Medicare: Improvements Needed to Address Improper Payments in Home Health
Published: 2009-02-27T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Medicare spending on home health totaled $12.9 billion in 2006, up 44 percent from 2002. Concerns have been raised that improper payments from practices indicating fraud and abuse may have contributed to Medicare home health spending and utilization. The Centers for Medicare & Medicaid Services (CMS), the agency that administers Medicare, is responsible for minimizing improper payments made on behalf of Medicare beneficiaries. GAO was asked to examine the growth in Medicare home health spending and utilization and the benefit's vulnerability to improper payments. GAO focused on states with the highest growth in Medicare home health spending or utilization; fraudulent and abusive practices contributing to recent spending and utilization; and administrative issues that make it vulnerable to improper payments. GAO analyzed Medicare claims data; reviewed Medicare laws and regulations and CMS documents; and interviewed stakeholders and contractors that administer and protect the home health benefit.
section_title: What GAO Found
paragraphs: California, Florida, Nevada, Oklahoma, Texas, and Utah were identified as experiencing the highest growth in Medicare home health spending or utilization from 2002 through 2006. These states ranked among the three highest in one or more of four spending and utilization indicators. Florida and Texas were among the top three on three or more indicators. Texas, Florida, and Nevada--the states with the highest percentage growth in Medicare home health spending from 2002 through 2006--had more than double the national spending growth rate of 44 percent during this period. Upcoding--overstating the severity of a beneficiary's condition--by home health agencies (HHA) and other fraudulent and abusive practices contributed to Medicare home health spending and utilization. For example, a CMS contractor found that only 9 percent of claims were properly coded for 670 Houston beneficiaries who had the most severe clinical rating and who were served by potentially fraudulent HHAs. Court cases and Department of Health and Human Services Office of Inspector General actions illustrated that kickbacks and billing for services not rendered also contributed to Medicare spending and utilization. Stakeholders identified these practices as common types of home health fraud and abuse. Inadequate administration of the Medicare home health benefit leaves the benefit vulnerable to improper payments. Although CMS policy charges its contractors, known as Regional Home Health Intermediaries (RHHI), with the responsibility of screening applications from prospective Medicare HHAs, CMS does not require RHHIs to verify the criminal history of persons named on the application. CMS does not generally include physicians, who are in a position to detect certain types of improper billing, in the agency's efforts to detect improper payments. For instance, CMS does not provide physicians responsible for authorizing home health care with information that would enable them to determine whether an HHA was billing for unauthorized care. Current CMS regulations provide for the removal of HHAs or HHA officials from Medicare for one type of abusive billing--billing for services that could not have been rendered. However, the agency has yet to address the removal of HHAs or HHA officials engaging in other types of abusive or improper billing.

section_title: Letter
paragraphs: In 2006, Medicare spent $12.9 billion for the 2.8 million beneficiaries  receiving home health care—in-home services provided to beneficiaries  who need care following discharge from a hospital or who have chronic  conditions that require continuing but intermittent care. Spending on the  Medicare home health benefit grew about 44 percent from 2002 through  2006, despite an increase of just less than 17 percent in the number of  beneficiaries using the benefit during that 5-year period. In addition, the  number of home health agencies (HHA) that billed Medicare increased  from 6,507 in 2002 to 8,412 in 2006, with more than half of the increase  occurring in just two states—Florida and Texas. The Medicare Payment  Advisory Commission (MedPAC) reported higher profit margins for HHAs  for this period compared to other types of Medicare providers as well.  MedPAC estimated average profit margins of 15.4 percent for freestanding  HHAs in 2006, compared with profit margins of 13.1 percent for skilled  nursing facilities, 12.4 percent for inpatient rehabilitation facilities, and 5.9  percent for outpatient dialysis centers.
The rapid growth in Medicare home health spending and the growth in the  number of HHAs have led to concerns about whether improper payments  to HHAs contributed to the high home health spending. Improper  payments can be due to mistakes on the part of HHAs, as well as fraud and  abuse. For example, improper payments can occur when an HHA submits  claims on behalf of beneficiaries who do not meet Medicare’s coverage  criteria, for services that are not reasonable and necessary, or for services  that are not delivered.
For the 12-month period ending September 30, 2007, the Comprehensive  Error Rate Testing (CERT) program—a program that monitors payment  accuracy in the Medicare fee-for-service program—estimated that  approximately 1.4 percent of Medicare home health claims were  improperly paid, resulting in more than $209 million of improper  payments. However, fraudulent claims may not be reflected in the CERT  error rate estimate. Because the program uses a random sample to select  claims, reviewers are unable to see provider billing patterns that indicate  potential fraud when making payment determinations.
One of the responsibilities of the Centers for Medicare & Medicaid  Services (CMS)—the agency that administers Medicare—is to minimize  improper payments made on behalf of its beneficiaries. GAO previously  reported on CMS’s lack of controls over the Medicare home health benefit  and its susceptibility to improper payments, including fraud and abuse.
GAO has designated Medicare a high-risk program since 1990 because of  the program’s vulnerability to improper payments.
You expressed questions about the recent growth in Medicare home health  spending and utilization and about whether the Medicare home health  benefit was vulnerable to certain types of improper payments, specifically  those that may indicate fraud and abuse. In this report we examined both  home health spending and utilization growth and the vulnerability of the  Medicare home health benefit to improper payments. Specifically, we  identified: (1) the states where home health spending or utilization growth  has been the highest; (2) the fraudulent and abusive practices that may  have contributed to home health spending and utilization; (3) aspects of  the Medicare home health benefit’s administration that make it susceptible  to improper payments; and (4) lessons learned from recent CMS initiatives  to reduce fraud and abuse in the home health benefit.
To identify the states with the greatest home health spending or utilization  growth from 2002 to 2006, we analyzed Medicare home health claims data  for the 50 states and Washington, D.C., on various indexes, including  growth in total spending; growth in percentage of beneficiaries using the  benefit; growth in the number of HHAs that billed Medicare; and the  number of home health cases qualifying for outlier payments, which are  additional payments for particularly expensive beneficiaries. We assessed  the reliability of the 2002 and 2006 claims data from CMS by reviewing  existing information about the data and the systems that produced them,  and interviewing a CMS contractor about the data. We determined that  these data were sufficiently reliable for the purposes of this report.
To identify the types of fraud and abuse that may have contributed to  home health spending and utilization, we interviewed stakeholders,  including CMS officials, CMS contractors responsible for processing home  health claims and home health program safeguard activities, Department  of Health and Human Services (HHS) Office of Inspector General (OIG)  officials, and officials with national and state associations of home health  care providers. We analyzed Medicare home health claims for the 50 states  and Washington, D.C., from 2006, specifically those claims for  beneficiaries receiving home health care for diabetes because some  stakeholders expressed concerns about the legitimacy of payments for  diabetic beneficiaries. We also reviewed information from court cases and  OIG actions related to Medicare home health fraud and abuse.
To identify aspects of the Medicare home health benefit and its  administration that make it susceptible to improper payments, we  reviewed CMS policies and procedures and relevant Medicare laws and  regulations. We also reviewed relevant MedPAC and OIG reports about the  Medicare home health benefit. In addition, we conducted site visits to one  of the three CMS contractors responsible for processing Medicare home  health claims and one of the four CMS contractors responsible for  Medicare home health program safeguard activities. We also interviewed  stakeholders to get their insights into aspects of the Medicare home health  benefit that make it susceptible to fraud and abuse.
To identify lessons learned from recent CMS initiatives to reduce fraud  and abuse in the home health benefit, we interviewed knowledgeable CMS  officials and reviewed documentation regarding the identified initiatives.  We also conducted site visits to the CMS contractors to learn about their  involvement in CMS’s recent initiatives.
We conducted our work from July 2007 through February 2009 in  accordance with generally accepted government auditing standards. Those  standards require that we plan and perform the audit to obtain  appropriate, sufficient evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.
subsections: section_title: Background
paragraphs: Medicare requires that covered services be reasonable and medically  necessary. To qualify for home health care, Medicare beneficiaries must  (1) be homebound; (2) need skilled nursing services on an intermittent  basis, or physical or speech therapy, or have a continuing need for  occupational therapy; (3) be under the care of a physician; and (4) be  receiving services under a plan of care established and periodically  reviewed by a physician. Beneficiaries who qualify for home health care  may also receive medical social services and home health aide services if  these services are part of the beneficiary’s plan of care.
subsections: section_title: HHA Requirements and Payments
paragraphs: An HHA becomes a Medicare-certified provider by meeting a series of  requirements. First, the HHA must submit an enrollment application for  screening by a Medicare contractor. The enrollment application includes  information about key officials, operating capital, and practice location.  The Medicare contractor reviews the application and, if the application  meets the standards, recommends approval to the HHA’s state survey  agency and CMS. Second, a state survey agency reviews the HHA to  determine if the HHA is compliant with the federal conditions of  participation, or an approved accrediting organization can accredit the  HHA. The conditions of participation for HHAs include requirements  concerning organizational structure, administration, patient rights,  medical supervision, and patient assessment. The HHA must also meet the  statutory and regulatory requirements in the state in which it is located,  which may include licensure requirements or approval under a CON.
Third, if the HHA passes the state survey or receives accreditation, the  HHA must sign a provider agreement with CMS. If the provider agreement  is accepted by CMS, the HHA is enrolled and obtains Medicare billing  privileges. To maintain billing privileges, an HHA must revalidate its  enrollment information every 5 years by resubmitting and recertifying the  accuracy of its enrollment information.
HHAs are paid using a prospective payment system (PPS) for 60 days of  care, called an episode. The amount of payment is based on an assessment  of the patient’s needs at the beginning of the episode. The payment for  each beneficiary is based on the national average cost of home health care  services, adjusted by the beneficiary’s categorization into a payment group  and the costliness of patients in each payment group relative to the  average payment. Classification into a payment group is based on the  severity of the beneficiary’s condition along three domains—clinical,  functional, and service use. HHAs receive an up-front payment for each  episode, based on submission of a Request for Anticipated Payment  (RAP), which is 50 or 60 percent of the expected total payment. The HHA  receives the balance of the payment after the episode is complete. Special  payment adjustments exist for HHAs with beneficiaries who have few  visits during an episode or who have partial episodes, and for HHAs with  outlier beneficiaries. CMS significantly refined the home health PPS  effective January 1, 2008.
section_title: CMS Contractor Roles and Responsibilities in Home Health
paragraphs: As of November 2008, CMS contracted with three Regional Home Health  Intermediaries (RHHI) to process and pay home health claims. In  processing and paying claims, RHHIs are responsible for minimizing  improper payments. The RHHIs also are responsible for screening HHA  enrollment applications and making recommendations to CMS and state  survey agencies about whether the applications should be approved.
As of November 2008, CMS contracted with four Program Safeguard  Contractors (PSC) that are responsible for preventing, detecting, and  deterring fraud in the Medicare home health benefit through benefit  integrity investigations and referrals to law enforcement. PSCs  coordinate their activities with the RHHI responsible for claims processing  in their jurisdiction. PSCs also work with the OIG and other law  enforcement organizations to pursue criminal or civil penalties. Specific  activities undertaken by PSCs to identify and prevent fraud and abuse  include analysis of claims data to identify improper billing that may  indicate fraud or abuse and on-site visits to beneficiaries and providers.
Medical review, performed either before or after a claim is approved for  payment, is one way that RHHIs and PSCs ensure that claims are being  paid correctly. Medical review involves obtaining HHA documentation,  such as the beneficiary’s plan of care and medical records, to determine  whether the beneficiary meets Medicare’s coverage criteria for home  health services, whether the care provided was reasonable and necessary,  and whether the claim was coded properly.
section_title: Actions in Response to Improper Billing
paragraphs: CMS and its contractors can take a series of actions against HHAs with a  pattern of improper billing or that are suspected of engaging in fraud or  abuse. Initially, an RHHI can educate an HHA about proper billing if the  HHA’s billing pattern appears to be aberrant. RHHIs can flag a percentage  of the HHA’s submitted claims for medical review if the HHA’s billing  pattern appears aberrant or there is knowledge of abuse in the service  area. RHHIs can also require the HHA to return any money it received in  excess of the proper amount (called an overpayment) or hold payment for  current claims while an overpayment is calculated if there is reason to  believe that the HHA has engaged in fraud or has been overpaid in the past  (called a payment suspension). Finally, if CMS or its contractors determine  that an HHA billed Medicare for a service that could not have been  provided on the date claimed, CMS can revoke the HHA’s Medicare billing  privileges and it would be barred from re-enrolling in the Medicare  program for 1 to 3 years.
If an HHA is suspected of engaging in fraud or other type of unlawful  activity, PSCs must refer the HHA to the OIG. Under the Social Security  Act, the OIG may take certain administrative actions against individuals  and HHAs, including those found to have submitted false or fraudulent  claims. The OIG may impose sanctions including the assessment of civil  monetary penalties (CMP) and exclusion of an individual or organization  from participation in federal health programs for a period of time. The  Social Security Act also provides for criminal penalties for certain  activities, including certain false statements and kickbacks, which are  payments to physicians or others to induce referrals or in return for  referrals. The OIG and PSCs may also refer cases to other law  enforcement entities such as the Federal Bureau of Investigation or state  law enforcement agencies. Upon investigation, these entities can decide  whether to pursue civil or criminal prosecution.
section_title: Past GAO Work
paragraphs: We have reported for more than two decades on program weaknesses in  Medicare’s home health benefit. Previous reports attributed improper  billing in Medicare home health to     vagueness in the coverage criteria, particularly uncertainty over the exact  meaning of terms such as homebound and intermittent care; insufficient physician involvement and inadequate monitoring of  beneficiary status; insufficient information being submitted with the claims upon which to  base a coverage decision; and the difficulty RHHIs have in assessing, from paper review alone, whether a  beneficiary meets the eligibility criteria, whether the services received are  appropriate given the beneficiary’s current condition, and whether the  beneficiary is actually receiving the services billed to Medicare.
section_title: Six States Identified as Experiencing Highest Medicare Home Health Spending or Utilization Growth from 2002 through 2006
paragraphs: Medicare home health spending or utilization growth from 2002 through  2006 was highest in California, Florida, Nevada, Oklahoma, Texas, and  Utah. These states ranked among the top three in at least one of four  spending and utilization indicators. Two states—Florida and Texas— ranked in the top three on three or more indicators.
States with the highest percentage growth in Medicare home health  spending from 2002 through 2006 were Texas (144 percent), Florida   (90 percent), and Nevada (88 percent). All three states had at least double  the national growth rate of 44 percent, and Texas’s increase in spending  was more than three times the national growth rate. (See fig. 1.) (See app. I  for the growth rates for all individual states.)
Texas (57 percent), Oklahoma (30 percent), and Florida (28 percent) had  the highest percentage growth in the percentage of Medicare beneficiaries  who used home health services from 2002 through 2006. The U.S.  percentage growth was 12 percent. (See fig. 2.) (See app. I for the  percentage growth in percentage of all Medicare beneficiaries who used  home health services, for all individual states.)
Texas (102 percent), Florida (100 percent), and Nevada (75 percent) had  the highest percentage growth in the number of HHAs that billed Medicare  from 2002 through 2006. In comparison, the national growth rate was   29 percent. (See fig. 3.) (See app. I for the percentage growth in number of  HHAs that billed Medicare for all individual states.)
States with the highest percentage of home health episodes that were  outliers in 2006 were Florida (12 percent), Utah (11 percent), and  California (7 percent). The percentage of outlier cases nationwide was   4 percent. (See fig. 4.) (See app. I for the percentage of outlier cases for all  individual states.)
section_title: Upcoding and Other Fraudulent and Abusive Practices Contributed to Home Health Spending and Utilization
paragraphs: Upcoding, or overstating the severity of a beneficiary’s condition, and  other fraudulent and abusive practices were problems in some areas and  contributed to Medicare home health spending and utilization. Data  analyses that we, CMS, and one PSC conducted showed that upcoding and  billing for unnecessary care contributed to spending and utilization.  Stakeholders also told us that common types of upcoding and billing for  unnecessary care in home health were billing for outlier cases when this  level of care was not required, billing for beneficiaries who were not  homebound, and billing for therapy visits that may have been medically  unnecessary. Other fraudulent and abusive practices, including  kickbacks, payments from HHAs to beneficiaries for use of their Medicare  identification numbers, and billing for services not rendered, also  contributed to Medicare home health spending and utilization. Court  cases and OIG actions illustrate how these practices contributed to  improper HHA spending and utilization. In addition, stakeholders  identified these practices as common types of home health fraud and  abuse, although some stakeholders acknowledged that they were difficult  to prove.
Medicare home health spending and utilization was due in part to  upcoding Medicare claims by billing for outlier cases that qualified for  additional payments, although beneficiaries did not require this level of  care. For example, in Miami-Dade County, a pattern of an unusually high  number of outlier cases in 2007 indicated fraudulent upcoding of Medicare  home health claims. According to one PSC’s analysis, in 2007, 57.5 percent  of home health cases in Miami-Dade County were outlier cases, compared  with 0.4 percent in Chicago, 8.6 percent in Dallas, 2.2 percent in Houston,  and 2.2 percent in Atlanta. The PSC’s analysis showed that Miami-Dade  HHAs received more than $550 million in outlier payments in 2007—an  amount more than four times greater than the combined total paid to  HHAs in Chicago, Dallas, Houston, and Atlanta, even though there were  more people over age 65 in each of the other four metropolitan areas.
The PSC also reported in its written analysis to CMS that many Miami- Dade County HHAs provided daily skilled nursing visits to administer  insulin injections for diabetic beneficiaries, which resulted in higher  costs per beneficiary and outlier payments, although beneficiaries may not  have required this level of care. In a November 2007 report to CMS, this  PSC stated that Miami-Dade County beneficiaries and their caregivers had  been coached in how to respond to investigators verifying whether the  skilled nursing services for insulin injections were necessary. For  example, according to the PSC representatives, some beneficiaries said  that they were unable to administer their own injection due to poor vision,  yet they were able to read the investigators’ business cards.
Our study of 2006 Medicare home health data from U.S. counties with 100  or more home health episodes confirmed the PSC’s analysis by indicating  that, compared with the rest of the country, a large percentage of home  health cases in Miami-Dade County involved diabetic beneficiaries. Nearly  50 percent of all Medicare beneficiaries in Miami-Dade County who  received home health services in 2006 had a diagnosis of diabetes. The  average for all counties included in the analysis, about 16 percent, was  significantly lower. Total Medicare payments for diabetes episodes in  Miami-Dade County exceeded $221 million in 2006. This figure was almost  double the diabetes-related payments in Los Angeles County, which had  nearly twice as many Medicare beneficiaries using home health services as  Miami. The average diabetes payment among all counties with at least one  beneficiary who had a diabetes home health episode was less than   $1 million.
In addition to fraudulent and abusive practices involving outlier payments,  stakeholders reported that before CMS amended its payment methodology  in 2008, some HHAs billed for 10 or more therapy visits in order to qualify  for additional Medicare payments, even though these visits may not have  been medically necessary. CMS concluded that the 10-therapy-visit  threshold, established during the implementation of the PPS in 2000,  distorted service delivery patterns by creating financial incentives for  HHAs to bill for 10 therapy visits. CMS analysis showed that, prior to  implementation of the PPS, the highest concentration of therapy visits per  episode ranged from 5 to 7 visits. After implementation of the PPS, the  highest concentration of therapy visits grew to 10 to 13 visits per episode.
Some stakeholders reported another type of fraud and abuse in which  HHAs submitted claims for beneficiaries who were not homebound or  who required fewer services than were provided. For example, several  Houston HHAs had an unusually high percentage of patients with the most  severe clinical rating. One PSC interviewed 670 Houston beneficiaries  who had the most severe clinical rating and who were patients of HHAs  identified by the PSC as having aberrant billing patterns. The PSC found   91 percent of claims for these beneficiaries to be in error. Nearly   50 percent of the beneficiaries were not homebound and therefore were  not eligible to receive any Medicare home health services. The  investigators also found that while 39 percent of the beneficiaries they  interviewed were eligible for the benefit, their clinical severity had been  exaggerated. The PSC concluded that only 9 percent of claims for the 670  beneficiaries were properly coded. In addition, the PSC found that other  home health beneficiaries it interviewed were not homebound; for  instance, some were mowing their lawns when investigators came to  interview them.
In addition, court cases and OIG actions illustrate how other fraudulent  and abusive practices such as kickbacks, payments by HHAs to  beneficiaries for use of their Medicare identification numbers, and billing  for services not rendered contributed to Medicare home health spending  and utilization. For example, in October 2004, a registered nurse who  owned the two largest HHAs in California pled guilty to defrauding  Medicare of $40 million by billing for services not rendered or medically  unnecessary; falsifying medical records to support fraudulent claims; and  paying kickbacks. In addition, a Pennsylvania HHA agreed to pay  $300,000 and enter into a settlement agreement with the OIG to resolve its  liability in May 2005 for alleged kickbacks. The HHA allegedly paid  Pennsylvania and Florida physicians kickbacks in the form of loans,  consulting fees, and rental space payments to induce them to refer  beneficiaries requiring home health services or durable medical  equipment, or both, paid for by Medicare. (See table 1 for examples of  court cases and OIG actions.)
Stakeholders, including industry representatives, also identified  kickbacks, payments by HHAs to beneficiaries for use of their Medicare  identification numbers, and billing for services not rendered as common  types of home health fraud and abuse. For example, a CMS official and  representatives from an RHHI, PSCs, and HHA associations told us that  some HHAs offered physicians kickbacks. For instance, representatives  from home health associations said that physician kickbacks were so  common in some parts of Florida that many physicians expected payment  for referrals and inquired how much the HHAs paid for referrals.  Stakeholders also told us that, based on their experience, some HHAs  hired physicians to serve as medical directors to disguise payments for  referrals by those physicians and that some HHAs had as many as 20 or 30  medical directors.
In addition, stakeholders told us that some HHAs offered kickbacks to  nurses, hospital discharge planners, and assisted living facility managers  for beneficiary referrals. For example, a CMS official and a PSC  representative told us that when some nurses were hired by a new HHA  employer, the nurses moved their patients from their former HHA  employer to the new one and received bonuses according to the number of  beneficiaries they brought with them. The PSC representative said that  beneficiaries were often very loyal to their nurses and often did not realize  they were being shifted among HHAs. In another practice reported by a  Florida home health association representative, HHAs allegedly paid  managers at senior housing projects and assisted living facilities above- market rent in exchange for beneficiary referrals.
According to stakeholders, HHAs that billed Medicare for services that  were not rendered may have paid beneficiaries for use of their Medicare  identification numbers. Stakeholders said that HHAs offered beneficiaries  payments in the form of cash or other goods, such as cigarettes or alcohol.  In addition, a CMS official told us that some Miami beneficiaries reported  that HHA nurses had given them insulin injections that investigators  suspected they did not actually receive. This official also reported that  Miami HHAs have submitted claims for visits that were probably not  provided, such as claims for visits that allegedly occurred when hurricanes  were in the area.
Stakeholders told us that kickbacks, payments to beneficiaries for illegal  use of their Medicare identification numbers, and billing for services not  rendered were difficult to prove. For example, one PSC representative  noted that in the past, the PSC could have relied on either beneficiaries or  physicians to testify about the HHA activity and thereby to act as a  safeguard against fraud and abuse, but with all parties involved in the  practices, this type of cooperation is less likely. An official from the OIG’s  Miami Office of Investigations echoed these concerns, stating that some  South Florida beneficiaries purportedly received more income in illegal  HHA payments than from their monthly disability checks and therefore  were less likely to be truthful about HHA fraudulent and abusive practices.
section_title: Inadequate Screening, Monitoring, Investigation, and Enforcement Procedures Leave Home Health Benefit Vulnerable to Improper Payments
paragraphs: Inadequate administration of the Medicare home health benefit leaves the  benefit vulnerable to improper payments. Although CMS policy charges  RHHIs with the responsibility of screening applications from prospective  Medicare HHAs, CMS does not require RHHIs to verify the criminal history  of persons named on the application. Furthermore, while CMS regulations  require that HHAs undergo revalidation at least once every 5 years, HHAs  are not routinely subjected to revalidation. CMS generally does not include  physicians, who are in a position to detect certain types of improper  billing, in CMS efforts to detect improper payments. CMS does not  routinely provide physicians authorizing home health care with the  information needed to detect billing for unauthorized services.
subsections: section_title: Inadequate Screening May Allow Problem Providers to Enter Medicare
paragraphs: Gaps in screening potential and current HHAs may allow problem  providers to enter and remain in the Medicare program. Although CMS  policy charges RHHIs with the responsibility of screening applications  from prospective Medicare HHAs, CMS does not require RHHIs to verify  the criminal history of persons named on the initial enrollment  application. An application is subject to denial if an owner has been  convicted of certain types of felonies within the past 10 years or if the  application contains false or misleading information. Because RHHIs do  not verify the criminal history responses, it is impossible for them to  identify false or misleading information or owners who have been  convicted of a felony within the past 10 years.
CMS regulations require that HHAs resubmit and recertify the accuracy of  their enrollment information every 5 years, but HHAs are not routinely  subjected to this revalidation. CMS adopted the revalidation requirement  in 2006 as a systematic means of collecting updated information about the  nation’s Medicare providers and reexamining their enrollment eligibility.  Revalidation requires that the HHA submit a new enrollment application  and any supporting documentation, and the RHHIs to validate the  information provided and, in some cases, to make an on-site inspection of  the HHA. In the preamble to the rule establishing the revalidation  requirement, CMS noted that revalidation will “ensure that Medicare  beneficiaries are receiving services furnished only by legitimate providers  and suppliers, and strengthen  ability to protect the Medicare Trust  Funds.”
section_title: Gaps in Monitoring Claims Make It Easy for Improper Payments to Occur
paragraphs: CMS generally does not include physicians, who are in a position to detect  certain types of improper billing, in CMS efforts to detect improper  payments. CMS does not routinely provide physicians authorizing home  health care with information that would allow the physicians to detect  billing for unauthorized services. Physicians must authorize the type and  frequency of home health visits but do not receive verification of the visits  included in the HHA’s claim to ensure that those claimed were consistent  with those authorized. Stakeholders reported to us numerous instances of  HHAs billing for services unauthorized by the physician.
RHHIs are responsible for monitoring home health claims, but limitations  in the number of medical reviews they conduct leave the benefit  vulnerable to improper payments, including payments resulting from fraud  and abuse. Two of the three RHHIs told us they are limited by CMS budget  constraints in the number of medical reviews they can conduct. In fiscal  year 2007, 0.5 percent of the more than 8.7 million HHA claims processed  were subjected to prepayment medical review by RHHIs. The RHHIs told  us they primarily focus on those claims submitted by HHAs whose billing  patterns exhibit differences from their peers on such measures as average  number of nursing visits per episode, episodes per beneficiary, and cost  per episode. The RHHIs reported to us that in fiscal year 2007 they denied,  in whole or in part, 41 percent of nearly 44,000 claims reviewed prior to  payment and 24 percent of the total submitted charges, for $23 million in  savings.
RHHIs rarely conduct postpayment medical reviews to recover funds  previously paid in error, even when an HHA is identified as billing  improperly through prepayment review. The RHHIs reported to us that in  fiscal year 2007 they conducted postpayment medical review on 640 of the  over 8.7 million claims processed, recouping $486,000 in overpayments.  According to a CMS official, the emphasis on prepayment review is to  avoid pursuing payments after they have been made.
section_title: Challenges in Investigation and Enforcement Leave Home Health Benefit Vulnerable to Improper Payments
paragraphs: Investigation and enforcement challenges restrict the number of HHAs  that are investigated and sanctioned for improper billing. Substantiating  improper payments for the home health benefit is time consuming and  labor intensive. PSCs identify HHAs to investigate based on referrals from  the RHHIs, other contractors, law enforcement entities, or from data  analysis. Their investigations can be based either on claims already paid or  on RAP submissions. For instance, one PSC noted that evidence to  substantiate medically unnecessary services or possible upcoding is best  gathered as close to the date the beneficiary was assessed as possible.  This requires coordination between the RHHI and the PSC so that the PSC  can assess the beneficiaries, in person, within days of submission of the  RAP to the RHHI. Once improper billing is established, the PSC must also  determine the amount of improper payments the HHA has already  received. One PSC told us that a nurse could conduct medical review of  about four home health claims per week due to the amount of information  that can comprise a 60-day episode. Once the PSC has gathered sufficient  evidence, it may refer the HHA to the OIG. If the OIG does not accept the  referral within a certain period of time, the PSC may present the case to  other law enforcement agencies for further investigation.
Current CMS regulations provide for the removal of providers or HHA  officials from the program for abuse of billing privileges in limited  circumstances. Those removed may not reenroll for a minimum of 1 year  and a maximum of 3 years. Prior to August 26, 2008, the regulations  provided for CMS to revoke a provider’s billing privileges, but only for  reasons other than improper billing, such as conviction for certain felonies  or submission of false or misleading information on the enrollment  application. Effective August 26, 2008, CMS may also revoke a provider’s  billing privileges for one narrowly defined type of abusive billing— submission of claims for services that could not have been furnished on  the date claimed. This would include claims for services provided to  deceased beneficiaries and claims for services when the physician or  beneficiary was not in the state or not in the country when services were  furnished. Discussing the new provision, CMS stated that the expanded  regulation was not intended to be used for isolated occurrences or  accidental billing errors, but was directed at those “providers and  suppliers who are engaging in a pattern of improper billing” and further  explained that it would revoke billing privileges only when there were at  least three instances of abusive billing. CMS also stated that it might  propose other provisions related to revocation of provider and supplier  billing privileges in the future.
While the OIG may remove providers from the Medicare program for  fraudulent billing, the OIG has rarely used its authority to exclude in the  absence of conviction for fraud. If an HHA or individual is convicted of a  crime related to the delivery of an item or service under Medicare, federal  law requires the OIG to exclude them from participating in any federal  health care program. The OIG also has the discretionary authority to  exclude HHAs and individuals based on the OIG’s determination that the  HHA paid kickbacks, submitted claims for services that were not provided  as claimed or were unnecessary, or submitted false or fraudulent claims.  HHAs that furnish services in excess of the needs of patients or who make  false representations of material facts in support of a claim may also be  excluded under the OIG’s discretionary authority. The OIG has rarely used  its discretion to exclude on the basis of fraudulent billing in the absence of  a conviction for fraud. In calendar year 2007, less than half of 1 percent of  all individual exclusions were for submitting false claims, submitting  claims for services that were not medically necessary, or making false  representations of material facts on a claim or documentation used to  support a claim. Rather than exclude on the basis of an OIG  determination or refer these cases for prosecution, the OIG may impose a  CMP or seek a settlement. Under a settlement agreement, the provider or  entity consents to the obligations specified by the OIG in exchange for the  OIG’s agreement not to seek exclusion.
section_title: Revalidation and Targeted Local Efforts Show Potential to Reduce Home Health Fraud and Abuse
paragraphs: In recent CMS and contractor initiatives, CMS learned that revalidation  and targeted efforts adapted to local circumstances show the potential to  reduce home health fraud and abuse. For example, as part of a 2-year  demonstration, CMS is requiring all HHAs in Houston and the greater Los  Angeles area to undergo revalidation at least once during the  demonstration. As of October 2008, 37 HHAs (out of approximately 845) in  the areas have had their billing privileges revoked for failure to resubmit  their information. These 37 HHAs billed for approximately $6.1 million in  fiscal year 2007. PSC efforts in Houston and Miami have also shown the  potential to save Medicare money. The PSC needed to adapt its strategies  to the different identified fraudulent and abusive practices in the two  communities. For instance, in Miami the PSC worked with physicians to  identify HHA overpayments in excess of $9 million.
subsections: section_title: Revalidation Can Help Ensure Legitimacy of Home Health Providers
paragraphs: An ongoing CMS demonstration project shows that revalidation may be an  effective method of ensuring the legitimacy of HHAs. CMS is currently  conducting a 2-year demonstration that, in part, requires HHAs to undergo  revalidation at least once during the demonstration. The demonstration,  which began in late 2007, is being conducted in two areas with a history of  fraudulent home health activity—greater Los Angeles and Houston.  HHAs that fail to resubmit their enrollment application within 60 days of  receiving notice have their billing privileges revoked. As of October 2008,  37 HHAs out of approximately 845 had their billing privileges revoked as  part of the demonstration. These 37 HHAs billed for approximately   $6.1 million in fiscal year 2007. According to a CMS official, all of these  agencies failed to resubmit the enrollment application.
Other parts of the demonstration will give CMS the ability to evaluate  other actions aimed at reducing and deterring fraudulent or abusive HHA  billing. In addition to revalidation, the demonstration requires state survey  agencies to conduct surveys of any HHA that underwent an ownership  change within the previous 2 years. RHHIs will also conduct a site visit to  all HHAs to verify that the HHA is located at the address identified on the  application. Billing privileges will be revoked for HHAs that fail to report  an ownership or address change; have key officials with a felony  conviction within the prior 10 years as determined by a background check;  or no longer meet all Medicare conditions of participation. As of May 2008,  the RHHIs responsible for California and Texas had begun conducting site  visits to HHAs to verify the address information on the enrollment  applications; state surveys of HHAs with an ownership change had not  begun.
section_title: Targeted Local Efforts Show Potential to Deter Fraud and Abuse and Save Medicare Dollars
paragraphs: One PSC’s recent efforts to detect and deter home health fraud and abuse  in two areas show that targeted efforts based on local fraudulent and  abusive practices can deter these activities and save the Medicare program  money. In Houston, the PSC targeted those HHAs that billed more than   50 percent of their claims at the most severe clinical level, because the  PSC’s experience showed that such billing patterns were indicative of  substantial upcoding. To identify potentially fraudulent claims, the PSC  monitored the submission of RAPs for the targeted HHAs. Once enough  beneficiaries were identified, the PSC sent teams of investigators,  including nurses, to Houston for on-site interviews with beneficiaries to  assess their health condition, including whether they were indeed  homebound, and then compared these results with the information  submitted by the HHA. Once an HHA reached a threshold percentage of  submitting upcoded claims or claims for beneficiaries who were not  homebound, the PSC worked with CMS to cancel the HHA’s RAP  privileges, meaning that the agency would only be paid at the end of the  episode following the submission of a valid claim. According to the PSC  officials, the cancellation of RAP privileges was particularly effective in  Houston because these HHAs relied on the RAP payments to cover their  expenses. Medicare payments for claims at the most severe clinical level  for 24 targeted HHAs decreased from nearly $1.9 million in January 2007 to  $34,461 in September 2007.
In Miami, the PSC identified a different practice that could not be  addressed through the cancellation of RAP privileges; instead, the PSC  worked with physicians to identify overpayments. This practice involved  the submission of high numbers of outlier claims for beneficiaries with  diabetes. The PSC told us that canceling RAP privileges would not have  been appropriate in Miami because outlier payments are determined at the  end of the episode; therefore, the HHAs in Miami were getting only a small  amount of the total episode payment from the up-front payment that is  based on the RAP submission. Also, the sheer volume of claims that nurses  would have had to review in Miami was prohibitive. Instead of focusing on  the suppression of RAP privileges, the PSC addressed the outlier problems  in Miami through collaboration with referring physicians. The PSC sent  letters to physicians that had referred beneficiaries whose care resulted in  high HHA reimbursements from outlier claims with the names of the  Medicare beneficiaries they had referred and the amount of payment the  HHAs had received based on those referrals. According to the PSC  officials, some of the referring physicians became concerned about the  amount of money the HHAs had received and collaborated with the PSC.  Some of the physicians indicated, for instance, that their signature had  been forged or that they did not realize the amount of care they were  authorizing. As a result of interviews with 31 of the physicians who  responded to the letters, nearly 950 plans of care were disavowed by the  physicians, resulting in overpayment assessments against HHAs in excess  of $9 million as of March 2008.
Despite the different strategies needed in Houston and Miami to address  the fraud and abuse concerns, the PSC found that city site visits, which  included beneficiary interviews, were necessary in both locations.  According to a PSC official, beneficiary interviews are needed so that they  have a basis on which to deny a claim. The official noted that medical  reviews that use only the medical records provided by the HHA are limited  because providers may know how to falsify records so that they can pass a  review. The PSC conducted 10 weeks of site visits in Houston between  March 2007 and February 2008, using between 6 and 24 staff per city site  visit, attempting 959 beneficiary interviews and completing 670. In Miami,  the PSC completed 118 beneficiary interviews during 6 week-long site  visits between mid-November 2007 and early March 2008 and 31 interviews  with physicians with high referral rates to targeted HHAs.
In October 2008, CMS announced new initiatives to further address issues  identified in Miami-Dade County. CMS officials from CMS’s Miami field  office are conducting beneficiary interviews with beneficiaries from HHAs  with either a high percentage of outlier episodes or a high dollar amount of  outlier payments. The beneficiaries will be visited at home to determine if  they qualified for the services they received and if they received all the  services for which Medicare was billed. Additionally, CMS is considering  implementing a trigger in Miami-Dade County that will flag an HHA for  increased scrutiny when more than 5 percent of the HHA’s claims are  outliers. Beneficiaries from these HHAs would be targeted for interviews  and the HHA’s claims would also be targeted for pre- or post-payment  medical review. According to CMS officials, as of December 2008, 13 HHAs  were subject to a 180-day payment suspension based on CMS’s  examination of outlier data.
section_title: Conclusions
paragraphs: Gaps in CMS’s administration of the $12.9 billion Medicare home health  benefit have left the agency vulnerable to improper payments, including  payments for claims resulting from fraudulent and abusive practices.  While we have reported for more than two decades about the lack of  controls over the Medicare home health benefit, CMS’s administration of  the benefit continues to be unable to prevent HHAs from billing for  services that are not medically necessary or that are not rendered.
The screening process RHHIs use for HHAs that have submitted  applications to participate in Medicare does not routinely include  verification of the criminal history of applicants. Without this information,  individuals and businesses that misrepresent their criminal histories or  have a history of relevant convictions, such as for fraud, could be allowed  to enter the Medicare program.
Physicians certifying home health plans of care are not currently given the  information needed for them to play a significant role in aiding CMS  efforts to reduce home health care fraud and abuse. Physicians lack  information about the care Medicare is billed for based on their  authorization. The PSC’s experience in Miami showed that giving  physicians more information about the care provided a beneficiary led to  the identification of HHAs that were falsifying physician authorizations or  providing levels of care in excess of patient needs.
RHHI monitoring of home health claims relies on medical reviews, but  these reviews could be improved to more effectively recoup potential  overpayments. Currently, RHHIs focus medical review efforts on  prepayment reviews. However, when prepayment medical reviews identify  HHAs as billing improperly, only rarely do RHHIs perform postpayment  medical reviews to recoup potential overpayments  CMS rarely removes those HHAs or key officials at HHAs that engage in a  pattern of abusive billing from Medicare. CMS recently issued regulations  authorizing the revocation of Medicare billing privileges of providers  engaging in one narrowly defined type of improper billing—billing for  services that could not have been rendered. While this is a step in the right  direction, CMS has yet to address the removal of HHAs or HHA officials  engaging in other types of improper or abusive billing.
Recent initiatives by CMS and PSCs show the potential of protecting  Medicare dollars with concerted efforts tailored to local conditions.  However, CMS has not taken advantage of opportunities to further prevent  and deter fraud and abuse as well as effectively sanction those engaging in  fraud and abuse. In the absence of greater prevention, detection, and  enforcement efforts, the Medicare home health benefit will continue to be  a ready target for fraud and abuse.
section_title: Recommendations for Executive Action
paragraphs: To strengthen the controls on improper payments in the Medicare home  health benefit, we recommend that the Administrator of CMS take the  following four actions:    Assess the feasibility of verifying the criminal history of all key officials  named on an HHA enrollment application.
Provide physicians whose identification number was used to certify or  recertify a plan of care with a statement of services the HHA provided to  that beneficiary based on the physician’s certification.
Direct CMS contractors to conduct postpayment medical reviews on  claims submitted by HHAs with high rates of improper billing identified  through prepayment review.
Amend current regulations to expand the types of improper billing  practices that are grounds for revocation of billing privileges. Grounds for  revocation could include a pattern of submitting claims that are falsified,  for persons who do not meet Medicare’s coverage criteria, or for services  that are not medically necessary.
section_title: Agency Comments and Our Evaluation
paragraphs: CMS reviewed a draft of this report and provided written comments,  which appear in appendix II.
In responding to our draft report, CMS stated it would consider two of our  four recommendations. CMS provided comments on, but neither agreed  nor disagreed, our other two recommendations. In considering our  recommendation that physicians who certify or recertify plans of care be  provided a statement of services received by beneficiaries, CMS noted that  this sort of physician cross-checking may not result in a payment change  on most claims since home health payments are calculated on the basis of  the number of days of care and the number of visits rather than by the  services provided. CMS suggested an alternative approach in which it  would target physician cross-checking for beneficiaries who receive a  large number of therapy visits and outlier claims. While we believe that all  physicians who certify or recertify plans of care should be provided a  statement of services, CMS’s alternative approach would be a reasonable  way to begin to implement this recommendation. CMS also stated that it  would consider our recommendation to amend regulations to expand the  types of improper billing practices that are grounds for revocation of  billing privileges.
CMS commented on, but neither agreed nor disagreed with our other two  recommendations. In response to our recommendation that CMS assess  the feasibility of verifying the adverse legal histories of key officials named  on enrollment applications, CMS stated that GAO’s use of the term  “adverse legal histories” was too broad. We have changed this term in our  report to “criminal history.” In response to our recommendation that CMS  direct its contractors to conduct postpayment medical reviews on claims  submitted by HHAs with high rates of improper billing, CMS stated that  contractors may already review these claims when they conduct reviews  for HHAs with high utilization. CMS also commented that contractors  must consider the costs and availability of resources when they prioritize  their work. While we agree that contractors must prioritize their work, we  believe that the claims submitted by HHAs already identified as having  high improper billing rates would have a high probability of improper  payments.
CMS highlighted its recent initiatives to address improper payments to  HHAs, noting that it has initiated new enrollment processes for Medicare  providers, such as denying enrollment to providers with payment  suspensions. It also commented that it has taken steps to address  improper outlier payments in Miami and developed a demonstration  project in California and Texas to address high-risk services and providers.  Our draft report discussed the projects in Miami, California, and Texas and  we added information about the new enrollment procedures.
CMS noted that the report only briefly mentioned the CON requirement in  some states. CMS believes CON requirements could stem the increase of  HHAs in high vulnerability areas of the country. While this could be the  case, CON requirements are a function of state laws or regulations, and  therefore outside the scope of our report, which focused on CMS’s efforts  to address improper payments.
In addition, CMS commented that resource constraints prevented  contractors from engaging in certain activities, such as conducting  criminal background checks on persons named on the HHA enrollment  applications. While some stakeholders told us that resource constraints  were an issue, it was beyond the scope of this report to evaluate whether  CMS’s resources were adequate to conduct these activities or to evaluate  how CMS allocates its program integrity funds.
CMS suggested we add a paragraph on the nature and extent of CMS’s  activities involving physicians. We did not include this paragraph, which  discussed several CMS initiatives involving ordering physicians. These  initiatives either were related to durable medical equipment, which was  outside our scope, or limited to the Miami area and already discussed in  the appropriate section of our report.
In response to our statement that CMS does not generally collect  information on the names and number of medical directors an HHA  employs, CMS stated that nearly every medical director qualifies as a  managing employee and information on managing employees is collected  on the enrollment application. We modified our statement to reflect that  the form does not ask HHAs to specify the names and number of medical  directors it employs. Therefore, CMS would have no way of knowing  which managing employees were medical directors and if all medical  directors had been named on the form.
CMS also requested that the report indicate that the OIG should more  robustly utilize its authority to exclude HHAs and impose monetary  penalties. We did not include these comments in our report since they fall  outside of our scope, which focuses on CMS’s efforts to address improper  payments.
CMS also provided technical comments, which we incorporated as  appropriate.
As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the Administrator of CMS,  committees, and others. The report also will be available at no charge on  the GAO Web site at http://www.gao.gov.
If you or your staff have any questions about this report, please contact me  at (202) 512-7114 or cosgrovej@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. GAO staff who made major contributions to this report are  listed in appendix III.
section_title: Appendix I: Medicare Home Health Spending and Utilization Growth in the United States, 2002 through 2006
paragraphs: For our analysis of 2002 and 2006 Medicare home health claims data for  the 50 states and Washington, D.C., we used the following four spending  and utilization indicators: percentage growth in Medicare home health  spending from 2002 through 2006 (table 2), percentage growth in the  percentage of Medicare beneficiaries who used home health services   from 2002 through 2006 (table 3), percentage growth in the number of  home health agencies (HHA) that billed Medicare from 2002 through 2006   (table 4), and percentage of outlier cases in 2006 (table 5).
section_title: Appendix II: Comments from the Centers for Medicare & Medicaid Services
section_title: Appendix III: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Christine Brudevold, Assistant  Director; Lori Achman; Carrie Davidson; Joanna Hiatt; Julian Klazkin;  Daniel Lee; Elizabeth T. Morrison; and Amanda Pusey made major  contributions to this report.