Department of Health and Human Services
 

OFFICE OF 

INSPECTOR GENERAL 

DOCUMENTATION OF 

COVERAGE REQUIREMENTS 

FOR MEDICARE HOME 

HEALTH CLAIMS
 

Daniel R. Levinson
 

Inspector General
 

March 2012
 

OEI-01-08-00390 
 

EXECUTIVE SUMMARY: DOCUMENTATION OF COVERAGE 

REQUIREMENTS FOR HOME HEALTH CLAIMS 

OEI-01-08-00390 

WHY WE DID THIS STUDY 

From 2002 to 2008, the number of home health agencies (HHA) grew by 39 percent from 

7,052 to 9,801. Medicare spending on home health increased 84 percent from 

$8.5 billion in 2000 to $15.7 billion in 2007. The rise of home health spending leads to 

concerns about the potential for improper payments due to fraud and abuse. 

HOW WE DID THIS STUDY 

We reviewed medical records of home health care for a sample of 495 beneficiaries to 

determine whether Medicare coverage requirements were met. We also analyzed Medicare 

claims to document the extent to which patients were under the care of the physician 

ordering home health services. We calculated the proportion of claims that had a 

corresponding billing from a physician for visits with that beneficiary at any time 3 months 

before and 3 months after the episode of care. 

WHAT WE FOUND 

Our medical record review showed that in 2008, 98 percent of beneficiaries met the 

homebound requirement and needed skilled nursing care or therapy services and that 

beneficiaries were under the care of a physician. HHAs submitted 22 percent of claims in 

error because services were not medically necessary or claims were coded inaccurately, 

resulting in $432 million in improper Medicare payments. Also, HHAs upcoded (i.e., billed 

at a level higher than warranted) about 10 percent ($278 million) of claims and downcoded 

(i.e., billed at a level lower than warranted) about 10 percent ($184 million) of claims. 

WHAT WE CONCLUDED 

Identifying home health fraud and abuse is a significant challenge that requires 

concentrated and sustained efforts using a variety of methods. Given the general concern 

about risks to the Medicare program in the home health area, further investigations 

beyond the medical record are needed to determine whether beneficiaries are eligible, 

services are furnished, and Medicare requirements for payment are met. The Office of 

Inspector General will continue to monitor Medicare home health claims to determine 

whether the services are appropriate and merit payment. 
TABLE OF CONTENTS 

Objectives ....................................................................................................1 

Background..................................................................................................1 

Methodology................................................................................................5 

Findings........................................................................................................8 

Medical records document that almost all home health 

beneficiaries met Medicare coverage requirements .........................8 

Home health agencies submitted 22 percent of claims in error 
 

in 2008, resulting in $432 million in improper payments ..............10 

Conclusion .................................................................................................12 

Agency Comments.........................................................................12 

Appendixes ................................................................................................13 

A: Detailed Sampling Methodology .............................................13 

B: Selected Point Estimates and Confidence Intervals .................15 

C: Agency Comments ...................................................................19 

Acknowledgments......................................................................................21 
 

 

 

 

 

 

OBJECTIVES 

1.	 To determine the extent to which home health medical records 

document compliance with Medicare coverage requirements. 

2.	 To determine the appropriateness of payments for Medicare home 

health claims. 

BACKGROUND 

Medicare beneficiaries who are generally confined to their homes are 

eligible to receive certain medical services at home.1 Home health services 

include part-time or intermittent skilled nursing care; physical, occupational, 

and speech therapy; medical social work; and home health aide services.2 

Home health provides treatment for an illness or injury and helps 

beneficiaries regain their independence and become as self-sufficient as 

possible. 

Medicare Requirements for Home Health Services 

To qualify for home health services, Medicare beneficiaries must (1) be 

homebound; (2) need intermittent skilled nursing care or physical, speech, or 

occupational therapy; (3) be under the care of a physician; and (4) be under a 

plan of care that has been established and periodically reviewed by a 

physician.3 For a home health agency (HHA) to receive payment from 

Medicare, a physician must certify the beneficiary’s need for home health 

services and must recertify the need at least every 60 days.4 

Homebound Status 

Medicare considers beneficiaries homebound if, because of illness or injury, 

they have conditions that restrict their ability to leave their places of 

residence. Homebound beneficiaries do not have to be bedridden, but 

should be able to leave their residences only infrequently with “considerable 

and taxing effort” for short durations or for health care treatment.5 

Intermittent Skilled Nursing or Therapy Services 

The Social Security Act defines “part-time or intermittent services” as 

skilled nursing and home health aide services furnished any number of days 

per week as long as the combined services are less than 8 hours each day and 

1

 Social Security Act, § 1835(a)(2)(A).
 

2

 Social Security Act, § 1861(m); Centers for Medicare & Medicaid Services (CMS), Medicare Benefits Policy 

Manual (MBPM), Pub. No. 100-02, ch. 7, § 40.
 

3

 42 CFR § 424.22.
 

4

 Ibid. 

5 MBPM, ch. 7, § 30.1.1. 

OEI-01-08-00390 Coverage Requirements for Medicare Home Health Claims 1 
 

 

 

 

 

 

 

28 or fewer hours per week.6 A registered nurse or licensed vocational nurse 

must provide the skilled nursing care.7 Home health aide services include 

personal care, such as bathing and dressing, feeding, and simple dressing 

changes that do not require the skills of a licensed nurse.8 Therapy services 

must be performed by a qualified therapist or therapy assistant under the 

supervision of a qualified therapist.9 

Requirement To Be Under the Care of a Physician 

Medicare requires that beneficiaries be under the care of a doctor of 

medicine, osteopathy, or podiatric medicine.10 CMS expects the physician 

who signs the plan of care to see the beneficiary;11 however, prior to 

April 2011, CMS did not require the ordering physician to see the 

beneficiary in person as a condition of payment for home health care.12 

Established Plan of Care 

Medicare pays for home health services only if they are provided under a 

plan of care that a physician establishes, approves, and periodically 

reviews.13 A plan of care should list 12 items, including all pertinent 

diagnoses, functional limitations, frequency of visits to be made, and the 

types of services required.14 The physician establishes the plan of care and 

must review, sign, and date it at least once every 60 days. If a beneficiary 

does not receive at least one covered home health visit within the 60-day 

episode, CMS considers the plan to be terminated.15 Medicare reimburses 

physicians for establishing and reviewing the plan of care. 

Home Health Prospective Payment System 

In October 2000, CMS implemented the home health prospective payment 

system (PPS). Under PPS, a standardized payment is made for each 60-day 

episode of care that a beneficiary receives from an HHA. The PPS payment 

covers skilled nursing and home health aide visits, as well as covered 

therapy, medical social services, and routine medical supplies.16 

HHAs use certain elements from the Outcome and Assessment Information 

Set (OASIS) to determine the payment amount for each 60-day episode of 

6 

7

 Social Security Act § 1861(m). 

MBPM, ch.7, § 40.1.1. 

8 MBPM, ch.7, § 50.2. 

9 MBPM, ch.7, § 40.1.1. 

10 42 CFR § 424.22(a)(iv). 

11 MBPM, ch.7, § 30.3. 

12 Patient Protection and Affordable Care Act (P.L. 111-148) (ACA), § 6407; CMS notice accessed at 

http://www.cms.gov on August 29, 2011. 

13 42 CFR § 424.22(a)(iii). 

14 42 CFR § 484.18; MBPM, ch.7, § 30.2.1. 

15 MBPM, ch.7, § 30.2.9. 

16 65 Fed. Reg. 41128 (July 3, 2000). 

OEI-01-08-00390 Coverage Requirements for Medicare Home Health Claims 2 
 

 

 

 

 

care for each beneficiary. OASIS evaluates beneficiaries and measures 

outcomes using demographic, clinical, and functional data items. Elements 

of OASIS contribute to a score that the HHAs use to assign the individual to 

a Home Health Resource Group (HHRG). The HHRGs reflect beneficiaries’ 

health conditions and their needs for care in three distinct areas: clinical 

severity, functional severity, and service utilization. The assignment to a 

given HHRG represents the amount of care that the HHA expects a 

beneficiary to need. A change in the group assignment can change the 

payment that the HHA receives for care of that individual. The HHA assigns 

the beneficiary to a Health Insurance Prospective Payment System (HIPPS) 

code that is based on the HHRG level. 

2008 Changes to Home Health PPS 

For home health care episodes paid prior to 2008, CMS adjusted the home 

health base payment by assigning beneficiaries to 1 of 80 HHRGs.17 As of 

January 1, 2008, CMS significantly refined the home health payment method 

with the goal of reducing overpayments. Although HHAs continue to assign 

individuals to an HHRG using OASIS, the score now depends on the timing 

of the episode. CMS created a case-mix model that differentiates payment 

based on whether the beneficiary is in an early episode (i.e., a first or second 

episode) or a late episode (i.e., third episode and beyond), as well as whether 

the beneficiary has received more than 20 therapy visits. CMS also 

expanded the number of HHRGs from 80 to 153 to better capture the actual 

cost of care. 

Home Health Fraud 

In 2011, CMS assigned newly enrolling HHAs to the high-risk screening 

level because of program vulnerabilities that these entities pose to 

Medicare.18 As early as 1997, the Office of Inspector General (OIG) 

reported on fraud in HHAs. OIG found that 40 percent of total services in 

HHA claims reviewed did not meet Medicare reimbursement requirements.19 

As part of its review, OIG interviewed beneficiaries or beneficiaries’ family 

members, as well as the physicians who certified the plans of care. OIG also 

requested medical records to determine whether beneficiaries were 

homebound and whether the home health services were medically necessary. 

Since that time, the Department of Health and Human Services (HHS) has 

changed Medicare payment requirements, suspended payments to some 

HHAs, and investigated and pursued criminal actions in its efforts to combat 

increasing Medicare fraud, waste, and abuse by HHAs. 

17 72 Fed. Reg. 49762 (Aug. 29, 2007). 

18 76 Fed. Reg. 5862, 5870 (Feb. 2, 2011).
 

19 OIG, Review of Medicare Home Health Services in California, Illinois, New York, and Texas, 

A-04-96-02121, July 1997. 

OEI-01-08-00390 Coverage Requirements for Medicare Home Health Claims 3 
 

 

 

 

 

 

 

 

 

 

Recent Changes in Medicare Home Health Payment Requirements 

CMS makes additional payments, known as outlier payments, to compensate 

HHAs that supply services to beneficiaries who incur unusually large costs. 

However, in 2008 a number of HHAs in Miami-Dade County accounted for 

more outlier payments than did HHAs in the rest of the Nation combined.20 

In an attempt to mitigate vulnerabilities associated with outlier payments, in 

2010 CMS capped outlier payments to individual HHAs at 10 percent of 

each HHA’s total home health payments.21 

To increase physician involvement with Medicare home health beneficiaries, 

as well as to provide additional clinical oversight for HHA-provided care, 

the ACA requires that physicians (or certain practitioners working with the 

physician) who certify beneficiaries as eligible for Medicare home health 

services have face-to-face encounters with those beneficiaries.22 Such 

encounters must occur within a 120-day window: either within the 90 days 

before beneficiaries start home health care or up to 30 days after they start 

care. The signing practitioner must document who saw the patient and the 

date of the encounter; the practitioner must also describe how clinical 

findings support the beneficiary’s eligibility for home health services.23 CMS 

gave HHAs until April 1, 2011, to comply with this requirement.24 

Health Care Fraud Prevention and Enforcement Action Team 

In 2007, HHS and the Department of Justice (DOJ) established the joint 

Medicare Fraud Strike Force, which was designed to combat fraud 

through the use of Medicare data analysis and an increased focus on 

community policing.25 Building on the success of the Strike Force, in 

2009 HHS and DOJ established an interagency Health Care Fraud 

Prevention and Enforcement Action Team to combat health care fraud 

nationwide.26 Now operating in 9 cities, Strike Force efforts have resulted 

in charges against 213 individuals or entities, 107 convictions, and 

$63.9 million in investigative receivables.27 

20 OIG, Aberrant Medicare Home Health Outlier Payment Patterns in Miami-Dade County and Other 

Geographic Areas in 2008, OEI-04-08-00570, December 2009.
 

21 74 Fed. Reg. 58078 (Nov. 10, 2009).
 

22 P.L. 111-148, § 6407.
 23 42 CFR § 424.22(a)(1)(v); 75 Fed. Reg. 70372, 70464 (Nov. 17, 2010).
 

24 CMS notice accessed at http://www.cms.gov on August 29, 2011.
 

25 HHS, Medicare Fraud Strike Force Operations Lead to Charges Against 53 Doctors, Health Care 

Executives and Beneficiaries for More than $50 Million in Alleged False Billing in Detroit (news release),
 

June 24, 2009. Accessed at http://www.hhs.gov/ on June 25, 2009.
 

26 HHS, Attorney General Holder and HHS Secretary Sebelius Announce New Interagency Health Care Fraud 

Prevention and Enforcement Action Team (news release), May 20, 2009. Accessed at http://www.hhs.gov/ on 

June 19, 2009.
 

27 HHS, Semiannual Report to Congress, Spring 2011.
 

OEI-01-08-00390 Coverage Requirements for Medicare Home Health Claims 4 
 

 

 

 

For example, on July 13, 2011, a manager and a registered nurse from an 

HHA pleaded guilty to participating in an alleged $25 million Medicare 

billing scheme.28 The two individuals falsified patient records to make it 

appear as though beneficiaries qualified for home health care and therapy 

services. 

CMS Anti-Fraud Activities 

In an evaluation of CMS-imposed Medicare payment suspensions in 

2007 and 2008, OIG found that the great majority of suspended providers 

exhibited characteristics that suggested fraud.29 Some of these suspensions 

were supported by information from beneficiaries. For example, 

beneficiaries told law enforcement or Government contractors that they 

received home health services even though they were not homebound. 

Beginning in 2009, CMS and Zone Program Integrity Contractors (ZPIC) 

conducted a 2-year study regarding home health outlier payments.30 The 

study consisted of interviewing beneficiaries to verify that they meet home 

health coverage requirements and visiting HHAs to review medical records 

to ensure that a physician who has some sort of relationship with the 

beneficiary signed a plan of care. 

Overall, CMS and ZPICs found that not all beneficiaries were, in fact, 

homebound. Many were not at home when site visits were conducted. CMS 

and ZPICs also found that the physicians who signed the beneficiaries’ plans 

of care were not the beneficiaries’ regular physicians. These findings, 

among other factors, prompted CMS to suspend 32 home health providers 

from the Medicare program. 

METHODOLOGY 

Scope 

Through review of the medical records, this evaluation determined the extent 

to which individual beneficiaries met Medicare coverage requirements for 

home health care. It also determined whether Medicare home health claims 

submitted and paid in 2008 were appropriate and whether higher rates of 

inappropriate payments existed among HHAs in geographical areas with 

patterns of aberrant billing than among HHAs in other areas. This study 

excluded episodes with four or fewer visits because they are reimbursed on a 

per-visit basis, as well as any claim with a reimbursement of less than $25. 

28 United States v. Nunez, S.D. Fla., No. 11-CR-20113. 

29 OIG, The Use of Payment Suspensions To Prevent Inappropriate Medicare Payments, OEI-01-09-00180,
 

November 2010.
 

30 Through CMS-awarded task orders, ZPICs detect and deter fraud, waste, and abuse of Medicare dollars by
 

conducting investigations; referring cases to law enforcement; and taking administrative actions, such as 

referring overpayments to claims processors.
 

OEI-01-08-00390 Coverage Requirements for Medicare Home Health Claims 5 
 

 

 

 

Data Sources 

We used the following three data sources to analyze Medicare home health 

claims and payments: (1) the National Claims History File (NCH), (2) the 

Online Survey Certification and Reporting System (OSCAR), and (3) a 

medical record review of home health claims. 

NCH. We used the NCH to select a sample for our medical record review. 

We calculated the proportion of claims that had corresponding billing from a 

physician for that beneficiary at any time 3 months before and 3 months 

after the episode of care. We also calculated the proportion of claims in our 

sample that documented whether the beneficiaries were under the care of the 

ordering physician. 

Online Survey Certification and Reporting System. We downloaded OSCAR 

survey and deficiency data from the three most recent surveys and analyzed 

the number and trends of deficiencies associated with plans of care for 

beneficiaries.31 

Home Health Medical Record Review. Through a contract with an 

independent firm, we conducted a medical record review of home health 

records for a sample of 495 beneficiaries. 

Sample Selection 

We obtained data on 5,536,018 home health claims from the NCH that were 

submitted in calendar year 2008. We used these data to select a stratified 

random sample of 495 home health claims. We divided the universe of 

home health claims from which we drew our sample into four strata using a 

set of five payment characteristics established in a previous OIG report that 

analyzed aberrant home health outlier payments.32 See Appendix A for 

details on the sample selection. 

Medical Record Collection 

We provided the contractor with a list of claims. For each claim, we 

included the beneficiary’s name, dates of services, and the name and address 

of the HHA. The contractor sent up to three written requests for medical 

records to each HHA and made additional telephone calls to each HHA, as 

needed. The contractor received 489 out of the 495 requested medical 

records, a 98.8-percent response rate. The contractor was unable to obtain 

six medical records because the HHAs had closed and the contractor was 

unable to determine the records’ current locations; we dropped these medical 

31 CMS oversees compliance with Medicare health and safety standards for HHAs through the survey or 

inspection process. Performed by States on behalf of CMS, these surveys include conducting investigations,
 

certifying and recertifying that HHAs meet Medicare’s Conditions of Participation, and explaining requirements 

to providers with regard to applicable Federal regulations.
 

32 OIG, Aberrant Medicare Home Health Outlier Payment Patterns in Miami-Dade County and Other 

Geographic Areas in 2008, OEI-04-08-00570, December 2009.
 

OEI-01-08-00390 Coverage Requirements for Medicare Home Health Claims 6 
 

 

records from our sample. We followed OIG policies to protect personally 

identifiable information. 

Medical Record Review 

The contractor reviewed the OASIS assessment and other information in the 

home health medical record to determine whether HHAs correctly coded and 

documented each 60-day episode. The contractor used Medicare policy on 

coverage requirements as well as professional judgment to verify that the 

beneficiary qualified for home health services and determine whether the 

HHA had accurately coded the OASIS. Contractor staff provided a payment 

code based on their review of the medical record, which we then used to 

compare to the one billed by the HHA. 

Based on the medical review, we calculated the proportion of claims that did 

not meet the Medicare program requirements. We also compared the 

proportion of inappropriate claims in each of the four strata, looking for 

differences among them. 

Medicare Home Health Cost Analysis 

We calculated the total dollar amount of claims that did not meet program 

requirements. This analysis included only Medicare home health claims that 

the contractor determined did not meet program requirements. In these 

situations, contractors reviewed the medical records to identify the 

appropriate diagnosis and calculated a new HIPPS code based on that 

information. We then used CMS’s fiscal year 2008 Home Health 

Prospective Payment System PC Pricer software to calculate the resulting 

Medicare reimbursement amounts. For each claim, we calculated the 

reimbursement amount using the recalculated HIPPS code submitted by the 

contractor. To calculate the total dollar amount of claims that did not meet 

program requirements, we then compared the recalculated dollar amount to 

the amount paid to the HHA. 

Limitations 

This review assessed the HHA’s medical record for the beneficiary but did 

not determine whether that record accurately reflected the beneficiary’s 

medical condition. We did not physically confirm that the beneficiary was 

homebound or determine whether the care provided was medically 

necessary. 

Standards 

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. 

OEI-01-08-00390 Coverage Requirements for Medicare Home Health Claims 7 
 

 

FINDINGS 

Medical records document that almost all home health 

beneficiaries met Medicare coverage requirements 

To qualify for home health care, a Medicare beneficiary must: (1) be 

homebound, (2) need skilled nursing care or therapy services, (3) be under 

the care of a physician, and (4) be under a plan of care that has been 

established and reviewed by a physician. Our medical record review showed 

that 98 percent of beneficiaries were homebound and almost all required 

skilled nursing care and skilled services. Our review also showed that 

98 percent of beneficiaries were under the care of a physician. Finally, all 

medical records included a plan of care, but 36 percent lacked at least one 

specified element. 

Medical records show that 98 percent of beneficiaries were 

homebound and needed skilled nursing care or therapy services 

Our medical record review showed that in 2008, 98 percent of all 

beneficiaries met the criterion of being homebound. Each medical record 

stated why the beneficiary was homebound and that the beneficiary 

continued to be confined to the home. We were unable to determine whether 

the remaining 2 percent were homebound. 

In addition to indicating compliance with the homebound requirement, all 

medical records indicated that each beneficiary needed intermittent skilled 

nursing care, physical therapy, or speech therapy or had a continuing need 

for occupational therapy (see Table 1). Furthermore, our medical record 

review determined that almost all medical records sufficiently documented 

that the skilled nursing care and therapy services were reasonable and 

necessary. 

Table 1: Extent of Documentation for Home Health Skilled Care and 

Therapy Services 

Type of Skilled Care and 

Therapy Service 

Percentage of Claims 

Documenting That 

Beneficiary Required 

Service 

Percentage of Claims 

Documenting That 

Care/Service Was 

Reasonable and 

Necessary 

Skilled Nursing Care 92% 99% 

Physical Therapy 53% 100% 

Occupational Therapy 18% 100% 

Speech Therapy 3% 100% 

Source: OIG medical record review of home health claims for 2008. 

OEI-01-08-00390 Coverage Requirements for Medicare Home Health Claims 8 
 

 

Medical records show that beneficiaries were under the care of a 

physician 

At the time of our review, CMS expected, but did not require, the physician 

who signed the plan of care to see the beneficiary at an unspecified interval 

of time. However, CMS did not explain how one might establish the 

physician-beneficiary relationship. For the purposes of our analysis, we 

used the signature on the plan of care as evidence of a relationship between 

the ordering physician and the beneficiary. Our review showed physicians’ 

signatures on 98 percent of the plans of care, but 21 percent of those plans 

were missing the dates on which the physicians signed them. HHAs can 

submit a request for advance payment based on verbal orders by the 

physician; however, the plan of care must be both signed and dated by a 

physician prior to final payment of the claim. 

To gain a better understanding of the relationship between the ordering 

physician and the beneficiary, we reviewed the home health record. 

Specifically, we reviewed physician orders, dates of phone calls, and 

progress notes to determine the extent to which the beneficiary was under 

the care of the ordering physician. Although 85 percent of the home health 

records included these items, only 11 percent of the records documented at 

least one face-to-face visit with the ordering physician. 

We also reviewed separate Medicare claims data from any time 3 months 

before and 3 months after the episodes of care to determine how many 

beneficiaries had face-to-face visits with the physicians who ordered home 

health services.33 We found that only 30 percent of beneficiaries had at least 

one visit during that 6-month period. Although Medicare did not require 

such visits at the time of our review, the ACA has since created this 

requirement, and CMS expected HHAs to comply as of April 1, 2011. 

All medical records included a plan of care; however, 36 percent 

lacked at least one specified item 

In particular, 18 percent of plans did not address discharge planning and 

9 percent lacked information about rehabilitation potential (see Table 2 for a 

list of specified items). A plan of care that is truly comprehensive matches 

beneficiaries’ needs with the appropriate level of services to improve their 

quality of life, maintain their independence, and avoid hospitalization or 

long-term care. Shortfalls in any area of the plan of care, therefore, can 

adversely affect beneficiaries’ outcomes. 

33 Our analysis of face-to-face encounters with the ordering physician differs from CMS’s requirement in two 

ways. First, we looked at all episodes of care, whereas CMS’s requirement is limited to the first episode of 

care. Second, our review included any visit 3 months before and 3 months after the episode of care, whereas 

CMS requires the qualifying visit to occur within a shorter period—3 months before or 30 days after the start of 

home health care. 

OEI-01-08-00390 Coverage Requirements for Medicare Home Health Claims 9 
 

 

 

Table 2: Specified Items Missing From Home Health Plans of Care 

Plan of Care Item Percentage of Plan of Care Item 

Not Documented 

Discharge plan 18% 

Rehabilitation potential 9% 

Instructions for timely discharge or referral 7% 

Frequency of visits to be made 6% 

Types of services, supplies, and equipment required 2% 

Prognosis 2% 

Functional limitations 1% 

Mental status 1% 

Activities permitted 1% 

Nutritional requirements 1% 

All medications and treatments 1% 

Safety measures to protect against injury 0% 

Source: OIG medical record review of home health claims, 2010. 

State surveys also show vulnerabilities in care planning. These surveys aim 

to ensure that HHAs are meeting Medicare’s conditions of participation. 

From 2008 through 2010, State surveyors cited deficiencies related to care 

planning more often than any other deficiency. In 2008, they cited 

12 percent of HHAs for not following a written plan of care established and 

periodically reviewed by a physician. They also cited 9 percent of all HHAs 

because the plans of care were missing required items. 

Home health agencies submitted 22 percent of claims 

in error in 2008, resulting in $432 million in improper 

payment 

Our medical record review showed that HHAs submitted 22 percent of 

claims in error because services were not necessary or claims were coded 

inaccurately. This $432 million in improper payments represented about 

2.5 percent of the total $17 billion in Medicare home health payments in 

2008. Two percent ($328 million) of claims were for services that were 

not medically necessary. The beneficiaries associated with these claims 

were not homebound, not in need of skilled nursing care, or not under the 

care of a physician. 

Our medical record review also showed that HHAs upcoded about 

10 percent of claims, i.e., billed them at a level higher than the beneficiaries’ 

OEI-01-08-00390 Coverage Requirements for Medicare Home Health Claims 10 
 

 

 

conditions warranted. HHAs also downcoded about 10 percent of claims, 

i.e., billed them at a level lower than the beneficiaries’ conditions warranted 

(see Table 3). Although estimated overpayments for upcoded claims were 

$278 million and estimated underpayments for downcoded claims were 

$184 million, we cannot reliably estimate the difference. Table 3 shows the 

error rates. 

Table 3: Percentage of Miscoded Home Health Services, 2008 

Type of Error Error Rate 

Incorrect code 20.2%

 Upcoded 10.4%

 Downcoded 9.8% 

Medically unnecessary services 2.1% 

Insufficient documentation 0% 

Total error rate* 21.8% 

Source: OIG medical record review of home health claims for 2008. 

* Total error rate does not equal the combined types of errors because 0.5 percent of claims had overlapping errors. 

Upcoding often resulted because HHAs assigned inappropriate diagnosis 

codes to the beneficiaries. When an HHA adds certain diagnosis codes to a 

beneficiary’s primary diagnosis code, the payment will increase for that 

beneficiary. Although a beneficiary may be accurately diagnosed with a 

disease, it is appropriate to list it for payment purposes only when the plan of 

care addresses the condition. For example, our review found that some 

HHAs inappropriately listed gastroesophageal reflux disease (GERD) as a 

diagnosis with no further documentation related to this diagnosis other than 

listing the GERD medication that the beneficiary was taking. Conversely, 

the reviewers supported the GERD diagnosis as appropriate in cases that 

included documentation on diet and medication education along with an 

assessment that specifically addressed the GERD diagnosis. 

Additionally, we did not find different rates of miscoding among HHAs that 

exhibited aberrant billing patterns in counties that OIG had identified in 

previous studies. 

CONCLUSION 

Our medical record review showed that HHAs nearly always document the 

information necessary to demonstrate compliance with Medicare coverage 

and payment requirements. Our study identified only 2 percent of claims as 

being for services that were not medically necessary. However, other OIG 

studies and investigations, as well as joint efforts between HHS and DOJ, 

OEI-01-08-00390 Coverage Requirements for Medicare Home Health Claims 11 
 

 

have demonstrated that home health is an area at increased risk for fraud. In 

2011, CMS assigned newly enrolling HHAs to the high risk screening level 

because of program vulnerabilities that these entities pose to Medicare. 

The nature of the Medicare home health benefit relies on an HHA’s 

documentation that a beneficiary is homebound and needs skilled nursing 

care or therapy. The ACA recognized the need to enhance the physician’s 

responsibility for certifying the need for home health services by requiring 

face-to-face contact with beneficiaries. 

Our review found that providers generally include adequate 

documentation in the medical record to support their claims for Medicare 

payment. Because our review did not look further at whether records were 

accurate, whether beneficiaries were eligible for the benefit, or whether 

the services were actually furnished, we can make no judgment about the 

extent to which these claims were properly paid. That determination 

would require additional investigation, such as site visits and interviews 

with physicians and beneficiaries. 

Identifying home health fraud and abuse is a significant challenge that 

requires concentrated and sustained efforts using a variety of methods. 

Given the general concern about risks to the Medicare program in the home 

health area, we conclude that further investigations beyond the medical 

record are needed to determine whether beneficiaries are eligible, services 

are furnished, and Medicare requirements for payment are met. OIG will 

continue to monitor Medicare home health claims to determine whether the 

services are appropriate and merit payment. 

AGENCY COMMENTS 

In its comments on the draft report, CMS stated that it has begun using 

technologies and analytic tools to prevent fraudulent payments and identify 

risky providers and claims. The agency also noted the importance of the 

new requirement for face-to-face interaction between the home health 

provider and beneficiaries. 

For the complete text of CMS’s comments, see Appendix C. 

OEI-01-08-00390 Coverage Requirements for Medicare Home Health Claims 12 
 

 

 

 

APPENDIX A 

Detailed Sampling Methodology 

In an earlier study—Aberrant Medicare Home Health Outlier Payment 

Patterns in Miami-Dade County and Other Geographic Areas in 2008 

(OEI-04-08-00570)—the Office of Inspector General (OIG) matched 

providers’ ZIP Codes to the corresponding counties and calculated the total 

number of home health providers in each county. In this study, OIG 

calculated the total amount that Medicare paid for the home health claims by 

county, provider, and beneficiary and calculated the outlier amounts included 

in those payments. Using this information, OIG calculated the following 

five payments and rates nationally, as well as that for each county and home 

health provider listed on the claims:34 

1.	 average outlier payment per provider;35 

2.	 average outlier payment per beneficiary;36 

3.	 average outlier payment per claim; 

4.	 outlier payment rates (i.e., outlier payments as a percentage of 

total home health payments); and 

5.	 outlier payment rates for claims with a primary diagnosis 

related to diabetes (i.e., outlier payments for claims with a 

primary diagnosis related to diabetes as a percentage of total 

home health payments).37 

We define payments as aberrant if they are at least twice the national average 

for three or more of the above five calculations. 

The four mutually exclusive strata are: 

 Stratum 1: 100 claims with a total reimbursement less than $2,500, 

 Stratum 2: 200 claims with a total reimbursement greater than or equal 

to $2,500, 

 Stratum 3: 75 claims from providers not in stratum 1 or 2 and not 

located in aberrant counties identified in the previous OIG study, and 

34 According to the U.S. Census Bureau, there were 3,141 counties or county equivalents in the United States in 

2007. There were 2,158 counties or county equivalents listed on the claims we reviewed. 

35 This value is the equivalent of total outlier payments for an individual home health provider. 

36 Some beneficiaries received services from more than one home health provider. These beneficiaries were 

counted more than once when calculating the average outlier payment per beneficiary for each home health 

provider. 

37 Services related to diabetes may constitute a payment vulnerability in the Medicare program. For example, 

some home health providers received Medicare payments for reportedly providing insulin injections to 

beneficiaries who did not qualify for home health services because they were not confined to their homes. 

OEI-01-08-00390 Coverage Requirements for Medicare Home Health Claims 13 
 

 

 

 Stratum 4: 120 claims from providers that were not in stratum 1 or 2 

and that were located in aberrant counties identified in the previous OIG 

study. (See Table A-1). 

Table A-1: Descriptions of Four Strata 

Stratum Stratum Description 

Number of Claims in 

Population Sample Size 

1 

Claims with total reimbursement 

< $2,500 2,515,212 100 

2 

Claims with total reimbursement 

≥ $2,500 2,111,072 200 

3 

Claims from providers that were not 

in stratum 1 or 2 and not located in 

aberrant counties identified in the 

previous OIG study 502,356 75 

4 

Claims from providers that were not 

in stratum 1 or 2 and were located in 

aberrant counties identified in the 

previous OIG study 407,378 120 

Total 5,536,018 495 

OEI-01-08-00390 Coverage Requirements for Medicare Home Health Claims 14 
 

 

 

 

 

 

 

 

 

 

 

 

 

APPENDIX B 

Selected Point Estimates and Confidence Intervals 

Table B-1: Estimates Regarding Miscoded Claims and Inappropriate 

Payments 

Type of Estimate Sample Size Point Estimate 

($ in millions) 

95-Percent 

Confidence Interval 

($ in millions) 

Percentage of claims that 

were upcoded in 2008 489 10.4% 7.2%–13.6% 

Percentage of claims that 

were downcoded in 2008 489 9.8% 6.5%–13.1% 

Percentage of claims that 

were appropriately coded 489 79.8% 75.5%–84.1% 

Percentage of claims that 

were inappropriately coded 489 20.2% 15.9%–24.5% 

Percentage of claims for 

services that were medically 

unnecessary 

489 2.1% 0.9%–4.6% 

Percentage of claims that 

had overlapping errors 489 0.5% 0.1%–3.2% 

Percentage of claims that 

did not meet Medicare 

program requirements 

489 21.8% 17.4%–26.3% 

Total amount of 

inappropriate home health 

payments 

489 $431.5 $285.9–$576.5 

Amount of inappropriate 

payments due to upcoding 489 $278.0 $184.1–$371.8 

Amount of inappropriate 

payments due to 

downcoding 

489 $184.3 $109.4–$259.3 

Amount of overpayments 

due to medically 

unnecessary services 

489 $328.0 $83.0–$575.5 

Source: Office of Inspector General (OIG) medical record review of home health claims for 2008. 

OEI-01-08-00390 Coverage Requirements for Medicare Home Health Claims 15 
 

Table B-2: Estimates Regarding Plan of Care Items 

Characteristic in Medical 

Records Sample Size Point Estimate 95-Percent 

Confidence Interval 

Contained a plan of care 489 100% * 

Lacked at least one required 

element 489 35.5% 30.5%–40.9% 

Lacked documentation on 

discharge plan 489 17.9% 14.1%–22.6% 

Lacked documentation on 

rehabilitation potential 489 9.4% 6.7%–12.9% 

Lacked documentation on 

instructions for timely 

discharge or referral 

489 7.0% 4.8%–10.0% 

Lacked documentation on 

frequency of visits to be 

made 

489 6.3% 4.2%–9.3% 

Lacked documentation on 

types of services, supplies, 

and equipment required 

489 1.8% 0.9%–3.5% 

Lacked documentation on 

prognosis 489 2.0% 0.9%–4.6% 

Lacked documentation on 

functional limitations 489 0.6% 0.2%–1.6% 

Lacked documentation on 

mental status 489 0.6% 0.2%–1.8% 

Lacked documentation on 

activities permitted 489 1.1% 0.3%–3.5% 

Lacked documentation on 

nutritional requirements 489 1.1% 0.5%–2.4% 

Lacked documentation on 

all medications and 

treatments 

489 1.1% 0.4%–3.0% 

Lacked documentation on 

safety measures to protect 

against injury 

489 0.2% 0%–1.4% 

Source: OIG medical record review of home health claims for 2008. 

*We are unable to calculate a confidence interval for this point estimate. We are confident that the point estimate 

accurately predicts the population value. 

OEI-01-08-00390 Coverage Requirements for Medicare Home Health Claims 16 
 

 

 

Table B-3: Estimates Regarding Requirements for Home Health Coverage 

Requirement Sample Size Point Estimate 95-Percent 

Confidence Interval 

Beneficiaries were 

homebound 489 98.3% 96.5%–99.2%

Beneficiaries had an 

uncertain homebound status 489 1.7% 0.7%–4.22%

Beneficiaries received 

skilled nursing care 489 92.3% 89.1%–94.6%

Skilled nursing care was 

reasonable and necessary 489 99.4% 97.5%–99.7%

Beneficiaries received 

physical therapy 489 53.3% 48.5%–58.1%

Physical therapy was 

reasonable and necessary 489 100% *

Beneficiaries received 

occupational therapy 489 17.8% 14.2%–21.6%

Occupational therapy was 

reasonable and necessary 489 100% *

Beneficiaries received 

speech therapy 489 3.1% 1.96%–4.92%

Speech therapy was 

reasonable and necessary 489 100% *

Source: OIG medical record review of home health claims for 2008. 

*We are unable to calculate a confidence interval for this point estimate. We are confident that the point estimate 

accurately predicts the population value. 

OEI-01-08-00390 Coverage Requirements for Medicare Home Health Claims 17 
 

 

 

Table B-4: Estimates Regarding Physician Involvement With Home Health 

Beneficiaries 

Type of Estimate Sample Size Point Estimate 95-Percent 

Confidence Interval 

Percentage of physicians 

who signed the plans of 

care 

489 98.0% 95.4%–99.1% 

Percentage of plans of care 

that were missing the date 

on which the physicians 

signed them 

489 21.1% 15.2%–27.1% 

Percentage of medical 

records indicating that the 

beneficiaries were under the 

care of the ordering 

physicians 

489 84.6% 80.6%–88.5% 

Percentage of medical 

records that documented at 

least one visit by the 

ordering physician 

489 10.7% 7.2%–14.1% 

Percentage of beneficiaries 

who did not have 

face-to-face visits with the 

ordering physicians during 

the 3 months before or after 

their home health episodes 

of care 

489 30.0% 25.1%–34.8% 

Source: OIG medical record review of home health claims for 2008. 

OEI-01-08-00390 Coverage Requirements for Medicare Home Health Claims 18 
APPENDIXC 

Agency Comments 

/fP'_.., 

(-.::/-	DEPARIMENT OF HEALTH & HUMAN SERVICES Centers for Medicare & Medicaid Services 

Administrator 

Washington. DC 20201 

DATE: JAN 272012 

TO: 	 Daniel R. Levinson 


Inspector General 


FROM: 	 MaciJ.ytl "Th.venner 

Actin~dq).inistrator 

SUBJECT: 	 Office of Inspector General (OlG) Draft Report: "Documentation of Coverage 

Requirements for Medicare Home Health Claims" (OEI-01-08-00390) 

Thank you for the opportunity to review and comment on the OIG draft report titled, 

"Documentation of Coverage Requirements for Medicare Home Health Claims" (OEI-01-08­

00390). The Centers for Medicare & Medicaid Services (CMS) appreciates the time and 

resources OIG has invested to review this issue. OIG's audit focused on a medical record review 

of home health records for a sample of beneficiaries to determine if Medicare coverage 

requirements were met. The objective ofthe audit was to determine the extent to which these 

records document compliance with Medicare coverage requirements and to determine payment 

accuracy for Medicare home health claims. OIG reported two findings to CMS for 

consideration. Its major findings stated the following: 1) medical records document that almost 

all home health beneficiaries met Medicare coverage requirements and 2) home health agencies 

submitted 22 percent of claims in error in 2008. 

The CMS is committed to reducing improper payments in the Medicare Fee-For-Service 

program. CMS will c.ontinue to use its availahle resources to ensure home health claims are paid 

in accordanc.e with Medic.are coverage requirements and billing policy. CMS considers the 

return on investment and other workload issues when determining the allocation ofthese 

resources to address vulnerabilities. We focus our medical review resources on the most highly 

vulnerable areas identified through any number of sources, including but not limited to, using 

internal data analysis tools and 01G reports. 

The OlG reported findings on types of errors. OlG found that only 2 percent of claims were not 

medically necessary and determined that the majority ofthe estimated $432 million dollars in 

improper payments were due to coding errors (upcoded overpayments or downcoded 

underpayments). CMS recognizes the signitlcance of the estimated improper payments in this 

report. Therefore, we will share this report with our contractors to consider as they determine 

where to focus resources in the future. 

OEI-01-08-00390 Coverage Requirements for Medicare Home Health Claims 19 
 

OEI-01-08-00390 Coverage Requirements for Medicare Home Health Claims 20 
 

ACKNOWLEDGMENTS 

This report was prepared under the direction of Joyce Greenleaf, Regional 

Inspector General for Evaluation and Inspections in the Boston regional 

office, and Russell Hereford, Deputy Regional Inspector General. 

Danielle Fletcher served as the team leader for this study. Other principal 

Office of Evaluation and Inspections staff from the Boston regional office 

who contributed to the report include Tim Chettiath; central office staff who 

contributed include Clarence Arnold and Sandy Khoury. 

OEI-01-08-00390 Coverage Requirements for Medicare Home Health Claims 21 
Office of Inspector General 

http://oig.hhs.gov 

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 Services (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 the following operating 

components: 

Office of Audit Services 

The Office of Audit Services (OAS) provides 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. These assessments help 

reduce waste, abuse, and mismanagement and promote economy and efficiency throughout HHS. 

Office of Evaluation and Inspections 

The Office of Evaluation and Inspections (OEI) conducts national evaluations to provide HHS, Congress, 

and the public with timely, useful, and reliable information on significant issues. These evaluations focus 

on preventing fraud, waste, or abuse and promoting economy, efficiency, and effectiveness of 

departmental programs. To promote impact, OEI reports also present practical recommendations for 

improving program operations. 

Office of Investigations 

The Office of Investigations (OI) conducts criminal, civil, and administrative investigations of fraud and 

misconduct related to HHS programs, operations, and beneficiaries. With investigators working in all 

50 States and the District of Columbia, OI utilizes its resources by actively coordinating with the 

Department of Justice and other Federal, State, and local law enforcement authorities. The investigative 

efforts of OI often lead to criminal convictions, administrative sanctions, and/or civil monetary penalties. 

Office of Counsel to the Inspector General 

The Office of Counsel to the Inspector General (OCIG) provides general legal services to OIG, rendering 

advice and opinions on HHS programs and operations and providing all legal support for OIG’s internal 

operations. OCIG represents OIG in all civil and administrative fraud and abuse cases involving HHS 

programs, including False Claims Act, program exclusion, and civil monetary penalty cases. In 

connection with these cases, OCIG also negotiates and monitors corporate integrity agreements. OCIG 

renders advisory opinions, issues compliance program guidance, publishes fraud alerts, and provides other 

guidance to the health care industry concerning the anti-kickback statute and other OIG enforcement 

authorities.