WASHINGTON, DC 20201

DEPARTMENT OF HEALTH AND HUlvIAN SERVICES

OFFICE OF INSPECTOR GENERAL

-

MAR 0.2 2012

TO: Marilyn Tavenner

Acting Administrator

Centers for Medicaid & Medicare Services

FROM:

r~(¿,;~~-

Stuart WrigiJ '

Deputy Inspector General

for Evaluation and Inspections

SUBJECT: Early Alert Memorandum Report: Intermediate Sanctions for

Noncompliant Home Health Agencies, OEI-06-11-00401

This early alert memorandum report provides information related to our ongoing study

Survey and Certification of Home Health Agencies (OEI-06-11-00400)1 and alerts the

Centers for Medicaid & Medicare Services (CMS) regarding Federal statutory

requirements to implement intermediate sanctions for noncompliant home health

agencies (HHAs).

SUMMARY

CMS has not implemented intermediate sanctions for noncompliant HHAs as directed by

the Omnibus Budget Reconciliation Act of 1987 (OBRA 1987) and as recommended in a

2008 Office ofInspector General (OIG) report.2, 3 Intermediate sanctions would allow

CMS to penalize HHAs found to be out of compliance with the Medicare conditions of

participation, and give noncompliant HHAs an incentive to improve their practices.

Without intermediate sanctions, the only option available to CMS to penalize

noncompliant HHAs is to terminate their Medicare participation, an option that the

2008 OIG study found CMS rarely exercised Each year since the 2008 report, CMS

indicated activities toward promulgating regulations to implement HHA intermediate

sanctions, but it has not yet issued a proposed rule. Given the length of time since the

passage of OBRA 1987 and since the 2008 OIG recommendation, CMS should make

1 Department of Health and Human Services (HHS), OIG, Work Plan, Fiscal Year 2012. Available online

at http://oig.hhs.gov/reports-and-publications/archives/workplan/20i2/Work-Plan-2012.pdf.This study

will examine recertification surveys, complaints, and eMS enforcement actions taken in recent years to

address HHAs found to be out of compliance with the Medicare conditions of participation.

20BRA 1987, P.L. 100-203, § 4023 (adding Social Security Act IS91(e) and (f)).

3 HHS, OIG, Deficiency History and Recertification of Medicare Home Health Agencies,

OEI-09-06-00040, August 200S.
Page 2 - Marilyn Tavenner

HHA intermediate sanctions a high priority and complete their implementation as soon as

possible.

BACKGROUND

HHAs provide home health services for Medicare beneficiaries with short- or long-term

illnesses or injuries who are confined to their homes and need skilled nursing care on an

intermittent basis, physical therapy, speech therapy, or continuing occupational therapy.4

In recent years, the use of home health services has grown. From 2002 to 2009, the

number of Medicare beneficiaries receiving home health services increased by nearly

29 percent (from 2.6 to 3.3 million beneficiaries) and the number of Medicare-certified

HHAs increased by 59 percent (from 6,813 to 10,821 HHAs).5

All HHAs participating in Medicare must meet Federal requirements. CMS is

responsible for ensuring HHAs' compliance with Federal requirements, including the

Medicare conditions of participation, through the survey and certification process.6 If a

surveyor determines that an HHA is out of compliance, the surveyor can cite the HHA

with a deficiency. To continue in Medicare, the HHA must correct the deficiency, which

may include submitting a plan of correction and undergoing additional inspections by

surveyors.7 To incentivize an HHA to complete a plan of correction and return to

compliance, CMS can place the HHA on a termination track from Medicare.

Federal Statutory Requirements for Intermediate Sanctions for Noncompliant

HHAs

Section 4023 of OBRA 1987 directed CMS to develop and implement, by no later than

April 1, 1989, intermediate sanctions to apply to certain HHAs found to no longer be in

compliance with the Medicare conditions of participation. 8 These intermediate sanctions

must include civil money penalties, payment suspension, and appointment of temporary

management.9 In response to OBRA 1987, CMS issued a Notice of Proposed

Rulemaking (NPRM) in 1991, proposing intermediate sanctions to apply to noncompliant

HHAs.10

OIG Recommendation to Implement HHA Intermediate Sanctions

In 2008, OIG issued a report regarding HHAs with repeat deficiency citations. 

1 1 We

found that 15 percent of HHAs received the same deficiency citation during three

consecutive surveys. We also found that CMS's sanction options for HHAs with

deficiency citations were limited because CMS had not implemented intermediate

4 Social Security Act §§ l8l2(a)(3), l8l4(a)(2)(C), 1 832(a)(2)(A), and 1 835(a)(2)(A).

5 eMS, Data Compendium, 2002, 2010. Accessed at https://www.cms.gov on August 8, 2011. In 2009,

Medicare paid $18.9 billion for home health services, compared to $9.6 billion in 2002.

6 Social Security Act § 1891.

7 eMS, State Operations Manual Pub. No. 100-07, ch. 2, §§ 2728, 2728A, and 2728B.

80BRA 1987, P.L. 100-203, § 4023 (adding Social Security Act l89l(e) and (f)).

9 Social Security Act 189l(f)(2)(A).

10 56 Fed. Reg. 37054 (Aug. 2, 1991).

ii HHS, OIG, Deficiency History and Recertification of Medicare Home Health Agencies,

OEI-09-06-00040, August 2008.

OEI-06-11-00401 Intermediate Sanctions for Noncompliant Home Health Agencies
Page 3 - Marilyn Tavenner

sanctions, leaving termination from Medicare as the only Federal sanction for

noncompliant HHAs. Further, we found that CMS rarely used the termination sanction;

in 2006, CMS terminated only 21 HHAs. In the 2008 report, we recommended that CMS

implement the intermediate sanctions as directed by OBRA 1987. CMS concurred with

the recommendation.

METHODOLOGY

We reviewed the 1991 NPRM and related material in the Federal Register. We also

reviewed CMS's response for OIG's Compendium of Unimplemented Recommendations

(Compendium) related to the 2008 OIG recommendation for each year during

2010-2012. Additionally, during a meeting with CMS officials in December 2011, we

discussed the status of HHA intermediate sanctions.

This study was conducted in accordance with the Quality Standards for Inspection and

Evaluation issued by the Council of the Inspectors General on Integrity and Efficiency.

RESULT

CMS Has Not Implemented Intermediate Sanctions as Required by Law and

Recommended by OIG

More than 20 years after Congress directed CMS to implement intermediate sanctions for

HHAs found to be out of compliance with the Medicare conditions of participation, CMS

has not implemented such sanctions. More specifically, CMS never issued a final rule for

the 1991 NPRM, withdrawing it in August 2000.12 Although CMS did not explain at the

time why it withdrew the NPRM, it indicated in its concurrence to the 2008 OIG

recommendation that legislative changes and other demands impeded promulgation of a

final rule. 

13

Each year since the 2008 OIG report, CMS provided written updates on its progress

toward developing a proposed rule for HHA intermediate sanctions in its written response

to OIG's upcoming Compendium. In the 2010 Compendium, CMS stated that it had

"drafted an alternative sanction that was under review.,,14 In the 2011 Compendium,

CMS stated that it was developing a new proposed rule for intermediate sanctions that it

anticipated publishing in 2011.15 In its written response to OIG for the forthcoming

2012 Compendium, CMS stated that a draft proposed rule containing alternative

sanctions would be sent for clearance within CMS and that it anticipated publishing a

new NPRM by September 2012.16

1265 Fed. Reg. 73782, 73858 (Nov. 30, 2000). Available at

http://www.gpo.gov/fdsys/pkg/GPO-UA-2000-ll-30/pdf/GPO-UA-2000-ll-30-9.pdf.

13 HHS, OIG, Deficiency History and Recertification of Medicare Home Health Agencies,

OEI-09-06-00040, August 2008.

14 HHS, OIG, Compendium of Unimplemented Recommendations, 2010. Available at

http:// oi g.hhs. gov /pub i i cati ons/ docs/ compendium/ compendium20 i O. pdf.

15 HHS, OIG, Compendium of Unimplemented Recommendations, 2011. Available at

http://oig.hhs. gov/reports-and-publications/compendium/20 ll.asp.

16 eMS update transmitted to OIG in January 2012.

OEI-06-11-00401 Intermediate Sanctions for Noncompliant Home Health Agencies
Page 4 - Marilyn Tavenner

CONCLUSION

Although CMS indicated activities toward promulgating regulations to implement HHA

intermediate sanctions, it has not yet issued a prupmit:ù rule. Given the length of time

since the passage of the original statute, CMS should make HHA intermediate sanctions a

high priority and should complete their implementation as soon as possible. Intermediate

sanctions would allow CMS to penalize HHAs found to be out of compliance with the

Medicare conditions of participation and would give noncompliant HHAs an incentive to

improve their practices. Without such sanctions, HHAs may face few consequences for

noncompliance, other than possible termination, an option that our 2008 report found

CMS rarely exercised.

This report is being issued directly in final form. If you have comments or questions

about this report, please provide them within 60 days. Please refer to report number

OEI-06-11-00401 in all correspondence.

OEI-06-11-00401 Intermediate Sanctions for Noncompliant Home Health Agencies