Department  of Health  and Human  Services 
OFFICE  OF 
INSPECTOR  GENERAL 
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VARIATION  AMONG  HOME  HEALTH

AGENCIES  IN  MEDICARE  PAYMENTS

FOR  HOME  HEALTH  SERVICES

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OEI-04-93-00260  OFFICE  OF INSPECIOR  GENERAL 
The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, as 
amended, is to protect the integrity of the Department  of Health and Human SeMces (HHS) 
programs as well as the health and welfare of beneficiaries served by those programs.  This 
statutory mission is carried out through a nationwide network of audits, investigations, and 
inspections conducted by three OIG operating componen~  the Offke  of Audit SeMces, the 
Offkx of Investigations, and the Office of Evaluation and Inspections.  The OIG also informs 
the Secretary of HHS of program and management problems and recommends courses to 
correct them. 
OFFICE  OF AUDIT  SERVICES 
The OIGS Office of Audit Services (OAS) provides all auditing services for HHS, either by 
conducting audits with its own audit resources or by overseeing audit work done by others. 
Audits examine the performance of HHS programs and/or its grantees and contractors in 
carrying out their respective responsibilities and are intended to provide independent 
assessments of HHS programs and operations in order to reduce waste, abuse, and 
mismanagement and to promote economy and efficiency throughout  the Department. 
OFFICE  OF INVESTIGATIONS 
The OIGS Office of Investigations (01) conducts criminal, civil, and administrative 
investigations of allegations of wrongdoing in HHS programs or to HHS beneficiaries and of 
unjust enrichment by providers.  The investigative efforts of 01 lead to criminal convictions, 
administrative sanctions, or civil money penalties.  The 01 also oversees State Medicaid fraud 
control units which investigate and prosecute fi-audand patient abuse in the Medicaid program. 
OFFICE  OF EVALUATION  AND INSPECIIONS 
The OIGS Office of Evaluation and Inspections (OEI) conducts short-term management and 
program evaluations (called inspections) that focus on issues of concern to the Department, 
the Congress, and the public.  The findings and recommendations contained in these inspection 
reports generate  rapid, accurate, and up-to-date information on the efficiency, vulnerability, 
and effectiveness of departmental  programs. 
OEISAtlanta Regional Office staff prepared this report under the direction of Jesse J. 
Flowers, Regional Inspector General. 
Atlanta Region  Headquarters 
Paula Bowker, Project Leader  Jennifer Antico, Program Specialist 
Ron Kalil, Team Leader  Brian Ritchie, Program Analyst 
Tammy Bomey,  Statistician  Linda Moscoe, Program Analyst 
Christopher Koehler, DRIG  Barbara Tedesco, Statistician 
Peggy Daniel, Program Analyst 
James Green, Contractor  EXECUTIVE  SUMMARY

PURPOSE 
To  describe  variation  among  home  health  agencies  in reimbursement  for  home  health 
services  paid  for by Medicare  and  assess potential  causes  of the variation. 
BACKGROUND 
Expenditures  for Medicare  home  health  care  are  increasing  at an extraordinary  rate. 
Medicare  payments  will total  an estimated  $14.4 billion  in 1995, up  from  $3.3 billion  in 
1990, an increase  of over  4 fold in only 5 years. 
The  Health  Care  Financing  Administration  (HCFA)  is involved  in a concerted  effort 
to examine  the  home  health  care  benefit,  As part  of that  initiative,  the  Office  of 
Inspector  General  (OIG)  has  developed  a coordinated  action  plan  to integrate 
investigations,  audits,  and  inspections  involving Medicare  home  health  care.  This 
inspection  is part  of that  OIG  coordinated  effort. 
METHODOLOGY 
We  analyzed  HCFA  data  on Medicare  reimbursement  for home  health  sewices  in 
calendar  year  1993.  The  HCFA  data  represented  services  provided  by 6,803 HI-L% to 
over  3 million  beneficiaries.  We  arrayed  the  HHAs  in ascending  order  based  on their 
average  reimbursement  per  beneficiary  and  divided  them  into  four  groups.  We  then 
analyzed  a number  of factors,  including  agency  characteristics,  beneficiary 
characteristics,  and  quality  of services,  and  how those  factors  varied  among  the  four 
groups.  We  called  the  groups  lower,  middle,  high-1 and  high-2. 
To  place  this  analysis  into  an appropriate  broader  context,  we incorporated  into  this 
report  findings  from  other  recent  OIG  work  on this subject.  Our  recommendations 
are  based  on the  entire  body  of OIG  analysis of home  health  services. 
FINDINGS 
The  Highest  Group  Of Home  Health  Agencies  Receive@  On Averagq  Five Times 
The Amount  Of Medicare  Reimbursement  Per  Beneficiary  As The  Lower  Group 
Average  reimbursement  per  beneficia~  among  the  groups  varied  significantly.  In the 
high-2 group,  the  average  reimbursement  was $7,978.  The  average  reimbursement  in 
the  lower  group  was $1,534.  The  HHAs  in the  high-1 and  high-2 groups,  which 
represented  one  third  of all the  HHAs  analyzed,  received  more  than  half  (51.5 
percent)  of the  nearly  $9.7 billion  reimbursed  by Medicare  in 1993.  The  two thirds  of 
the  HI-L% in the  lower  and  middle  groups  provided  home  health  semices  at  or below 
the  national  average  reimbursement  per  beneficiary  of $2,957. 
i  Average Reimbursement  Per Visit Was Similar Among HHf@  But The Number  Of 
Visits Varied Widely 
The  average  number  of visits nationally  was 50 per  beneficiary.  The  average  number 
of visits per  beneficiary  by HHAs  in the  highest  group  was about  five times  greater 
than  that  by HHAs  in the  lower  group.  In the  highest  group  that  average  was  141 
visits, as compared  to 27 visits in the  lower  group.  Nearly  two thirds  of all the  HHAs 
averaged  33 visits per  beneficiary,  well below  the  national  average  of 50. 
The  average  reimbursement  per  visit nationally  for all 6,803 HHAs  in 1993 was $58.06. 
The  average  reimbursement  per  visit in each  of the  four  groups  of HHAs  was within 
$2 of the  national  average. 
Higher Group Home Health  Agencies Tended To Be Proprietary  For-Profi~ Non-
affiliated Organizations  Which Provided Seven Times More Aide Visits As The Lower 
Group And Which Employed A Higher Percentage  Of Total FTEs As Aides 
Some  agency  characteristics,  such as ownership  and  affiliation  status,  were  good 
predictors  of which  HHAs  received  higher  reimbursement  per  beneficiary.  Higher-
reimbursement  HHAs  also had  twice  as many  staff and  four  times  the  number  of 
home  health  aides,  on average,  as lower  group  agencies. 
Quality Of Sewice And Beneficiary  Characteristics  Were Similar  Among AU Four 
Groups Of HHAs And Did Not Appear  To Explain The Variation In Average 
Reimbursement 
~  which  provided  home  health  services  at a higher  level of reimbursement  per 
beneficiary  did not  have  fewer  deficiencies  or complaints  than  lower  reimbursement 
agencies.  In fact,  the  percentage  of HHAs  in the  highest  group  that  had  at least  one 
complaint  was more  than  three  times  the  percentage  of HHAs  in the  lower  group. 
Agencies  in the  higher-reimbursement  groups  were  also less likely to be  accredited. 
Beneficiary  characteristics  such  as age, gender,  race,  qualifying  conditions  and  principal 
diagnostic  codes  did not  explain  the wide variation  in average  reimbursement  per 
beneficiary. 
DISCUSSION 
The  work  performed  in this inspection  must  be placed  into  the  broadest  conte~ 
including  the  battery  of OIG  work  in home  health  performed  over  the  past  year.  The 
findings  from  this inspection  and  all other  OIG  work  in home  health  present  a picture 
of a Medicare  benefit  which  is vulnerable  to fraud  and  abuse.  For  example,  over  the 
past  year,  we have  identified  numerous  instances  of inappropriate  home  health 
payments  through  audits  of provider  claims  in Florida  and  Georgia. 
ii  b	 In one  case we found  that  75 percent  of the  claims  submitted  by one  HHA  did 
not  meet  Medicare  guidelines. 
b	 In another  project  we found  that  26 percent  of randomly  reviewed  claims  in 
Florida  did not  meet  Medicare  guidelines.  These  claims were  for beneficiaries 
who were  not  homebound,  unnecessary  visits, and visits that  were  never 
provided. 
We have  also found  several  types  of fraud  among  HHAs  around  the  nation.  Some  of 
the  fraud  we found  includes  excessive  services,  services  not  rendered,  use  of unlicensed 
staff, cost report  fraud,  falsified  plans  of care,  forged  physicians  signatures,  and 
kickback.  Between  1990 and  1994, OIG  investigations  have  led  to 25 successful 
criminal  prosecutions  of I-II%% or their  employees  and  the  imposition  of 3 criminal 
penalties.  In  1993 and  1994 alone,  39 HHAs  or their  employees  were  excluded  from 
participating  in the  Medicare  or Medicaid  program. 
We  have  also looked  at how other  payers  manage  home  health  benefits.  For  example, 
other  payers  tend  to limit  the  benefit  by capping  the  number  of visits or services 
allowed  per  beneficial.  They  also emphasize  case  management  and  use  copayments. 
RECOMMENDATIONS 
HCFA Should Explore Ways to Address Excessive Utilization  and Inappropriate 
Variation  in Reimbursement  Among HHAs. 
The  work  of the  OIGS audit  and  investigations  staff have  identified  instances  of 
medically  unnecessary  care  and  inappropriate  or fradulent  billing by specific  HHAs. 
The  data  in this report  describes  more  broadly  patterns  of billing by certain  HI+% 
which  may indicate  fraud  or abuse.  As such, we believe  it is prudent  for HCFA  to 
take  steps  to investigate  such patterns  and  place  systematic  controls  on the  home 
health  benefit  to prevent  abuse. 
First.  HCFA  Should  Intensifv  its Efforts  to Scrutinize  Claims  Submitted  bv High  Cost 
Agencies. 
HCFA  has  already  begun  this effort  through  its activities  under  Operation  Restore 
Trust.  We  have  provided  information  to HCFA  about  the  agencies  in our  analysis 
which  had  higher  than  average  per  beneficiary  reimbursement,  for  the  purposes  of 
targeting  agencies  for further  review. 
Second,  HCFA  Should  Exulore  Wavs in Which  to Prevent  Unscrupulous  Agencies 
from  Enea~ing  in Abusive  Practices. 
In addition  to targeting  certain  agencies  for review,  HCFA  should  work  to develop 
mechanisms  to prevent  agencies  from  engaging  in practices  which  result  in 
inappropriate  use  of the  home  health  benefit. 
...
111  This  can be  done  in a variety  of ways,  For  example: 
b	 Involving  Beneficiaries  in Detecting  and  Reporting  Unscrupulous  Behavio~ 
through  the  use  of Explanation  of Medical  Benefits  (which  HCFA  is currently 
testing),  confirmation  of visits receive~  and  certification  of need  and  eligibility 
for home  health  care. 
b	 Involving  Physicians  in Detecting  and  Reporting  Unscrupulous  Behavior:  now 
that  HCFA  is paying  physicians  for case  management  services  delivered  to 
home  health  patients,  it is in a good  position  to use physicians  to monitor  the 
care  provided  to beneficiaries,  report  unscrupulous  providers,  and  refer  patients 
to agencies  with  a record  of good  practice.  This will require  educational 
outreach  to the  physician  community. 
b	 Setting  Higher  Standards  for Participation  in the  Medicare  Program:  HCFA  is 
now considering  its policies  with regard  to how agencies  enter  the  Medicare 
program  and  obtain  permission  to bill for services,  and  under  what  conditions 
certain  entities  may be  suspended  or dropped  from  the  program. 
HCFA Should Continue Its Efforts To Improve The Home Health  Benefit and To 
Control Frau& Waste and Abuse. 
We  support  HCFAS efforts  in developing  potential  long term  solutions  towards 
benefit  reform  which will assist in preventing  fraud  and  abuse  by unscrupulous 
providers.  These  HCFA  efforts  include: 
b	 Outcome  Measures:  We urge  HCFA  to continue  their  work  in developing 
outcome  measures  which  can be  used  to assess  the  performance  of individual 
home  health  agencies. 
b	 Pros~ective  Pawn ent  System:  We believe  that  a home  health  prospective 
payment  system  might  be  the  most  effective  long term  model  for restructuring 
the  benefit  and  we encourage  HCFA  to continue  their  work  in testing  such a 
system.  We  believe,  however,  that  it is important  that  a new  system  not 
grandfather  in utilization  patterns  of the  higher-reimbursement  agencies.  It is 
worth  noting  that  this was an important  issue when  a prospective  payment 
system  was being  developed  for hospitals. 
Additional  structural  reform  might  also assist in preventing  fraud,  waste  and  abuse.

As we indicated  in a prior  report,  Home  Health  Agencies:  Alternative  Coverage  and

Payment  Policies,  issued  in May  1995, HCFA  may wish to consider  adopting  certain

practices  of other  third  party  payers.

We  also believe  that  the  use  of aides  deserves  further  examination,  based  on the  data

presented  in this report.

iv  We plan  to work  together  with HCFA  and  the  Assistant  Secretary  for Planning  and 
Evaluation  (ASPE)  on further  analysis which  can help  shape  these  alternatives. 
Budget Implications 
The  elimination  of frau~  waste  and  abuse  in the  home  health  benefit  can  create 
significant  cost  savings for the  program.  Such an elimination  would  ultimately  reduce 
the  average  number  of visits for beneficiaries  overal~  while  ensuring  that  appropriate 
services  are  still delivered  to beneficiaries  in need.  To  estimate  the  potential  impact 
of effective  action,  we developed  the  following  calculations. 
b	 We  estimated  Medicare  expenditures  based  on different  levels  of average 
number  of visits per  beneficiary  nationwide.  For  example,  if the  national 
average  number  of visits had  been  45 instead  of 50, Medicare  would  have  saved 
over  $1 billion  in 1993 in Medicare  payments  for home  health  services. 
b	 The  average  number  of visits per  Medicare  beneficiary  for  almost  two-thirds  of 
home  health  agencies  (the  lower  and  middle  groups)  in 1993 was 33.  If the 
average  number  of visits by the  remaining  one-third  of HHAs  had  also been  33 
visits per  beneficiary,  Medicare  cost would  have  decreased  by about  $3.3 billion 
in  1993. 
w	 However,  based  on HCFA  actuarial  figures,  the  average  number  of visits per 
beneficiary  is increasing  annually.  Based  on our  calculations  for  1993 data, 
each  time  the  national  average  number  of visits per  beneficiary  increases  by 
one,  it costs the  Medicare  program  an additional  $191.4 million.  If this upward 
trend  in the  number  of visits were  to continue  unabated,  the  potential  increase 
in the  cost to Medicare  would be  substantial. 
b	 Using  HCFA  projections  of $14.4 billion  in Medicare  home  health  care 
expenditures  for  1995, an average  number  of 33 visits per  HHA  would  result  in 
a savings of nearly  $5.0 billion. 
AGENCY COMMIWrS 
We  received  comments  on the  report  from  HCFA  and  ASPE.  HCFA  concurred  with

our  recommendations,  but  felt  that  the  report  did not  fully distinguish  between

variation  that  is appropriate  and variation  that  suggests  excessive  utilization  or

inappropriate  reimbursement  levels.  HCFA  concluded,  however,  that  when

considered  with  the  other  OIG  work in home  health  over  the  last  several  years,  the

findings  in this report  do suggest  enough  of a pattern  to recommend  that  HCFA

examine,  and  address  where  appropriate,  excessive  utilization  and  inappropriate

variation  in reimbursement  among  HHAs.

ASPE  concurred  that  the  study showed  clear  evidence  of patterns  in home  health

agency  practices,  and  that  such patterns  should  be  investigated  and  more  thoroughly

v  understood.  Noting  that  our  data  were  limited,  ASPE  stated  that  recommendations 
for  change  should  be  approached  cautiously.  ASPE  expressed  concern  for the  welfare 
of beneficiaries,  and  stated  that  any recommendations  which would  directly  impact 
them  be  eliminated.  ASPE  suggested  two follow-up  reviews  to our  study  -- one  a 
regression  analysis  on potential  causes  of variation  in C@  and  two an intensive  review 
to target  high-cost  HHAs. 
We plan  to work  with HCFA  and  ASPE  concerning  additional  efforts  in this area,  and 
have  so indicated  in the  report.  We have  also made  some  revisions  to the  text  of the 
report  based  on their  comments,  particularly  in the  focus  of our  recommendations. 
The  full text  of HCFA  and  ASPE  comments  is contained  in appendix  C. 
vi  TABLE  OF  CONTENTS

PAGE 
EmEcmwE  suMMARY 
INTROIXJCIXON . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...1

FINDINGS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...7

  Highest  group  HHAs  received  five times  the  reimbursement  aslower  groups  . .  7

Number  ofvisits  varied  amongHHAs,  but  reimbursement  did not  . . . . . . . ...9

 
Higher  group  HHAs  tended  to be  proprietary  for-profit,  non-affiliated  . . . . . .  11

 
Quality  of service  did not  appear  to explain  the  variation  . . . . . . . . . . . . . . . .  13

 
Characteristics  of beneficiaries  were  similar  among  all HHAs  . . . . . . . . . . . . .  14

 
DISCUSSION  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...16

RECOMMENDATIONS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...18

AGENCY COMMENTs  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...20

APPENDICES

A  Details  Of Possible  Causes  OfVariation  In Average  Reimbursement  . . . . . . .  A-1

B:  Calculation  Of Estimated  Savings  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..B-l

C  Agency  Comments  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..C-l  INTRODUCTION

PURPOSE 
To  describe  variation  among  home  health  agencies  in reimbursement  for home  health 
services  paid  for by Medicare  and  assess potential  causes  of the  variation. 
BACKGROUND 
Home Hml.th Ck.re 
Home  health  care  is nursing,  therapeutic,  medical  social,  or aide  services  which  are

provided  in a patients  home.  Home  health  care  allows people  with  limited  mobility  to

live independently  while  still receiving  professional  health  care  services.  Section  1861,

Title  XVIII  of the  Social  Security  Act  authorized  Medicare  Part  A payments  for home

health  care  services.  If a beneficiary  does  not  have  Part  A entitlement,  home  health

semices  may be  covered  by Medicare  Part  B.

To  receive  Medicare  reimbursement,  home  health  agencies  (HHAs)  must  provide  a

skilled  care  service  to a homebound  beneficiary.  Beneficiaries  who  need  intermittent

skilled  nursing  services,  physical  therapy,  speech  therapy,  and  occupational  therapy

may  qualify  for  home  health  services  under  Medicare.  Registered  nurses  and  licensed

therapists  must  provide  or supervise  skilled  services.  Nursing  and  home  health  aide

sewices  must  be  provided  on an intermittent  (i.e., not  daily)  or part-time  (less than  8

hours  per  day) basis.

Beneficiaries  may receive  an unlimited  number  of home  health  visits.  However,

Section  1861 of the  Social  Security  Act  authorizes  the  Department  to set limits  on

allowable  costs  incurred  by a provider  of services  for which  payment  may be  made

under  the  Medicare  program.  Under  this authority,  the  Department  has maintained

limits  on HHA  per-visit  costs since  1979.

Home  health  agencies  may supplement  skilled  services  with  medical  social  services  and

home  health  aide  services.  Medical  social  services  are  provided  by a qualified  medical

social worker  or a social work  assistant  under  the  supemision  of a qualified  medical

social worker.  Medical  social  services  are  necessary  to resolve  social  or emotional

problems  which  are  expected  to be  an impediment  to effective  treatment  of a

beneficiarys  medical  condition.  Home  health  aide  services  are  hands-on  personal  care

or services  which  are  needed  to maintain  a beneficiarys  health  or to facilitate

treatment.  Home  health  aide  services  include  personal  care  (bathing,  changing  bed

linens,  feeding,  etc.),  changing  dressings  for simple  wounds,  assistance  with

medications,  assistance  with  some  therapy  activities,  and  routine  care  of prosthetic  and

orthotic  devices.

11  All home  health  services  must  be  specified  in a plan  of care  which  a physician  must 
sign.  Physician  certification  must  be  updated  every  62 days.  According  to current 
Medicare  rules,  physicians  who sign a plan  do not  have  to actually  see  the  patient  for 
whom  the  plan  was written.  This holds  true  for both  the  initial  plan  as well as 
subsequent  updates. 
Growth  Of Hotne Health Care 
Home  health  care  spending  by all insurers  nationwide  is skyrocketing.  It is increasing 
at a greater  rate  than  any other  type  of health  care  in the  United  States.  In  1993, 
expenditures  for home  health  care  increased  23.8 percent  over  the  previous  year, 
according  to HCFAS Office  of the  Actuary.  During  that  time,  expenditures  for  all 
types  of health  care  increased  by 7.8 percent.  Hospital  and  physician  care  increased 
by 6.7 percent  and  5.8 percent  respectively  in 1993. 
Expenditures  for home  health  care  paid  for by Medicare  are  also increasing  at an 
extraordinary  rate,  beginning  in 1989 with  the  settlement  of a major  court  case, 
Duggan  v. Sullivan,  as illustrated  by the  following  graphic.  In this case,  Medicare 
beneficiaries  and  others  sued  the  Department  claiming  that  the  Departments 
interpretation  of part  time  and  intermittent  was in conflict  with  the  intent  of 
Congress  and  the  wording  of the  law.  The  Department  settled  the  litigation  and 
revised  the  coverage  guidelines  as a result. 
MEDICARE  HOME  HEALTH  EXPENDITURES 
Expendlture6  (In  Blltlorm)
S16 
I 
S14.4 
s14-
S1
s12-
slo- $9 
S8  -
S7 
$6-
*4 
S4 - S3. 
*2  -
1990  1991  1982  1993  1994  1996  est 
YEAR 
2
 Home  health  care  is one  of the  fastest  growing segments  of health  care  paid  for by 
Medicare.  Medicare  payments  will total  an estimated  $14.4 billion  in 1995, up from 
$3.3 billion  in 1990, an increase  of over  4 fold in only 5 years.  The  Health  Care 
Financing  Administration  predicts  that  expenditures  will continue  to rise  even  more 
dramatically,  reaching  an estimated  $18.8 billion  in 1996. 
Hmlth Clue FtinchgAdmMtdon  Revkws of Home Health Clrre 
The  Health  Care  Financing  Administration  (HCFA)  administers  the  Medicare 
program,  and  has funded  a number  of studies  in recent  years  to examine  home  health 
care  services.  For  example,  HCFA  has a demonstration  study underway  to test  a 
prospective  payment  system  for home  health  care.  Another  HCFA  research  team  is 
developing  and  testing  a set  of outcome-based  quality  measures  for home  health  care. 
This  team  expects  to examine  quality  from  the  perspectives  of providers,  patients, 
regulators,  and  payers.  HCFA  is also sponsoring  a three-year  study to test  a nurse-
managed  model  of home  health  care.  Firtally, HCFA  conducts  an  annual  survey  to 
determine  satisfaction  of Medicare  beneficiaries. 
The  Administrator  of HCFA  also convened  a task  force  to complete  a comprehensive 
examination  of home  health  care  from  both  a policy and  an operations  perspective. 
The  task  force  consists  of staff from  all HCFA  components  that  deal  in some  way with 
home  health. 
OtherHome HealthStud&s 
Considerable  work  has been  done  toward  analyzing  and  understanding  variations  in 
the  use  of and  reimbursement  for home  health  services.  For  example,  in a report  to 
Congress  in 1994, the  Prospective  Payment  Assessment  Commission  (PROPAC) 
examined  the  variation  in home  health  agency  costs and  the  relationship  between  costs 
and  Medicare  reimbursement.  1 That  report  found  that  many  factors  affected  agency 
costs, such  as geography,  economies  of scale,  and  local market  characteristics.  The 
report  concluded  that,  ...the  current  payment  system  may not  be  rewarding  efficiency 
and  may be  overcompensating  the  less efficient  agencies. 
Authors  Henry  Goldberg  and  Robert  Schmitz  in their  article  Contemplating  Home 
Health  PPS:  Current  Patterns  of Medicare  Semite  Use, analyzed  home  health  care 
episodes  as part  of a HCFA  prospective  payment  demonstration  project.  They  found 
that,  in general,  rural  agencies,  proprietary  agencies,  larger  agencies,  new  agencies  and 
free-standing  agencies  had  longer  episodes  than  agencies  that  were  urban,  not-for-
profit,  small,  older  or hospital-based.  They  also found  that  the  number  of visits per 
beneficiary  was the  cause  of the  variation  in reimbursement  per  episode. 
1 InterimAnalysisof PaymentReform for Home Health SeMcesy CongressionalReport C-94-02. 
ProspectivePaymentAssessmentCommission.P. 31. 
3  Other OIG Wo& In Home Health 
Because  of the  phenomenal  growth  in Medicare  home  health  expenditures  and 
concerns  about  possible  fraud,  waste  and  abuse,  the  HCFA  Administrator  asked  the 
Office  of Inspector  General  to join  HCFA  and  its task  force  in a concerted 
examination  of home  health  care.  Accordingly,  we developed  a strategic  home  health 
plan  that  incorporated  audits,  investigations,  and  inspections  of Medicare  home  health 
care  policies  and  operations. 
This  report  describes  the  extent  of the variation  in average  reimbursement  per 
beneficiary  among  6,803 home  health  agencies  in 1993 and  the  relationship  between  a 
number  of factors  which  could  potentially  cause  that  variation. 
METHODOLOGY 
To  measure  the  variation  in reimbursement  for home  health  services  to Medicare 
beneficiaries,  we used  average  reimbursement  per  beneficiary.  We  used  average 
reimbursement  per  beneficiary  because  use of averages  is a recognized  and  easily-
understood  method  of mathematically  representing  a large  number  of data  elements. 
To  determine  the  extent  of variation  among  HHAs  in Medicare  average 
reimbursement  per  beneficiary  for home  health  services,  we first identified  all HHAs 
in the  United  States  that  were  certified  to participate  in the  Medicare  program.  We 
used  HCFAS On-line  Survey and  Certification  Reporting  System  (OSCAR)  for  1993 
and  identified  6,803 HHAs. 
We  then  identified  all episodes  of care  reported  by the  6,803 HHAs  for Medicare 
beneficiaries.  We  used  HCFAS National  Claims  History  data  file and  identified 
3,263,100  episodes  of home  health  care  in 1993.  For  our  calculations  of variations  in 
HHA  average  reimbursement  and visits per  beneficiary,  we considered  each  episode 
of home  health  care  to be  equivalent  to one  beneficiary. 
Next we attempted  to divide  the  HHAs  into  three  groups  of approximately  equal 
numbers  of agencies,  which we called  lower,  middle  and  higher  (See  Table  1).  We 
arrayed  the  6,803 HHAs  in ascending  order  based  on average  reimbursement.  We 
arbitrarily  selected  three  groups  as a basis  for comparing  agencies.  However,  using 
SAS software,  we observed  a skewed  distribution  for our  dependent  variable  --
average  reimbursement  per  beneficiary.  Accordingly,  we then  divided  the  6,803 HHAs 
into  four  groups  for analysis.  We  called  the  four  groups  lower,  middle,  high-1,  and 
high-2. 
We  performed  various  statistical  analyses  on the  6,803 HHAs,  including  a univariate 
analysis  and  analysis  of variance.  Our  use of the  analysis  of variance  procedure  was 
not  as robust  as it could  have  been  because  we could  not  assume  the  population 
variance  among  the  four  groups  was equal.  We  did not  validate  the  data  obtained 
from  HCFA  data  bases. 
4
 The  four  groups  are  shown  in table  1.  Also displayed  in table  1 are  the  percentage  of 
the  6,803 HHAs  in each  of the  four  groups  and  the  percentage  and  number  of all the 
beneficiaries  in the  four  groups. 
Lower  Middle  Higher  Group  Totals

Group  Group

HHAs  HHAs

Number  of Hl+L%  I  2.270  I  2.262  I  1.930  I  341  !  6.803

Number  of Beneficiaries  I  843,833  I 1,347,085  I 948,826  I 123,356  I 3,263,100

Percent  of HHAs  33.4%  33.3%  28.3%  5.0%  I  100%

Percent  of Beneficiaries  25.8%  41.3%  29.1%  3.8%  1OO$ZO

With  few exceptions,  only two factors  primarily  influence  average  reimbursement  per

beneficiary.  They  are  the  cost per  visit and  the  number  of visits.  We  looked  at both

of these.

Since  these  agencies  differ  in a variety  of ways, we also examined  other  factors  which

helped  explain  why the  variation  exists.  We  identified  these  factors  through

discussions  with  HCFA  staff, fiscal interrnedia~  staff, and  provider  staff.  These

discussions  were  supplemented  by reviewing  statutes,  regulations,  and  policies  which

govern  the  delive~  of home  health.  In addition,  we studied  existing  research  reports,

audits,  and  other  publications  which focussed  on home  health.

Our  objective  in examining  the  other  factors  was to determine  statistical  relationships

between  these  factors  and  the  HHAs  average  reimbursement  per  beneficiary.  These

factors  are  characteristics  of the  beneficiaries  served  (including  principal  diagnoses  for

those  beneficiaries),  characteristics  of the  HHAs,  and  quality  of home  health  services

provided.  All of the  analysis  of these  data,  however,  needed  to be  considered  in the

broader  context  of recent  OIG  work  performed  on this subject.  We,  therefore,  drew

from  recent  OIG  work  on home  health  in developing  the  findings  and

recommendations  in this report.

Data Lbnitatbns and Future Wok 
We  recognize  that  there  are  numerous  potential  data  elements  which  could  be  used  to 
measure  the  effect  of beneficiary  characteristics,  agency  characteristics,  and  quality  of 
home  health  services  on average  HHA  reimbursement  per  beneficiary.  The  data  used 
5
 in this report  are  inherently  descriptive.  As such, they  do not  purport  to show causal 
relationships  relating  to the  variation  in average  reimbursement  among  HHAs. 
For  purposes  of this report  we used  only those  measures  that  were  readily  available 
through  existing  HCFA  data  sets.  For  example,  in the  absence  of outcome  measures, 
which we understand  are  being  developed,  we had  to use  available  data.  Those  data 
were  numbers  of complaints  and  numbers  of Survey and  Certification  deficiencies,  as 
recorded  by HCFA.  We  also used  data  from  the  two accrediting  organizations  to 
identi~  HHAs  which were  accredited.  Though  complaints,  deficiencies  and 
accreditation  status  may not  be  optimal,  we believe  they  are  reasonable  proxies  for 
quality. 
There  were  no readily  available  data  on other  factors  which  could  influence  average 
reimbursement  per  beneficiary.  For  example,  the  lack  of readily  available  data  on 
case  mix, the  presence  of a caregiver  in the  home  of the  beneficiary,  and  the  use of 
other  services  in lieu  of home  health  (such  as SNFS), did not  allow us to use  those 
factors  as possible  influences  on reimbursement  or to establish  their  statistical 
relationship  to reimbursement. 
In addition,  there  are  other  factors  that  maybe  important  to  consider  in explaining 
HHA  variation  which  are  not  discussed  in this report.  Factors  such  as geographic 
location  and  operations  of fiscal intermediaries  may play a role.  We  will consider 
these  potential  influences  in future  OIG  home  health  activities. 
We  conducted  our  inspection  in accordance  with  the  QualityStandardsfor Inspections 
issued  by the  Presidents  Council  on Integrity  and  Efficiency. 
6
 FINDINGS

THE HIGHEST  GROUP  OF HHAs RECEIVED  ON AVERAGE  FIVE TIMES 
THE AMOUNT  OF MEDICARE  REIMBURSEMENT  PER BENEFICIARY  AS 
THE LOWER  GROUP 
Average Reimbursement  For Home Health Agencies Varied Widely Among The 
6@3  Home Health  Agencies 
b(cid:1) The  average  reimbursement  per  beneficiary  for the  four  groups  ranged  from 
$1,534 to $7,978. 
b(cid:1) Table  2 shows significant  variation  in average  reimbursement  per  beneficiary 
among  the  four  groups  of HHAs.  The  average  reimbursement  per  beneficiary 
for the  high-2  group  was about  5.2 times  greater  than  the  average 
reimbursement  for the  lower  group.  The  average  reimbursement  to HHAs  in 
the  high-1  and  middle  groups  were  2.7 and  1.6 times  greater  than  in the  lower 
*  groups. 
.:,,

HHAs  Arrayed  into  Four  Groups  Based  on Their 
Average  Medicare  Reimbursement  per  Beneficiary 
> 
Lower  Middle  Higher  Group  Total 
Group  Group  Average
HHAs  HHAs 
1 I  H
,.  ... ..:,.; :$, . High- 1  High-z : :.:: :y: ..:..: 
 .;:.: ;:::;  
Average  Reimbursement  per  $1,534  $2,51 4  $4,198  $7,978  $2,957
Beneficiary 
Range  of Average  $1,982  $3,164 
Reimbursement  per  <$1,982  >$6,484 
Beneficiary  $3;63  $;84 
w  The  HHAs  which  comprised  the  two high groups  represented  one  third  of all 
the  agencies,  served  one  third  of the  beneficiaries,  but  received  51.5 percent  of 
the  $9.65 billion  reimbursed  by Medicare  in 1993 for home  health  services.  In 
addition,  the  341 HHAs  in the  high-2 group,  which  represented  only 5 percent  of all the  HHAs,  received  10 percent  of the  total  Medicare  reimbursement  for 
home  health  services  in 1993.  The  two-thirds  of the  HI-I&  in the  lower  and 
middle  groups  received  48.5 percent  of the  1993 Medicare  reimbursement. 
Most HHAs Provided Home Health  Care At Less Than The National  Average 
Reimbursement  Per Medicare  Beneficiary 
b	 The  chart  below  shows that  sixty-three  percent  (4,253)  of the  HHAs  provided 
home  health  semices  at or below  the  national  average  reimbursement  of $2,957 
per  beneficiary. 
b	 Thirty-seven  percent  (2,550)  of the  HHAs  provided  home  health  services  above 
the  $2,957 national  average  reimbursement  per  beneficiary. 
Almost Tw~Thirds  Of HHAs  Provided Home Health  Services For Less 
Than The National Average Reimbursement  Per Beneficiary 
#  of  HHAs
6000 
4263 
4000 
2650 
3000 
/ 
2000 
1000 
0 
S2065  S44S1 
HHAs  Avg  Reimbursement  Per  Beneficiary 
i-i HAs  Arrayed  6eiow  &  Above 
Nationai  Mean  of  S2.957 
8
 AVERAGE  REIMBUMEMENT  PER VISIT WAS SIMILAR AMONG  ~ 
BUT THE  NUMBER  OF VISITS VARIED WIDELY 
Average Number  Of Visits By HHAs In The Highest Group Was About Five Times 
Greater  Than That By HHAs In The Lower Group 
b	 In  1993, the  6,803 HHAs  provided  164.5 million  home  heaJth  visits to  3.26 
million  Medicare  beneficiaries.  The  average  number  of visits per  beneficiary 
for all 6,803 HHAs  was 50.  See table  3. 
b	 The  average  number  of visits ranged  horn  27 visits per  beneficiary  in the  lower 
group  of HHAs  to  141 visits per  beneficiary  in the  high-2 group  of HHAs. 
Lower  Middle  Higher  Group 
Group  Group 
HHAs  HHAs 
I  !  I 
.,., , High-1  High-2
Average  Number  of  27  41  72  141 
Visits Per  Beneficiary 
b	 Table  4 shows that  the  ratio  of average  visits by the  top  3 groups  of HHAs  to 
the  visits by the  lower  group  is directly  correlated  to the  ratio  of average 
reimbursement  by the  top  3 groups  to that  in the  lower  group.  To  illustrate, 
HHAs  in the  high-2  group  averaged  5.2 visits per  beneficiary  to every  one  visit 
by HHAs  in the  lower  group.  Likewise,  average  reimbursement  for high-2 
HHAs  was $5.2 for  eve~  $1 received  by HHAs  in the  lower  group. 
IIGROUPS  OF HHAs  I  REIMBURSEMENT  mm  II 
I  I 
I  I 
Average  Ratio  Average  Ratio 
High-2  $7,978  5.2  141  5.2 
High-1  $4,198  2.7  72  2.6 
Middle  $2,514  1.6  41  1.7 
9
 Over 60 Percent  Of HHAs Made Less Than The National Average Number  Of Visits 
Per Beneficiary 
b	 The chart below shows that 62 percent  (4,228) of the HHAs averaged  33 visits 
per  beneficiary.  This  average  is well below  the  national  average  of 50 visits per 
beneficiary. 
	 Thirty-eight  percent  (2,575)  of the  HHAs  averaged  81 visits per  beneficiary  --
well abo;e  the  national  average  of 50. 
Almost IkmThirds  Of HHAs Provided Fewer Than The 
National Average Number Of Visits Per Beneficiary 
#  of  HHAe 
6000 
422e 
/ 
4000 
3000 
2000 
1000 
0 
as 
HHAu  Avg  #  of  Vlaitis  Per  eem-flolary 
HI-3A*  Arrayed  Below  &  Above  National 
Mean  Number  of  60  ViSitu 
The  Average Reimbursement  Per  Visit Was Fairly Consistent  Across All Four  Groups 
As illustrated  in table  5, the  average  reimbursement  per  visit varied  among  the  four 
groups  by only about  $2 to $4. 
10
 Higher  Group 
Average

Reimbursement  per  $56.06  $60.82  $58.28  I $56.71

Visit

HIGHER  GROUP  HHAs  TENDED  TO  BE PROPRIETARY  FOR-PROFIT,  NON-
AFFILIATED  ORGANIZATIONS 
Some Agency Characteristics  Were Good Predictors Of Which HHAs Received 
Higher Reimbursement  And Provided Higher Numbers Of Visits 
b	 The  percentage  of proprietary  for-profit  agencies  rose  from  27 percent  in the 
lower  group  to  85 percent  in the  high-2 group,  as illustrated  in table  6. 
b	 The  percentage  of voluntary  non-profit  and  public/government  HHAs 
decreased  from  the  lower  and  middle  groups  to the  higher  groups. 
Type  of Ownership	 Lower  Middle  Higher  Group 
Group  Group  HHAs 
HHAs  HHAs 
IIProprietary  For-Profit  I  26.7%  I  37.5%  \  65.4%  I  85.4% 
IIVoluntaxy  Non-Profit  I  43.8%  I  44.8%  I  24.1%  I  11.7% 
Public/Government  29.5%  17.7%  10.5%  2.9% 
TOTALS  100%  100%  100%  100% 
11
 b	 The  majority  of HHAs  in the  two higher  groups  were  non-dfiliated  Only a 
small  percentage  of HHAs  in the  higher  groups  were  affiliated  with  a hospital, 
skilled  nursing  facility or other  medical  service  organization.  See  page  A-2. 
b	 The  percentage  of non-affiliated  HHAs  rose  from  the  lower  group  to the  higher 
groups.  See  page  A-3. 
b	 Over  41 percent  of high-2 agencies  had  branches,  as compared  to  12.8 percent 
of the  lower  group  HI-IA.  See page  A-4. 
The Two Higher Groups Provided Seven Times More Aide Visits A  Lower Group 
Agencies And Employed  A Higher Percentage  Of Total ITEs  As Aides 
b	 HHAs  in the  high-2 group  provided  7 times  more  aide  visits per  beneficiary  and 
four  times  more  skilled  nursing  visits as those  in the  lower  group,  as table  7 
below  illustrates. 
Home  Health  Aides  10.4  17.6  37.0  77.5  23.6 
Skilled  Nursing  13.3  18.5  29.0  52.9  21.5 
Physical  Therapy  2.8  3.9  4.4  7.3  3.9 
All Other  Types  0.8  1.4  1.6  3.0  H  1.4 
Average  Number  for M  27.4  41.3  72.0  140.7  50.4 
Types  of Visits 
12
 b	 Over  half  of all visits performed  by high-2 group  agencies  were  aide  visits.  See 
page  A-5. 
b	 High-2  group  HHAs  averaged  25home  health  aides  (representing  40 percent 
oftheir  work  force)  as compared  toan  averageof  about  7forthe  lower  group 
(representing  28 percent  of their  work  force).  See page  A-6. 
Home Health  Agencies Generally Provided The Same Types Of SeMces 
b	 All HHAs  in all four  groups  and  98 percent  of HHAs in all four groups 
provided nursing services and home health aide services, respectively.  See page 
A-7. 
b	 The  majority  of the  agencies  provided  therapy  services,  regardless  of group. 
See  page  A-7. 
QUALITY  OF HHA SERVICES DID NOT APPEAR TO EXPLAIN THE 
VARIATION  IN AVERAGE  REIMBURSEMENT  PER BENEFICIARY 
In the  absence  of outcome  measures  for Medicare  home  health  services,  we used 
several  proxies  for quality.  Those  proxies  were  the  number  of deficiencies  and 
complaints  recorded  by the  HCFA  Survey and  Certification  Branch,  and  an HI-IAs 
accreditation  status.  While  we recognize  that  accreditation  is an  alternative  to 
certification  through  the  State  survey mechanism,  we believe  that  the  popular 
perception  is that  agencies  which  are  accredited  hold  the  promise  of providing  better 
services.  This  may or may not  be  the  case. 
HHAs That Provided SeMces At A Higher Level Of Reimbursement  Did Not Have 
Fewer Deficiencies 
To  participate  in the  Medicare  program,  HHAs  must  agree  to be  surveyed  annually  to 
determine  if they  are  in compliance  with Medicare  conditions  of participation. 
Conditions  of participation  are  health,  quality  and  persomel  standards  and  are 
prescribed  in the  Code  of Federal  Regulations.  There  are  12 conditions  of 
participation.  Annual  suweys  of compliance  with the  conditions  are  performed  by 
State  survey  agencies  under  contract  with HCFA.  HCFA  expects  HHAs  to correct 
deficiencies  identified  by a State  survey within  60 days of being  notified  of them,  or 
sooner  if a question  of adequate  and  safe  care  is raised. 
When  we arrayed  HCFAS Survey and  Certification  data  on HHA  deficiencies,  we 
found  no significant  difference  among  the  agencies  in the  four  groups.  This  is 
illustrated  by table  8.  The  rows which refer  to deficiencies  contain  data  about  both 
types  of deficiencies,  that  is, conditions  deficiencies  and  standards  deficiencies. 
Conditions  are  broad,  refer  to systems,  or address  jeopardy  to a beneficiarys  health  or 
safety.  Standards  are  components  of conditions. 
13
 Lower  Middle  Higher  Group  HHAs 
Deficiency  Status  Group  Group 
HHAs  HHAs 
% HHAs  With  1 To  6 Deficiencies  \  45.5%  ]  43.8%  I  46.8%  I  42.8% 
9Z0HHAs  With  7 Or  More  8.l?ZO  11.0%  12.5%  16.4% 
Deficiencies 
% HHAs  with  Current  Condition  3.3%  3.5%  4.3%  7.0% 
Deficiencies 
YOHHAs  with  Current  Standards  53.4%  54.6%  59.2?lo  58.7% 
Deficiencies 
The Percentage  Of HHAs In The Highest Group That Had At Least One Complaint 
Was More  Than  Three  Times  The  Percentage  of HHAs  In The  Lower  Group 
b	 Nearly  60 percent  of HHAs  in the  high-2 group  had  at least  one  complaint,  as 
compared  to about  17 percent  of I-II%% in the  lower  group.  See  page  A-8. 
Agencies In The Highest Group Were Much k  Likely To Be Accredited  Than 
Those In The Lower Groups 
b	 Both  average  reimbursement  and  average  number  of visits per  beneficiary  of all 
accredited  HHAs  were  lower  than  the  average  reimbursement  and  average 
number  of visits of non-accredited  HHAs.  See  pages  A-9 through 
A-Il. 
CHARACTERISTICS  OF  BENEFICIARIES  SERVED  BY HHAs  WERE  SIMILAR 
AMONG  ALL  FOUR  HHA  GROUPS 
b	 Little  difference  existed  among  the  four  groups  of HHAs  in the  age  of 
beneficiaries  served.  See page  A-12. 
b	 There  was a slight increase  in the  percentage  of episodes  for female 
beneficiaries  and  nonwhite  beneficiaries  from  the  lower  group  to the  higher 
groups.  See  pages  A-13 and  A-14. 
14
 b	 The  percentage  of deaths  while in care  of an HHA  increased  slightly from  the 
Iowergroup  tothe  higher  groups.  Seepage  A-15. 
b	 The  percentage  of episodes  for beneficiaries  who were  Medicare-eligible 
because  they were  aged,  disabled  or in end-stage  renal  disease  was quite  similar 
among  the  four  groups.  Seepage  A-16. 
b	 Lastly,  an analysis  of principal  diagnostic  codes,  a proxy for medical  condition, 
did not  suggest  that  beneficiaries  inthe  higher  groups  were  any sicker  orinany 
greater  need  ofmedical  services  than  those  beneficiaries  inthe  lower  and 
middle  groups.  See  pages  A-17 through  A-21. 
15
 DISCUSSION

This  report  shows wide variation  among  6,803 home  health  agencies  (HHAs)  in the 
average  reimbursement  per  Medicare  beneficiary  in 1993.  The  major  reason  for the 
variation  was the  average  number  of visits per  beneficiary  that  HHAs  provided.  Some 
HHAs  made  substantially  more  visits per  beneficiary,  on average,  than  others. 
The  work  performed  in this inspection  must  be  placed  in the  broadest  context, 
including  the  battery  of OIG  work  in home  health  which  has been  performed  over  the 
past  year.  The  findings  horn  this inspection  coupled  with  the  findings  from  other  OIG 
work  present  a picture  of a Medicare  benefit  which  is vulnerable  to fraud  and  abuse. 
While  variation  in reimbursement  among  HHAs  is not  inherently  bad,  our  analyses 
certainly  suggest  that  excessive  numbers  of visits are  being  provided  by some  HHAs  in 
some  cases.  Again,  this conclusion  is strengthened  when  considered  with  other  OIG 
findings  regarding  abuse  of the  benefit  and  outright  fraud.  Examples  of findings  from 
other  OIG  work  will make  this clearer. 
Over  the  past  year,  we have  identified  numerous  instances  of inappropriate  home 
health  payments  through  audits  of provider  claims  in Florida  and  Georgia.  For 
example,  an audit  of one  HHA  in Florida  revealed  that  of $45.4 million  claimed  in 
1993, well over  half, $25.9 million,  did not  meet  reimbursement  requirements.  Seventy 
five percent  of the  claims  submitted  did not  meet  Medicare  guidelines.  We  found: 
b  visits claimed  were  never  made; 
b  visits were  made  to persons  who were  not  homebound; 
b  visits which  physicians  denied  having  authorized  were  made;  and 
b  visits were  made  to beneficiaries  who  did not want  the  services. 
In another  project  in Florida,  we randomly  selected  HHA  claims  in the  state  and 
found  that  26 percent  of claims  did not  meet  Medicare  guidelines.  Inappropriate 
claims  included: 
b  visits to beneficiaries  who were  not  homebound; 
b  visits to beneficiaries  who did not  need  the  services  that  were  delivered;  and 
b  visits claims  for services  not  provided. 
Based  on these  audit  findings,  we recommended  that  HCFA  require  physicians  to have 
knowledge  of beneficiaries  condition  prior  to certi~g  a plan  of care,  require  fiscal 
intermediaries  which  review  Florida  claims to noti~  beneficiaries  when  claims  are  paid 
16
 on their  behalf,  and  require  fiscal intermediaries  to perform  in-depth  reviews  of claims 
horn  HHAs  in Florida. 
In an audit  of an HHA  based  in Georgia,  we found  the  agency  claimed  approximately 
$14 million  in unallowable  costs during  one  cost reporting  year.  Those  unallowable 
costs included  expenses  for 
b  theater  tickets, 
b  alcoholic  beverages, 
b  bags  of Vidalia  onions  for legislators,  and 
b  gourmet  popcorn  for physicians. 
We  have  found  several  types  of fraud  among  HHAs,  including 
b  cost report  fraud, 
b  excessive  services, 
b  services  not  rendered, 
b  use  of unlicensed  staff, 
b  falsified  plans  of care, 
b  forged  physicians  signatures,  and 
b  kickbacks. 
Our  investigative  work  has led to indictments  and  possible  exclusions  from  the 
Medicare  program.  Between  1990 and  1994, OIG  investigations  led  to 25 successful 
criminal  prosecutions  of HHAs  or their  employees  and  the  imposition  of 3 civil money 
penalties.  In  1993 and  1994 alone,  39 HHAs  or their  employees  were  excluded  from 
participating  in the  Medicare  or Medicaid  program. 
We  have  also looked  at how other  payers  manage  home  health  benefits.  In our 
inspection  report,  Home  Health  Agencies:  Alternative  Coverage  and  Payment 
Policies, we describe  mechanisms  used  by other  payers.  For  example,  other  payers 
tend  to structurally  limit  their  benefit  by capping  the  number  of services  or visits 
allowed  per  beneficiary.  They  also emphasize  case  management,  post  payment  review, 
and  ensure  beneficiary  participation  through  copayments.  In addition  they  encourage 
beneficiaries  to report  cases  of inappropriate  services,  abuse  and  fraud. 
17
 RECOMMENDATIONS

HCFA Should Ikplore  Ways to Address Excessive Utilization and Inappropriate 
Variation  in Reimbursement  Among HHAs. 
The  work  of the  OIGS audit  and  investigations  staff have  identified  instances  of 
medically  unnecessary  care  and  inappropriate  or fradulent  billing by specific  HHAs. 
The  data  in this report  describes  more  broadly  patterns  of billing by certain  HI-L% 
which  may indicate  fraud  or abuse.  AS such, we believe  it is prudent  for  HCFA  to 
take  steps  to investigate  such patterns  and  place  systematic  controls  on the  home 
health  benefit  to prevent  abuse. 
First,  HCFA  Should  Intensifv  its Efforts  to Scrutinize  Claims  Submitted  bv Hi~h  Cost 
Apencies. 
HCFA  has  already  begun  this effort  through  its activities  under  Operation  Restore 
Trust.  We  have  provided  information  to HCFA  about  the  agencies  in our  analysis 
which  had  higher  than  average  per  beneficia~  reimbursement,  for the  purposes  of 
targeting  agencies  for further  review. 
Second.  HCFA  Should  Explore  Wavs in Which  to Prevent  Unscrwmlous  Agencies 
from  EnEagin~  in Abusive  Practices. 
In addition  to targeting  certain  agencies  for review,  HCFA  should  work  to  develop 
mechanisms  to prevent  agencies  from  engaging  in practices  which  result  in 
inappropriate  use  of the  home  health  benefit. 
This  can be  done  in a variety  of ways.  For  example: 
b	 Involving  Beneficiaries  in Detecting  and  Reporting  Unscrupulous  Behavior: 
through  the  use  of Explanation  of Medical  Benefits  (which  HCFA  is currently 
testing),  confirmation  of visits received,  and  certification  of need  and  eligibility 
for home  health  care. 
b	 Involving  Physicians  in Detecting  and  Reporting  Unscrupulous  Behavior:  now 
that  HCFA  is paying  physicians  for case  management  services  delivered  to 
home  health  patients,  it is in a good  position  to use physicians  to monitor  the 
care  provided  to beneficiaries,  report  unscrupulous  providers,  and  refer  patients 
to agencies  with  a record  of good  practice.  fiis  wifl require  educational 
outreach  to the  physician  community. 
b	 Setting  Higher  Standards  for Participation  in the  Medicare  Program:  HCFA  is 
now considering  its policies  with regard  to how agencies  enter  the  Medicare 
program  and  obtain  permission  to bill for sewices,  and  under  what  conditions 
certain  entities  may be  suspended  or dropped  from  the  program. 
18  HCFA Should Continue  Its Efforts To Improve The Home Health  Benefit and To 
Control Frau@ Waste and Abuse. 
We support  HCFAS efforts  in developing  potential  long term  solutions  towards 
benefit  reform  which will assist in preventing  fraud  and  abuse  by unscrupulous 
providers.  These  HCFA  efforts  include: 
b	 Outcome  Measures:  We  urge  HCFA  to continue  their  work  in developing 
outcome  measures  which  can be  used  to assess  the  performance  of individual 
home  health  agencies. 
b	 Pros~ective  Pa vrnent  Svstem:  We believe  that  a home  health  prospective 
payment  system  might  be  the  most  effective  long term  model  for restructuring 
the  benefit  and  we encourage  HCFA  to continue  their  work  in testing  such  a 
system.  We  believe,  however,  that  it is important  that  a new system  not 
grandfather  in utilization  patterns  of the  higher-reimbursement  agencies.  It is 
worth  noting  that  this was an important  issue when  a prospective  payment 
system  was being  developed  for hospitals. 
Additional  structural  reform  might  also assist in preventing  fraud,  waste  and  abuse.

As we indicated  in a prior  report,  Home  Health  Agencies:  Alternative  Coverage  and

Payment  Policies,  issued  in May  1995, HCFA  may wish to consider  adopting  certain

practices  of other  third  party  payers.

We also believe  that  the  use  of aides  deserves  further  examination,  based  on the  data

presented  in this report.

We  plan  to work  together  with HCFA  and  the  Assistant  Secretary  for Planning  and

Evaluation  (ASPE)  on further  analysis which  can  help  shape  these  alternatives.

Budget Implications 
The  elimination  of fraud,  waste  and  abuse  in the  home  health  benefit  can  create 
significant  cost  savings for the  program.  Such  an elimination  would  ultimately  reduce 
the  average  number  of visits for beneficiaries  overall,  while  ensuring  that  appropriate 
services  are  still delivered  to beneficiaries  in need.  To  estimate  the  potential  impact 
of effective  action,  we developed  the  following  calculations. 
b	 We estimated  Medicare  expenditures  based  on different  levels  of average 
number  of visits per  beneficiary  nationwide.  For  example,  if the  national 
average  number  of visits had  been  45 instead  of 50, Medicare  would  have  saved 
over  $1 billion  in 1993 in Medicare  payments  for home  health  services. 
k	 The  average  number  of visits per  Medicare  beneficia~  for  almost  two-thirds  of 
home  health  agencies  (the  lower  and  middle  groups)  in 1993 was 33.  If the 
average  number  of visits by the  remaining  one-third  of HHAs  had  also been  33 
19  visits per  beneficia~,  Medicare  cost would  have  decreased  by about  $3.3 billion 
in  1993. 
F	 However,  based  on HCFA  actuarial  figures,  the  average  number  of visits per 
beneficiary  is increasing  annually.  Based  on our  calculations  for  1993 data, 
each  time  the  national  average  number  of visits per  beneficiary  increases  by 
one,  it costs the  Medicare  program  an additional  $191.4 million.  If this upward 
trend  in the  number  of visits were  to continue  unabated,  the  potential  increase 
in the  cost to Medicare  would be  substantial. 
b	 Using  HCFA  projections  of $14.4 billion  in Medicare  home  health  care 
expenditures  for  1995, an average  number  of 33 visits per  HHA  would  result  in 
a savings of nearly  $5.0 billion. 
AGENCY  COMMENTS 
We  received  comments  on the  report  from  HCFA  and  ASPE.  HCFA  concurred  with

our  recommendations,  but  felt that  the  report  did not  fully distinguish  between

variation  that  is appropriate  and variation  that  suggests  excessive  utilization  or

inappropriate  reimbursement  levels.  HCFA  concluded,  however,  that  when

considered  with the  other  OIG  work  in home  health  over  the  last  several  years,  the

findings  in this report  do suggest  enough  of a pattern  to recommend  that  HCFA

examine,  and  address  where  appropriate,  excessive  utilization  and  inappropriate

variation  in reimbursement  among  HHAs.

ASPE  concurred  that  the  study showed  clear  evidence  of patterns  in home  health

agency  practices,  and  that  such patterns  should  be  investigated  and  more  thoroughly

understood.  Noting  that  our  data  were  limited,  ASPE  stated  that  recommendations

for  change  should  be  approached  cautiously.  ASPE  expressed  concern  for the  welfare

of beneficiaries,  and  stated  that  any recommendations  which would  directly  impact

them  be  eliminated.  ASPE  suggested  two follow-up  reviews  to our  study  -- one  a

regression  analysis  on potential  causes  of variation  in cost, and  two an intensive  review

to target  high-cost  HHAs.

We  plan  to work with HCFA  and  ASPE  concerning  additional  efforts  in this area,  and 
have  so indicated  in the  report.  We  have  also made  some  revisions  to the  text  of the 
report  based  on their  comments,  particularly  in the  focus  of our  recommendations. 
The  full text  of HCFA  and  ASPE  comments  is contained  in appendix  C. 
20
 APPENDIX  A 
DETAILS REGARDING  POSSXBLECAUSES OF THE 
VARIATION  IN AVEIUIGE  REIMBURSEMENT  PER BENEFICIARY 
AMONG HOME HEALTH  AGENCIES 
A-1  ORGANIZATIONAL  AFFILIATION 
THE MAJORITY  OF AGENCIES IN THE TWO HIGHER  GROUPS  WERE 
NON-AFFILIATED  HHAs 
When we compared  organizational  affiliation,  we found  that  the  distribution  of 
agencies  affiliated  with various  types  of larger,  umbrella  health  care-related 
organizations  was quite  similar  from  one  group  to the  next,  except  for  the  high-2 
group.  In the  high-2 group,  nearly  twice the  percentage  of agencies  are  in the  other 
category,  which  is the  non-affiliated  category. 
Lower  Middle  Higher  Group 
FACILITY  TYPE  Group  Group  HHAs 
HHAs  HHAs 
I  I  I  I  II 
Government  & Voluntarv*  1%  1%  1%  I?zo 
I 
Official  Health  Agency**  23%  13%  12940  12!Z0 
II 
Rehabilitation  I o% I  o%  I o%  I o% 
II 
Hospital-Based  I  35%  I  36%  I  20%  I  4% 
II 
SNF-Based  2%  1%  1%  1% 
I t  1 t 
II 
Other/Non-affiliated  I  31%  I  39%  I  60%  I  80% 
TOTALS  1009?0  100%  100%  100% 
* Government  and voluntary  is a type  of official health  agency  which  is a 
governmental  HHA  that  also receives  voluntary  support. 
** Official  health  agency  is usually  a county  or local  public  health  department. 
A-2
 ORGANIZATIONAL  AFFILIATION  (Cent) 
THE PERCENTAGE  OF NON-AFFILIATED  HHAs IUSES FROM  THE  LOWER 
TO HIGHER  GROUPS 
The array  of affdiated  versus  non-affiliated  agencies  is visually summarized  in the 
following  bar  charts.  Affiliated  HHAs  are  those  that  are  run  by or are  part  of a 
visiting  nurses  association,  a government  or voluntary  agency,  an official  health  agency, 
a rehabilitation  facility,  a hospital,  or a skilled nursing  facility.  Non-aflliated  agencies 
are  those  defined  by the  HCFA  as other. 
HHA  FACILITY  TYPES

Affiliatevds
 . Non-Affiliated

% of  HHAs 
100% 
80% 
80% 
tzz 
l%
61%  60% 
 
60% 
40% 
31% 
20% 
o% 
LOW  MIDDLE  HIGH-1  HIGH-2 
HHA  GROUPS 
_  Affiliated  =  Non-Affiliated 
4  Groups  of  HHAs  by  Average 
Reimbursement  per  Beneficiary 
A-3
 BRANCHES

FORTY-ONE  PERCENT  OF THE HHAs IN THE HIGHEST  GROUP  HAD 
BRANCHES,  OVER  3 TIMES THE PERCENTAGE  OF HHAs IN THE LOWER 
Lower  Middle  Higher  Group 
Group  Group  HHAs 
HHAs  HHAs 
High-1  High-2 
Percent  of HHAs  with  12.8%  20.7%  30.4%  41.470 
Branches 
= 
I 
A-4
 TYPE OF HHA VISIT 
OVER HALF OF ALL VISITS PROVIDED  BY HIGHER  GROUP  HHAs WERE 
HOME  HEALTH  AIDE VISITS 
HHAs in the lower group provided nearly sixty percent  of all their visits as skilled 
nursing  and  physical  therapy  visits while figher  @oup  agencies  provided  less than  half 
of their  visits in those  categories. 
Type  of Visit  Lower  Middle  Higher  Group  Total 
Listed  in Descending  Group  Group  HHAs  Average 
Order  by Utilization  HHAs  HHAs 
I 
Percentage  of Total  Visits 
II 
Home  Health  Aides  I  38.1%  I  42.6%  I  51.4%  I  55.1%  46.9% 
Skilled  Nursing  I  48.6%  I  44.8%  I  40.3%  I  37.7%  II  42.7% 
Physical  Therapy  10.2%  9.3%  6.1%  H== 
1  I  1  !  2 
Occupational  Therapy  1.4%  1.5%  0.8%  0.5%  ~  1.1% 
Speech  Pathology  0.9%  0.7%  0.5% 
r  I  ,  1  0.5%  Ik 
Social  Services  0.8?Z0  1.1%  0.9% 
!  loO%  lk 
TOTALS  100%  100%  100%  10070  100% 
A-5
 PROFILE  OF FIEs 
HIGHER  GROUP  AGENCIES HAD A DISPROPORTIONATELY  HIGHER 
NUMBER  OF HOME  HEALTH  AIDES 
Average  Number  of FTE  Lower  Middle  Higher  Group  HHAs 
by Categories  Group  Group 
Registered  Nurses  9.5 (41%)  14.8 (38%)  16.0 (31%)  15.6 (25%) 
Licensed  Practical  Nurses  2.0 (9%)  2.0 (5%)  5.2 (10%)  8.9 (14%) 
Physical  Therapists  0.9  1.8  1.7  1.2 
Occupational  Therapists  0.2  0.5  0.4  0.4 
Speech  Therapists  0.1  0.3  0.3  0.3 
Social  Workers  0.5  0.8  0.8  1.2 
Aide  Workers  6.5 (28%)  12.9 (33%)  19.2 (37%)  25.1 (40%) 
Pharmacists  0.02  0.04  0.03  0.03 
Dietitians  I  0.05I  0.06  I  0.06  I  0.20 
All Other  Staff  I  3.4  I  5.9  I  7.9  I 9.6 
Average Total FIEsPer  23.2  39.0  51.5  62.5 
HHA  In Each Group 
A-6  TYPES OF SERVICES 
HHAs IN ALL FOUR  GROUPS ARE PROVIDING,  IN G~  THE SAME 
TYPES OF SERVICES 
HHAs  in all four  groups  provided  nursing  services  and  over  98 percent  of all HHAs 
provided  home  health  aide  services.  Well  over half  of all the  agencies  provided 
different  types  of therapy  semices,  that  is, physical,  occupational,  and  speech,  as well. 
Details  of the  percentage  of each  type  of service  provided  by all four  groups,  both  by 
HHA  employees  and  by contract,  are  in the  following table. 
Type  of Semite  HHAs  Lower  Middle  Higher  Group  HHAs 
Provide  Group  Group 
HHAs  HHAs 
Nursing  /  100%  /  100%  I  100%  I  100% 
Physical  Therapy  86.6%  93.89%  90.8%  90.9% 
Occupational  Therapy  64.O?ZO  74.8%  71.7940  66.6% 
Speech  Therapy  71.7%  83.1%  74.5%  76.5% 
Medical  Social  Worker  62.7%  78.5%  81.5%  82.4% 
Home  Health  Aide  I  98.4%  I  99.5%  I  99.3%  I  98.8% 
Interns  & Residents  I  1.0%  I  1.0%  I  1.2%  I  1.5% 
Food  Services  I  25.5%  I  27.3%  I  20.5%  ]  21.1% 
I  I  I 
Pharmacy  12.8%  I  15.7?40  13.2%  12.0% 
Medical  Equipment  17.3%  16.2%  15.7%  15.8% 
t  I  I I 
Vocational  I  1.8%  \  1.4%  I  1.5%  I  2.6% 
Laboratory  13.9%  16.5%  16.7%  20.5% 
I  1 1 1 
Other  23.2%  22.7%  26.7%  29.9% 
A-7
 COMPLAINTS 
THE  PERCENTAGE  OF HHAs IN THE HIGHEST  GROUP  THAT HAD AT 
LEAST ONE COMPLAINT WAS THREE  TIMES THE PERCENTAGE  OF HHAs 
IN THE  LOWER  GROUP 
Anyone may  lodge  a complaint  against  an HHA.  That  is, the  beneficiary,  a friend  or 
family member  of the  beneficiary,  or an employee  of an HHA  is free  to lodge  a 
complaint.  HHAs  are  required  by Medicare  regulations  to inform  all home  health 
recipients  of a hotline  telephone  number  they  or any other  interested  party  may use to 
complain. 
As the  following  figure  illustrates,  the  percentage  of HHAs  with current  complaints 
against  them  was nearly  57, as compared  to nearly  17 percent  in the  lower  group  of 
HHAs. 
PERCENT  OF  HHAS 
WITH  CURRENT  COMPLAINTS 
%  of  HHAs 
70% 
60s  66.9% 
60% 
40% 
so% 
16.7% 
20% 
10% 
o%  m 
LOW  MIDDLE  HIGH-1  HIQH-2 
HHA  QROUPS 
4  C3roups  of  HHA8  by  Average 
Reimbursement  per  BonefIoiary 
A-8
 ACCREDITATION 
AGENCIES  IN THE  HIGHEST  GROUP  WERE  MUCH LESS LIKELY TO BE 
Accredited  THAN THOSE IN THE LOWER GROUPS 
An W  may  choose  to achieve  or continue  their  Medicare  certification  either 
through  participation  in a State  agency  survey or through  a process  called  deeming. 
Two not-for-profit  organizations  have  been  granted  authority  by HCFA  to deem 
HHAs  through  an accreditation  process.  The  two organizations  are  the  Community 
Health  Accreditation  Program  (CHAP),  a subsidiary  of the  National  League  for 
Nursing,  and  the  Joint  Commission  on Accreditation  of Healthcare  Organizations 
(JCAHO).  Agencies  that  achieve  accreditation  from  CHAP  or JCAHO  will be 
deemed  compliant  with Federal  standards,  that  is the  conditions  of participation. 
Lower  Middle  Higher  Group 
TYPE  OF  Group  Group 
ACCREDITATION  HHAs  HHAs 
Percent  of HHAs

CHAP  Accredited  1.3%  1.8%  1.1%  .6%

A-9
 ACCREDITATION  (Cent) 
AVERAGE  REIMBURSEMENT  PER BENEFICIARY  OF ALL ACCREDITED 
HHAs WAS LOWER  THAN THE AVERAGE  REIMBURSEMENT  PER 
BENEFICIARY  OF NON-ACCREDITED  AGENCIES 
One  might  assume  that,  due  to the  expense  incurred  for accreditation,  agencies  which 
elect  to seek  accreditation  would  have  a higher  average  reimbursement  per  beneficiary 
than  agencies  which  are  not  accredited.  In other  words,  agencies  which  seek 
accreditation  might  tend  to fall in the  higher  groups  of HHAs.  We  found,  however, 
that  the  average  reimbursement  per  beneficiary  receiving  home  health  services  in 
accredited  HHAs  was $300 less than  beneficiaries  receiving  services  from  a non-
accredited  EEL% 
Accredited  HHAs  Provide 
Less  Costly  Services 
Avg  Reimbursement  Per  Bonoflclary
S3600 
SStoel 
/ / 
S2703
S3000 
/  / 
S2600 
S2000 
s 1600 
s 1000 
S600 
so 
Accredited  HklA~  Non-Auaredlt.d  HHAs 
A-10
 ACCREDITATION  (cent) 
AVERAGE  NUMBER  OF VISITS PER BENEFICIARY  OF ALL Accredited 
HHAs WAS LOWER THAN AVERAGE  NUMBER  OF VISITS PER 
BENEFICIARY  OF NON-ACCREDITED  AGENCIES 
The average number  of visits per beneficiary receiving home health  services from an 
accredited  HHA was 44.  The average number of visits per beneficiary receiving home 
health services from a non-accredited  HI-IA was 54.  The mean for the entire  6,803 
HHAs was 50 visits per beneficiary. 
Accredited  HHAs  Provide  Fewer  Visits 
Avg  Numb.r  of  Visit.  Per  Bonoflciary 
44 
/ 
Aeorodlted  HHAs  Nlon-Acoredlt.d  HHA= 
A-11
 AGE OF BENEFICIARY 
LITILE DIFFERENCE  EXISTED AMONG THE FOUR  GROUPS  OF  HHAs  IN 
THE AGE OF THE  BENEFICIARIES  THEY SERVED 
When  we compared  the  average  age  of beneficiaries  being  seined  by the  HHAs  in the 
four  groups,  we found  a very small variation  among  the  groups. 
Percent  of Home  Lower  Middle  Higher  Group

Health  Episodes  for  Group  Group

Medicare  Beneficiaries  HHAs  HI-W

Age <65  6.3%  6.8%  7.5%  8.5% 
Age 65-79  53.1%  51.2%  49.770  48.89to  51.1% 
Age  >79  40.6%  42.0%  42.8%  42.79Z0  41.9% 
Total  I  100%  I  100%  I  100%  I  100%  100% 
Average  Age  of  76.4  76.7  76.5  75.7  76.5 
Beneficiary  When 
Home  Health  Service 
Began 
A-12
 GENDER OF BENEFICIARY

THERE  WAS A SLIGHT INCREASE IN THE PERCENTAGE  OF EPISODES 
FOR FEMALE  BENEFICIARIES  FROM THE LOWER  GROUP  TO THE 
HIGHER  GROUPS 
As illustrated  by the  table  below,  the  percentage  of females  increased  by about  3

percentage  points  from  the  lower  group  to the  high-1 group  and  by about  4

percentage  points  from  the  lower  group  to the  high-2 group.  On  the  other  hand,  the

percentage  of males  decreased  by about  2 percentage  points  from  the  lower  group  to

the  high-1  group  and  by about  4 percentage  points  from  the  lower  group  to the  high-2

group.

A-13
 RACE OF BENEFICIARY 
THE PERCENTAGE  OF EPISODES FOR NON-WHITE BENEFICIARIES 
INCREASED  FROM  THE LOWER GROUP TO THE HIGHER  GROUPS 
The  percentage  of episodes  for non-white  beneficiaries  nearly  doubled  from  the  lower

group  to the  high-2 group,  as illustrated  by the  following  table.  On the  other  hand,

the  percentage  of episodes  for white  beneficiaries  decreased  by about  7 percentage

points  from  the  lower  group  to the  high-1 group  and  by about  11 percentage  points

from  the  lower  group  to the  high-2 group.

Percent  of Home  Lower  Middle  Higher  Group  Total

Health  Episodes  for  Group  Group

Beneficiaries  HHAs  HHAs

White  88.4%  85.6%  81.3%  77.3%  lk=
1  1  I  1 
11Non-White  ]  11.8%  \  14.4%  I  18.7%  I  22.7%  II 15.3% 
II

Total  I  100%  I  100%  I  100%  I  100%  [  100% 
A-14

.  DEATHS  WHILE  IN CARE

THERE WAS A SLIGHT DIFFEREN CE IN THE PERCENT  OF DEATHS 
WHILE  IN CARE OF A HOME  HEALTH AGENCY BETWEEN  THE  LOWER 
GROUP  AND THE  HIGHER  GROUPS 
When  we examined  home  health  services  that  were  truncated  by death  of the 
beneficiary,  we found  only a slight difference. 
Lower  Middle  Higher  Group  Total

Group  Group  HHAs

HHA

Percent  of Medicare

Beneficiaries  Who  Died  2.4%  2.7%  3.2%  3.5%  2.8%

During  a Home  Health

Episode

A-15
 ELIGIBILITY OF BENEFICIARY 
THE PERCENTAGE  OF EPISODES FOR BENEFICIARIES  WHo  WERE 
MEDICARE-ELIGIBLE  BECAUSE THEY WERE AGED, DISABLED OR IN 
END-STAGE  RENAL DISEASE WAS SIMILAR AMONG GROUPS 
We found  only a slight  difference  among  the  groups,  as shown below. 
Percent  of Episodes  Lower  Middle  Higher  Group  Total 
for Beneficiaries  Group  Group  Average 
Who  Are:  HHAs  HHAs  I 
Disabled  5.1%  5.4%  6.1%  6.4?Z0  5.6% 
ESRD  1.7%  2.0%  1.9%  1.8%  -+  1.970 
i  1 I  [ I  i= 
Total  100%  100%  100%  100% 
A-16
 AVERAGE  MEDICARE  REIMBURSEMENT  PER BENEFICIARY  INCREASED 
GREATLY  FROM  THE I.XXVERGROUP AGENCIES TO THE HIGHER 
GROUP  AGENCIES  WITHIN EACH DIAGNOSIK! CODE 
We arrayed all diagnostic codes  by total  reimbursement  by the  Medicare  program  to 
the  6,803 HHAs  in our  inspection.  The  following table  shows the  15 diagnostic  codes 
with the  highest  reimbursement  amounts  representing  52.4 percent  of total  Medicare 
expenditures  for home  health  in calendar  year  1993. 
ICD-9-CM  Lower  Middle  Higher  Group  Total 
Diagnostic  Code  Group  Group  Average 
HHAs  HHAs 
Diabetes  Mellitus  $1,575  $2,752  $4,988  $8,386  $3,652 
Heart  Failure  $1,423  $2,172  $3,380  $6,047  $2,537 
Chronic  Ulcer  of Skin  $2,714  $4,145  $5,981  $8,908  $4,610 
Cerebrovascular  $1,946  $2,798  $3,916  $5,831  $3,049 
Disease  F 
Hypertension  $1,177  $1,860  $2,959  $5,071  $2,513 
,  t  I 
Puhnonary  Disease  $1,474  $%215  $3,327  $5,103  II  $2,498  II 
Osteoarthrosis  $1,027  $1,509  $2,273  $3,979  $1,692 
Urinary  System  $2,461  $3,473  $4,815  $7,156  $3,685 
Symptoms 
Fracture  of Neck  $1,327  $1,946  $2,691  $3,935  $2,056 
of Femur 
Cardiac  Dysrhythmias  $1,124  $1,723  $2,689  $4,352  $2,055 
Other  Urinary  Tract  $1,486  $2,062  $3,001  $4,765  $2,501 
Disorders 
General  Symptoms  $1,224  $1,983  $3,035  $5,108  $2,287 
Osteoporosis  $1,882  $2,984  $4,124  $7,083  $3,035 
Other  Forms  of Heart  $1,069  $1,558  $2,560  $4,710  $1,834 
Disease 
Pneumonia  $1.045  $1.523  $2.152  $3.045  $1.629 
A-17
 Even  when  adjusting  forsize  of the~such  differences  remain.  Forexample,  we 
analyzed  patterns  of payment  for the  three  principal  diagnoses  which  accounted  for 
almost  one  quarter  of all  1993 Medicare  expenditures,  diabetes,  heart  failure,  and  skin 
ulcers,  concentrating  only on large  HHAs  (those  with at least  1,000 beneficiaries). 
These  results  were  consistent  with those  shown  on the  previous  page.  Using  the 
principal  diagnosis  of diabetes  we found  that  large  HHAs  with over  $5,000 average 
reimbursement  per  beneficiary  were  reimbursed  an average  of $7,17*  large  HHAs 
with  an  average  reimbursement  per  beneficiary  of $3,000 to $5,000 were  reimbursed 
an average  of $4,433; large  HHAs  with an  average  reimbursement  per  beneficiary  of 
$1,000 to $3,000 were  reimbursed  an average  of $2,293; and  all other  large  HHAs 
were  reimbursed  an  average  of $1,481. 
A-18
 AVERAGE  REIMBURSEMENT  PER VISIT IN EACH DIAGNOSTIC  CODE DID 
NOT VARY MUCH AMONG THE FOUR  GROUPS OF HHAs 
When we analyzed the average reimbursement  per visit in the top  15 diagnostic codes, 
we found  little  variation. 
[CD-9-CM  Lower  Middle  Higher  Group 
Diagnostic  Code  Group  Group 
HHAs  HHAs 
I 
Diabetes  Mellitus  I  $52.29  !  $56.88  $57.51 !  $53.13 
Heart  Failure  $55.39  $59.56  $55.26  $61.37 
Chronic  Ulcer  of  $57.78  $64.02  $62.22  $58.65  $61.92 
Win 
Cerebrovascular  $56.07  $62.22  $60.20  $52.52  $59.66 
Disease 
Hypertension  $47.91  $52.55  $53.81  $55.65  $53.35 
1  I  I  I 
Pulmonary  Disease  $54.79  $60.01  $58.42  $59.36  $58.50 
Osteoarthrosis  $58.03  $64.62  $59.88  $56.72  $60.98 
Urinary  Systems  $55.83  $61.19  $57.73  $60.44  $58.84 
Symptoms 
Fracture  of Neck 
of Femur  $58.18  $65.34  $64.58  $52.06  $62.93 
Cardiac  $55.35  $57.82  $57.01  $57.30  $57.11 
Dysrhythmias 
Other  Urinary  Tract  $55.20  $58.79  $55.96  $57.19  $56.86 
Disorders 
General  Symptoms  $55.54  $59.25  $56.85  $56.57  $57.46 
Osteoporosis  I  $56.21  I  $61.73  I  $59.68 I  $60.40  $60.05 
Other  Forms  of  $56.62  $61.59  $58.83  $57.17  $59.29 
Heart  Disease 
Pneumonia  I  $58.26  I  $63.98  I  $61.31  I  $44.51  $60.38 
A-19
 THE NUMBER  OF VISlT?3PER BENEFICIARY  IN EACH DIAGNOSTIC  CODE 
INCREASED  GREATLY  FROM THE LOW GROUP  TO THE HIGHER 
GROUPS 
We found that the average number  of visits in the highest group HHAs was from 3 to 
5timesgreaterthan  the  average  number  of visits in the  lower  group  agencies. 
ICD-9-CM  Lower  Middle  Higher  Group  Total 
Diagnostic  Code  Group  Group  HHAs  Average 
HHAs  HHAs 
Diabetes  Mellitus  I  30  I  48  I  87  I  158  II  65 
I  I  I  I  II 
Heart  Failure  26  37  61  99  44 
Chronic  Ulcer  of  47  65  96  152  75 
skin 
Cerebrovascular  35  45  65  111  51 
Disease 
Hypertension  25  35  55  91  47 
Puhnonary  Disease  27  37  57  86  43 
Osteoarthrosis  18  23  38  70  ~1=  28 
Urinary  Systems  44  57  83  118  63 
Symptoms 
Fracture  of Neck 
of Femur  23  30  42  76  33 
Cardiac  20  30  47  76  36 
Dysrhythmias  -l--
Other  Urinary  Tract  27  35  54  83  44 
Disorders 
General  Symptoms  22  33  53  90  40 
Osteoporosis  34  48  69  117  55 
Other  Forms  of  19  25  43  82  31 
Heart  Disease  k 
Pneumonia  I  18  I  24  I  35  I  68  II  27 
A-20
 HIGH  GROUP  SERVED  ONLY 5% OF THE BENEFICIARIES,  BUT RECEIVED 
NEARLY  11% OF THE MEDICARE  DOLLARS 
The  15 diagnostic codes in this analysis had the highest reimbursement  of all 
diagnostic codes and in the aggregate represented  nearly 52 percent  of Medicare 
reimbursement  for home  health  care  in 1993. 
Percent  of Beneficiaries  22.86%  39.75%  32.35%  5.04%

Receiving  Home  Health

Services  in the  Top  15

Diagnostic  Codes

Percent  of Total  12.67%  33.64%  42.76%  10.93%  100%

Reimbursement  to the

HHAs  for the  15 Top

Diagnostic  Codes

A-21
 APPENDIX  B

CALCULATION  OF ESTIMATED  SAVINGS 
The  formula  we used  for estimating  savings to Medicare  that  would  result  from 
reducing  the  average  number  of visits is illustrated  with the  following  example.  Our 
calculations  are  based  on a universe  of 3.26 million  beneficiaries  receiving  care  from 
6,803 home  health  agencies  in 1993.  The  average  number  of visits per  beneficiary 
made  by the  HI-L% was 50. 
Our  calculations  show that  decreasing  the  average  number  of visits per  beneficiary 
nationally  by one  visit results  in a savings of more  than  $190 million.  In our  example 
below,  we used  an average  of 45 visits per  beneficiary  -- a reduction  of about  5 from 
the  national  average  of 50.4.  By reducing  the  average  number  of visits from  50.4 to 
45, Medicare  would  save over  $1 billion. 
Average  Cost  Per  Home  Health  Visit:  $58.66 
Average #  of Visits Per Beneficiary Episode  x 45 
Average  Cost  Per  Beneficiary  Episode  $2,639.70 
Total  Beneficiary  Episodes  X 3.263.100 
Total  Reimbursement  Cost  (Q45 Visits  $8,613,605,070 
Total  Reimbursement  Cost  @50.4 Visits  $9.648,423.752 
Annual  Savings to Medicare  $1,034,818,682 
B-1
 APPENDIX  C 
AGENCY COMMENTS 
HEALTH  CARE FINANCING ADMINEIRATION 
ASSISTANT  SECRETARY  FOR PIANNIN G AND EVALUATION 
c-1  f~ 
,lm~  % 
.4+ 1~ 
4DEPARTMENT OF HEALTHa  liuMAN  5ERV1CES  Health Care  Financine  Admifiistratior 
%
%,
%.,m
>  The Administrator 
Washington,  D.C.  20201 
DATE 
TO	 June  Gibbs  Brown 
Inspector  General 
+M 
FROM	 Bruce  C. Vlade 
Administrator 
SUBJECT	 Office  of lns~ector  General  (C)IG) Draft  Report:  Vtiation  Among  FIome 
Health  Agen~ies  in Medicare  Payments  for Home  Health  Services 
(OEI-04-93-00260) 
This  drallreport,which  provides  information  on the extent  and  causes  of variation  in 
Medicare  payments  for borne health  care, helps to identify the problems  we are 
addressing  together  as part of Operation  Restore Trust. 
We  concur  with  OIGS recommendations  whh  one comment:  We  believe  the  report 
should  fully distinguish  between  variation  that is appropriate  andvariation  that suggests 
excessive utilization  or inappropriate  reimbursement  levels. 
Our specific  comments  on the  recommendations  are attached.  Thank  you  for the 
reports 
oppofinity  to review  and  comment  on this report.  1 look  forward  to working  with  you  in 
the future  on these issues. 
Attachment  )lealth  Care Financirw Administrations  (HCm)  Comments  on Office 
sp~  (O=  DraftReno~  Variation  A.moqg 
H~e~  vments for 
(I 
Home  Health .SSmices (OEI-04-93-002~O\ 
13CFA shouldexplore  ways to address  excessive utilization  and inappropriate  variation  in 
reimbursement  among  HI-L%, 
We concur.  brough  the Medicare  Home  Health  Initiative,  HCFA  is explofig  ways to 
restructure  the benefit  and payment  policy to address the problems  identified  by OIG 
and us.  We will consider  the suggestions  offered  by OIG  to address  excessive utilkation. 
HCJ?A  currenfly  has  a demonstration  that  pays for home health  prospectively,  on a per 
episode basis.  TM  method  of payment  would resolve the problem  of cwerutilization  of 
visits regardless  of the  type of visit.  This payment  method  would  also eliminate  the  need 
for agency limits,  as suggested  in the report.  Even  though  we  are  a number  of years 
from  implementing  this type of prospective  payment  system (PPS),  any system which sets 
parameters  for number  of visits by specific conditiort would be as extensive  a project  as a 
per episode  PPS. 
OIG  Recommendation  2 
HCFA  should  continue  its efforts  to improve  the home health  benefit  and  to control 
fraud, waste,  and  abuse. 
ResPon~ 
We  concur,  AS mentioned  ti  tbe  HCFA  is striving  to achieve  a well  managed 
report, 
home  health  benefit  and  to control  fraud,  waste,  and  abuse  through  the  Me~care  Home 
Health  Initiative  and  varkmsagencywkie fraud  and abuse  detectiort  and  enforcement 
activities.  We  and will  advice to consider  options  that 
apprmi~te,  pay  heed  @  01(?s 
maintain  the  quality  of services and that  do not financially punish beneficiaries  for 
abusive, excessive, or fraudulent  practices  of providers.  .,.. 
Page2 
Additional  C.ommen~ 
We do not Believe that  the  (31G methodology  allows onc to firmly draw a conclusion 
that the variation  i,n Medicare  payments  among HHAs,  as found  by OIG,  is a result  of 
inappropriate  utMzMion,  waste,  fraud,  and  abuse.  As  01(3  itself  concedes: 
.  The  data used  in its report  are inherently  descriptive  and, as such,  do  not 
purport  to show causal  relationships  relating  to the variation  in 
,reimbursement  among  HHAs. 
.  A host  of other,  nonobserved,  factors may contribute  to variation  in 
reimbursemen~  including  severity of ihess  and case mix, payer  m~  and 
the  role  of other  caregivers  in the home. 
Further,  the report  does not fully distinguish  between variation  that  is appropriate  and 
variation  that  suggests excessive utilization  or inappropriate  reimbursement  leveis. 
Nevertheless,  the  reports  findings, taken  in conjunction  with the battery  of OIG  work in 
home  health  performed  over the past year, do suggest enough  of a pattern  to 
recommend  that  HCFA  examine,  and address where proper,  excessive utilization  and 
inappropriate  variation  in reimbursement  among HHAs.  ,:W<,l,,

,+
*.+  Jfg   
DEPARTMENT OF HEALTH a  HUMAN SERVICES 
officeof the SecretatV 
;3 
9
-. 
* 
*>l*,d,o 
Washington,  D.C.  20201 
JUNE  22,  1995 
TO:	 June Gibbs Brown 
Inspector  General 
FROM:	 Assistant  Secretary  for 
Planning  and Evaluation 
SUBJECT:  O~G Drafi Repo~  V~ation  Among  Home Health Agencies  in Medicare 
payments  for Home Health Services,  OEI-04-93-00260  - COMMENTS 
We are pleased  to have the opportunity  to comment  on such an important  report.  The study 
shows clear evidence  of patterns  in home health agency practice where visit and reimbursement 
rates vary significantly  from agency to agency, and appear to have an upward trend in certain 
agency groupings  (non-affiliated).  This report is significant, and as such, the findings  should 
stimulate  additional  close review which are essential to  efforts to control fraud and abuse in 
Operation  Restore  Trust. 
This report clearly  demonstrates  patterns that should be investigated  and more thoroughly 
understood.  We understand  that this report is a quick effort to try to identi~  reasons for 
variation.  However  because  the data are limited,  particularly  the data on patient characteristics 
and severity of illness,  we suggest that you proceed cautiously when offering  recommendations 
for change.  Strong unsubstantiated  recommendations  may prove harmful to patients  if 
incorrectly  interpreted. 
Accordingly,  we make  several suggestions  regarding revisions to this report: 
	 First, eliminate the recommendations that affect patients directly (i.e., agency visit limits 
and beneficiary limit pp. 17-18)and insteadsuggestafollow-upstudytodetermine a 
cause and effect relationship with a regression analysis factoring in agency patterns and 
essential patient characteristics (kg., age, gender, severity of illness). 
. 
  Second, the findings identifi  interesting agency patterns that could be used to streamline 
government oversight.  Agencies  that fall outside the patterns found in the study should 
be targeted  for intensified  review.  The government representatives  could use the 
following  mechanisms  to target specific agencies and cases: 
,, 
1. Establish  visit triggers  for intensified review by intermediaries  to assess 
appropriate  volume  and levels of cme based on selective criteria, e.g., more than 50, 100, or 150 
visits should have intensive  review by qualified  case-managers  to look at fi.mctional status, 
medications,  diagnosis,  age, gender, and home environment.  Page 2-- June Gibbs Brown 
2.  Increase efforts by auditors, program integrity and fraud and abuse teams to 
capture agency mismanagement of the benefit. Target agencies that are outliers.  For exampie, 
non-aftlliated agencies with high visit averages and branch ofllces, or agencies with high 
reimbursement averages, complaints and deficiencies. 
  Third,  we suggest that all references to determining causality be eliminated.  The 
pqose  of the study is stated as to determine the ~1~  of variation  . .. 
(P. 1) but in fact it did not measure any cause and effect relationships.  Other causal 
statements  throughout  the text should be eliminated  to avoid misinterpretations  of the 
findings. 
Prepared  by:  RuthI 260-0370