Department of Health and Human Services 

OFFICE OF 

INSPECTOR GENERAL 

JANET REHNQUIST 

Inspector General 

JANUARY 2002 

OEI-04-00-00550 

MEDICARE ENROLLMENT OF HOME 

HEALTH PROVIDERS 
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 

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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

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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 

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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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--------------------------

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 

President’s Council on Integrity and Efficiency. 

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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. 

1

We were unable to obtain results for 9 of the 1,190 owners due to missing dates of birth. 

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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 subsample 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 

General’s 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. 

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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 applicant’s 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. 

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--

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--

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 

Locations 

Universe 

of 

HHAs 

Proportional 

Sample of 

RHHIs 

Adjustments Adjusted 

Sample 

# of Owners 

and 

Managers 

Associated 

with HHA 

Iowa 443 138 138 575 

Wisconsin 148 47 -1 46 117 

South 

Carolina 

125 39 -4 35 163 

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.

2

We 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. 

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--

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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 

Estimate 

Lower 95% 

Confidence Interval 

Upper 95% 

Confidence Interval 

Total Owners 

& Managers 

4,273 3,594 4,952 

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 

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-- 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 

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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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