Department of Health and Human Services 
OFFICE OF 
INSPECTOR GENERAL 
MEDICARE ENROLLMENT OF HOME 
HEALTH PROVIDERS 
JANET REHNQUIST 
Inspector General 
JANUARY 2002 
OEI-04-00-00550  OFFICE OF INSPECTOR GENERAL 
The mission of the Office of Inspector General (OIG) mandated by Public Law 95-452, as 
amended by Public Law 100-504, is to protect the integrity of the Department of Health and 
Human Services programs as well as the health and welfare of beneficiaries served by them.  This 
statutory mission is carried out through a nationwide program of audits, investigations, 
inspections, sanctions, and fraud alerts.  The Inspector General informs the Secretary of program 
and management problems and recommends legislative, regulatory, and operational approaches to 
correct them. 
Office of Evaluation and Inspections 
The Office of Evaluation and Inspections (OEI) is one of several components of the Office of 
Inspector General.  It conducts short-term management and program evaluations (called 
inspections) that focus on issues of concern to the Department, the Congress, and the public.  The 
inspection reports provide findings and recommendations on the efficiency, vulnerability, and 
effectiveness of departmental programs. 
OEI's Atlanta Regional Office prepared this report under the direction of Jesse J. Flowers, 
Regional Inspector General.  Principal OEI staff included: 
Peggy Daniel, Lead Analyst

Tricia Davis, Program Specialist

Allison Grablowsky, Program Analyst

Gerius Patterson, Program Analyst

Joe Townsel, Team Leader

To obtain copies of this report, please call the Atlanta Regional Office at (404) 562-7723. 
Reports are also available on the World Wide Web at our home page address: 
http://www.hhs.gov/oig/oei/  EXECUTIVE  SUMMARY 
PURPOSE 
To determine if the Centers for Medicare & Medicaid Services enrolled home health 
providers who were ineligible for participation in Medicare. 
BACKGROUND 
Medicare beneficiaries who are homebound and in need of qualifying skilled services on a 
part-time or intermittent basis are eligible for home health care.  Such beneficiaries must 
be under the care of a physician who has established a plan of care.  The beneficiaries may 
receive skilled nursing and home health aide services, as well as physical, speech, and 
occupational therapy.  The home health benefit is unlimited as long as the services are 
considered medically necessary. 
Prior reports by the Office of Inspector General and others, have shown that while most 
home health care providers are honest, some providers improperly billed Medicare for 
unqualified services and services not provided. 
The Balanced Budget Act of 1997 required the Centers for Medicare & Medicaid Services 
(CMS) to deny Medicare enrollment to entities and individuals who had been excluded 
from Medicare by the Office of Inspector General or debarred from government program 
participation by the General Services Administration.  The BBA also authorized CMS to 
deny enrollment to parties convicted of non-healthcare related felonies if the offense is 
determined to be inconsistent with the best interest of the Medicare program and its 
beneficiaries.  Additionally, CMS regulations require denial of Medicare participation to 
providers who are undercapitalized. 
This OIG report focuses on the effectiveness of CMS enrollment practices to keep 
ineligible home health care providers out of Medicare.  We examined a sample of 
providers enrolled between October 1, 1997 and September 30, 2000. 
FINDING 
CMS Processes Seem to Have Effectively Prevented Enrollment of Ineligible Persons and 
Entities for Providing Home Health Care to Medicare Beneficiaries 
Excluded or debarred persons or entities 
During the period of our inspection, CMS enrolled 880 home health agencies with an 
estimated 4,273 owners and managers.  We independently reviewed provider enrollment 
1 
Home Health Provider Enrollment  OEI-04-00-00550  for a sample of 272 of the 880 home health agencies.  We also reviewed 1,190 owners or 
managers associated with those agencies.  None of the agencies, owners, or managers we 
reviewed had been excluded from Medicare participation before they were enrolled to 
provide home health care. 
Felons 
We reviewed a sample of 492 of the estimated 4,273 home health agency owners or 
managers who were approved for Medicare participation during the period of our 
inspection.  We found none who had a felony record when they were approved by CMS. 
Based on residential addresses, we searched criminal records in Federal and applicable 
State or local court jurisdictions. 
Undercapitalized Agencies 
For 95 of our sampled 272 agencies, we verified that Medicare contractors had 
determined they met minimum capitalization requirements before approval.  The remaining 
177 had enrolled in a prior period.  Thus, a determination of capitalization levels was not 
applicable. 
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Home Health Provider Enrollment  OEI-04-00-00550  TABLE  OF  CONTENTS 
EXECUTIVE SUMMARY  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  1

INTRODUCTION  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  4

FINDING

Enrollment process seemed effective  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

APPENDIX  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  10

3

Home Health Provider Enrollment  OEI-04-00-00550  INTRODUCTION 
PURPOSE 
To determine if the Centers for Medicare & Medicaid Services enrolled home health 
providers who were ineligible for participation in Medicare. 
BACKGROUND 
Providing Home Health Care to Medicare Beneficiaries 
Home health services are provided to Medicare beneficiaries who are homebound and in 
need of qualifying skilled services on a part-time or intermittent basis.  Such beneficiaries 
must be under the care of a physician who has established a plan of care. 
Medicare beneficiaries may receive skilled nursing, home health aide services, and 
physical, speech, and occupational therapy.  The home health benefit is unlimited as long 
as the services are considered medically necessary. 
Medicare home health expenditures rose from $3.7 billion in 1990 to $17.8 billion in 1997. 
However, since 1997, both the costs and the number of home health agencies (HHAs) 
have continuously declined.  To illustrate, by the end of Fiscal Year 2000, the cost of 
home health care had declined to $9.2 billion.  Likewise, 10,807 HHAs were participating 
in the Medicare program in 1997.  That number had declined to 7,099 at the end of 
Calendar Year 2000. 
The Centers for Medicare & Medicaid Services (CMS) attributed the decreases partly to 
the Balanced Budget Act of 1997.  Among other things, the Act authorized more stringent 
HHA enrollment practices. 
Prior Reviews Show Improper Activities by Many Home Health Care Providers 
Prior Office of Inspector General (OIG) audits and investigations have routinely 
documented that, while most health care providers are honest, improper billing and 
payments continue to exist.  For example, OIG audit reports in 1997 and 1999 showed 
improper payments for home health services at 40 percent and 19 percent, respectively, in 
four large States. 
Likewise, since 1997, OIG investigations have led to numerous prosecutions of, or 
settlements with, HHA owners for fraudulent Medicare claims.  For example, such claims 
included salaries, travel, and legal expenses that were not related to care of Medicare 
beneficiaries, and therefore unallowable.  They also included services to 
4 
Home Health Provider Enrollment  OEI-04-00-00550  ineligible beneficiaries, particularly those not homebound.  The resulting fines and 
settlements were often significant, including $10 million at one firm. 
CMS Can Deny Participation by Unscrupulous and Undercapitalized Home Health Care 
Providers 
CMS can deny Medicare participation to unscrupulous home health providers and to those 
for whom successful performance is doubtful due to limited financial resources. 
CMS must deny enrollment to HHAs if they, their owners or managers have been 
excluded from Medicare participation by the OIG or GSA.  Also, family or household 
members of such a person must be denied participation. 
The Balanced Budget Act of 1997 (BBA) authorized CMS to deny enrollment for 
Medicare participation to individuals and entities who have been convicted of a felony 
under Federal or State law for an offense which is inconsistent with the best interests of 
the Medicare program and its beneficiaries. 
By regulation, CMS requires that a new HHA have enough funds on hand to operate for 
the first 3 months without reimbursement.  The objective is to ensure financial stability of 
home health providers. 
CMS regional offices have responsibility for final approval or denial determinations.  The 
decision, however, should be based on findings and recommendations by Medicare 
contractors called Regional Home Health Intermediaries (RHHIs), and State licensing and 
certification agencies. 
To obtain approval as a Medicare provider, a home health applicant must submit an 
application via a CMS 855 form.  CMS provides guidance for provider enrollment in 
Section 3040 of the Medicare Intermediary Manual.  Generally, applicants apply to State 
licensing and certification agencies.  Those agencies forward applications to the 
appropriate RHHI for review. 
When an RHHI recommends approval, the State licensing and certification agency verifies 
that HHA applicants meet the requirements aimed at protecting the health and safety of 
beneficiaries.  An HHA must be licensed by a State before it can receive approval for 
Medicare participation. 
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Home Health Provider Enrollment  OEI-04-00-00550  METHODOLOGY 
To determine whether or not CMS enrolled ineligible HHAs to provide services under 
Medicare, we reviewed CMS enrollment process and results for a sample of 272 enrolled 
HHAs.  Between October 1, 1997 and September 30, 2000 CMS enrolled 880 HHAs and 
an estimated 4,273 owners and managers associated with them. 
We initially selected a random proportional stratified-cluster sample of 277.  We reduced 
the sample size to 272 HHAs.  This resulted in a sample of 1,190 HHA owners and 
managers.  We dropped five HHAs from our sample because RHHIs could not locate files 
or RHHI logs contained incorrect enrollment data. 
For each of the 272 HHAs and 1,190 owners or managers, we independently verified that 
none had been excluded from Medicare prior to CMS approving them for home health 
care to Medicare beneficiaries. 
From our sample of  owners and managers, we used a random sub-sample of 492 to 
determine whether CMS had approved any who had a prior felony record. 
Finally, we verified that RHHIs had determined, where applicable, that home health 
applicants met minium capitalization requirements before CMS approved them to provide 
home health care. 
The appendix to this report describes our methodology in further detail. 
--------------------------
We performed this inspection between December 2000 and October 2001.  We conducted 
this inspection in accordance with the Quality Standards for Inspections issued by the 
Presidents Council on Integrity and Efficiency. 
6

Home Health Provider Enrollment  OEI-04-00-00550  FINDING 
CMS Processes Seemed to Effectively Prevent Enrollment of 
Ineligible Persons and Entities for Providing Home Health 
Care to Medicare Beneficiaries 
Preventing enrollment of excluded or debarred persons or entities 
To assure that no excluded individuals and entities are approved to provide home health 
care, RHHIs search two data sources.  As required, RHHIs compare home health care 
applicants to both the OIG exclusion list and the GSA debarment list.  CMS must deny 
Medicare participation to any HHA applicant appearing on either list. 
From the universe of 880 HHAs, we independently reviewed provider enrollment 
information on 272, as well as 1,190 HHA owners and managers.  We found none that 
had been previously excluded from Medicare participation. 
We used three major automated data sources to identify excluded parties.  First, we tested 
272 HHAs and 1,190 HHA owners and managers against the OIG List of Excluded 
Individuals/Entities.  The OIG exclusion list identifies individuals and entities that are 
excluded from participation in Medicare, Medicaid, and other Federal health programs. 
The list currently includes over 15,000 individuals and entities. 
Second, we tested the same 272 HHAs and 1,190 HHA owners and managers by using the 
GSA List of Parties Excluded from Federal Procurement and Nonprocurement programs. 
The GSA debarment list identifies individuals and entities that are excluded from 
participation in Federal programs governmentwide.  The basis for such actions can include 
criminal convictions or a civil judgement for fraud, false claims, or other offenses 
indicating a lack of business integrity. 
Finally, we tested 1,181 HHA owners and managers1 by using the Healthcare Integrity and 
Protection Databank (HIPDB).  The Databank is a national database managed by the 
Health Resources and Services Administration, within the U.S. Department of Health and 
Human Services.  It identifies prior actions that would be considered adverse to the 
provision of health care, including licensing and certification decisions, which may have 
resulted from criminal convictions, civil judgements, or similar events. 
1We were unable to obtain results for 9 of the 1,190 owners due to missing dates of birth. 
7 
Home Health Provider Enrollment  OEI-04-00-00550  Preventing enrollment of felons 
CMS has the authority to deny Medicare participation for individuals and entities that had 
a felony conviction under Federal or State law for an offense which is inconsistent with the 
best interests of the Medicare program and its beneficiaries.  Between October 1, 1997 
and September 30, 2000, CMS enrolled 880 HHAs and an estimated 4,273 associated 
owners and managers. 
The system used by CMS and its RHHIs seems to be effectively keeping felons from 
receiving approval to participate in Medicare.  We searched for criminal records for a sub-
sample of 492 HHA owners and managers connected with 115 HHAs.  We found none 
who had a felony record over a 7-year period beginning in August 1994 and ending in July 
2001.  This period encompassed the date that CMS approved each of the selected home 
health agencies to provide care to Medicare beneficiaries. 
Our sample of 272 HHAs had 1,190 owners and managers.  From those owners and 
managers, we selected a sub-set of 492 owners and managers.  We searched in Federal 
jurisdictions where each of the 492 members of our sample resided.  Likewise, we 
searched applicable State or local court jurisdictions.  Our search of criminal records 
covered both health care and non-health care crimes.  Health care related felons might 
have been identified during our searches of OIG, GSA, and HIPDB electronic files, 
however, some non-health care crimes would not be identified from those files alone. 
RHHIs do not systematically and routinely search criminal history records to deny 
Medicare participation for felons.  Instead, they rely on their search for parties that have 
been excluded from Medicare participation.  They search the DHHS Office of Inspector 
Generals exclusion list, and the GSA debarred list.  Some individuals that appear on these 
lists are there because of a felony act, particularly one which is health care related. 
CMS allows RHHIs to specifically search criminal history data files when they have reason 
to suspect that an HHA applicant is a felon.  However, each of the five RHHIs advised us 
that no such searches were done during the period of our inspection -- October 1, 1997 
through September 30, 2000. 
Preventing enrollment of undercapitalized agencies 
For 95 of the 272 HHAs appearing in our sample, we verified that RHHIs did determine 
that they met minimum capitalization requirements before CMS enrolled them to provide 
home health care.  The remaining 177 HHAs had already enrolled during a prior period. 
Therefore, an RHHI determination of minimum capitalization requirements did not apply. 
Typically, the 177 HHAs appeared in our sample because they had applied for approval 
for management, ownership, or other operational changes. 
8

Home Health Provider Enrollment  OEI-04-00-00550  To prevent undercapitalized providers from enrolling in Medicare, RHHIs obtain the 
following documentation for each applicant. 
C	 Applicants must submit a projection of home health visits during the first 3 months 
and the first year of operation. 
C	 Applicants must submit a copy of bank statements and other evidence showing 
sufficient funding to meet minimum needs for the first 3 months of operation.  At 
least 50 percent of that amount must be unencumbered, non-borrowed funds. 
C	 A bank officer must provide an attestation showing that funds are in the accounts 
specified by applicants, and that the funds are immediately available.  The 
attestation must accompany an applicants bank statements. 
We did not independently gather financial data on each application and determine that they 
met minimal capital requirements.  Instead, we reviewed RHHI records for applicable 
HHAs and verified that the RHHI had collected the financial data and performed needed 
calculations to determine that the HHA applicants met minimal requirements. 
9

Home Health Provider Enrollment  OEI-04-00-00550  APPENDIX 
METHODOLOGY

Scope 
Our study focused on determining whether or not CMS enrolled ineligible HHAs for 
Medicare participation2 between October 1, 1997 and September 30, 2000.  For our 
review, we sampled 272 applicant HHAs, and 1,190 owners and managers which were 
associated with them.  We used SAS to select HHA applicants proportionately stratified 
by each RHHI jurisdiction.  Table 1 shows our sample selections. 
Table 1

Sample Selection

RHHI  Universe  Proportional  Adjustments  Adjusted  # of Owners 
Locations  of  Sample of  Sample  and 
HHAs  RHHIs  Managers 
Associated 
with HHA 
Iowa  443  138  -- 138  575 
Wisconsin  148  47  -1  46  117 
South  125  39  -4  35  163 
Carolina 
California  113  36  -- 36  267 
Maine  51  17  -- 17  68 
TOTALS  880  277  -5*  272  1,190** 
*We eliminated five HHAs because RHHIs could not locate files for four, and their enrollment logs

contained incorrect information for one.

**This number is based on a non-distinct count of owners and managers for sampled HHAs. It represents

each time an owner or manager appeared on an HHA application, and some were associated with more

than one HHA.

2We used the term ineligible to refer to entities and individuals who were (1) excluded from Medicare by the OIG or 
debarred from government participation by the General Services Administration, (2) felons, and (3) undercapitalized parties. 
We recognize that providers may be ineligible for reasons other than the three addressed in this report. 
10 
Home Health Provider Enrollment  OEI-04-00-00550  Data Collection 
Selecting HHAs For Our Inspection:  To identify HHA applicants that CMS approved 
for Medicare participation between October 1, 1997 and September 30, 2000, we used 
tracking logs maintained by each RHHI. The logs contained names of applicant home 
health agencies, and dates applications were received, approved, returned, or denied.  The 
logs showed that CMS approved 880 home health agencies.  Table 2 below shows our 
estimated total number of owners and managers associated with the 880 HHAs in our 
universe.  Our estimate is calculated based on the number of distinct HHA owners and 
managers, 1,070.  Our analysis revealed that several HHA owners and managers appeared 
on multiple HHA enrollment applications.  For example, one owner was the sole 
proprietor of five HHAs seeking enrollment. For our estimate of total owners and 
managers for the 880 approved HHAs, we counted duplicate owners and managers only 
once. 
Table 2

Point Estimate of Approved Distinct Owners and Managers

Between October 1, 1997 and September 30, 2000

Point  Lower 95%  Upper 95% 
Estimate  Confidence Interval  Confidence Interval 
Total Owners  4,273  3,594  4,952 
& Managers 
Some RHHI staff furnished testimonial and anecdotal information suggesting that more 
HHAs had been approved than those shown on the tracking logs.  Therefore, the logs may 
not be totally correct.  While we recognize that the logs could be incomplete, we relied on 
them for our sample.  We did so because they contained specific data on HHA 
applications and resulting CMS decisions that we needed for our inspection. 
Documenting CMS Decisions For Sampled HHAs:  We obtained and reviewed key 
documentation from RHHIs leading to approval of the 272 HHA entities and the 1,190 
owners or managers.  For example, we obtained and reviewed copies of 
-- HHA applications contained on CMS forms 855 and related documentation, 
-- calculations by RHHI staff to determine if HHA applicants met minimum 
capitalization requirements, 
-- results of on-line screening by RHHIs to determine if HHA applicants had been 
excluded from Medicare participation by OIG or debarred from government 
program participation by GSA, and 
11 
Home Health Provider Enrollment  OEI-04-00-00550  -- RHHI recommendations to CMS regional offices for each HHA applicant. 
Understanding CMS Enrollment Process:  We reviewed CMS policies and procedures, 
and RHHI procedures, for enrolling Medicare providers.  We did on-site inspections and 
interviews at four of the five RHHIs.  We also conducted on-site interviews with staff at 
CMS headquarters and one regional office.  We surveyed staff at the remaining eight 
CMS regional offices and at the remaining RHHI by e-mail.  One CMS regional office did 
not respond to our requests for information. 
Data Analysis 
Identifying HHAs That Had Been Excluded From Medicare:  CMS must deny 
enrollment to HHAs if they, their owners or managers have been excluded from Medicare 
participation by the OIG or GSA.  Also, family or household members of such a person 
should be denied participation. 
For each of our sampled 272 HHAs and the 1,190 owners or managers, we independently 
reviewed two data bases to ascertain if any had been excluded from Medicare participation 
before CMS approved their application to provide home health care to Medicare 
beneficiaries.  We searched the OIG exclusion list and the GSA debarred list to identify 
any prior Medicare exclusions for all 1,190 owners or managers. 
Also, for 1,181 of the 1,190 owners and managers, we searched the Healthcare Integrity 
and Protection Databank (HIPDB) to identify any who were, or should have been 
excluded because of improper acts.  We were unable to complete this search for all 1,190 
owners and managers because the date of birth was missing for 9 of them.  In the HIPDB, 
the date of birth is critical for positive identification. 
We verified all possible exclusions on the three data bases by cross referencing social 
security numbers for our sampled 1,190 owners and managers. 
Identifying HHA Owners or Managers That Had a Felony Record: CMS has the 
authority to deny Medicare participation for individuals and entities that had a felony 
conviction under Federal or State law for an offense which is inconsistent with the best 
interests of the Medicare program and its beneficiaries. 
We independently reviewed a sub-sample of 492 of the 1,190 owners and managers to 
identify any who had a felony record before CMS approved them to provide home health 
care to Medicare beneficiaries.  We selected our sub-sample to provide proportionate 
representation of the five RHHIs. 
We initially selected 500 HHA owners or managers, but dropped 8 because their addresses 
could not be located.  The sub-sample represented 115 of the 880 home health agencies 
CMS approved between October 1, 1997 and September 30, 2000.  To identify felons, we 
12 
Home Health Provider Enrollment  OEI-04-00-00550  used a contract research organization to search criminal records, for a 7-year period, in 
Federal and State jurisdictions where the members of our sample resided. 
Documenting That RHHIs Determined Capitalization Levels For Approved HHAs: 
We independently analyzed case files for 95 of the 272 HHAs to determine if RHHIs had 
collected needed financial data and determined that the HHAs met required capitalization 
levels before granting approval to serve Medicare beneficiaries.  This determination was 
not applicable to the remaining 177 HHAs because they were already enrolled, and their 
initial 3 months of operation had transpired previously.  The 177 HHAs appeared in our 
sample of 272 because they had applied for clearance of an ownership, management, or 
other operational change. 
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Home Health Provider Enrollment  OEI-04-00-00550