Getting care at home. Cost-effectiveness for Medicare meets optimum patient comfort.

Ann Marie O'Rourke massaged lotion into Mary E. Spicer's foot and shin, smoothing carefully over the 96-year-old's delicate skin and a scabbed-over scrape.

"What I should have saved is my hockey shin guards," Mrs. Spicer said, reclining in a soft chair and mocking the wound she suffered when she accidentally kicked herself. "My family threatened to give me some for Christmas."

What she got instead, courtesy of the government's Medicare health program, were visits from Mrs. O'Rourke, a home health nurse with Overlook Visiting Nurse Association Inc. of Worcester.

It is the kind of service that has allowed Mrs. Spicer to stay in her trim home in a Worcester suburb rather than a nursing home, where the costs of caring for her wound could have been much higher. It is also the kind of service that home health agencies, mindful of boosting their revenues, are increasingly seeking to offer to seniors on Medicare.

From national for-profit corporations to local nonprofit organizations, Medicare is the big target of home health agencies. Despite a measure in the new Medicare reform law that cuts payment increases to agencies for three years, Medicare remains an important customer for home health organizations that are trying to build stronger health networks, reward investors or balance out lower payments from managed care organizations and Medicaid.

"Other payers, well, they just don't pay as well," said Mary M. Stone, director of operations of UMass Memorial Home Health and Hospice in Worcester. "I think everybody's looking to grow their Medicare business."

At its most basic, caring for seniors in their homes means bringing them the nurses, therapists and social workers who can keep them eating well, moving better and healing properly from illnesses, broken bones and surgeries. The nurses and other clinicians making house calls must also serve as the eyes and ears of doctors who are back in their offices or hospital suites. Sometimes a visiting nurse becomes a friend, too, comforting families and listening to neighborhood gossip.

That translates to long days on the road. Before she even sets foot in Mrs. Spicer's home, Mrs. O'Rourke of Overlook checks on one patient and heads into her office on Millbrook Street in Worcester.

A short drive later she arrives at Mrs. Spicer's home with a bag of medical records and supplies. After checking the wound on her patient's leg, taking Mrs. Spicer's blood pressure and asking a few questions about sleep and appetite, Mrs. O'Rourke dons her coat, shoulders her bag and heads back outside for a trip to her office and five more patient visits.

What concerns her is getting the appropriate care to homebound seniors.

"If she didn't have us coming in to take care of her," Mrs. O'Rourke said, referring to Mrs. Spicer, "she'd have to be in a facility somewhere."

Once a service aimed at providing long-term care at home to seniors, home health care has evolved into an increasingly medical business. And it is growing.

Nursing, occupational therapy, physical therapy, respiratory therapy - all of it and more, according to the estimates of Gentiva Health Services of Melville, N.Y., will amount to $87 billion in spending in the United States by 2010.

In Massachusetts, Medicare alone paid for nearly 4.4 million home health visits to about 87,000 people in 1999, according to the latest data available. The government paid $283.3 million for those visits, or about $65 per visit.

Home health care's mission changed over the last decade, at least where it concerns Medicare, because of the Balanced Budget Act of 1997 and a new payment system that put the emphasis on shorter-term health services.

The new "prospective payment system" instituted in 2000 gave agencies payments for 60-day "episodes" of care. In the 2003 fiscal year, a base payment for one episode was $2,160, which could be adjusted for local market conditions, therapy use and other factors.

Home health agencies also came under new requirements after 1997 to fill out outcome-and-assessment paperwork aimed at measuring quality of care.

The result of the new measures was a sharp drop in Medicare spending on home health care, the loss of thousands of agencies nationwide and a wealth of data on quality that led last year to national reports on home care agencies.

Medicare home care spending plunged from a high of $17.9 billion in 1997 to $10.5 billion in 2002, according to the Centers for Medicare and Medicaid Services. Home health agencies, which numbered about 10,570 in 1997, merged with others or went out of business, leaving just 7,104 agencies nationwide in 2003.

Yet the agencies that remain appear generally healthy, at least when it comes to Medicare payments. The Medicare Payment Advisory Commission, which guides Congress on Medicare spending matters, calculated last year that the average home health group's national Medicare margin, or payments over costs, was 23.3 percent.

That was the kind of information Congress used during the Medicare reform debate to settle on language concerning the "market basket," or the inflation increase in payments to home care agencies.

The new law cut those increases by 0.8 percent this year through 2006, which means that payments to home health agencies will likely go up about 2.5 percent this year. Payments in rural areas will receive a one-year 5 percent boost.

Home health industry officials generally said they appreciate the increase, but some cautioned that slimming it down may hurt some vulnerable agencies. The Home and Health Care Association of Massachusetts Inc. estimates the lower pay increases will shave $2.5 million from the payments home health agencies here would have otherwise received.

Few ways exist to make that up in an industry that spends most of its money on salaries and already underwent cuts to reimbursements in 2002, said Patricia M. Kelleher, the association's executive director.

"The majority of our costs are in personnel, so we always have to look at that line item," she said.

The slim increase could affect some agencies that are operating on the edge, said Theresa M. Forster, vice president for policy of the National Association for Home Care & Hospice.

"Many agencies are in the red. Many agencies are doing well," Ms. Forster said. "The reduction in the market basket for some of those agencies that are doing well, they have to suck it up and take it in. For those below the line, it does provide a threat to them providing Medicare services."

But the nation's largest home health business, Gentiva, reported that even with lower pay increases, its financial position will be stronger.

In a conference call last fall, Gentiva Chairman and Chief Executive Ronald Malone said that between the lower payments and the one-time boost for rural services, "we are better off."

Home health advocates argue that individuals and organizations that pay for health care are better off, too, when care can take place at home. In 2000, according to government data, the average cost of a home care visit was $100 compared to $420 for one day in a nursing home and $2,750 in a hospital.

The biggest cost issue for home health agencies - as for hospitals, nursing homes and nursing schools - is the nursing shortage. It keeps nursing salaries high, and agencies cannot compete with hospitals that offer $80,000 or more per year to nurses, said Karen H. Green, president and chief executive of the VNA Care Network Inc., which operates in Central Massachusetts. The VNA Care Network starts its nurses at about $50,000 a year.

"While we're having to increase wages just to get these clinicians to come through the door, our payment sources are not helping," Ms. Green said.

Budget cuts to Medicaid have hurt, too. The health program for the poor is funded by the federal government and states, which have cut Medicaid spending in the last few years to balance budgets. In Massachusetts, Medicaid payments to home health agencies last year were an estimated 28 percent to 35 percent less than the cost of providing care.

Some home health agencies are also repaying Medicare because the agency has calculated that it paid too much when it instituted the new payment system in 2000.

Together, the cost and payment issues are the kinds of pressures that have home health agencies looking for ways to get bigger, smarter and more plugged in to technologies that could help them thrive economically.

"It's cost containment and revenue enhancement," said Wayne A. Regan, president of Overlook Visiting Nurse Association.

But the nurses demonstrate it's still about people, too.

Dorrie J. Silver, a nurse for the UMass Memorial Home Health and Hospice service, stepped into the warm kitchen of James H. Gannon and his wife, Carlene M. Gannon, on a bitterly cold morning last week, knocking the snow from her shoes.

Mr. Gannon, a 76-year-old congestive heart failure patient, sat at the couple's kitchen table and cracked jokes.

"I feel good, I feel perfect," he said. "I read the obits every day and I don't see my name."

Mrs. Gannon, 80, cheerfully showed off a quilt she was making. But she soon mentioned her sadness over the deaths and illnesses of friends and relatives. Her husband, she said, was hospitalized six times last year.

"I hope he doesn't have to go in this year," she said. "Oh, God, I've had enough."

Ms. Silver chatted quietly with the couple, called Mr. Gannon's doctor and then gathered up her bags to leave. But not before one last thing.

"Give me a hug," she said to Mrs. Gannon, and the two women embraced before Ms. Silver walked out to her next appointment.