This is the accessible text file for GAO report number GAO-09-185 
entitled 'Medicare: Improvements Needed to Address Improper Payments in 
Home Health' which was released on March 13, 2009.

This text file was formatted by the U.S. Government Accountability 
Office (GAO) to be accessible to users with visual impairments, as part 
of a longer term project to improve GAO products' accessibility. Every 
attempt has been made to maintain the structural and data integrity of 
the original printed product. Accessibility features, such as text 
descriptions of tables, consecutively numbered footnotes placed at the 
end of the file, and the text of agency comment letters, are provided 
but may not exactly duplicate the presentation or format of the printed 
version. The portable document format (PDF) file is an exact electronic 
replica of the printed version. We welcome your feedback. Please E-mail 
your comments regarding the contents or accessibility features of this 
document to Webmaster@gao.gov. 

This is a work of the U.S. government and is not subject to copyright 
protection in the United States. It may be reproduced and distributed 
in its entirety without further permission from GAO. Because this work 
may contain copyrighted images or other material, permission from the 
copyright holder may be necessary if you wish to reproduce this 
material separately. 

Report to the Ranking Member, Committee on Finance, U.S. Senate: 

United States Government Accountability Office: 
GAO: 

February 2009: 

Medicare: 

Improvements Needed to Address Improper Payments in Home Health: 

GAO-09-185: 

GAO Highlights: 

Highlights of GAO-09-185, a report to the Ranking Member, Committee on 
Finance, U.S. Senate. 

Why GAO Did This Study: 

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. 

What GAO Found: 

California, Florida, Louisiana, 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 of the 
four 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. 

What GAO Recommends: 

CMS stated it would consider two of our four recommendations—to amend 
regulations to expand the types of improper billing practices that are 
grounds for revocation of billing privileges and to provide physicians 
who certify or recertify plans of care with a statement of services 
received by beneficiaries. CMS provided comments on, but neither agreed 
nor disagreed with our other two recommendations. 

View [hyperlink, http://www.gao.gov/products/GAO-09-185] or key 
components. For more information, contact James C. Cosgrove at (202) 
512-7114 or cosgrovej@gao.gov. 

[End of section] 

Contents: 

Letter: 

Results in Brief: 

Background: 

Seven States Identified as Experiencing Highest Medicare Home Health 
Spending or Utilization Growth from 2002 through 2006: 

Upcoding and Other Fraudulent and Abusive Practices Contributed to Home 
Health Spending and Utilization: 

Inadequate Screening, Monitoring, Investigation, and Enforcement 
Procedures Leave Home Health Benefit Vulnerable to Improper Payments: 

Revalidation and Targeted Local Efforts Show Potential to Reduce Home 
Health Fraud and Abuse: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendix I: Medicare Home Health Spending and Utilization Growth in the 
United States, 2002 through 2006: 

Appendix II: Comments from the Centers for Medicare & Medicaid 
Services: 

Appendix III: GAO Contact and Staff Acknowledgments: 

Tables: 

Table 1: Examples of Medicare Home Health Court Cases and OIG Actions: 

Table 2: Percentage Growth in Medicare Home Health Spending from 2002 
through 2006, States in Descending Order: 

Table 3: Percentage Growth in the Percentage of Medicare Beneficiaries 
Who Used HHA Services from 2002 through 2006, States in Descending 
Order: 

Table 4: Percentage Growth in the Number of HHAs from 2002 through 
2006, States in Descending Order: 

Table 5: Percentage of Outlier Cases, States in Descending Order, 2006: 

Figures: 

Figure 1: States with the Highest Percentage Growth in Medicare Home 
Health Spending from 2002 through 2006: 

Figure 2: States with the Highest Percentage Growth in the Percentage 
of Beneficiaries Who Used Home Health Services from 2002 through 2006: 

Figure 3: States with the Highest Percentage Growth in the Number of 
HHAs from 2002 through 2006: 

Figure 4: States with the Highest Percentage of Outlier Cases in 2006: 

Abbreviations: 

CERT: Comprehensive Error Rate Testing: 

CMP: civil monetary penalty: 

CMS: Centers for Medicare & Medicaid Services: 

CON: Certificate of Need: 

HHA: home health agency: 

HHS: Department of Health and Human Services: 

MAC: Medicare Administrative Contractors: 

MedPAC: Medicare Payment Advisory Commission: 

OIG: Office of Inspector General: 

PPS: prospective payment system: 

PSC: Program Safeguard Contractor: 

RAP: Request for Anticipated Payment: 

RHHI: Regional Home Health Intermediary: 

USAO: U.S. Attorneys' Offices: 

ZPIC: Zone Program Integrity Contractors: 

[End of section] 

United States Government Accountability Office:
Washington, DC 20548: 

February 27, 2009: 

The Honorable Charles E. Grassley: 
Ranking Member: 
Committee on Finance: 
United States Senate: 

Dear Senator Grassley: 

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) increased from 6,553 
in 2002 to 8,463 in 2006, with more than half of the increase occurring 
in just two states--Florida and Texas. The Medicare Payment Advisory 
Commission (MedPAC)[Footnote 1] 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. 
[Footnote 2] 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.[Footnote 
3] 

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.[Footnote 4] 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; and the 
number of home health cases qualifying for outlier payments, which are 
additional payments for particularly expensive beneficiaries.[Footnote 
5] 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,[Footnote 6] 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. 

Results in Brief: 

We identified seven states--California, Florida, Louisiana, Nevada, 
Oklahoma, Texas, and Utah--as experiencing the highest Medicare home 
health spending or utilization growth from 2002 through 2006. These 
seven states were among the three highest in one or more of the four 
spending and utilization indicators we examined using Medicare claims 
data. Two of the seven states--Florida and Texas--ranked in the top 
three on three of the four indicators. Texas, Florida, and Nevada--the 
states with the highest percentage growth in Medicare home health 
spending from 2002 to 2006--had more than double the national spending 
growth, and Texas's increase in spending was more than three times the 
national growth rate. 

Upcoding--overstating the severity of a beneficiary's condition--by 
HHAs and other fraudulent and abusive practices contributed to Medicare 
home health spending and utilization. For instance, 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. In addition, court cases and OIG 
actions illustrated how other fraudulent and abusive practices, 
including payments to physicians for referrals, payments by HHAs to 
beneficiaries for use of their Medicare identification numbers, and 
billing for services not rendered, contributed to spending and 
utilization. Stakeholders also identified these practices as common 
types of home health fraud and abuse, although some stakeholders 
acknowledged that they were difficult to prove. 

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 its contractors to 
verify the criminal history of persons named on the application. CMS 
regulations require that HHAs undergo revalidation--which requires 
providers to resubmit enrollment information for reverification--at 
least once every 5 years. However, HHAs are not routinely subjected to 
revalidation. CMS also generally does not include physicians, who are 
in a position to detect certain types of improper billing, in the 
agency's efforts to detect improper payments. For example, CMS does not 
routinely provide physicians authorizing home health care with 
information that would enable them to detect whether an HHA was billing 
for unauthorized services. Furthermore, current CMS regulations provide 
for the removal of HHAs or HHA officials from Medicare for just one 
narrowly defined type of abusive billing--billing for services that 
could not have been rendered. 

In recent CMS and contractor initiatives, CMS learned that revalidation 
and targeted enforcement efforts adapted to local billing practices 
show the potential to reduce home health fraud and abuse. For example, 
beginning in late 2007, CMS initiated a demonstration project requiring 
all HHAs in Houston and the greater Los Angeles area to undergo 
revalidation by resubmitting the CMS enrollment application for 
screening. Those HHAs that failed to resubmit their application had 
their billing privileges revoked. As of October 2008, 37 HHAs--out of 
approximately 845, which billed for approximately $6.1 million in 
fiscal year 2007--had their billing privileges revoked as part of the 
demonstration for failure to resubmit their information for 
revalidation. A contractor's efforts in Houston and Miami also showed 
the potential to save money by adapting to local patterns of fraud and 
abuse. For instance, in Miami, the contractor worked with physicians to 
identify HHA overpayments in excess of $9 million. 

To help reduce improper payments to Medicare HHAs, we are recommending 
that the Administrator of CMS take four actions. The recommended 
actions will enable CMS to more effectively screen HHAs and HHA 
officials participating in the Medicare program, more effectively 
partner with physicians to identify potentially fraudulent and abusive 
activities, and more effectively sanction providers engaging in 
improper billing practices. 

In comments on a draft of this report, CMS stated it would consider two 
of our four recommendations--to amend regulations to expand the types 
of improper billing practices that are grounds for revocation of 
billing privileges and to provide physicians who certify or recertify 
plans of care with a statement of services received by beneficiaries. 
CMS provided comments on, but neither agreed nor disagreed with our 
other two recommendations. In addition to its comments on our 
recommendations, CMS highlighted its recent initiatives to address 
improper payments to HHAs, but also noted that resource constraints 
prevented contractors from engaging in certain activities discussed in 
our report. CMS also stated that the report only briefly mentions 
Certificates of Need (CON) requirements that are in place in some 
states to control health care capacity increases, which CMS believes 
could stem the increase of HHAs in high vulnerability areas. However, 
it was beyond the scope of this report to evaluate whether CMS's 
resources were adequate to conduct these activities and to assess the 
impact of CON requirements, which states impose. CMS also provided 
comments pertaining to specific sections of the report, and we 
incorporated these comments where appropriate. 

Background: 

Medicare requires that covered services be reasonable and medically 
necessary.[Footnote 7] To qualify for home health care, Medicare 
beneficiaries must (1) be homebound;[Footnote 8] (2) need skilled 
nursing services on an intermittent basis,[Footnote 9] 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. 

HHA Requirements and Payments: 

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,[Footnote 10] 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.[Footnote 11] 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.[Footnote 12] 

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.[Footnote 13] 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.[Footnote 14] 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.[Footnote 15] 

CMS Contractor Roles and Responsibilities in Home Health: 

As of November 2008, CMS contracted with three Regional Home Health 
Intermediaries (RHHI) to process and pay home health claims.[Footnote 
16] 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.[Footnote 17] 
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.[Footnote 18] 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. 

Actions in Response to Improper Billing: 

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.[Footnote 19] 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. 

Past GAO Work: 

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;[Footnote 20] 

* insufficient physician involvement and inadequate monitoring of 
beneficiary status;[Footnote 21] 

* insufficient information being submitted with the claims upon which 
to base a coverage decision;[Footnote 22] 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.[Footnote 23] 

Seven States Identified as Experiencing Highest Medicare Home Health 
Spending or Utilization Growth from 2002 through 2006: 

Medicare home health spending or utilization growth from 2002 through 
2006 was highest in California, Florida, Louisiana, 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 of the four 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 
figure 1.) (See appendix I for the growth rates for all individual 
states.) 

Figure 1: States with the Highest Percentage Growth in Medicare Home 
Health Spending from 2002 through 2006: 

[Refer to PDF for image: vertical bar graph] 

State: Texas; 
Growth in spending: 144%. 

State: Florida; 
Growth in spending: 90%. 

State: Nevada; 
Growth in spending: 88%. 

State: United States overall; 
Growth in spending: 44%. 

Source: GAO analysis of CMS data. 

[End of figure] 

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 figure 2.) (See appendix I 
for the percentage growth in percentage of all Medicare beneficiaries 
who used home health services, for all individual states.) 

Figure 2: States with the Highest Percentage Growth in the Percentage 
of Beneficiaries Who Used Home Health Services from 2002 through 2006: 

[Refer to PDF for image: vertical bar graph] 

State: Texas; 
Growth in beneficiaries: 57%. 

State: Oklahoma; 
Growth in beneficiaries: 30%. 

State: Florida; 
Growth in beneficiaries: 28%. 

State: United States overall; 
Growth in beneficiaries: 12%. 

Source: GAO analysis of CMS data. 

[End of figure] 

Louisiana (63 percent), Texas (54 percent), and Nevada (46 percent) had 
the highest percentage growth in the number of HHAs from 2002 through 
2006. In comparison, the national growth rate was 24 percent. (See 
figure 3.) (See appendix I for the percentage growth in number of HHAs 
for all individual states.) 

Figure 3: States with the Highest Percentage Growth in the Number of 
HHAs from 2002 through 2006: 

[Refer to PDF for image: vertical bar graph] 

State: Louisiana; 
Growth in number of HHAs: 63%. 

State: Texas; 
Growth in number of HHAs: 54%. 

State: Nevada; 
Growth in number of HHAs: 46%. 

State: United States overall; 
Growth in number of HHAs: 24%. 

Source: GAO analysis of CMS data. 

[End of figure] 

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 figure 4.) (See appendix I for the percentage of 
outlier cases for all individual states.) 

Figure 4: States with the Highest Percentage of Outlier Cases in 2006: 

[Refer to PDF for image: vertical bar graph] 

State: Florida; 
Outlier cases: 12%. 

State: Utah; 
Outlier cases: 11%. 

State: California; 
Outlier cases: 7%. 

State: United States overall; 
Outlier cases: 4%. 

Source: GAO analysis of CMS data. 

[End of figure] 

Upcoding and Other Fraudulent and Abusive Practices Contributed to Home 
Health Spending and Utilization: 

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. 
[Footnote 24] 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.[Footnote 25] 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.[Footnote 26] 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. 
[Footnote 27] 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,[Footnote 28] which 
resulted in higher costs per beneficiary and outlier payments, although 
beneficiaries may not have required this level of care.[Footnote 29] 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.[Footnote 30] 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.[Footnote 31] 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. 
[Footnote 32] 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.[Footnote 33] 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.) 

Table 1: Examples of Medicare Home Health Court Cases and OIG Actions: 

Case/OIG action, state, date: Court Case Florida March 2008; 
Description: Three defendants who owned four Miami health care 
corporations were convicted of defrauding Medicare of more than $14 
million by, among other things, providing unnecessary medical services, 
home health services, and durable medical equipment. The owners were 
also found guilty of receiving kickbacks in exchange for beneficiary 
referrals. 

Case/OIG action, state, date: OIG Settlement Florida March 2008; 
Description: A Florida HHA agreed to pay $178,000 to settle a case in 
which it was alleged that the HHA paid kickbacks for beneficiary 
referrals. 

Case/OIG action, state, date: Court Case Louisiana December 2007; 
Description: The owner of a Louisiana HHA was found guilty of 
defrauding Medicare over a 5-year period and was ordered to pay more 
than $4.6 million in damages and penalties. Among other charges, the 
owner was convicted of making illegal payments to physicians for 
referrals. The physicians were members of the company's advisory board. 

Case/OIG action, state, date: OIG Settlement Texas December 2007; 
Description: A Texas HHA agreed to pay $86,327 to settle a case in 
which it was alleged that the HHA paid kickbacks. The OIG alleged that 
the HHA supplied free nursing and community development services to 
providers in order to induce them to refer patients for home health 
services. 

Case/OIG action, state, date: Court Case California May 2006; 
Description: A California HHA owner was sentenced to 2 years in prison 
and ordered to pay Medicare $600,000 in restitution for Medicare fraud. 
The HHA owner pled guilty to, among other things, paying kickbacks to 
physicians to provide unnecessary services, billing Medicare for home 
health services that were medically unnecessary or not performed as 
claimed, and falsifying medical records to conceal the fraud. 

Case/OIG action, state, date: OIG Settlement Pennsylvania May 2005; 
Description: A Pennsylvania HHA agreed to pay $300,000 to settle a case 
in which it was alleged that the HHA had paid kickbacks under Medicare. 
The OIG alleged that from February 1997 through May 1998, the HHA made 
payments in the form of loans, consulting fees, and monthly space 
rental payments to physicians in Pennsylvania and Florida to induce 
their referral of Medicare beneficiaries. 

Case/OIG action, state, date: OIG Settlement Florida February 2005; 
Description: A nationwide HHA agreed to pay $130,000 to resolve its 
liability for kickbacks allegedly paid by one of its franchisees. The 
OIG alleged that the franchisee paid commissions to nonemployees for 
each patient referred. The amounts of the commissions were allegedly 
based on the type of services utilized by the referred patients. 

Case/OIG action, state, date: Court Case California October 2004; 
Description: The owner of the two largest HHAs in California pled 
guilty to defrauding Medicare of approximately $40 million and filing 
false tax returns to conceal the illegal income. Among other things, 
the HHAs were alleged to have made illegal payments to marketers, 
physicians, patients, and nurses and then to have billed Medicare for 
services that were not medically necessary or not performed. 

Source: GAO analysis of information from U.S. Attorneys' Offices and 
the HHS OIG. 

Note: Data are from the sources' respective Web sites. 

[End of table] 

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.[Footnote 34] 

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 Screening, Monitoring, Investigation, and Enforcement 
Procedures Leave Home Health Benefit Vulnerable to Improper Payments: 

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. 

Inadequate Screening May Allow Problem Providers to Enter Medicare: 

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.[Footnote 35] 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.[Footnote 36] 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,[Footnote 37] 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 [CMS's] ability to protect the Medicare Trust 
Funds."[Footnote 38] 

Gaps in Monitoring Claims Make It Easy for Improper Payments to Occur: 

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. 

Challenges in Investigation and Enforcement Leave Home Health Benefit 
Vulnerable to Improper Payments: 

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.[Footnote 
39] 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.[Footnote 40] 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.[Footnote 41] 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.[Footnote 42] 

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.[Footnote 43] Rather than exclude 
on the basis of an OIG determination or refer these cases for 
prosecution,[Footnote 44] 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. 

Revalidation and Targeted Local Efforts Show Potential to Reduce Home 
Health Fraud and Abuse: 

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. 

Revalidation Can Help Ensure Legitimacy of Home Health Providers: 

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.[Footnote 45] 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. 

Targeted Local Efforts Show Potential to Deter Fraud and Abuse and Save 
Medicare Dollars: 

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. 

Conclusions: 

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. 

Recommendations for Executive Action: 

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. 

Agency Comments and Our Evaluation: 

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 [hyperlink, 
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. 

Sincerely yours, 

Signed by: 

James C. Cosgrove: 
Director, Health Care: 

[End of section] 

Appendix I: Medicare Home Health Spending and Utilization Growth in the 
United States, 2002 through 2006: 

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) from 2002 through 2006 (table 4), and percentage 
of outlier cases in 2006 (table 5). 

Table 2: Percentage Growth in Medicare Home Health Spending from 2002 
through 2006, States in Descending Order: 

State: Texas[A]; 
Growth in Medicare HHA spending: 144%. 

State: Florida[A]; 
Growth in Medicare HHA spending: 90%. 

State: Nevada[A]; 
Growth in Medicare HHA spending: 88%. 

State: Oklahoma[A]; 
Growth in Medicare HHA spending: 65%. 

State: Illinois; 
Growth in Medicare HHA spending: 62%. 

State: Indiana; 
Growth in Medicare HHA spending: 44%. 

State: Michigan; 
Growth in Medicare HHA spending: 42%. 

State: Louisiana[A]; 
Growth in Medicare HHA spending: 41%. 

State: New Mexico; 
Growth in Medicare HHA spending: 39%. 

State: Mississippi; 
Growth in Medicare HHA spending: 38%. 

State: Idaho; 
Growth in Medicare HHA spending: 34%. 

State: Alaska; 
Growth in Medicare HHA spending: 34%. 

State: California[A]; 
Growth in Medicare HHA spending: 34%. 

State: Ohio; 
Growth in Medicare HHA spending: 33%. 

State: Arkansas; 
Growth in Medicare HHA spending: 32%. 

State: Georgia; 
Growth in Medicare HHA spending: 31%. 

State: Arizona; 
Growth in Medicare HHA spending: 31%. 

State: Tennessee; 
Growth in Medicare HHA spending: 31%. 

State: Alabama; 
Growth in Medicare HHA spending: 30%. 

State: Minnesota; 
Growth in Medicare HHA spending: 30%. 

State: Kansas; 
Growth in Medicare HHA spending: 30%. 

State: Massachusetts; 
Growth in Medicare HHA spending: 30%. 

State: New Hampshire; 
Growth in Medicare HHA spending: 28%. 

State: Colorado; 
Growth in Medicare HHA spending: 27%. 

State: Washington; 
Growth in Medicare HHA spending: 26%. 

State: South Carolina; 
Growth in Medicare HHA spending: 24%. 

State: Utah[A]; 
Growth in Medicare HHA spending: 24%. 

State: North Carolina; 
Growth in Medicare HHA spending: 23%. 

State: Missouri; 
Growth in Medicare HHA spending: 22%. 

State: Virginia; 
Growth in Medicare HHA spending: 22%. 

State: Wisconsin; 
Growth in Medicare HHA spending: 19%. 

State: Nebraska; 
Growth in Medicare HHA spending: 17%. 

State: Connecticut; 
Growth in Medicare HHA spending: 16%. 

State: Iowa; 
Growth in Medicare HHA spending: 15%. 

State: Maryland; 
Growth in Medicare HHA spending: 15%. 

State: Delaware; 
Growth in Medicare HHA spending: 14%. 

State: Maine; 
Growth in Medicare HHA spending: 13%. 

State: New York; 
Growth in Medicare HHA spending: 13%. 

State: South Dakota; 
Growth in Medicare HHA spending: 12%. 

State: Vermont; 
Growth in Medicare HHA spending: 12%. 

State: Kentucky; 
Growth in Medicare HHA spending: 12%. 

State: Rhode Island; 
Growth in Medicare HHA spending: 10%. 

State: New Jersey; 
Growth in Medicare HHA spending: 8%. 

State: Wyoming; 
Growth in Medicare HHA spending: 7%. 

State: District of Columbia; 
Growth in Medicare HHA spending: 2%. 

State: Pennsylvania; 
Growth in Medicare HHA spending: 2%. 

State: Montana; 
Growth in Medicare HHA spending: 1%. 

State: Oregon; 
Growth in Medicare HHA spending: 0%. 

State: West Virginia; 
Growth in Medicare HHA spending: -1%. 

State: Hawaii; 
Growth in Medicare HHA spending: -5%. 

State: North Dakota; 
Growth in Medicare HHA spending: -8%. 

State: United States; 
Growth in Medicare HHA spending: 42%. 

Source: GAO analysis of Centers for Medicare & Medicaid Services (CMS) 
data. 

[A] These states ranked among the top three in at least one of four 
spending and utilization indicators. 

[End of table] 

Table 3: Percentage Growth in the Percentage of Medicare Beneficiaries 
Who Used HHA Services from 2002 through 2006, States in Descending 
Order: 

State: Texas[A]; 
Growth in Part A beneficiaries who use HHA services: 57%. 

State: Oklahoma[A]; 
Growth in Part A beneficiaries who use HHA services: 30%. 

State: Florida[A]; 
Growth in Part A beneficiaries who use HHA services: 28%. 

State: Nevada[A]; 
Growth in Part A beneficiaries who use HHA services: 25%. 

State: Illinois; 
Growth in Part A beneficiaries who use HHA services: 23%. 

State: Louisiana[A]; 
Growth in Part A beneficiaries who use HHA services: 23%. 

State: Minnesota; 
Growth in Part A beneficiaries who use HHA services: 22%. 

State: Michigan; 
Growth in Part A beneficiaries who use HHA services: 19%. 

State: Mississippi; 
Growth in Part A beneficiaries who use HHA services: 18%. 

State: Indiana; 
Growth in Part A beneficiaries who use HHA services: 17%. 

State: Alabama; 
Growth in Part A beneficiaries who use HHA services: 15%. 

State: Georgia; 
Growth in Part A beneficiaries who use HHA services: 14%. 

State: Tennessee; 
Growth in Part A beneficiaries who use HHA services: 14%. 

State: Ohio; 
Growth in Part A beneficiaries who use HHA services: 14%. 

State: Utah[A]; 
Growth in Part A beneficiaries who use HHA services: 12%. 

State: Arkansas; 
Growth in Part A beneficiaries who use HHA services: 10%. 

State: Kansas; 
Growth in Part A beneficiaries who use HHA services: 10%. 

State: Idaho; 
Growth in Part A beneficiaries who use HHA services: 10%. 

State: North Carolina; 
Growth in Part A beneficiaries who use HHA services: 9%. 

State: Massachusetts; 
Growth in Part A beneficiaries who use HHA services: 7%. 

State: Wisconsin; 
Growth in Part A beneficiaries who use HHA services: 7%. 

State: New Mexico; 
Growth in Part A beneficiaries who use HHA services: 5%. 

State: New Hampshire; 
Growth in Part A beneficiaries who use HHA services: 5%. 

State: Connecticut; 
Growth in Part A beneficiaries who use HHA services: 4%. 

State: Alaska; 
Growth in Part A beneficiaries who use HHA services: 4%. 

State: Arizona; 
Growth in Part A beneficiaries who use HHA services: 4%. 

State: New York; 
Growth in Part A beneficiaries who use HHA services: 4%. 

State: Virginia; 
Growth in Part A beneficiaries who use HHA services: 3%. 

State: Kentucky; 
Growth in Part A beneficiaries who use HHA services: 3%. 

State: South Carolina; 
Growth in Part A beneficiaries who use HHA services: 2%. 

State: District of Columbia; 
Growth in Part A beneficiaries who use HHA services: 2%. 

State: Maine; 
Growth in Part A beneficiaries who use HHA services: 2%. 

State: Delaware; 
Growth in Part A beneficiaries who use HHA services: 1%. 

State: New Jersey; 
Growth in Part A beneficiaries who use HHA services: 1%. 

State: Colorado; 
Growth in Part A beneficiaries who use HHA services: 0%. 

State: Iowa; 
Growth in Part A beneficiaries who use HHA services: 0%. 

State: California[A]; 
Growth in Part A beneficiaries who use HHA services: -1%. 

State: Missouri; 
Growth in Part A beneficiaries who use HHA services: -2%. 

State: Pennsylvania; 
Growth in Part A beneficiaries who use HHA services: -2%. 

State: Maryland; 
Growth in Part A beneficiaries who use HHA services: -3%. 

State: Rhode Island; 
Growth in Part A beneficiaries who use HHA services: -3%. 

State: Vermont; 
Growth in Part A beneficiaries who use HHA services: -5%. 

State: Nebraska; 
Growth in Part A beneficiaries who use HHA services: -6%. 

State: West Virginia; 
Growth in Part A beneficiaries who use HHA services: -6%. 

State: Washington; 
Growth in Part A beneficiaries who use HHA services: -6%. 

State: Montana; 
Growth in Part A beneficiaries who use HHA services: -6%. 

State: North Dakota; 
Growth in Part A beneficiaries who use HHA services: -7%. 

State: Wyoming; 
Growth in Part A beneficiaries who use HHA services: -8%. 

State: Hawaii; 
Growth in Part A beneficiaries who use HHA services: -12%. 

State: Oregon; 
Growth in Part A beneficiaries who use HHA services: -12%. 

State: South Dakota; 
Growth in Part A beneficiaries who use HHA services: -15%. 

State: United States; 
Growth in Part A beneficiaries who use HHA services: 12%. 

Source: GAO analysis of CMS data. 

[A] These states ranked among the top three in at least one of four 
spending and utilization indicators. 

[End of table] 

Table 4: Percentage Growth in the Number of HHAs from 2002 through 
2006, States in Descending Order: 

State: Louisiana[A]; 
Growth in number of HHAs: 63%. 

State: Texas[A]; 
Growth in number of HHAs: 54%. 

State: Nevada[A]; 
Growth in number of HHAs: 46%. 

State: New Hampshire; 
Growth in number of HHAs: 38%. 

State: Michigan; 
Growth in number of HHAs: 35%. 

State: District of Columbia; 
Growth in number of HHAs: 35%. 

State: Alaska; 
Growth in number of HHAs: 34%. 

State: New Mexico; 
Growth in number of HHAs: 34%. 

State: Mississippi; 
Growth in number of HHAs: 31%. 

State: California[A]; 
Growth in number of HHAs: 29%. 

State: Idaho; 
Growth in number of HHAs: 29%. 

State: Maryland; 
Growth in number of HHAs: 29%. 

State: Rhode Island; 
Growth in number of HHAs: 28%. 

State: Arizona; 
Growth in number of HHAs: 28%. 

State: Florida[A]; 
Growth in number of HHAs: 27%. 

State: South Carolina; 
Growth in number of HHAs: 27%. 

State: Georgia; 
Growth in number of HHAs: 27%. 

State: Illinois; 
Growth in number of HHAs: 27%. 

State: North Carolina; 
Growth in number of HHAs: 25%. 

State: Vermont; 
Growth in number of HHAs: 25%. 

State: Ohio; 
Growth in number of HHAs: 24. 

State: Maine; 
Growth in number of HHAs: 23%. 

State: Colorado; 
Growth in number of HHAs: 22%. 

State: North Dakota; 
Growth in number of HHAs: 21%. 

State: Virginia; 
Growth in number of HHAs: 21%. 

State: Oklahoma[A]; 
Growth in number of HHAs: 21%. 

State: New York; 
Growth in number of HHAs: 20%. 

State: Washington; 
Growth in number of HHAs: 20%. 

State: Massachusetts; 
Growth in number of HHAs: 19%. 

State: Indiana; 
Growth in number of HHAs: 19%. 

State: Utah[A]; 
Growth in number of HHAs: 18%. 

State: Iowa; 
Growth in number of HHAs: 18%. 

State: Hawaii; 
Growth in number of HHAs: 18. 

State: Alabama; 
Growth in number of HHAs: 17%. 

State: Tennessee; 
Growth in number of HHAs: 16%. 

State: Pennsylvania; 
Growth in number of HHAs: 16%. 

State: Delaware; 
Growth in number of HHAs: 16%. 

State: Connecticut; 
Growth in number of HHAs: 16%. 

State: Wisconsin; 
Growth in number of HHAs: 15%. 

State: New Jersey; 
Growth in number of HHAs: 15%. 

State: Minnesota; 
Growth in number of HHAs: 13%. 

State: Arkansas; 
Growth in number of HHAs: 13%. 

State: Kansas; 
Growth in number of HHAs: 12%. 

State: Wyoming; 
Growth in number of HHAs: 12%. 

State: Oregon; 
Growth in number of HHAs: 11%. 

State: Missouri; 
Growth in number of HHAs: 11%. 

State: West Virginia; 
Growth in number of HHAs: 8%. 

State: South Dakota; 
Growth in number of HHAs: 7%. 

State: Kentucky; 
Growth in number of HHAs: 6%. 

State: Montana; 
Growth in number of HHAs: 0%. 

State: Nebraska; 
Growth in number of HHAs): -4%. 

State: United States; 
Growth in number of HHAs: 29%. 

[End of table] 

Source: GAO analysis of CMS data. 

[A] These states ranked among the top three in at least one of four 
spending and utilization indicators. 

Table 5: Percentage of Outlier Cases, States in Descending Order, 2006: 

State: Florida[A]; 
Average percentage of outlier cases: 12%. 

State: Utah[A]; 
Average percentage of outlier cases: 11%. 

State: California[A]; 
Average percentage of outlier cases: 7%. 

State: New York; 
Average percentage of outlier cases: 7%. 

State: Texas[A]; 
Average percentage of outlier cases: 6%. 

State: Connecticut; 
Average percentage of outlier cases: 5%. 

State: Massachusetts; 
Average percentage of outlier cases: 4%. 

State: Colorado; 
Average percentage of outlier cases: 4%. 

State: Oklahoma[A]; 
Average percentage of outlier cases: 4%. 

State: Nevada[A]; 
Average percentage of outlier cases: 3%. 

State: New Hampshire; 
Average percentage of outlier cases: 3%. 

State: Wyoming; 
Average percentage of outlier cases: 3%. 

State: Wisconsin; 
Average percentage of outlier cases: 3%. 

State: Vermont; 
Average percentage of outlier cases: 3%. 

State: Ohio; 
Average percentage of outlier cases: 3%. 

State: Kansas; 
Average percentage of outlier cases: 3%. 

State: Arkansas; 
Average percentage of outlier cases: 3%. 

State: Rhode Island; 
Average percentage of outlier cases: 3%. 

State: Maine; 
Average percentage of outlier cases: 3%. 

State: Idaho; 
Average percentage of outlier cases: 3%. 

State: Iowa; 
Average percentage of outlier cases: 3%. 

State: Minnesota; 
Average percentage of outlier cases: 3%. 

State: Arizona; 
Average percentage of outlier cases: 2%. 

State: Montana; 
Average percentage of outlier cases: 2%. 

State: Virginia; 
Average percentage of outlier cases: 2%. 

State: Georgia; 
Average percentage of outlier cases: 2%. 

State: Nebraska; 
Average percentage of outlier cases: 2%. 

State: Delaware; 
Average percentage of outlier cases: 2%. 

State: Alaska; 
Average percentage of outlier cases: 2%. 

State: New Mexico; 
Average percentage of outlier cases: 2%. 

State: Missouri; 
Average percentage of outlier cases: 2%. 

State: District of Columbia; 
Average percentage of outlier cases: 2%. 

State: Indiana; 
Average percentage of outlier cases: 2%. 

State: Tennessee; 
Average percentage of outlier cases: 2%. 

State: New Jersey; 
Average percentage of outlier cases: 2%. 

State: Pennsylvania; 
Average percentage of outlier cases: 2%. 

State: Kentucky; 
Average percentage of outlier cases: 2%. 

State: North Carolina; 
Average percentage of outlier cases: 2%. 

State: Louisiana[A]; 
Average percentage of outlier cases: 2%. 

State: North Dakota; 
Average percentage of outlier cases: 1%. 

State: Maryland; 
Average percentage of outlier cases: 1%. 

State: West Virginia; 
Average percentage of outlier cases: 1%. 

State: Michigan; 
Average percentage of outlier cases: 1%. 

State: Alabama; 
Average percentage of outlier cases: 1%. 

State: Washington; 
Average percentage of outlier cases: 1%. 

State: South Dakota; 
Average percentage of outlier cases: 1%. 

State: Illinois; 
Average percentage of outlier cases: 1%. 

State: Oregon; 
Average percentage of outlier cases: 1%. 

State: South Carolina; 
Average percentage of outlier cases: 1%. 

State: Hawaii; 
Average percentage of outlier cases: 1%. 

State: Mississippi; 
Average percentage of outlier cases: 0%. 

State: United States; 
Average percentage of outlier cases: 4%. 

Source: GAO analysis of CMS data. 

[A] These states ranked among the top three in at least one of four 
spending and utilization indicators. 

[End of table] 

[End of section] 

Appendix II: Comments from the Centers for Medicare & Medicaid 
Services: 

Department of Health and Human Services: 
Office of the Secretary: 
Assistant Secretary for Legislation: 
Washington, DC 20201: 

January 29, 2009: 

James Cosgrove: 
Director, Health Care: 
U.S. Government Accountability Office: 
441 G Street N.W.
Washington, DC 20548: 

Dear Mr. Cosgrove: 

Enclosed are comments on the U.S. Government Accountability Office's 
(GAO) report entitled: "Medicare: Improvements Needed to Address 
Improper Payments in Home Health " (GAO 09-185). 

The Department appreciates the opportunity to review this report before 
its publication. 

Sincerely, 

Signed by: 

Barbara Pisaro Clark: 
Acting Assistant Secretary for Legislation: 

Attachment: 

Department Of Health & Human Services: 
Centers for Medicare & Medicaid Services
200 Independence Avenue SW: 
Washington, DC 20201: 

Date: January 29, 2009: 

To: Barbara Pisaro Clark: 
Acting Assistant Secretary for Legislation: 
Office of the Secretary: 

From: [Signed by] Charlene Frizzera: 
Acting Administrator: 

Subject: Government Accountability Office Draft Report: "Medicare: 
Improvements Needed to Address Improper Payments in Home Health" (GAO-
09-185): 

Thank you for the opportunity to review and comment on the Government 
Accountability Office (GAO) draft report. "Medicare: Improvement Needed 
to Address Payments in Home Health." The Centers for Medicare & 
Medicaid Services (CMS) appreciates the time and resources the GAO has 
invested to research and report on Medicare's Home Health benefit. 

The CMS is committed to continually reviewing and refining our 
processes to improve the Medicare program. As a result, within the past 
several months. CMS has taken a number of steps to address improper 
payments in home health that will strengthen anti-fraud efforts across 
Medicare, including the Home Health benefit. CMS has begun by 
initiating new enrollment processes that will impact home health 
agencies (HHA) as well as other Medicare providers. Effective January 
1, 2009. and pursuant to Federal regulations at 42 CFR §424.530(a)(6) 
and (a)(7), an organizational provider (including a HHA, can be denied 
enrollment if the owner: (1) has an existing overpayment that has not 
been repaid in full, or (2) has been placed under a Medicare payment 
suspension. CMS Change Request #6097, which went into effect on January 
20, 2009, requires contractors to undertake certain additional 
verification activities for providers (including HHAs that are changing 
their practice location, banking information, special payment address, 
or are reactivating their Medicare billing privileges. We believe that 
these two activities, as they relate to HHAs, will assist its in 
halting questionable HHA behavior and help ensure that HHAs cannot 
enroll in Medicare without having satisfied their existing obligations 
to the Medicare program. 

In addition. CMS has taken steps to address widespread abuse of outlier 
payments to Medicare certified HHAs in Miami-Dade County. Florida. 
Outlier payments are allowed by CMS for situations that occur 
infrequently within a normal ease-mix, but there are over 300 HHAs in 
South Florida and they have come to rely upon outlier payments as a 
predominant part of their overall reimbursement. The outlier payments 
in Miami are about 58 percent (2007 data) of the HHAs overall 
reimbursement, the highest percentage of outlier payments in the 
country. That compares to a national outlier payment of 6 percent. The 
outlier payment was never intended to be such a large part of HHA 
reimbursement. To address this problem, CMS has taken a number of 
steps: it is suspending HHAs with high amounts of outlier payments: 
enhancing visits to beneficiaries in their homes to verify that the 
beneficiaries qualify for the benefit; and utilizing autodenial edits 
for beneficiaries that do not qualify for the home health benefit. CMS 
will continue to perform ongoing beneficiary and physician interviews 
as well as onsite visits to HHAs in Miami-Dade that can result in 
edits, revocation, deactivation and other actions. 

In 2007, CMS developed a Demonstration Project for HHAs in 
geographically high-risk areas of the country (California and Texas) to 
address high-risk services and providers. This demonstration involved 
strengthening initial provider and supplier enrollment and revalidation 
of enrollment to prevent "bad" providers from entering the program. The 
demonstration also incorporated criminal background checks of owners 
and managing employees into the provider enrollment process. Although 
criminal background checks have not yet produced substantial results. 
mandatory reenrollment reviews and site visits have resulted in 
referral of 55 HHAs for revocation of their Medicare billing 
privileges. The first year accomplishments of the HHA demonstration 
project demonstrates the effectiveness of intensified provider 
enrollment and enhanced program integrity resources. Contingent on 
additional funding. CMS plans on expanding the HHA demonstration to 
Miami-Dade County in light of increasing HHA fraud in South Florida. 

The report only briefly mentions the requirement of a Certificate of 
Need (CON), which CMS believes would have a significant impact on 
stemming the increase of HHAs in high vulnerability areas of the 
country. The two States (Texas and Florida) with the highest percentage 
growth in Medicare Home Health spending from 2002-2006 are States 
without a CON requirement. Moreover, neither California nor Utah has a 
CON, and these two States are also included in the top seven States 
mentioned in the Draft Report as experiencing the highest percentage 
growth in Home Health spending from 2002-2006. CMS believes this is an 
area that the GAO should further explore. 

We note the following specific comments should be addressed in this 
report: 

Specific Comments: 

1. Under "What GAO Found" on the Highlights page, the GAO states in the 
third paragraph that "... CMS does not include physicians. who are in a 
position to detect certain types of improper billing, in the agency's 
efforts to detect improper payments." 

The CMS and its contractors do include physician interviews, as well as 
data analysis. on the top-ordering Home Health physicians. TriCenturion 
interviewed 76 such physicians in the Miami area. resulting in the 
disavowing of approximately 1,000 plans of care and overpayments near 
$11 million. The GAO report later acknowledges on page 7 that "... in 
Miami, the contractor worked with physicians to identify HHA 
overpayments in excess of $9 million." 

2. Page 2. last paragraph, last sentence should be revised to say: 

"However, fraudulent claims are often not reflected in the CERT error 
rate estimate. Since 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." 

3. Page 6 [now page 5], last paragraph: The following sentence should 
he inserted immediately after the sentence identified in the previous 
comment: "CMS officials cited Regional Home Health Intermediary (RHHI) 
resource constraints as the reason for the lack of contractor activity 
in this area." CMS believes it is important to explain the reason why 
criminal background checks have not been routinely performed. A similar 
sentence appears to have originally been inserted in the first 
paragraph of page 7, but seems to have been stricken. It should be 
reinserted as described in this comment. 

4. Page 7 [now page 5], lst paragraph: The sentence "However, HHAs are 
generally not subjected to revalidation" is incorrect and should be 
revised to read: "HHAs are subjected to revalidation to the extent that 
RHHI resources are available." 

5. Page 7 [now page 5], 1st paragraph. last two sentences: For clarity, 
CMS suggests that the GAO should indicate that the physicians being 
referenced in the report are the physicians who are ordering the Home 
Health services and/or signing the plans of care. CMS refers to them as 
"ordering physicians." For accuracy. CMS suggests that the GAO revise 
its report to include the language below regarding the extent and 
nature of CMS' activities involving ordering physicians: 

"The CMS' Field Offices and Program Safeguard Contractors (PSCs) are 
identifying high risk ordering and referring physicians for a number of 
high risk services, such as durable medical equipment (DME), diagnostic 
tests, and HHA services, and interviewing those physicians. Based on 
the interviews and signed attestations that the doctors never ordered 
the services/equipment. Medicare contractors have implemented a number 
of highly effective administrative actions, such as autodenial edits, 
prepay review, payment suspension, revocation, and referral to law 
enforcement. CMS Field Offices and PSCs have also identified and 
interviewed high utilizing beneficiaries and implemented similar 
actions based on their feedback that services were not rendered. CMS' 
current 7-State DME Stop Gap Plan addresses both high utilizing 
ordering physicians and beneficiaries. For instance, in Miami, the 
contractor worked with physicians to identify HHA overpayments in 
excess of $9 million." 

6. Page 10 [now page 8], footnote 13: We suggest the GAO make the 
distinction between what the service domain level determination took 
into account before and after the refinements of 2008. Specifically, 
with regards to the following sentence in footnote 13: "The service use 
domain is based on the anticipated number of therapy visits a 
beneficiary will receive and whether the beneficiary was recently in a 
hospital or rehabilitation facility." We recommend revising the above 
sentence to read. In the original HH PPS, the service use domain was 
based on the anticipated number of therapy visits a beneficiary will 
receive and whether the beneficiary was recently in a hospital or 
rehabilitation facility." This change was proposed in the proposed rule 
at 72 FR 25361 and finalized in the final rule at 72 FR 49838. 

7. Page 11 [now page 9], 1st paragraph: The GAO states that RHHIs are 
"... responsible for screening HHA enrollment applications and making 
recommendations to CMS ... whether the applications should be 
approved." 

The GAO has noted in the past that it is difficult to assess 
beneficiary eligibility for home health or whether services arc 
reasonable and necessary based on paper review alone. The same theory 
holds true for determining if an application should be approved by 
individuals reviewing paper alone. The RHHI should, at a minimum, 
inform CMS or the Zone Program Integrity Contractor of new applications 
being considered so that they can perform a site visit. 

8. Page 13 [now page 10], 1st paragraph: Please delete "1 to 3 years." 
The 1-to-3 year period refers to the enrollment bar under 42 CFR 
§424.535(e), which does not necessarily equate to the period of 
revocation. They are two related, but distinct, concepts. 

In addition, while the GAO statement is true, it is not the only reason 
for revocation. The GAO report should state that there are other 
reasons CMS will revoke. 

9. Pages 23-24 [now page 20], footnote: The information is not 
accurate. The CMS-855A collects information on all managing employees 
of the HHA. Since virtually every medical director of an HHA will 
qualify as a managing employee, it follows that CMS will, in fact. 
capture information on HHA medical directors. 

10. Page 25 [now page 21], last paragraph: "....CMS does not require 
RHHIs to verify the criminal backgrounds of persons named on the 
application." The following sentence should be inserted immediately 
after this sentence identified in the previous comment: "CMS officials 
cited RHHI resource constraints as the reason for the lack of 
contractor activity in this area." 

In addition. the GAO should clarify in the next sentence of this 
paragraph that HHAs are subjected to revalidation to the extent that 
the RHHIs' resources permit it. 

11. Page 26 [now page 21], 1st paragraph: The following sentence should 
be inserted immediately after the language "...on the initial 
enrollment application.° "CMS officials cited RHHI resource constraints 
as the reason for the lack of contractor activity in this area." 

12. Page 26 [now page 21-22], 1st paragraph: Please revise the sentence 
that begins "An application is subject to..." to read as follows: "An 
application is subject to denial for reasons including. but not limited 
to: (1) the provider, supplier, or an owner thereof has been convicted 
of certain types of felonies within the past 10 years; (2) the 
application contains false and misleading information; (3) 
noncompliance with Medicare enrollment requirements: and (4) the 
provider is not operational." 

13. Page 26 [now page 22], 1st paragraph: Regarding the sentence that 
begins "Because RHHIs... the fact that criminal background checks have 
usually not been performed has little relation to the contractor's 
ability to detect false or misleading information. Contractors verity 
other information on the form, including State licensure data and 
information on whether the provider is excluded or debarred from 
Medicare and have denied applications based on the falsification of 
data other than that which relates to felony convictions. This sentence 
should be revised to read as follows: "RHHIs are not required to verify 
the criminal backgrounds of persons named on the application. CMS 
officials cited RHHI resource constraints as the reason for the lack of 
contractor activity in this area." 

14. Page 26 [now page 22], 2nd paragraph: The language ".... but HHAs 
are generally not subjected to this revalidation" is inaccurate. As 
stated previously. HHAs are subjected to revalidation to the extent 
that the RHHIs' resources permit it. 

15. Pages 30-31 [now page 24]: The GAO discusses Office of Inspector 
General (OIG) exclusions. including the finding that OIG rarely uses 
its authority to exclude in the absence of conviction for fraud. 

The CMS requests that the report indicate that CMS agrees that OIG 
should more robustly utilize its discretionary exclusion authority and 
imposition of civil monetary penalty authority against HHAs. 

16. Page 36 [now page 28], first paragraph: The report should be 
updated to indicate that CMS suspended 13 HHA agencies by December, 
2008. 

17. Page 36 [now page 28], 2nd full paragraph: Consistent with previous 
comments. the language "...backgrounds of applicants" should be 
followed by "...due to resource constraints." 

GAO Recommendation: 

Assess the feasibility of verifying the adverse legal history of all 
key officials named in an HHA enrollment application. 

CMS Response: 

The CMS believes that the statement "assess the feasibility of 
verifying the adverse legal history..." is misleading. The term 
"adverse legal history' is very broad and, with the exception of 
criminal convictions. RHHIs do verify a number of the adverse actions 
identified in Section 3 of the CMS-855. These include GSA debarments, 
0IG exclusions, and license suspensions and revocations. We therefore 
suggest that the term "adverse legal history- be changed to "criminal 
history."
	
GAO Recommendation: 

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. 

CMS Response: 

We will consider this recommendation. Physicians play a critical role 
in determining patient eligibility for home care and developing care 
plans that reflect a reasonable and necessary mix of home health 
services. HHAs are paid a prospectively-set payment for a 60-day 
episode of care, with additional payment for beneficiaries receiving 6 
or more therapy visits. Outlier payments are available for high-cost 
episodes but are computed based on the number of visits provided. 
Therefore, this sort of physician cross-checking may not result in a 
payment change for most HHA claims. An alternative approach would be to 
target the physician cross-checking for beneficiaries who receive a 
large number of therapy services or for claims resulting in outlier 
payments. 

GAO Recommendation: 

Direct CMS contractors to conduct postpayment medical reviews on claims 
submitted by HHAs with high rates of improper billing identified 
through prepayment review. 

CMS Response: 

Based on the data analysis. contractors currently conduct prepay and 
postpay medical reviews for any HHAs with high utilization. which may 
include the particular claims referenced by the GAO. However, 
contractors must consider the costs and the availability of resources 
as they prioritize their work and consider conducting additional 
reviews. 

GAO Recommendation: 

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 Response: 

The CMS will take the GAO's recommendation under consideration as we 
continue to further analyze and develop strategies to better screen 
home health providers and to identify and prevent fraudulent activity 
in the home health program. 

[End of section] 

Appendix III: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

James C. Cosgrove, (202) 512-7114 or cosgrovej@gao.gov: 

Staff Acknowledgments: 

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. 

[End of section] 

Footnotes: 

[1] MedPAC is an agency that advises Congress on issues affecting the 
Medicare program. 

[2] Generally, fraud involves intentional acts of deception or 
representation to deceive with knowledge that the action or 
representation could result in gain. Abuse typically involves actions 
that are inconsistent with sound fiscal, business, or medical practices 
and result in unnecessary cost. Officials from the Centers for Medicare 
& Medicaid Services (CMS)--the agency that administers Medicare--and 
stakeholders, including officials with national and state associations 
of home health care providers and the Department of Health and Human 
Services (HHS) Office of Inspector General (OIG), use the broad term 
"fraud and abuse" to describe a wide range of activities for which 
sanctions may be imposed under the Social Security Act, including 
submitting claims that are known (or should be known) to be false or 
fraudulent, are for a pattern of services that are not medically 
necessary, or are for services that were not provided as claimed. In 
this report we use the term to describe these types of activities. 

[3] For example, a recent report from the HHS OIG found that the CERT 
error rate for durable medical equipment may be understated because 
claims for items that were considered proper by the CERT contractor 
were found to be not medically necessary or not delivered when 
additional documentation was reviewed by an OIG contractor. See HHS 
OIG, Medical Review of Claims for the Fiscal Year 2006 Comprehensive 
Error Rate Testing Program, report A-01-07-00508 (Aug. 22, 2008). 

[4] See GAO, Medicare: Home Health Services: A Difficult Program to 
Control, [hyperlink, http://www.gao.gov/products/GAO/HRD-81-155] (Sept. 
25, 1981); Medicare: Need to Strengthen Home Health Care Payment 
Controls and Address Unmet Needs, [hyperlink, 
http://www.gao.gov/products/GAO/HRD-87-9] (Dec. 2, 1986); and Medicare: 
Home Health Utilization Expands While Program Controls Deteriorate, 
[hyperlink, http://www.gao.gov/products/GAO/HEHS-96-16] (Mar. 27, 
1996). 

[5] Medicare claims data for 2006 were the most recent data available 
when we began our work. 

[6] The OIG's mission is to protect the integrity of HHS programs, as 
well as the health and welfare of the beneficiaries of those programs. 
The OIG's duties are carried out through a nationwide network of 
audits, investigations, inspections, and other mission-related 
functions performed by OIG components. 

[7] Medicare-covered services generally must be reasonable and 
medically necessary for the diagnosis or treatment of illness or injury 
or to improve the functioning of a malformed body part. 

[8] Homebound means the patient's condition is such that the patient is 
generally confined to home, and consequently leaving home would require 
a considerable and taxing effort. If the patient leaves the home, the 
patient may still be considered homebound if the absences from the home 
are infrequent or of relatively short duration, or the absences are due 
to the need to receive health care treatment. See 42 U.S.C. §§ 
1395f(a)(2)(C), (8); 1395n(a)(2)(A). 

[9] Intermittent means skilled nursing care that is either provided or 
needed on fewer than 7 days each week or fewer than 8 hours of each day 
for periods of 21 days or less (with extensions in exceptional 
circumstances when the need for additional care is finite and 
predictable). See 42 U.S.C. §1395x(m)(7). 

[10] Key officials must be named on an enrollment application. These 
individuals are owners, directors (if the HHA is a corporation), 
managing employees, partners, and authorized and delegated officials. 
An authorized official is an appointed official (for example, chief 
executive officer or chairman of the board) with the legal authority to 
enroll an organization in the Medicare program, make changes or updates 
to the organization's status in the Medicare program, and commit the 
organization to fully abide by Medicare statutes and regulations. 
Delegated officials are those authorized to report changes and updates 
to the organization's enrollment record. 

[11] State laws or regulations that require prior approval for state 
health care capacity increases are commonly referred to as CON 
requirements. 

[12] CMS may require an HHA to revalidate more frequently based on 
complaints or compliance concerns. Providers must also resubmit their 
enrollment application under certain circumstances, for example, if 
certain information, such as their address, changes, or if they wish to 
reactivate their Medicare billing privileges. As of January 20, 2009, 
CMS requires contractors to undertake additional verification 
activities for providers who are changing certain information or who 
are reactivating their Medicare billing privileges. 

[13] The clinical domain measures whether the beneficiary has one or 
more clinical conditions, such as presence of wounds, problems with 
vision, or pain. The functional domain measures the beneficiary's 
ability to perform activities of daily living, such as bathing, 
dressing oneself, or walking. The service use domain is based on the 
number of therapy visits provided and the episode's sequence in a 
series of consecutive episodes. 

[14] HHAs receive a 60 percent up-front payment for initial episodes 
and a 50 percent up-front payment for subsequent episodes for 
beneficiaries who receive multiple episodes of care. 

[15] See 42 C.F.R. pt. 484 (2007), 72 Fed. Reg. 49762 (Aug. 29, 2007). 
The refinements to the payment system were designed to make home health 
payments more accurate. Changes included revisions to and expansion of 
the patient classification system and replacement of the single 10- 
therapy-visit threshold with three graduated therapy thresholds. 

[16] The RHHIs are responsible for processing claims and enrolling 
providers in a given jurisdiction. In November 2008, the three RHHIs 
were National Government Services, Palmetto GBA, and Cahaba Government 
Benefit Administrators, LLC. CMS is currently restructuring its 
operations by contracting with 15 Medicare Administrative Contractors 
(MAC) that will be responsible for claims processing, provider 
enrollment, provider customer service, and other activities within a 
given jurisdiction. Four of the 15 MACs will be responsible for home 
health. 

[17] Each PSC is responsible for a separate jurisdiction. The four PSCs 
were TriCenturion; New England Benefit Integrity Support Center; 
TrustSolutions, LLC; and Cahaba Safeguard Administrators, LLC. CMS is 
transitioning its benefit integrity work from PSCs to Zone Program 
Integrity Contractors (ZPIC). ZPICs will be responsible for benefit 
integrity for all aspects of the Medicare benefit, whereas PSCs work on 
specific parts of the Medicare benefit. Two ZPIC contracts were awarded 
in September 2008, and CMS estimates the transition to ZPICs will be 
complete by the end of calendar year 2009. 

[18] Prepayment medical reviews occur after the up-front payment has 
been made, but before the final payment for the episode. Postpayment 
reviews occur after the final payment. 

[19] In general, the so-called anti-kickback statute provides for 
criminal penalties against those who knowingly and willfully solicit, 
receive, offer, or pay remuneration to induce or in return for 
referring an individual to a person for the furnishing or arranging for 
the furnishing of items or services for which payment may be made under 
a federal health care program. See 42 U.S.C. §§ 1320a-7b(b). 

[20] See [hyperlink, http://www.gao.gov/products/GAO/HRD-81-155] and 
[hyperlink, http://www.gao.gov/products/GAO/HRD-87-9]. 

[21] See [hyperlink, http://www.gao.gov/products/GAO/HRD-81-155]. 

[22] See [hyperlink, http://www.gao.gov/products/GAO/HEHS-96-16]. 

[23] See [hyperlink, http://www.gao.gov/products/GAO/HEHS-96-16]. 

[24] While HHA providers could bill for care that they do not realize 
is unnecessary, this report's discussion of billing for unnecessary 
care refers to billing patterns that suggest the HHA is intentionally 
engaging in a fraudulent and abusive practice. 

[25] Under the PPS, one way that Medicare home health beneficiaries are 
grouped along the service utilization dimension is by the number of 
therapy visits. Prior to 2008, HHAs serving beneficiaries that received 
10 or more therapy visits received higher payments than HHAs serving 
beneficiaries who received fewer visits. See Medicare Program: 
Prospective Payment System for Home Health Agencies, 65 Fed. Reg. 
41,128 (July 3, 2000). 

[26] While an HHA could unintentionally bill for a service that is not 
rendered, this report's discussion of billing for services not rendered 
refers to billing patterns that suggest the HHA is knowingly engaged in 
a fraudulent and abusive practice. 

[27] Outlier payments may not exceed 5 percent of the national total of 
Medicare home health payments projected or estimated in a given fiscal 
year. 

[28] Medicare beneficiaries can receive skilled nursing services from 
an HHA for insulin injections if they cannot inject themselves and no 
other person is willing and able to administer the injections. 

[29] A recently enacted Florida law requires all HHAs to report to the 
state survey agency, on a quarterly basis, the number of insulin- 
dependent diabetic patients receiving insulin-injection services from 
the HHA and the number of patients receiving home health services from 
that agency. The first report was due October 15, 2008, for the period 
from July 2008 through September 2008. See Fla. Stat. Ann. § 
400.474(6)(f)1.3. (West 2008). 

[30] Effective January 1, 2008, CMS amended its home health PPS. One 
change was the creation of additional therapy thresholds "to reduce the 
undesirable emphasis in treatment planning on a single therapy visit 
threshold, and to restore the primacy of clinical considerations in 
treatment planning for rehabilitation patients." 72 Fed. Reg. 25356, 
25363 (May 4, 2007). 

[31] HHAs receive higher payments for claims for patients with this 
rating than they receive for claims for patients with less severe 
ratings. 

[32] The PSC found that the remaining claims were denied due to 
services that were not rendered, not reasonable or necessary, or for 
other reasons. 

[33] The HHA owner's actions were investigated after a payroll clerk at 
one of the HHAs filed a lawsuit against the HHAs, the owner, and her 
husband. 

[34] CMS does not require HHAs to have medical directors and does not 
ask HHAs to specify the names and number of medical directors it 
employs on its enrollment application. However, Florida recently 
enacted a law that allows the state survey agency to deny, revoke, or 
suspend the license of an HHA that contracts with more than one medical 
director. The law also prohibits HHAs from giving remuneration to a 
physician unless there is a medical director contract in effect. The 
law, which went into effect July 1, 2008, also carries a $5,000 fine. 
See Fla. Stat. Ann. § 400.476(6)(h), (i). (West 2008). 

[35] Criminal history that must be reported on the enrollment 
application includes convictions and guilty pleas for selected felonies 
within 10 years of enrollment or reenrollment and convictions for 
misdemeanors. 

[36] 42 C.F.R. §§ 424.530(a)(3), (4) (2007). Other grounds for denial 
of enrollment include noncompliance with Medicare enrollment 
requirements and a determination by CMS that the provider is not 
operational. As of January 1, 2009, providers also may be denied 
enrollment if the owner has an overpayment at the time the application 
is filed that has not been repaid in full or has been placed under 
payment suspension. 42 C.F.R. §§ 424.530(a)(6), (7) (2008). 

[37] 42 C.F.R. § 424.515 (2007). 

[38] 71 Fed. Reg. 20754, 20758-9 (Apr. 21, 2006). 

[39] In fiscal year 2007, through medical review of 1,296 claims, the 
PSCs identified $28.1 million in HHA overpayments for recoupment by the 
RHHIs. 

[40] 73 Fed. Reg. 36448, 36461 (June 27, 2008) (to be codified at 42 
C.F.R. § 424.535(c)). 

[41] 73 Fed. Reg. 36461 (June 27, 2008) (to be codified at 42 C.F.R. § 
424.535(a)(8)). 

[42] 73 Fed. Reg. 36455, 36457 (June 27, 2008). 

[43] In calendar year 2007, the HHS OIG excluded 3,127 individuals. 
Ninety-eight percent of the exclusions of individuals in 2007 were 
based on a conviction, license revocation, or suspension. Less than 2 
percent were based on default of student loan obligations. In the same 
year, the HHS OIG excluded 138 entities, including 12 entities on the 
basis of the OIG's determination that the provider submitted false 
claims, submitted claims for services that were not medically 
necessary, or made false representations of material facts on a claim 
or documentation used to support a claim. None of the 12 was an HHA. 

[44] U.S. Attorneys, responsible for prosecuting Medicare fraud under 
both civil and criminal statutes, are unable to accept all matters and 
have a substantial backlog of pending cases. According to the Health 
Care Fraud and Abuse Control Program Annual Report for fiscal year 2006 
by HHS and the Department of Justice, at the end of fiscal year 2006, 
the U.S. Attorneys' Offices (USAO) had 1,677 health care fraud criminal 
matters pending (2,713 defendants) and 1,268 civil health care fraud 
matters pending. A referral to the USAOs remains a pending matter until 
an indictment or information is filed or it is declined for 
prosecution. 

[45] The greater Los Angeles area includes Los Angeles, Orange, 
Riverside, and San Bernardino counties in California. The Houston area 
is Harris County in Texas. 

[End of section] 

GAO's Mission: 

The Government Accountability Office, the audit, evaluation and 
investigative arm of Congress, exists to support Congress in meeting 
its constitutional responsibilities and to help improve the performance 
and accountability of the federal government for the American people. 
GAO examines the use of public funds; evaluates federal programs and 
policies; and provides analyses, recommendations, and other assistance 
to help Congress make informed oversight, policy, and funding 
decisions. GAO's commitment to good government is reflected in its core 
values of accountability, integrity, and reliability. 

Obtaining Copies of GAO Reports and Testimony: 

The fastest and easiest way to obtain copies of GAO documents at no 
cost is through GAO's Web site [hyperlink, http://www.gao.gov]. Each 
weekday, GAO posts newly released reports, testimony, and 
correspondence on its Web site. To have GAO e-mail you a list of newly 
posted products every afternoon, go to [hyperlink, http://www.gao.gov] 
and select "E-mail Updates." 

Order by Phone: 

The price of each GAO publication reflects GAO’s actual cost of
production and distribution and depends on the number of pages in the
publication and whether the publication is printed in color or black and
white. Pricing and ordering information is posted on GAO’s Web site, 
[hyperlink, http://www.gao.gov/ordering.htm]. 

Place orders by calling (202) 512-6000, toll free (866) 801-7077, or
TDD (202) 512-2537. 

Orders may be paid for using American Express, Discover Card,
MasterCard, Visa, check, or money order. Call for additional 
information. 

To Report Fraud, Waste, and Abuse in Federal Programs: 

Contact: 

Web site: [hyperlink, http://www.gao.gov/fraudnet/fraudnet.htm]: 
E-mail: fraudnet@gao.gov: 
Automated answering system: (800) 424-5454 or (202) 512-7470: 

Congressional Relations: 

Ralph Dawn, Managing Director, dawnr@gao.gov: 
(202) 512-4400: 
U.S. Government Accountability Office: 
441 G Street NW, Room 7125: 
Washington, D.C. 20548: 

Public Affairs: 

Chuck Young, Managing Director, youngc1@gao.gov: 
(202) 512-4800: 
U.S. Government Accountability Office: 
441 G Street NW, Room 7149: 
Washington, D.C. 20548: