Department of Health and Human Services

OFFICE OF

INSPECTOR GENERAL

CMS AND CONTRACTOR

OVERSIGHT OF HOME 

HEALTH AGENCIES

Daniel R. Levinson 

Inspector General

December 2012

OEI-04-11-00220
EXECUTIVE SUMMARY: CMS AND CONTRACTOR OVERSIGHT OF HOME 

HEALTH AGENCIES

OEI-04-11-00220

WHY WE DID THIS STUDY 

In 2010, Medicare paid $19.5 billion to 11,203 home health agencies (HHA) for home 

health services provided to 3.4 million beneficiaries. HHAs are considered to be 

particularly vulnerable to fraud, waste, and abuse. The Centers for Medicare & Medicaid 

Services (CMS) designated newly enrolling HHAs as high-risk providers in March 2011, 

citing their record of fraud, waste, and abuse. A 2012 Office of Inspector General (OIG) 

report also found that one in four HHAs had questionable billing, which was concentrated 

in certain geographic areas where Federal investigators and analysts have focused their 

efforts to combat fraud, waste, and abuse. Other OIG studies have found vulnerabilities 

in Medicare contractors’ efforts to identify and investigate potential fraud and abuse, as 

well as limitations in CMS’s oversight of these contractors.

HOW WE DID THIS STUDY

We collected information and supporting documentation from CMS, selected Medicare 

Administrative Contractors (MAC), and selected Zone Program Integrity Contractors 

(ZPIC) regarding activities to prevent improper payments on home health claims and to 

detect and deter potential HHA fraud in 2011. In addition, we identified geographic areas 

prone to HHA fraud, waste, and abuse and determined whether contractor activities 

focused on these areas. We also analyzed claims data to determine whether Medicare 

paid HHAs that were suspended or had their billing privileges revoked, and we examined 

the timeliness with which CMS and its contractors acted on revocation recommendations. 

WHAT WE FOUND

In 2011, the 2 MACs we reviewed collectively prevented $275 million in improper 

payments and referred 14 instances of potential fraud. The four ZPICs we reviewed did 

not identify any HHA vulnerabilities and varied substantially in their efforts to detect and 

deter fraud. In 2011, Medicare also inappropriately paid five HHAs with suspended or 

revoked billing privileges; additionally, CMS did not act on all revocation 

recommendations.

WHAT WE RECOMMEND

We recommend that CMS (1) establish additional contractor performance standards for 

high-risk providers in fraud-prone areas, (2) develop a system to track revocation 

recommendations and respond to them in a timely manner, and (3) follow up on and 

prevent inappropriate payments made to HHAs with suspended or revoked billing 

privileges. CMS concurred with all three recommendations.
 

TABLE OF CONTENTS

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

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

Methodology ................................................................................................9 

Findings......................................................................................................13 

In 2011, the two MACs we reviewed collectively prevented 

$275 million in improper payments and referred 14 instances of 

potential fraud ................................................................................13 

In 2011, the four ZPICs we reviewed did not identify any HHA 

vulnerabilities and varied substantially in their efforts to detect and 

deter fraud ......................................................................................15 

In 2011, Medicare inappropriately paid five HHAs with suspended 

or revoked billing privileges; additionally, CMS did not act on all 

revocation recommendations......................................... ...17 

Conclusion and Recommendations ............................................................19 

Agency Comments and Office of Inspector General Response .....21 

Appendixes ................................................................................................22 

A: Map of Medicare Administrative Contractors .........................22 

B: Map of Zone Program Integrity Contractors ............................23 

C: Number and Percentage of Home Health Agencies for Which 

Zone Program Integrity Contractors Initiated Investigations From 

External and Internal Sources in 2011 ...........................................24 

D: Number and Percentage of Home Health Agencies for Which 

Zone Program Integrity Contractors Recommended Specific 

Administrative Actions and Referred Law Enforcement Cases in 

2011.................................................... ............................25 

E: Agency Comments....................................................26 

Acknowledgments..................................................................................... 29 
 

CMS and Contractor Oversight of Home Health Agencies (OEI-04-11-00220) 1

OBJECTIVES 

To determine the extent to which: 

1. the Centers for Medicare & Medicaid Services (CMS) and its 

contractors performed activities to prevent improper payments and 

to detect and deter potential fraud among home health agencies 

(HHA) in 2011 and

2. HHAs with suspended or revoked billing privileges received 

inappropriate Medicare payments in 2011. 

BACKGROUND

In 2010, the Medicare program paid $19.5 billion to 11,203 HHAs for 

home health services provided to 3.4 million beneficiaries.1

 Home health 

services are covered under Parts A and B of Medicare. Part A covers 

home health services for individuals enrolled in Part A only, and Part B 

covers home health services for individuals enrolled in Part B only.2 For 

individuals enrolled in Parts A and B, Part A covers postinstitutional home 

health services for up to 100 visits and Part B covers services if the 

individual exhausts the 100-visit limit.3 Home health services include 

part-time or intermittent skilled nursing services, physical therapy, 

occupational therapy, speech language pathology services, part-time or 

intermittent home health aide services, medical social services, and 

medical supplies and durable medical equipment.4, 5 Although there are 

copayments for most other Medicare services, there are generally no

beneficiary copayments for home health services. 

1 Office of Inspector General (OIG) analysis of 2010 National Claims History (NCH) 

Part A Standard Analytical File.

2 Social Security Act, § 1812(a)(3), 42 U.S.C. § 1395d(a)(3); Medicare Benefit Policy 

Manual, Pub. No. 100-02, ch. 7, § 60.3. 3 Social Security Act, § 1812(a)(3), 42 U.S.C. § 1395d(a)(3); Medicare Benefit Policy 

Manual, Pub. No. 100-02, ch. 7, § 60.1. Home health services are postinstitutional if they 

are initiated within 14 days of discharge from an inpatient hospital stay lasting at least 3 

consecutive days or within 14 days of discharge from a skilled nursing facility in which 

the individual was provided posthospital extended care services. Social Security Act, § 

1861(tt)(1), 42 U.S.C. § 1395x(tt)(1); Medicare Benefit Policy Manual, Pub. No. 100-02, 

ch. 7, § 60.1. If an individual is enrolled in Parts A and B but does not meet the 

3-consecutive-day stay requirement or the 14-day initiation of care requirement, home 

health services are covered under Medicare Part B. Medicare Benefit Policy Manual, 

Pub. No. 100-02, ch. 7, § 60.2. 4 Social Security Act, § 1861(m), 42 U.S.C. § 1395x(m). 

5 Part-time or intermittent skilled nursing or home health aide services are furnished for a 

total of fewer than 8 hours each day and 28 or fewer hours each week (or, subject to 

review on a case-by-case basis as to the need for care, fewer than 8 hours each day and 

35 or fewer hours per week). Social Security Act, § 1861(m), 42 U.S.C. § 1395x(m).
 

CMS and Contractor Oversight of Home Health Agencies (OEI-04-11-00220) 2

Medicare Home Health Coverage Criteria

To qualify for home health services, Medicare beneficiaries must: 

• be confined to the home (i.e., homebound); 

• be in need of intermittent skilled nursing care or physical, speech, or 

continuing occupational therapy; 

• be under the care of a physician; and

• be under a plan of care established and periodically reviewed by a 

physician. 6, 7, 8 

For home health care starting on or after January 1, 2011, the certifying 

physician or nonphysician practitioner must document a face-to-face 

encounter with the beneficiary prior to certifying his or her eligibility.

9, 10

Fraud in the Home Health Benefit 

CMS designated newly enrolling HHAs as high-risk providers in March 

2011, citing their record of fraud, waste, and abuse.11 Findings from OIG 

reports and results of Federal investigations also indicate that HHAs may 

be vulnerable to fraud. Further, they indicate that certain geographic areas 

may be more prone to HHA fraud than others. For example, a 2012 OIG 

report found that one in four HHAs nationwide had questionable billing 

6 Social Security Act, §§ 1814(a)(2)(C) and 1835(a)(2)(A), 42 U.S.C. §§ 1395f(a)(2)(C) 

and 1395n(a)(2)(A). 

7 A beneficiary is considered to be homebound when he or she has a condition because of 

an illness or injury that restricts his or her ability to leave his or her residence except with 

the aid of supportive devices, the use of special transportation, or the assistance of 

another person; or if leaving home is medically contraindicated. CMS, Medicare Benefit 

Policy Manual, Pub. No. 100-02, ch. 7, § 30.1.1. 8 For purposes of benefit eligibility, “intermittent skilled nursing care” means care that is 

provided or needed fewer than 7 days each week or fewer than 8 hours of each day for 

periods of 21 or fewer days (with extensions in exceptional circumstances when the need 

for additional care is finite and predictable). Social Security Act, § 1861(m), 42 U.S.C. 

§ 1395x(m).

9 CMS, Medicare Benefit Policy Manual, Pub. No. 100-02, ch. 7, § 30.5.1. Starting on or 

after January 1, 2012, for patients receiving home health care immediately after an acute 

or a postacute stay, a physician who cared for the patient in an acute or a postacute 

facility can inform the certifying physician regarding face-to-face encounters with the 

patient. 42 CFR § 424.22(a)(1)(v), as amended by final rule entitled Medicare Program; 

Home Health Prospective Payment System Rate Update for Calendar Year 2012 (76 Fed. 

Reg. 68526 (Nov. 4, 2011)), effective January 1, 2012.

10 CMS, Medicare Benefit Policy Manual, Pub. No. 100-02, ch. 7, § 30.5.1.1. This 

encounter must occur no more than 90 days before the start of home health care or within 

30 days after the start of care.

11 CMS, Testimony of Ted Doolittle entitled Protecting Medicare and Medicaid: Efforts 

to Prevent, Investigate and Prosecute Health Care Fraud, before Committee on the 

Judiciary, Subcommittee on Crime and Terrorism, U.S. Senate, March 2012; 42 CFR 

§ 424.518(c)(i).
 

CMS and Contractor Oversight of Home Health Agencies (OEI-04-11-00220) 3

and eight States had high percentages of HHAs with questionable 

billing.12 

Federal investigators and analysts have focused their efforts to combat 

Medicare fraud, waste, and abuse on certain geographic areas of Florida, 

Texas, Louisiana, California, Illinois, New York, and Michigan that are at 

a high-risk for fraud.

13 These efforts have included Medicare Strike Force 

(Strike Force) investigations and cases. The Strike Force is an essential 

component of the Health Care Fraud Prevention and Enforcement Action 

Team, a joint effort of the Department of Health and Human Services 

(HHS) and the Department of Justice (DOJ) to prevent, deter, and 

aggressively prosecute health care fraud. Strike Forces are designed to

identify and investigate fraud and to prosecute perpetrators quickly. Strike 

Force teams are composed of Federal prosecutors and law enforcement

personnel and, in some cases, State and local law enforcement personnel. 

These teams are supported by data analysts and CMS program experts.14 

Strike Force investigations have led to charges against individuals for

billing Medicare for potentially fraudulent home health services in 2011. 

For example, owners of an HHA in Miami were charged with conspiring 

to commit health care fraud, money laundering, and payment of kickbacks 

in July 2011.15 These owners allegedly submitted fraudulent claims to 

Medicare for home health services from August 2006 to March 2009 

amounting to more than $11 million. Additionally, these owners allegedly 

paid kickbacks to recruiters and instructed nurses to falsify patient medical 

records to make it appear that Medicare beneficiaries qualified for and 

received home health services that were not medically necessary or were 

not provided. 

States identified as having high percentages of questionable billing HHAs 

in the prior OIG report also coincided with Strike Force cities where 

individuals were charged for billing potentially fraudulent HHA services 

in 2011. Using these three criteria, we identified certain areas prone to 

HHA fraud (Figure 1). Specifically, OIG defined fraud-prone areas as 

those that (1) are Strike Force cities, (2) are Strike Force cities where 

individuals had been charged with billing potentially fraudulent home 

12 OIG, Inappropriate and Questionable Billing by Medicare Home Health Agencies, 

OEI-04-11-00240, August 2012. 13 OIG, Testimony of Daniel R. Levinson entitled Anatomy of a Fraud Bust: From 

Investigation to Conviction before the U.S. Senate Committee on Finance, April 2012. 14 Ibid. 15 U.S. Attorney’s Office, Southern District of Florida, Miami Husband and Wife 

Charged with Home Health Care Fraud, July 27, 2011. Accessed at 

http://www.justice.gov/usao/fls/PressReleases/110727-03.html on February 16, 2012.
 

CMS and Contractor Oversight of Home Health Agencies (OEI-04-11-00220) 4

health services in 2011, and (3) are located in a State that had a high 

percentage of HHAs with questionable billing identified by OIG. 

Figure 1: Fraud-Prone Areas

Medicare Program Administration and Oversight Contractors

CMS uses contractors to assist in the administration and oversight of 

Medicare. Administration activities include preventing improper 

Medicare payments, and oversight activities include detecting and 

deterring fraud. CMS provides direction and technical guidance to these 

contractors by publishing program manuals and statements of work, which 

govern contractor duties. In addition, contractor oversight is a current 

HHS top management challenge, and OIG has identified issues with CMS 

contractor oversight in previous reports.16

Medicare Administrative Contractors

The Medicare Prescription Drug, Improvement, and Modernization Act of 

2003 mandated that CMS replace claims processing contractors (fiscal 

intermediaries and carriers) with Medicare Administrative Contractors 

16 OIG, 2011 Top Management and Performance Challenges, Management Issue 7: 

Oversight of CMS Program and Benefit Integrity Contractors; Zone Program Integrity 

Contractors’ Data Issues Hinder Effective Oversight, OEI-03-09-00520, November 

2011; and Medicare’s Program Safeguard Contractors: Performance Evaluation 

Reports, OEI-03-04-00050, March 2006.

Sources: OIG analysis of Health Care Fraud Prevention and Enforcement Action Team Strike Force cities, DOJ press 

releases, and HHAs with questionable billing. 
 

CMS and Contractor Oversight of Home Health Agencies (OEI-04-11-00220) 5

(MAC).

17 As a part of this contracting reform, CMS established four 

regions in which MACs process and pay Medicare Parts A and B home 

health claims.18 Each region covers multiple States.19 As of December

2012, CMS had awarded contracts for all four regions, and three of the 

four regions were operational.20 Appendix A provides a map of the MAC 

regions and lists the States in each region. 

Claims Processing. MACs are responsible for making correct, reliable, 

and timely payment of Medicare home health claims.21 To accomplish 

this, MACs are expected to use computerized edits, analyze and review 

claims to prevent improper payments, and educate providers submitting 

improper claims. 

Claims Review To Prevent or Identify Improper Payments. To prevent or 

identify improper payments, MACs conduct both complex and 

noncomplex reviews of claims.22 Complex reviews involve requesting, 

receiving, and conducting medical record reviews of documentation 

associated with claims. Noncomplex reviews occur when the MAC makes 

a claim determination without conducting clinical review of medical 

documentation submitted by the provider. Review of claims may occur 

either before payment or after payment. 

Additionally, MACs implement computerized edits to prevent improper 

payments for claims submitted by providers that have been excluded, have 

been suspended, or have had their Medicare billing privileges revoked. 

For example, MACs collaborate with benefit integrity contractors, such as

Program Safeguard Contractors (PSC) and Zone Program Integrity 

Contractors (ZPIC), to implement computerized edits to ensure that

suspended HHAs do not receive Medicare payments.23 MACs also 

17 Medicare Prescription Drug, Improvement, and Modernization Act of 2003, 

P.L. 108-173, § 911; Social Security Act, § 1874A. 18 These four MAC regions also process and pay hospice claims. CMS, Medicare 

Administrative Contractor Jurisdictions Fact Sheet. Accessed at 

https://www.cms.gov/MedicareContractingReform/Downloads/MACJurisdictionFactshee

t.pdf on March 18, 2011.

19 MAC regions also cover territories, such as Puerto Rico. 20 The three MACs operational in June 2012 were Regions A (operational as of 

December 2010), C (January 2011), and B (June 2011). CMS awarded the contract for 

the Region D MAC in September 2012 but the contract is currently under protest. 21 CMS, Part A and Part B MAC Statement of Work, ch. 4, § 4.4b, September 2011. 22 CMS, Medicare Program Integrity Manual, Pub. No. 100-08, ch. 3, § 3.3.1. 23 Contractors implement edits in their claims processing systems to verify and validate 

claims data by detecting errors or potential errors. Edits also verify that certain data are 

consistent and appropriate. CMS, Medicare Administrative Contractor Workload 

Implementation Handbook (Legacy-to-MAC), ch. 4, § 4.10.3.2. Accessed at 

http://www.cms.gov/MedicareContractingReform/Downloads/Legacy2MACImp.pdf on 

February 3, 2012. 
 

approve or deny recommendations to revoke an HHA’s Medicare billing 

privileges.24 Once a MAC approves a revocation recommendation, it 

implements an edit to ensure that the HHA does not receive Medicare 

payment during the revocation period. 

Referrals To Investigate Potential Fraud. MACs must refer any instances 

of suspected fraud they encounter during their claims reviews to benefit 

integrity contractors.25 After investigating MAC referrals, benefit integrity 

contractors determine the proper actions to take to address the potential 

fraud. Actions may include referring the provider to law enforcement or 

recommending administrative actions. 

ZPICs 

The Medicare Prescription Drug, Improvement and Modernization Act of 

2003 required CMS to implement Medicare contracting reform. As part of 

contracting reform, CMS is replacing the Medicare Parts A and B Program 

PSCs with ZPICs. CMS established seven zones in which ZPICs will 

operate, and each zone covers multiple States.26 As of June 2012, CMS 

had awarded the contracts for all seven zones, and six were operational.27 

Appendix B provides a map of the ZPIC zones and lists the States in each 

zone. 

ZPICs are responsible for preventing, detecting, and deterring fraud in 

Medicare, including fraud among HHAs.28 

Identifying Vulnerabilities To Prevent Fraud. One of the ways ZPICs help 

prevent fraud, waste, and abuse is identifying program vulnerabilities 

through the analysis and management of provider, supplier, and 

beneficiary data.29, 30 Program vulnerabilities may also be identified 

through other sources, such as audits, fraud alerts, and information from 

24 CMS, Medicare Program Integrity Manual, Pub. No. 100-08, ch. 15, § 15.27.2. CMS 

approves or denies revocation recommendations in which the providers or suppliers
 

submit claims for services or supplies that could not have been furnished to specific 

individuals on the dates of service. MACs approve or deny revocation recommendations 

for other reasons, such as HHAs’ not maintaining appropriate physical facilities (e.g., 

facilities are not located at the addresses on file with CMS or are not open during
 

business hours). Revocation recommendations may originate from contractors (e.g.,
 

ZPICs) or CMS. 

25 CMS, Medicare Program Integrity Manual, Pub. No. 100-08, ch. 3, § 3.6.A.
 26 ZPIC zones also cover territories, such as Puerto Rico. 

27 The six ZPICs operational in June 2012 were Zones 1 (operational as of December 

2010), 2 (February 2011), 3 (April 2012), 4 (February 2009), 5 (December 2009), and 7 

(February 2009). The Zone 6 ZPIC contract was awarded in September 2011, but was 

not operational as of September 2012. 28 CMS, Medicare Program Integrity Manual, Pub. No. 100-08, ch. 4, § 4.2.2.
 29 Ibid. 

30 CMS, Medicare Benefit Vulnerability Reporting, Transmittal 211, Change Request
 

5581, June 2007.
 

CMS and Contractor Oversight of Home Health Agencies (OEI-04-11-00220) 6 
 

CMS and Contractor Oversight of Home Health Agencies (OEI-04-11-00220) 7

OIG. Examples of vulnerabilities may include providers receiving 

improper payments because of incorrect coding or billing for more than 

the allowed number of services. ZPICs submit identified program 

vulnerabilities to CMS in a report that includes information on how each 

vulnerability was discovered, a summary of the vulnerability issues, a 

description of the methodology, recommendations for resolving the 

vulnerability, and any action taken to resolve it.31 Some methods through 

which program vulnerabilities may be resolved are claims processing 

edits, provider education, or issuance of new regulations. 

Analysis To Detect Fraud. ZPICs are expected to detect potential fraud by 

analyzing information from internal or external sources.

32 Internal sources 

may include proactive data analysis of claims, while external sources may 

include beneficiary complaints or referrals from law enforcement and 

MACs.33

Once potential fraud has been identified, ZPICs open investigations.34 

Investigations may include interviews with beneficiaries to determine 

whether they are homebound or medical reviews of potentially fraudulent 

home health claims to determine whether services were medically 

necessary.35 

Administrative Actions To Deter Fraud. ZPICs are expected to

recommend appropriate administrative actions to CMS or its contractors 

when they identify reliable evidence of fraud.36 Administrative actions 

may include payment suspension or revocation of a provider’s billing 

privileges, edits for prepayment review of claims, overpayment 

recoupment, civil monetary penalties, and deactivation of a provider’s 

billing privileges.

37 However, these recommendations are not always the 

result of investigations. For instance, ZPICs may receive a request from 

law enforcement to recommend a provider payment suspension. ZPICs 

may also refer certain providers or beneficiaries to claims processing 

contractors (e.g., MACs) for outreach and education. 

31 CMS, Medicare Program Integrity Manual, Pub. No. 100-08, ch. 4, § 4.31. 32 Ibid., § 4.2.2. 33 Ibid. 34 Ibid., § 4.7. 35 Ibid., § 4.7.1. 36 Ibid., § 4.2.2. 37 A provider’s billing privileges may be deactivated for many reasons, including not 

submitting a Medicare claim for 12 consecutive months, failing to report a change to 

information supplied on an enrollment application to CMS within 90 calendar days of 

the change, or failing to report a change in ownership or control to CMS within 30 

calendar days of the change. CMS, Medicare Program Integrity Manual, Pub. No. 100-

08, ch. 15, § 25.27.1.
 

CMS and Contractor Oversight of Home Health Agencies (OEI-04-11-00220) 8

CMS must approve certain administrative actions that ZPICs recommend

before they can be implemented. For instance, CMS must approve or 

deny recommendations to suspend Medicare payments to providers.38 

While they are suspended, providers should not receive Medicare 

payments. In some instances, CMS must also approve or deny 

recommendations to revoke billing privileges of providers that do not 

comply with Medicare requirements.39 Provider billing privileges may be 

revoked for 1 to 3 years, and providers are barred from reenrolling in 

Medicare or receiving payment during that time.40 Providers must apply 

to reenroll in Medicare after the expiration of the reenrollment bar. 

ZPICs may also deter fraud by referring cases to law enforcement for 

further development.41

Related OIG Work

Previous OIG reports have identified billing and coding as problems 

among HHAs. For instance, in 2012, OIG found one out of four HHAs 

had questionable billing and eight States had high percentages of HHAs 

with questionable billing.42 

In 2012, OIG found that 98 percent of medical records for home health 

claims documented that Medicare beneficiaries met coverage requirements 

for home health services.43 However, HHAs submitted 22 percent of 

claims in error because services were unnecessary or claims were coded 

inaccurately, resulting in $432 million in improper payments. That review 

assessed HHAs’ medical records for beneficiaries but did not determine 

whether those records accurately reflected beneficiaries’ medical 

38 CMS, Medicare Program Integrity Manual, Pub. No. 100-08, ch. 8, § 8.3.2.1. The 

initial approval is for a payment suspension period of up to 180 days, with the option to 

extend for an additional 180 days.

39 CMS, Medicare Program Integrity Manual, Pub. No. 100-08, ch. 15, § 15.27.3.1. 

CMS approves or denies revocation recommendations in which the providers or suppliers 

submit claims for services or supplies that could not have been furnished to specific 

individuals on the dates of service. 

40 42 CFR § 424.535(a)(12)(ii)(c). 41 Law enforcement may include the OIG/Office of Investigations, Federal Bureau of 

Investigation, Civilian Health and Medical Program of the Uniformed Services (now 

TRICARE), Railroad Retirement Beneficiaries OIG, and/or the Medicaid Fraud Control 

Units. CMS, Medicare Program Integrity Manual, Pub. No. 100-08, ch. 4, §§ 4.18.1 and 

4.18.1.5.3. Certain allegations are referred directly to law enforcement without a ZPIC 

investigation, such as specific allegations that indicate HHAs are involved with organized 

crime. These referrals are known as immediate advisements. However, immediate 

advisements are not considered case referrals to law enforcement. CMS, Medicare 

Program Integrity Manual, Pub. No. 100-08, ch. 4, §§ 4.18.1.2, 4.8. 42 OIG, Inappropriate and Questionable Billing by Medicare Home Health Agencies, 

OEI-04-11-00240, August 2012. 43 OIG, Coverage Requirements and Payment Accuracy for Medicare Home Health 

Claims, OEI-01-08-00390, March 2012.
 

CMS and Contractor Oversight of Home Health Agencies (OEI-04-11-00220) 9

conditions. It did not involve visiting beneficiaries to confirm their 

homebound status, nor did it determine whether the care provided was 

medically necessary. 

In 2009, OIG found that Miami-Dade County, Florida, accounted for more 

home health outlier payments in 2008 than the rest of the Nation combined 

and that 67 percent of HHAs that received outlier payments greater than 

$1 million were located in Miami-Dade County.44

Previous OIG studies have also found vulnerabilities in Medicare 

contractors’ efforts to identify and investigate potential fraud and abuse, as 

well as limitations in CMS’s oversight of these contractors. For instance, 

in 2007, OIG found that PSCs performed substantially different levels of 

activities to detect and deter fraud across jurisdictions.45 In 2010, OIG 

found that only one of three Recovery Audit Contractors (RAC) referred a 

total of two cases of potential fraud to CMS during a demonstration 

project between 2005 and 2008.46 However, CMS reported that it received 

no specific provider referrals from Recovery Audit Contractors during this 

time. 

METHODOLOGY

We reviewed the home health administration and oversight activities that

MACs, ZPICs, and CMS performed from January to October 2011, 

hereinafter referred to as 2011.47 We included MACs from Regions A and 

C and ZPICs from Zones 1, 4, 5, and 7. We did not include the remaining 

MACs and ZPICs because they were not fully operational during our 

evaluation timeframe. 

We selected 2011 because it was the first period in which MACs and 

ZPICs were operational in HHA fraud-prone areas. OIG defined fraudprone areas as those that (1) are Strike Force cities, (2) are Strike Force 

cities where individuals had been charged with billing potentially 

fraudulent home health services in 2011, and (3) are located in a State that 

44 OIG, Aberrant Medicare Home Health Outlier Payment Patterns in Miami-Dade 

County and Other Geographic Areas in 2008, OEI-04-08-00570, November 2009. CMS 

makes additional payments, known as outlier payments, to HHAs that supply services to 

beneficiaries who incur unusually large costs.

45 OIG, Medicare’s Program Safeguard Contractors: Activities To Detect and Deter 

Fraud and Abuse, OEI-03-06-00010, July 2007. 46 OIG, Recovery Audit Contractors’ Fraud Referrals, OEI-03-09-00130, February 2010. 

CMS contracts with RACs to identify improper payments from Medicare Parts A and B 

claims that have been paid by claims processing contractors.

47 We did not include November and December 2011 in our review timeframe because 

we collected data from CMS and its contractors in November 2011. 
 

CMS and Contractor Oversight of Home Health Agencies (OEI-04-11-00220) 10

had a high percentage of HHAs with questionable billing identified by 

OIG.

Data Collection

We requested information from MACs, ZPICs, and CMS on activities 

performed to prevent improper payments on home health claims and to 

detect and deter potential fraud among HHAs in 2011. We requested that 

respondents submit documentation to support their responses. If we did 

not receive documentation supporting the reported activities, we did not 

include them in our report. 

Data Analysis

For each MAC region and ZPIC zone, we also analyzed 2011 home health 

claims data to determine the total number of HHAs, the total number of 

home health claims paid, and the total amount Medicare paid for these 

claims. Finally, to determine the extent to which HHAs with suspended or 

revoked billing privileges received improper payments, we analyzed home 

health claims data from CMS’s Part A Standard Analytic File for 2011. 

We reviewed responses and documentation to determine the number and 

type of contractor activities to prevent improper payments and detect and 

deter potential fraud in 2011. 

MACs’ Activities To Prevent Improper Payments Among Home Health 

Claims. We identified the methods (e.g., proactive data analysis or 

medical review) each MAC used to prevent improper payments. We then 

calculated the number and dollar amount of home health claims for which 

each MAC prevented payment as a result of each method. However, we 

did not determine whether HHAs appealed improper payments the MACs 

prevented. We also asked MACs to specify the number of instances of 

potential home health fraud they referred to benefit integrity contractors in 

2011. We then determined whether activities and efforts varied across 

MAC regions and fraud-prone areas. 

ZPICs’ Activities To Prevent, Detect, and Deter Fraud Among HHAs. We 

asked ZPICs to specify how many and what type of vulnerabilities they 

reported to CMS in 2011. We also asked ZPICs to specify which methods 

they used to identify potential fraud and initiate investigations on HHAs in 

2011. We then determined how many HHA investigations were initiated
 

CMS and Contractor Oversight of Home Health Agencies (OEI-04-11-00220) 11

in 2011 in each ZPIC zone and whether the investigations resulted from 

internal or external sources.48 

We asked ZPICs to specify which administrative actions they 

recommended to CMS and/or MACs to address potential fraud. 

Administrative actions included recoupment of overpayments, prepayment 

edits, revocation of billing privileges, payment suspensions, unannounced 

site visits, provider education referrals, and requests for anticipated 

payment suppressions.49 We also determined the number of case referrals 

ZPICs made to law enforcement. Finally, we determined whether

activities and efforts varied across ZPIC zones and fraud-prone areas. 

Improper Payments to HHAs With Suspended or Revoked Billing 

Privileges. We determined the number of HHAs that ZPICs recommended 

for payment suspension or revocation of billing privileges. We then 

determined whether these recommendations had been approved or denied 

by CMS or MACs. For approved recommendations, we determined the 

dates on which HHAs were suspended or had billing privileges revoked 

and the time it took for approval.50 For recommendations not approved or 

pending, we asked why these HHAs were not suspended or did not have 

their billing privileges revoked. Additionally, we reviewed home health

claims data to determine whether Medicare paid HHAs that were 

suspended, had billing privileges revoked, or were recommended for 

revocation. 

Limitations

While we substantiated responses from our information request using 

documentation submitted by CMS and its contractors, these data were 

self-reported. Our findings also cannot be projected to all MACs and 

ZPICs because not all were operational at the time of our review. 

Additionally, the fraud-prone areas identified in this report are not 

intended to be a comprehensive list of areas in which HHA fraud, waste, 

and abuse may be occurring. 

48 We did not account for investigations initiated before or after our timeframe. In 

addition, one ZPIC zone reported that it sometimes initiated multiple investigations on 

the same HHA. Therefore, we determined the number of unique HHA investigations 

initiated in this zone. Finally, we did not determine whether an investigation was closed 

or open at the conclusion of our review timeframe. 

49 Payment for home health episodes is typically made in two parts. The initial payment 

is made at the start of the episode and the final payment is made at the end of the episode. 

To receive initial payments, HHAs must submit a request for anticipated payment (RAP) 

to claims processing contractors. One ZPIC in our evaluation recommended that CMS 

suppress RAPs for multiple HHAs because of the potential for fraud, significant 

overpayments, or inappropriate payments. 

50 To determine the dates that HHA billing privileges were revoked, we used the 

revocation dates that contractors reported. If multiple revocation dates were reported, we 

used the latest.
 

CMS and Contractor Oversight of Home Health Agencies (OEI-04-11-00220) 12

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.
 

CMS and Contractor Oversight of Home Health Agencies (OEI-04-11-00220) 13

FINDINGS

In 2011, the two MACs we reviewed collectively 

prevented $275 million in improper payments and 

referred 14 instances of potential fraud 

MACs’ primary responsibility is to process and pay Medicare claims 

submitted by a variety of providers, including HHAs. MACs are also 

required to prevent payment for improper claims and refer instances of 

potential fraud to benefit integrity contractors. Collectively, the two 

MACs in our review prevented $275 million in improper payments, with 

one MAC accounting for approximately 98 percent of these improper 

payments. In addition, the MACs referred 14 instances of potential home 

health fraud to benefit integrity contractors for further investigation. 

The Region A MAC prevented approximately 98 percent of 

improper payments

The two MACs in our review performed data analyses and prepayment 

medical review of home health claims to prevent $275 million in improper 

payments in 2011.51 The Region A MAC accounted for approximately 

98 percent ($268 million of $275 million) of improper payments prevented 

by the two MACs in our review. This region included 5 percent (326 of 

7,138) of HHAs in these two MAC regions. 

In contrast, the Region C MAC, which included the HHA fraud-prone 

areas of Miami, Baton Rouge, Dallas, and Houston, accounted for the 

remaining 2 percent ($6 million of $275 million) of improper payments 

prevented by these two MACs. This MAC region contained 95 percent 

(6,812 of 7,138) of HHAs in our review. See Table 1 for improper 

payments by MAC region. 

51 MACs may also use other methods to prevent improper payments (e.g., postpayment 

review of claims). However, the MACs in our review did not report using these methods. 
 

CMS and Contractor Oversight of Home Health Agencies (OEI-04-11-00220) 14

 Table 1: Improper Payments by MAC Region, 2011*

Region

Number 

of 

HHAs**

Total 

Home 

Health 

Claims 

Reviewed

Total Home 

Health 

Claims With 

Improper 

Payments

Total Improper 

Payments 

Prevented

Percentage 

of Improper 

Payments 

Prevented

Fraud-Prone 

Areas 

MAC A 326 59,446 55,499 $268,424,685 98% --

MAC C*** 6,812 6,525 2,718 $6,170,817 2%

Miami, Baton 

Rouge, 

Dallas, 

Houston

Total 7,138 65,971 58,217 $274,595,502 100%

*Our review timeframe was from January to October 2011. We did not include November and December 2011 in our review 

timeframe because we collected data from CMS and its contractors in November 2011.

**This number includes HHAs with paid claims in 2011.

***The Region C MAC reported that it prevented 220 improper payments because of proactive data analysis; however, it was 

unable to provide us with documentation to substantiate this, and we did not include these improper payments in our 

analysis.

Source: OIG analysis of MAC claims processing workload data and home health claims data, 2011. 

MACs referred 14 instances of potential fraud to benefit 

integrity contractors 

The Region A MAC referred 11 of 14 HHAs and the Region C MAC 

referred the remaining 3 HHAs to benefit integrity contractors. Seven of 

the eleven HHAs that the Region A MAC referred to benefit integrity 

contractors allegedly altered advance beneficiary notices (ABN).

52 The 

MAC uncovered this potential fraud through medical review. The 

Region A MAC referred the remaining 4 HHAs on the basis of complaints 

from beneficiaries or other HHAs alleging that these HHAs billed for 

services that were not provided. In 2011, Medicare paid these 11 HHAs 

approximately $61 million. 

The Region C MAC referred 3 HHAs to benefit integrity contractors for

various reasons, such as consistently billing high numbers of therapy 

visits. In 2011, Medicare paid approximately $2.2 million to two of these 

HHAs.

52 An ABN must be issued when a provider believes that Medicare may not pay for an 

item or service that it usually covers because the item or service is not considered 

medically reasonable and necessary. In these cases, the beneficiary must pay the 

provider directly for any noncovered services. CMS, Advance Beneficiary Notice of 

Noncoverage, Part A and Part B. 
 

CMS and Contractor Oversight of Home Health Agencies (OEI-04-11-00220) 15

In 2011, the four ZPICs we reviewed did not identify 

any HHA vulnerabilities and varied substantially in 

their efforts to detect and deter fraud

ZPICs are responsible for preventing fraud by identifying program 

vulnerabilities.53 They are also responsible for detecting and investigating 

potential fraud identified through external and internal sources, as well as 

deterring Medicare fraud by recommending appropriate administrative 

actions to CMS or MACs or referring cases of potential fraud to law 

enforcement. 

In 2011, ZPICs did not identify any HHA-specific vulnerabilities.54 

Additionally, ZPICs in different geographic zones and fraud-prone areas

did not perform similar levels of activities to detect and deter fraud among 

HHAs in 2011. 

The Zone 7 ZPIC initiated over half of investigations on HHAs 

in 2011

In 2011, the four ZPICs in our review initiated investigations on 255 of 

6,796 (4 percent) HHAs located in these zones. Table 2 shows the number 

and percentage of HHAs for which investigations were initiated by ZPIC 

zone. 

Table 2: Number and Percentage of HHAs for Which ZPICs Initiated Investigations, 2011

Zone Number of 

HHAs* 

Number of 

HHAs for 

Which 

Investigations

Were Initiated

Percentage of 

HHAs for 

Which 

Investigations

Were Initiated

Percentage of 

Total HHAs 

With 

Investigations 

Initiated

Fraud-Prone 

Areas 

ZPIC 1 1,115 44 4% 17% Los Angeles

ZPIC 4 2,886 31 1% 12% Dallas, Houston

ZPIC 5 1,351 33 2% 13% Baton Rouge

ZPIC 7** 1,444 147 10% 58% Miami

 Total 6,796 255 4% 100%

*This number includes HHAs with paid claims in 2011. However, some HHAs on which ZPICs initiated investigations in 2011 

may have submitted claims that were not paid during this timeframe and are therefore not included in this number.

**The Zone 7 ZPIC reported that it initiated multiple investigations of the same HHAs. We determined the number of unique 

HHAs for which investigations were initiated in this zone.

Source: OIG analysis of ZPIC benefit integrity workload data and home health claims data, 2011.

53 Vulnerabilities may include issues such as providers receiving increased Medicare 

payments because of incorrect coding.

54 ZPIC Zone 5 reported that it identified and submitted two vulnerabilities to CMS in 

May 2011 that were not specific to home health but had the potential to affect home 

health. As of June 2012, this ZPIC reported that CMS had not responded to these 

vulnerabilities.
 

CMS and Contractor Oversight of Home Health Agencies (OEI-04-11-00220) 16

The Zone 7 ZPIC, which includes the HHA fraud-prone area of Miami,

initiated investigations on 147 HHAs in 2011. These investigations 

accounted for over half (58 percent) of all investigations initiated. This 

ZPIC used investigative methods including site visits to determine 

whether HHAs were operational at their business addresses and 

beneficiary interviews to determine whether beneficiaries receiving home 

health services were homebound. The other three ZPICs, which included 

the fraud-prone areas of Dallas, Houston, Los Angeles, and Baton Rouge, 

initiated investigations on the remaining 108 HHAs; each initiated 17 

percent or less of total investigations.

All ZPICs used external or internal sources to initiate investigations on 

HHAs. Overall, ZPICs initiated more investigations on HHAs from 

external than internal sources in 2011. Specifically, the investigations of 

192 of 255 (75 percent) HHAs were initiated from external sources. 

Examples of external sources included beneficiary complaints of 

kickbacks or billing for services that were not provided. Internal sources 

included proactive data analysis of HHA claims and research that 

uncovered potential beneficiary sharing between HHAs and other 

providers.55 Appendix C provides the number and percentage of HHAs for 

which investigations were initiated from external and internal sources by 

ZPIC zone in 2011. 

The Zones 4 and 7 ZPICs recommended administrative actions 

and referred law enforcement cases for the majority of HHAs 

in 2011

ZPICs recommended administrative actions to CMS or MACs to address 

potential fraud or to prevent and recover inappropriate payments.56 

Recommended administrative actions included recoupment of 

overpayments, prepayment edits, revocation of billing privileges, payment 

suspensions, unannounced site visits, provider education referrals, and 

requests for anticipated payment suppressions. In addition, ZPICs referred 

cases to law enforcement agencies that could pursue civil, criminal, and 

administrative remedies for fraud. 

The Zones 4 and 7 ZPICs, which include the fraud-prone areas of Dallas, 

Houston, and Miami, recommended administrative actions and referred 

law enforcement cases for the majority of HHAs (219 of 248) in 2011. 

55 Beneficiary sharing occurs when multiple providers fraudulently bill Medicare for the 

same beneficiary.

56 We determined the number of administrative actions recommended and law 

enforcement cases referred for unique HHAs within each zone. ZPICs may have 

recommended multiple administrative actions and/or referred law enforcement cases for 

the same HHA. 
 

CMS and Contractor Oversight of Home Health Agencies (OEI-04-11-00220) 17

Together, these two ZPICs recommended administrative actions and 

referred law enforcement cases for approximately eight times the number 

of HHAs of the two other ZPIC zones in our review, which also included 

fraud-prone areas. 

Table 3 shows the number and percentage of HHAs for which 

administrative actions were recommended and law enforcement cases 

were referred by ZPIC zone. Appendix D provides the number and 

percentage of HHAs for which ZPICs recommended specific 

administrative actions and referred law enforcement cases in 2011. 

Table 3: Number and Percentage of HHAs for Which ZPICs Recommended

Administrative Actions and Referred Law Enforcement Cases, 2011

Zone Number of 

HHAs* 

Number of HHAs for 

Which ZPICs 

Recommended 

Administrative 

Actions and Referred 

Law Enforcement 

Cases** 

Percentage of HHAs 

for Which ZPICs 

Recommended 

Administrative 

Actions and 

Referred Law 

Enforcement Cases 

Fraud-Prone Areas

ZPIC 1 1,115 19 8% Los Angeles

ZPIC 4 2,886 72 29% Dallas, Houston

ZPIC 5 1,351 10 4% Baton Rouge

ZPIC 7 1,444 147 59% Miami

 Total 6,796 248 100%

*This number includes HHAs with paid claims in 2011. However, some HHAs on which ZPICs initiated investigations in 2011 

may have submitted claims that were not paid during this timeframe and are therefore not included in this number. 

**We counted the unique HHAs that had administrative actions and/or law enforcement case referrals in 2011 because certain 

ZPICs recommended multiple administrative actions and/or referred multiple law enforcement cases for the same HHA. 

Source: OIG analysis of ZPIC benefit integrity workload data and home health claims data, 2011.

In 2011, Medicare inappropriately paid five HHAs with 

suspended or revoked billing privileges; additionally, 

CMS did not act on all revocation recommendations

Medicare inappropriately paid four HHAs after they had been suspended 

and one HHA after its billing privileges had been revoked in 2011. In 

addition, revocation review delays resulted in CMS’ not acting on 

5 revocation recommendations in 2011. As a result, Medicare paid 

$651,777 in 2011 to two HHAs whose billing privileges had been 

recommended for revocation. 
 

CMS and Contractor Oversight of Home Health Agencies (OEI-04-11-00220) 18

Medicare inappropriately paid approximately $137,000 to four 

suspended HHAs and one HHA that had its billing privileges 

revoked 

CMS approved ZPIC recommendations to suspend payments to 15 of 

16 HHAs in 2011.57 The HHAs were suspended for a variety of reasons, 

including misrepresentation of services billed to Medicare, improper 

certification of beneficiaries, or involvement in a conspiracy to commit 

fraud. Medicare inappropriately paid $79,933 to 4 of these 15 HHAs in 

2011 after the suspensions were effective.

The Region C MAC also revoked the billing privileges of 16 of 17 HHAs 

in 2011.58 Fourteen were revoked for not maintaining appropriate physical 

facilities (e.g., facilities were not located at the addresses on file with 

CMS or were not open during business hours). The remaining HHAs’ 

billing privileges were revoked because they did not maintain appropriate 

physical facilities and the owners were alleged or convicted felons.59 

Medicare inappropriately paid $57,349 to one of the 16 HHAs in 2011 

after its billing privileges were revoked.

CMS did not act on five revocation recommendations 

In 2011, the Zone 7 ZPIC recommended the revocation of 17 HHAs’ 

billing privileges in Florida. These recommendations were sent directly to 

the Region C MAC, which took action on all of them. Specifically, the 

Region C MAC approved 16 of these 17 revocation recommendations in 

an average of 12 days. 

In contrast, the Zone 4 ZPIC sent five revocation recommendations to 

CMS from May to September 2011 for HHAs in Texas. However, CMS 

did not take action on these recommendations and, in October 2011, 

instructed the Zone 4 ZPIC to submit them to the Region C MAC. As a 

result, Medicare paid two HHAs a total of $651,777 after receiving the 

recommendations that their billing privileges be revoked. 

As of May 2012, the Zone 4 ZPIC reported that it had submitted two 

revocation recommendations to the Region C MAC. It also reported that 

the remaining revocation recommendations had not been submitted 

because of time and resource constraints. 

57 CMS approved the remaining payment suspension outside our review timeframe. 58 The MAC did not revoke the billing privileges of one HHA because it voluntarily 

terminated its participation in Medicare before the recommended revocation date.

59 If the owner of a provider or supplier has been convicted of a Federal or State felony 

offense that CMS has determined to be detrimental to the best interests of the program 

and its beneficiaries 10 years before enrollment or revalidation of enrollment, the billing 

privileges of the provider or supplier may be revoked. CMS, Medicare Program 

Integrity Manual, Pub. No. 100-08, ch. 15, § 15.27.2.
 

CMS and Contractor Oversight of Home Health Agencies (OEI-04-11-00220) 19

CONCLUSION AND RECOMMENDATIONS

HHAs are considered to be particularly vulnerable to fraud, waste, and 

abuse. CMS designated newly enrolling HHAs as high-risk providers in 

March 2011, citing their record of fraud, waste, and abuse. Additionally, 

previous OIG work has identified questionable billing patterns among 

HHAs, particularly in specific fraud-prone areas. Despite these risks, our 

evaluation found potential issues with CMS’s and its contractors’ ability to 

identify and respond to potential fraud. 

In 2011, the two MACs we reviewed collectively prevented $275 million 

in improper payments and referred 14 instances of potential fraud. 

Further, the four ZPICs we reviewed did not identify any HHA 

vulnerabilities and varied substantially in their efforts to detect and deter 

fraud. In 2011, Medicare inappropriately paid five HHAs with suspended 

or revoked billing privileges; additionally, CMS did not act on all 

revocation recommendations. 

We therefore recommend that CMS: 

Establish Additional Contractor Performance Standards for 

High-Risk Providers in Fraud-Prone Areas

CMS should establish additional performance standards for contractor 

activities to ensure that they are providing oversight commensurate with 

risks posed by high-risk providers, including newly enrolled HHAs, in 

fraud-prone areas. To do this, CMS could work with contractors to 

identify current fraud schemes in each jurisdiction and annually develop 

contractor performance standards specific to those fraud schemes. 

However, contractors would need to maintain flexibility to oversee all 

types of providers in their jurisdictions. Therefore, these performance 

standards could guide contractors in focusing their activities on specific 

types of providers that are exhibiting high levels of potential fraud and that 

need particular oversight emphasis, such as HHAs as identified in this and 

previous OIG work. While these standards should not be the only 

measure of contractor performance, they could provide important 

information on contractor performance and ensure contractors are 

factoring current fraud schemes into their oversight activities. 

Develop a System To Track Revocation Recommendations and 

Respond to Them in a Timely Manner

CMS should develop a system to track revocation recommendations. This 

system should flag recommendations to which CMS or its contractors 

have not responded within a specified timeframe (e.g., within 30 days of 

receipt) and require documentation to justify why any cases exceed this 

timeframe. For revocation recommendations that exceed this timeframe, 

CMS should consider implementing safeguards (e.g., prepayment reviews, 
 

CMS and Contractor Oversight of Home Health Agencies (OEI-04-11-00220) 20

payment suspensions) to prevent payments to providers recommended for 

revocation while it determines whether to revoke their billing privileges. 

Finally, CMS should educate contractors on how to properly submit 

revocation recommendations to CMS or its contractors to ensure they are 

submitted and processed in a consistent and timely manner. 

Follow Up on and Prevent Future Inappropriate Payments 

Made to HHAs With Suspended or Revoked Billing Privileges

CMS should follow up on these inappropriate payments made to HHAs to 

determine the reasons for them. CMS should also ensure that edits are in 

place or are functioning properly to prevent inappropriate Medicare 

payments to HHAs with suspended or revoked billing privileges. We have

provided CMS separately with additional information on the HHAs with 

inappropriate payments identified in our report. 
 

CMS and Contractor Oversight of Home Health Agencies (OEI-04-11-00220) 21

AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 

RESPONSE 

In its comments on the draft report, CMS concurred with all three 

recommendations. CMS acknowledged that home health services have 

historically been vulnerable to fraud, waste, and abuse. For this reason, 

CMS indicated that it is taking additional steps to address vulnerabilities 

in the HHA enrollment and claims payment process using authorities 

granted under the Affordable Care Act. CMS stated that it is building

models in its Fraud Prevention System (FPS) that can detect and generate 

alerts for suspicious billing by all major provider types, including HHAs. 

With regard to our first recommendation, CMS stated that it has 

established categories for enrollment screening on the basis of risk of 

fraud. In addition, CMS stated that it uses the FPS to identify high risk 

providers, and provides alerts on these providers identified as potentially 

fraudulent. Program integrity contractors are required to review and 

investigate all FPS alerts, and CMS is modifying the statement of work for 

all ZPICs to clarify processes to be used in this work. 

With regard to our second recommendation, CMS stated that it has 

established guidelines to ensure that revocation recommendations are 

addressed in a timely manner. Additionally, CMS stated that it has 

implemented a tracking system that includes revocation-specific tasks,

status, request dates, contact dates, and other applicable information. 

With regard to our final recommendation, CMS stated that it will follow 

up and forward additional information on the HHAs with improper 

payments to the appropriate contractors. CMS also stated that it has 

ensured that edits are in place and are functioning properly to prevent 

inappropriate payments to HHAs identified in our report. According to 

CMS, when a revocation is entered into the Provider Enrollment, Chain, 

and Ownership System (PECOS), edits are triggered in the appropriate 

claims systems to prevent claims from being paid with dates of service on 

or after the date of revocation.

We support CMS’s efforts to address these issues and encourage continued 

progress. For the full text of CMS’s comments, see Appendix E. 
 

CMS and Contractor Oversight of Home Health Agencies (OEI-04-11-00220) 22

APPENDIX A

Map of Medicare Administrative Contractors

Medicare Administrative Contactors, Regions, and Operational Dates:

Region A, National Heritage Insurance Corporation, December 2010: 

Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and 

Vermont.

Region B,* CIGNA Government Services, June 2011: Colorado, Delaware, 

District of Columbia, Iowa, Kansas, Maryland, Missouri, Montana, Nebraska, 

North Dakota, Pennsylvania, South Dakota, Utah, Virginia, West Virginia, and 

Wyoming.

Region C, Palmetto Government Benefits Administrator, January 2011: 

Alabama, Arkansas, Florida, Georgia, Illinois, Indiana, Kentucky, Louisiana, 

Mississippi, New Mexico, North Carolina, Ohio, Oklahoma, South Carolina, 

Tennessee, and Texas.

Region D,* Noridian Administrative Services, Not Yet Operational: Alaska, 

American Samoa, Arizona, California, Guam, Hawaii, Idaho, Michigan, 

Minnesota, Nevada, New Jersey, New York, Northern Mariana Islands, Oregon, 

Puerto Rico, U.S. Virgin Islands, Washington, and Wisconsin.

*This region was not included in our review because it was not fully operational 

during our study timeframe, which extended from January to October 2011.

D 

C 

B 

A 
 

CMS and Contractor Oversight of Home Health Agencies (OEI-04-11-00220) 23

APPENDIX B

Map of Zone Program Integrity Contractors 

Zone Program Integrity Contractors, Zones, and Operational Dates:

Zone 1, Safeguard Services, LLC, December 2010: American Samoa,

California, Guam, Hawaii, Nevada, and the Northern Mariana Islands.

Zone 2,* AdvanceMed Corporation, February 2011: Alaska, Arizona, Idaho, 

Iowa, Kansas, Missouri, Montana, Nebraska, North Dakota, Oregon, South 

Dakota, Utah, Washington, and Wyoming.

Zone 3,* Cahaba Safeguard Administrators, April 2012: Illinois, Indiana

Kentucky, Michigan, Minnesota, Ohio, and Wisconsin.

Zone 4, Health Integrity, LLC, February 2009: Colorado, New Mexico, 

Oklahoma, and Texas. 

Zone 5, AdvanceMed Corporation, December 2009: Alabama, Arkansas, 

Georgia, Louisiana, Mississippi, North Carolina, South Carolina, Tennessee, 

Virginia, and West Virginia.

Zone 6,* Cahaba Safeguard Administrators, Not Yet Operational: 

Connecticut, Delaware, District of Columbia, Maine, Maryland, Massachusetts, 

New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, and 

Vermont.

Zone 7, Safeguard Services, LLC, February 2009: Florida, Puerto Rico, and 

U.S. Virgin Islands.

*This zone was not included in our review because it was not operational during 

our study timeframe, which extended from January to October 2011.

2 

4 

1 

6 

3 

5 

7 
 

APPENDIX C 

Number and Percentage of Home Health Agencies for Which Zone Program Integrity 

Contractors Initiated Investigations From External and Internal Sources in 2011* 

Zone 

Program 

Integrity 

Contractor 

(ZPIC) Zone 

Number of 

Home Health 

Agencies 

(HHA)** 

Number of 

HHAs for 

Which 

Investigations 

Were Initiated 

From External 

Sources 

Percentage of 

Total HHAs for 

Which 

Investigations 

Were Initiated 

From External 

Sources 

Number of 

HHAs for 

Which 

Investigations 

Were Initiated 

From Internal 

Sources 

Percentage of 

Total HHAs for 

Which 

Investigations 

Were Initiated 

From Internal 

Sources*** 

Fraud-Prone 

Areas 

ZPIC 1 1,115 28 11% 16 6% Los Angeles 

ZPIC 4 2,886 26 10% 5 2% Dallas, Houston 

ZPIC 5 1,351 30 12% 3 1% Baton Rouge 

ZPIC 7† 1,444 108 42% 39 15% Miami 

 Total 6,796 192 75% 63 25% 

*Internal sources may include proactive data analysis of claims, while external sources may include beneficiary complaints or referrals from law
 

enforcement and MACs. 

**This number includes HHAs with paid claims in 2011. However, some HHAs on which ZPICs initiated investigations in 2011 may have 

submitted claims that were not paid during this timeframe and are therefore not included in this number. 

***Column does not sum to total because of rounding. 

†The Zone 7 ZPIC reported that it initiated multiple investigations of the same HHAs. We determined the number of unique HHAs for which 

investigations were initiated in this zone. We used the source of the first investigation initiated as the source (i.e., external, internal) for any HHAs 

on which this ZPIC initiated multiple investigations. 

Source: Office of Inspector General analysis of ZPIC benefit integrity workload data and home health claims data, 2011. 

CMS and Contractor Oversight of Home Health Agencies (OEI-04-11-00220) 24 
CMS and Contractor Oversight of Home Health Agencies (OEI-04-11-00220) 25

APPENDIX D

Number and Percentage of Home Health Agencies for Which Zone Program Integrity Contractors Recommended Specific Administrative 

Actions and Referred Law Enforcement Cases in 2011

Zone Program 

Integrity 

Contractor 

(ZPIC) Zone

Number of Home 

Health Agencies 

(HHA) 

Recommended 

for Overpayment 

Recoupment

Number of 

HHAs 

Recommended 

for Prepayment 

Edits

Number of 

HHAs 

Recommended 

for Revocation

of Billing 

Privileges

Number of 

HHAs 

Recommended 

for Payment 

Suspension

Number of 

HHAs 

Referred to 

Law 

Enforcement

Number of 

HHAs 

Recommended 

for Other 

Administrative 

Actions* 

Number of HHAs 

for Which ZPICs 

Recommended

Administrative 

Actions and 

Referred Law 

Enforcement 

Cases** 

Percentage of 

Total HHAs for 

Which ZPICs 

Recommended

Administrative 

Actions and 

Referred Law 

Enforcement 

Cases 

Fraud-Prone 

Areas 

ZPIC 1 11 7 0 2 0 2 19 8% Los Angeles

ZPIC 4 58 0 5 8 8 2 72 29% Dallas, 

Houston

ZPIC 5 5 1 0 3 1 1 10 4% Baton Rouge

ZPIC 7 72 71 17 3 10 9 147 59% Miami

 Total 146 79 22 16 19 14 248 100%

*ZPICs reported that other administrative actions included requests for unannounced site visits, referrals for provider education, and requests for anticipated payment suppressions. In addition, while we did not include these 

administrative actions, ZPIC Zones 1, 4, and 7 added beneficiaries to existing autodeny edits. ZPIC Zone 4 also added one provider to a new autodeny edit. 

**Rows do not sum to totals because we counted the unique HHAs that had administrative actions and/or law enforcement case referrals in 2011. Certain ZPICs recommended multiple administrative actions and/or referred law 

enforcement cases for the same HHA.

Source: Office of Inspector General analysis of ZPIC benefit integrity workload data and home health claims data, 2011.
APPENDIXE 

Agency Comments 

c..__·!# ~' DEPARTMENT OF HEALlli & HUMAN s_E_R_v_ICES ___ ___ __c_e_n_ro_rs_ro_r_ _Med_lca_·_re_&_M_od __~c_._"'_se_rvi_c•_• "'~ Administrator 

Washington. DC 20201 

DATE: NOV 0 5 2012 

TO: 	 Daniel R. Levinson 


Inspcc_tor Oeneral 


FROM: 	 Ma~1 Tawooncr 


Acting Admiriistrator 


SUB.JECT: 	 Office of Inspector -General (010) Draft Report: "CMS and Contractor Oversight 

ofl-lome Health Agencies" (OEI-04-11-00220) 

The Centers for Medicare & Medicaid Services (CMS) appreciates the opportunity to review and 

comment on the OIG draft report entitled, •·eMS and Contractor Oversight of Home Health 

Agencies." The objectives of the draft report were to determine the extent to which: I) CMS and 

its contractors performed activities to prevent impn,per payments and to detect and deter 

potential fraud among home health agencies (HHA) in 2011, and 2) Hl!As with suspended or 

revoked billing privileges received inappropriate Medicare payments in 20 ll. 

As stated in the 010 report. Medicare paid $19.5 billion to 11,203 HHAs in 2010. HHA services 

have historically been vulnerable to fraud, wasie, and abuse. As such, CMS is taking additional 

steps to address potential vulnerabilities in ihe enrollment and claims payment process [;)r this 

supplier group using the authorities granted under the Affordable Care Act 1

• Under the new 

screening regulations2

, all newly enrolling HHAs are considered a high risk provider/supplier 

and are therefore subject to the highest level of screening, including unannounced silt! visits. As 

part ofCMS's revalidation efforts, all currently enrolled HHAs were sent revalidation notices 

prior to December 31, 2011, and are currently in process. In addition. all HHAs are subject to an 

unannounced physical site visit as part of the revalidation process. 

The Affordable Care Act also enhanced CMS's authority to suspend payments for credible 

allegations of fraud. CMS is using this new authority to coordinate administrative actions with 

law enforcement activities. For example, in February 2012, CMS announced the suspension of 

payments to 78 HHAs involved in an alleged fraud scheme .in Dallas that was part of the 

February 28,2012, Health Care Fraud Prevention and Enforcement Action Team (HEAT) Strike 

Force takcdown. ln October 2012, CMS suspended or took other administrative action against 30 

1 Section 6401 of the Affordable Care Act provided the Secretary with authority to perform catPgorical risk·based 

screening on providers and suppliers at enrollment and upon revalidation. 

'CMS 6028-FC entitled, "Medicare, Medicaid and Children's Health Insurance Programs; Additional Screening 

Requirements, Application Fees, Te.mporary Enrollment Moratoria, PaymPnt Suspensions and Compliance Plans for 

Providers and Suppliers" was published in the Federal Register on February 2, 2011. 

CMS and Contractor Oversight of Home Health Agencies (OEl-04-11 -00220) 26 
 

CMS and Contractor Oversight of Home Health Agencies (OEI-04-11-00220) 27
 

CMS and Contractor Oversight of Home Health Agencies (OEI-04-11-00220) 28
 

CMS and Contractor Oversight of Home Health Agencies (OEI-04-11-00220) 29

ACKNOWLEDGMENTS

This report was prepared under the direction of Dwayne Grant, Regional 

Inspector General for Evaluation and Inspections in the Atlanta regional 

office, and Jaime Durley, Deputy Regional Inspector General. 

David Samchok served as the lead analyst for this study. Other Office of 

Evaluation and Inspections staff from the Atlanta regional office who 

conducted this study include Rachel Daiber. Central office staff who 

provided support include Kevin Farber, Scott Manley, and Debra Roush. 
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.