v.

Summary of the Whole Study

This project was a large, multifaceted research program consisting of 15 substudies that examined various aspects of the cost-effectiveness of home care compared with that of institutional care. The 15 substudies were conducted by teams across Canada; six studies examined home care as a substitute for long-term care, and nine examined home care as a substitute for hospital or acute care services. Like the pieces of a puzzle, each of the findings from the individual substudies, when combined with the other findings, will give a more complete picture of the cost-effectiveness of home care in all of its aspects.

Summaries of Substudies

Substudy 1: Final Report of the Study on the Comparative Cost Analysis of Home Care and Residential Care Services
This study set out to determine the relative costs to government of home/community-based services compared with those of residential long-term care services, by level of care, in the British Columbia setting. Using a unique linked database at the University of British Columbia, the study followed four cohorts of new admissions to the British Columbia continuing care system between 1987 and 1997 and tracked subjects' use of home care, residential care, physicians, hospitals, and pharmaceuticals from one year before the first assessment and for three years after the assessment. The costs were compared overall and by the five care levels used in British Columbia. The study found that home care is generally cheaper, at all levels of care, than is care in residential facilities. The costs, however, are in the transitions. Home care is much cheaper for governments if the clients are stable in their type and level of care than for those who change their type or level of care. The costs for stable clients are about one half of the costs of clients who are in transition. The study found that 30 to 60 per cent of the costs for home care clients are for hospital care and that traditional services, such as home nursing, account for only about one third to one half of overall home care costs.

Substudy 2: Care Trajectories: The Natural History of Clients Moving Through the Continuing Care System
Substudy two tracked the movement of clients through the British Columbia continuing care system over a 10-year period to document patterns of movement and to determine if care patterns might be predictable. Predictable care patterns have implications for clinicians who could then prepare in advance for possible changes in care status. However, the study found that, contrary to assumptions there would be four to six common patterns of movement, there was in fact a wide variety of care trajectories, none with a large percentage of clients. The most common pattern was for clients to enter the system at a given level and type of care and die without any changes in the level and type of care. A total of 6,384 clients was used for the study which accessed a linkable longitudinal database at the University of B.C.

Substudy 3: Cost Implications of Informal Supports
The third study used a unique Edmonton database of some 5,000 home care clients to examine the relationship between the amount of formal home care services clients receive and the amount of informal (family) support the clients have. In essence, the study asked whether those clients needing home care who had no family support received more formal service from the system than did those with family support at home. The first scenario is one in which formal care substitutes for informal care, and the second scenario is one in which formal care complements home care. If the sectors complement each other, an increased provision of formal home care will result in the need for more informal support. If, instead, one substitutes for the other, changing demographics (e.g., more working women, one-parent families, increasing aging population) will necessitate more resources being applied to formal care to offset future decreases in the availability of informal care. Using complex statistical analysis, the report found that formal and informal care are complementary, not substitutive.

Substudy 4: Pilot Study of the Costs and Outcomes of Home Care and Residential Long Term Care Services
Substudy 4 was a small pilot study for a second, larger study (substudy 5) focusing on the costs and outcomes of care in the community and in long-term care facilities. In particular, it delineates the economic, social, and psychological burden borne by family members and informal caregivers when patients are in home care rather than in institutional settings. The purpose of the pilot study was to test instrumentation and determine the feasibility of data collection strategies for substudy 5. Three study sites were used: Winnipeg, rural Prince Edward Island, and London, Ontario. Information was collected both on clients and on informal caregivers through interviews and questionnaires. The pilot study enabled the research group to better refine its measurement tools, determine sufficient sample sizes, and resolve other issues that could affect the outcome of substudy 5.

Substudy 5: A Study of the Costs and Outcomes of Home Care and Residential Long Term Care Services
This study examined whether it costs less to provide care in the community than in a long-term care facility and whether the outcomes of care are worse, the same, or better for community clients compared to facility clients. The study also measured the informal costs of care by identifying the psychological, social, and financial burdens shouldered by family, friends, and volunteers looking after clients. Information was collected through interviews with both clients and informal caregivers in Winnipeg and Victoria and through diaries. The study found that, regardless of whether only formal care costs or both formal and informal care costs were considered, community care was significantly less costly than residential care. Home care costs were about 40% to 50% of residential care costs in terms of the cost to government. However, informal costs were considerable: clients and informal caregivers contributed about half of the care costs of community clients and about one third of the care costs of facility clients. The researchers not that different jurisdictions may have different policies regarding the delivery of health care services, impacting relative care costs. A total of 580 clients were involved in the study.

Substudy 6: Decision-Making: Home Care or Long-Term Care Facility
This qualitative study interviewed case managers in British Columbia, Alberta, Saskatchewan, Ontario and Prince Edward Island to delineate the decision-making process regarding the question of whether clients were cared for at home or placed in residential care and thus to determine ways of bringing about an effective substitution of home care for facility care. Eighty-nine case managers in both rural and urban settings completed questionnaires and participated in focus groups. Through this data collection, almost a dozen "factors" were identified that allowed patients to be cared for at home, including the availability of informal supports, adequate funding and staffing for formal home care services, community support, meal programs, supportive housing, adequate family finances, respite programs, day programs, transportation, and home maintenance. Likewise, a number of factors influenced the decision to place the client in facility care, including the need for transitional, convalescent, or respite care; heavy 24-hour care needs; an unsafe home environment; the presence of incontinence or an inability to transfer; client dissatisfaction with home care services; and the belief that facility care is cheaper.

Substudy 7: Overview of Home Care Clients
This studyprovides a descriptive overview of the characteristics of home care clients in two jurisdictions, British Columbia and Saskatchewan. It also provides some basic data on resource utilization for British Columbia This study was prepared because there is no national database on home care in Canada. It was believed that some provincial data would be a useful contribution to information about home care. Home care data from British Columbia (33,053 clients) and Saskatchewan (12,623 clients) for the fiscal years 1997/98 and 1998/99 were examined, as was information on gender, age, length of stay, and marital status. A separate analysis on clients discharged from hospital into home care in British Columbia examined the role of home care in replacing hospital care. Key findings were: overall there were approximately 1.3 females for every male in care across both jurisdictions. The relative proportion of females to males was higher for long-term clients than for short stay clients. The highest proportion of clients in both provinces was in the 75-to-84 age group. The analysis of service utilization in British Columbia found that both men and women who were in short-term care (up to 90 days) averaged some 27 days per care episode. Clients in care for 91 to 365 days averaged 259 days for men and 279 days for women. As periods of care lengthened, the proportion of home support services to professional services grew. Men and women in the short-term group received more professional services than home support services; those in longer-term care received up to nine times as much home support than professional services. - Clients discharged from hospital had slightly shorter durations of home care services, but used more professional hours. The most common diagnoses were neoplasms (19.7%) and circulatory diseases (16.7 %). The findings are significant because: the relative proportion of short- and long-term care clients in various jurisdictions will impact the volume and type of resources required. The growing emphasis in some jurisdictions on home care as hospital substitution may result in human resource and budget issues as cheaper home support services are replaced with more costly professional services.

Substudy 8: Eligibility for Community, Hospital, and Institutional Services in Canada: A Preliminary Study of Case Managers in Seven Provinces
This study asked 60 case managers from seven provinces to rate 16 different vignettes and indicate the level and type of care they would recommend in regard to home care, residential care, and hospital care. Generally, it was found that significant differences existed across jurisdictions in regard to eligibility and access to services. Staff assigned to the clients also differed; for example, the expected involvement of registered nurses ranged from 93.8 per cent to 54.4 per cent across jurisdictions. Placement results also differed when case managers were blinded and then not blinded to information regarding informal support. The study makes policy suggestions, including one to standardize the understanding of "who is eligible for what" based on comprehensive assessment data, so that client needs are responded to in an effective and equitable manner.

Substudy 9: Costs of Acute Care and Home Care Services
This study looked at the cost-effectiveness of home care compared with that of acute care to determine if additional opportunities existed for cost savings or increased system efficiencies. The study used Alberta data for hospitals and home care to generate data on care episodes for people in hospital, those with inter-hospital transfers, and episodes that included both hospital care and home care services. Data were analyzed on the basis of case mix groups (CMG), which categorize hospitalizations into groups of individuals that use approximately equal amounts of resources. The results showed that admissions with inter-hospital transfers were 1.75 times more costly than those without transfers. The report concludes that, as a result, costing should be done by episode of care (a set of contiguous inpatient and home care contacts) and that current hospital costs calculated by CMG or resource intensity weight (an index number that measures the relative cost of a CMG) may be under-estimates. The report found that most combinations of hospital care and home care were more expensive than hospital care alone, but that care needs (number of diagnoses) were also higher for persons who received home care. The author notes that case severity is an important indicator of home care assignment and that home care episodes are more costly because they have a higher degree of severity.

Substudy 10: Economic Evaluation of a Geriatric Day Hospital: Cost-Benefit Analysis Based on Functional Autonomy Changes
This study investigated whether the benefits related to a geriatric hospital day program exceed the costs, using a cost-benefit analysis based on changes in functional autonomy (a means of measuring the ability to perform daily tasks). The latter was measured at admission and discharge to the geriatrics unit at Sherbrooke University. The study found that for each dollar invested in care, $2.14 of benefits were derived in terms of improvement in functional status. The report observes that a measurement of dollar benefits alone does not incorporate other important aspects for clients such as improvement in cognitive function, socialization, and well-being. As a result, the findings of a 118 per cent cost-benefit may in fact be the lower limit of the possible benefit of such hospitals. The authors also suggest health policy-makers will need to grapple with the issue of optimal length of stay for patients - too long or too short a stay may increase the costs and not the benefits.

Substudy 11: An Economic Evaluation of Hospital-Based and Home-Based Intravenous Antibiotic Therapy for Individuals with Cellulitis
This study examined the costs and outcomes of antibiotic intravenous (IV) therapy for individuals with cellulitis, focusing on a comparison between hospital versus home care locations. (Antibiotic IV therapy is the most commonly prescribed IV therapy in Canada, and cellulitis is a major reason for such prescriptions.) The initial goal of a randomized control trial proved to be unattainable. The study was modified to an observational cohort study design, which the author notes is more prone to bias. As well, in several instances a lack of adequate home care services meant that many people were treated through repeat visits to emergency departments rather than strictly at home. However, the study's main findings showed that home care and emergency care cost about half of the care in hospital, afford patients a better quality of life, and result in fewer complications and higher rates of resolution of the cellulitis.

Substudy 12: Cost-Effectiveness of Home versus Hospital Support of Breastfeeding in Neonates
This study examined the costs associated with breastfeeding term and pre-term infants in both home and hospital contexts. It also sought to examine the efficacy, safety, level of maternal satisfaction, and resources involved in managing breastfeeding. It showed no differences in indirect family costs, hospital delivery costs, or total system costs. In terms of outcomes, the group with home care had significantly higher rates of babies being exclusively breastfed. The qualitative data regarding maternal satisfaction appear to support early discharge from hospital accompanied by home visiting by the community nurses. The authors of the report suggest policy-makers consider home support for breastfeeding a viable option in terms of costs and clinical outcomes for mothers of term infants and suggest that mothers be offered a choice of either standard care or early discharge with home visits by a lactation consultant or nurse with breastfeeding expertise.

Substudy 13: The Geriatric Outcome Evaluation Study
This study explored service use within a geriatric services program; specifically, it explored how a geriatric day hospital fits into a broad spectrum of services in Victoria, B.C.. Clients were studied in five geriatric care settings: an outpatient clinic, a day hospital, post-acute inpatient rehabilitation, residential rehabilitation, and inpatient psychogeriatric rehabilitation. The researchers wished to determine if patient needs could best be served by such specialized services, supporting the continuum of care concept, or if in fact inpatient and other services could be substituted. They found that each service did appear to address a particular need or constellation of needs, based on their study of mental and physical health, daily functioning and bodily pain. This finding supports the notion of an integrated hospital-based system of outpatient and inpatient services for geriatric clients. The study encountered several challenges, including time limitations and a restructuring of outpatient programs during the research period, leading to a substantial reduction in sample size. As a result, researchers could not complete a cost-effectiveness analysis.

Substudy 14: Evaluation of the Cost-Effectiveness of the Quick Response Program of Saskatoon District Health
This study evaluated the cost-effectiveness and efficiency of Saskatoon District Health's Quick Response Program (QRP), which identifies vulnerable elderly patients in the emergency department and arranges appropriate community services to avoid unnecessary hospital admissions. Chart reviews were conducted for all people over the age of 60 who visited emergency departments during an 11-week period in 1999. The study identified only two patients out of 3,074 who were not seen by the QRP and whose hospital admission could have been avoided with appropriate care in the community - a finding that shows the QRP is working very efficiently. An unexpected finding was that 46 patients visited the emergency department repeatedly (up to 19 times.) The study confirmed that the costs of providing community-based services initiated by QRP are lower than the costs of providing hospital care; but unless hospital beds are closed, QRP is an add-on cost.

Substudy 15: An Analysis of Blockage to the Effective Transfer of Clients from Acute Care to Home Care
This study examined the discharge process from hospitals to home care services to identify barriers and inefficiencies that impede the transfer to home care. It used a series of interviews and focus groups with hospital and home care providers in seven jurisdictions, as well as an expert panel to detail key problems to effective transfers. Six main types of systems barriers were found: barriers to working together, family/patient barriers, geographic barriers, system management and control barriers, system change barriers, and resource barriers. The report identifies three overarching principles of best-practices to bridge the gap: establishing formal systems that include common information systems and the flexible use of resources; building relationships and informal networks between hospitals and home care with boundary-spanning positions and the development of working relationships; and building system capacity with adequate budgets, resources, and programs to underpin the system.