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Substudy 1: Executive Summary

Comparative Cost Analysis of Home Care and Residential Care Services

by Marcus J. Hollander, PhD

Growth in the elderly population and restraint in the health sector have led to decision makers placing an increasing priority on home care services. In Canada, there are three models of home care: a preventive and maintenance model which is designed to reduce the rate of deterioration for persons with relatively low level care needs; an acute care substitution model where home care substitutes for hospital care; and a long term care substitution model which uses home care as a substitute for facility care. This study focuses on the long term care substitution model. The research question is: In the British Columbia continuing care sector, is home care for the elderly a cost-effective alternative for government funders to care in long term care facilities, by level of care?

To answer this question, data were obtained on four cohorts of clients for one year prior to initial assessment and three years post-assessment. The cohorts were new admissions to the British Columbia continuing care (home care and residential care) system in the 1987/88, 1990/91 and 1993/94 and 1996/97 fiscal years. Costs to government for home care services, residential services, pharmaceuticals, fee-for-service physician services and hospital services were analyzed.

The central finding of this study was that, on average, the overall health care costs to government for clients in home care are about one half to three quarters of the costs for clients in facility care, by level of care. A related finding was that costs differ by the type of client. The lowest home care costs were for individuals who were stable in their type and level of care. For clients who died the costs for home care were higher, compared to clients in long term care facilities. It was also found that some one half of the overall health care costs for home care clients were attributable to their use of acute care hospital services and that a significant portion of the health costs for home care clients occur at transition points, that is, when there is a change in the client’s type, and/or level, of care.

These findings are compared to the American literature which indicates that home care is not a cost-effective substitute for residential care. Possible reasons for the differences in findings are discussed. The study concludes with a discussion of the implications of the findings for a series of potential, future, policy agendas regarding: the organization and management of continuing care services; legislation and administrative policy; service delivery; resource allocation; information systems; and research.