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. 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. 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. 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. 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. 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.) 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. 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. 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.” 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. 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. 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. 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. 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. 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. 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. 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. 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). 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.

Summary: 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. 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.