Channeling Effects on Hospital, Nursnig Home and Other Medical Services


U.S. Department of Health and Human Services

Channeling Effects on Hospital, Nursing Home, and Other Medical Services

Executive Summary

Judith Wooldridge and Jennifer Schore

Mathematica Policy Research, Inc.

May 1986

This report was prepared under contract #HHS-100-80-0157 between the U.S. Department of Health and Human Services (HHS), Office of Social Services Policy (now the Office of Disability, Aging and Long-Term Care Policy) and Mathematica Policy Research, Inc. For additional information about the study, you may visit the DALTCP home page at or contact the office at HHS/ASPE/DALTCP, Room 424E, H.H. Humphrey Building, 200 Independence Avenue, SW, Washington, DC 20201. The e-mail address is: The DALTCP Project Officer was Robert Clark.

In September 1980 the National Long Term Care Demonstration--know as "channeling"--was initiated by three units of the U.S. Department of Health and Human Services. It was to be a rigorous test of comprehensive case management of community care as a way to contain the rapidly increasing costs of long term care for the elderly while providing adequate care to those in need and improving the quality of their lives.


Channeling was designed to use comprehensive case management to allocate community services appropriately to the frail elderly who needed long term care. The specific goal was to enable elderly persons, whenever appropriate, to remain in their own homes rather than enter nursing homes. Channeling had no direct control over medical or nursing home care expenditures. It financed direct community services, to a lesser or greater degree, according to the channeling model, but always as part of a comprehensive plan for care in the community. Channeling was implemented through local channeling projects.

Channeling consisted of seven core features:

  • Outreach to identify and attract potential clients who were at high risk of entering a long term care institution.

  • Standardized eligibility screening to determine whether an applicant met the following pre-established criteria: (a) Age: must be 65 years or older. (b) Functional disability: must have two moderate disabilities in performing activities of daily living (ADL), or three severe impairments in ability to perform instrumental activities of daily living (IADL), or two severe IADL impairments and one severe ADL disability. Cognitive or behavioral difficulties affecting the ability to perform ADL can count as one of the severe IADL impairments. (c) Unmet needs: must have an unmet need (expected to last for at least six months) for two or more services or an informal support system in danger of collapse. (d) Residence: must be living in the community or (if institutionalized) certified as likely to be discharged into the community within three months.

  • Comprehensive in-person assessment to identify the problems, resources, and service needs of individual clients in preparation for developing a care plan.

  • Initial care planning to specify the types and amount of care required to meet the identified needs of clients.

  • Service arrangement to implement the care plan through the provision of both formal and informal in-home and community services.

  • Ongoing monitoring to ensure that services are appropriately delivered and continue to meet the needs of clients.

  • Periodic reassessment to adjust care plans to the changing needs of clients.

Two models of channeling were tested. The basic case management model relied primarily on the seven core features. The channeling project assumed responsibility for helping clients gain access to the necessary services and for coordinating the services of multiple providers. This model provided a small amount of additional funding to fill gaps in existing programs. But it relied primarily on what was already available in each community, thus testing the premise that the major shortcomings of the current system were problems associated with information and coordination that could largely be resolved by client-centered case management.

The financial control model differed from the basic model in several ways:

  • It expanded service coverage to include a broader range of community services.

  • It established a funds pool to ensure that services could be allocated on the basis of need and appropriateness rather than on the eligibility requirements of specific categorical programs (though it required participants to have Medicare Part A coverage).

  • It empowered case managers to authorize the amount, duration, and scope of services paid from the funds pool, making them accountable for the full package of community services.

  • It imposed two limits on expenditures from the funds pool. First, average client expenditures could not exceed 60 percent of the average nursing home rate in the area. Second, expenditures for an individual client could not exceed 85 percent of that rate without special approval.

  • It required clients to share in the cost of services if their income exceeded 200 percent of the state's Supplemental Security Income (SSI) eligibility level plus the food stamp bonus amount.


Ten sites across the country participated in the demonstration:

Basic Case Management Model Financial Control Model
Baltimore, Maryland Miami, Florida
Houston, Texas Greater Lynn, Massachusetts
Middlesex County, New Jersey Rensselaer County, New York
Eastern Kentucky Cleveland, Ohio
Southern Maine Philadelphia, Pennsylvania

In September of 1980, the 10 participating states, a technical assistance contractor, and a national evaluation contractor were awarded contracts and began planning. A local project in each state was then selected. These projects were already well-established departments within existing human service organizations (typically area agencies on aging or private nonprofit service providers). The 10 local projects opened their doors to clients between February and June of 1982, and were fully operational through June of 1984. The local projects were phased out of the federal program in March of 1985, although most still continue to operate under state or other auspices.

The goal of the evaluation was to identify the impact of the demonstration on the following services and costs:

  • The use of formal health and long term care services, particularly hospital and nursing home care and community services.

  • Public and private expenditures for health and long term care services.

  • Individual outcomes, including mortality, physical functioning, unmet service needs, and social/psychological well-being.

  • Caregiving by family and friends, including the amount of care provided, the amount of financial support provided, and the stress, satisfaction, and well-being of caregivers.

The evaluation relied on an experimental design to compare the outcomes of channeling with what would have happened in the absence of channeling. Elderly persons who were referred to each channeling project were interviewed to determine their eligibility for channeling. If found eligible, they were randomly assigned either to a treatment group, whose members had the opportunity to participate in channeling, or to a control group, whose members continued to rely on whatever services were other wise available in their community. In all, 6,341 persons were randomly assigned. Given both the substantial death rate among this population and interview noncompletions, the random assignment process yielded research samples of 3,372 to 6.326 elderly persons, depending on the analysis.

Several data sources formed the basis for the research. An extensive in-person survey was administered to the elderly members of the research sample (both treatment and controls) at baseline and at 6, 12, and (for half the sample) 18 months thereafter. Another survey was administered (usually by telephone) to the primary informal caregivers of a subset of the sample members at baseline, and at 6 and 12 months thereafter. Service and cost data were collected from Medicare, Medicaid, and channeling records, and where necessary, from providers directly; participant tracking data and project cost records were collected from the channeling projects; official death records were obtained from state agencies. Finally, state, local, and project staff were interviewed about the implementation and operation of the demonstration.


The impacts of channeling on the mortality, and nursing home, hospital, and other medical service use and expenditures of the treatment group relative to the experience of the control group are summarized below.

Death rates among the control group were very high. Seventeen percent of the control group had died within the first six months. After one year, 27 percent of the control group had died, and, after 18 months, 39 percent of the control group in the basic sites and 33 percent in the financial control sites had died.

Channeling had no impact on mortality. Cumulative mortality rates for the treatment and control groups were very similar every month over the 18-month period. Under the basic model, the treatment group tended to have slightly lower mortality rates than controls; under the financial control model, the reverse was true. But none of the differences was statistically significant.

The population served was not at high risk of institutionalization. Under both models, the percentage of control group survivors who were residing in a nursing home increased from 10 percent at 6 months to 13 percent at 12 months, to 19 percent at 18 months after randomization. The most recent (1977) national data on nursing home rates for the 65-year-old and over population showed that for persons between 75 and 84 years (the average age at entry into channeling was 80) 6.8 percent were nursing home residents; for those who were 85 years old and over, 21.6 percent were nursing home residents. Thus, the nursing home residence rates of the channeling sample are similar to what were found for a national sample of persons who were several years older.

The survivors in the control group spent 30 to 32 days in a nursing home over one year and 58 to 64 days over 18 months, with the days increasing over the three six-month periods. In months 13 to 18, 16 to 18 percent of survival days were spent in a nursing home.

Private persons and Medicaid were the major payors for nursing home care. In the first six months, average control group expenditures for nursing home use were $666 in the basic sites and $560 in the financial control sites. These expenditures rose in the next six months, reflecting an increase in use. Again, consistent with national data on nursing home expenditures, private payors and Medicaid were the major payors. In the first six months, 51 percent of the expenditures were privately paid, and between 32 and 37 percent were paid by Medicaid; in the following six-month period, Medicaid's share grew to 47 percent, while private payors' expenditures declined to 45 percent of total expenditures.

Nursing home use and expenditures were lower for the treatment group than for the control group, but the differences were not large and were generally not statistically significant. The treatment/control differences in nursing home use and expenditures were both small absolutely (for example, 3- to 4-day reductions over a year and 5- to 6-day reductions over 18 months) and modest (between 8 and 19 percent) when viewed as a proportion of the control group's use. The impacts of the basic model were concentrated in the first six months, but some of the impacts carried over into the second six months. In the first six months, a 20 percent (2.4-day) reduction occurred in the number of days used (two of which were ICF days), and a 25 percent reduction occurred in total expenditures (due to reduced private expenditures and unchanged public expenditures). These basic model impacts were concentrated in the second and third months after enrollment, which is what would be expected if the major impacts of channeling had occurred as soon as the care plan had been implemented (which took slightly over one month for the median client). Although all of the treatment/control differences were negative during the second six months, the only statistically significant impact was a 19 percent reduction in the percentage with stays (to 12 percent of the treatment group), due primarily to reduced admissions.

Under the financial control model, the treatment/control differences were generally consistent in sign with those evident under the basic model and they were larger in months 7-12 than in months 1-6--but none of the differences was statistically significant.

Reductions under the basic model were concentrated in one site. Southern Maine had large (13- and 12-day) treatment/control differences in the two successive six-month periods analyzed, representing 46 and 38 percent reductions, respectively, relative to the control group. The explanation seems to be that control group use in that site was unusually high (due partly to the recruitment of nursing home residents who were certified for discharge), that the site was well supplied with nursing home beds, and that the site had moderate wait times to admission (less than 3 weeks for private patients).

Channeling reduced nursing home use for persons in a nursing home at screen. For the small group of 149 sample members in a nursing home at the screen, large reductions occurred in the number of nursing home days under each model in the first year after randomization. Under the basic model, the effect was statistically significant in the first six months, and was associated with reduced nursing home expenditures (due to a reduction in private expenditures). The effects were due entirely to the treatment/control differences in Southern Maine. Under the financial control model, the effect was statistically significant in the second six-month period and was distributed more widely across sites.

Control group hospital use and expenditures were very high, although they fell over time. Over the first year after randomization, the control group in the basic model sites spent 20 days in the hospital, and the control group in the financial control model sites spent 27 days. In the first six months, 52 percent of the control group in the basic sites had a hospital stay; in the last six months, 29 percent of the survivors had a stay. In the financial control sites, the stay rates were 56 percent and 36 percent in the first and last six months, respectively. The reduction in hospital use suggests both that, over time, a diminution of the importance of the acute episode occurred that in many cases led to application to channeling and that a selection process was in effect, with the sickest channeling participants dying soonest. Consistent with the use pattern, control group expenditures were $3,412 in the basic sites in the first six months, falling to $1,921 in the last six months; the comparable expenditures in the financial control sites were $4,899 and $2,623. About 90 percent of these expenditures were paid for by Medicare. These expenditure levels were consistent with those found for Medicare patients in their last year of life (Lubitz and Prihoda, 1983).

The control group exhibited a high use of and expenditures on other medical services. Relative to Medicare enrollees in the catchment areas of channeling sites, channeling participants exhibited a high use of and expenditures on those physician and other medical services covered by Medicare and Medicaid. In the basic sites, the control group expenditures for survivors at the start of the period were, respectively, $928, $747, and $702 for the three six-month periods analyzed. The equivalent financial control site expenditures were $1,266, $1,040, and $1,078. The reductions over time were due to both reduced percentages of users and reduced expenditures per user. These high expenditures, which include Medicare, Medicaid, and Medicare coinsurance and deductible amounts for non-Medicaid sample members, were predominantly by Medicare (between 72 and 80 percent of expenditures, varying by model and time period). (These estimates are incomplete; they exclude private payments for noncovered services and for services for which providers refused to accept the assigned benefits. We do not know the precise extent to which total expenditures are underreported in our data, but we believe that our estimates may be two-thirds or more of the true total.)

Channeling had no impact on the use of or expenditures on hospital, physician, and other medical services. None of the treatment/control differences in use of or expenditures on hospital, physician, and other medical services was large or statistically significant. Thus, although channeling enrolled a sample whose hospital, physician, and other medical service use and expenditures were more like those of persons in their last year of life than those of the U.S. population 65 years and over, the demonstration had no effect on hospital and other medical service use and expenditures. It may be that very sick persons who enter the medical care system are less likely to have their hospital and other medical service use affected by the availability of case-managed community care services than by physician decisions.