Home Health & Hospice Week

The honeymoon with the prospective payment system is over, and it could be law-abiding home health agencies who wind up in divorce court.

Home health agencies should prepare to get painted with the fraud brush all over again as fraud scams come to light, investigators delve into PPS infractions and high profit margins are alleged.

The Centers for Medicare & Medicaid Services has stopped payment to three unnamed Los Angeles-area HHAs after discovering $100 million in fraudulently billed claims, CMS reportedly has told the National Association for Home Care and Hospice. The HHAs, which had been operating for about three years, allegedly secured Medicare beneficiaries' ID numbers and billed for home care services for patients who never received them, reports William Dombi with NAHC's Center for Health Care Law.

CMS has recovered about $24 million from the HHAs so far, but no arrests or indictments in relation to the matter have been announced. CMS Region IX Administrator Jeff Flick didn't respond to calls for this story by press time.

The warning sign was an exponential increase in the amount of services (and dollars) being billed, Dombi says. When intermediary and program safety contractor investigators looked into it further, the claims were backed up by "perfect" documentation and timing - a sure sign of suspicion.

Meanwhile, an investigation of kickbacks for home care referrals appears to be underway in the Las Vegas area (see Eli's HCW, Vol. XIII, No. 3). It is unclear if the two investigations are related, Dombi notes.

The HHS Office of Inspector General has trained its sights on patients' prior hospital stays and on therapy provision, which is very lucrative for HHAs if the visit number is 10 or more. More areas of inquiry are likely to surface as the OIG spots PPS system weaknesses.

And the Medicare Payment Advisory Commission continues to insist that HHA profit margins reach enviable heights - an estimated 16.8 percent this year - even though an independently confirmed NAHC study says agencies will actually lose money on average in 2003-2004 (see Eli's HCW, Vol. XIII, No. 5).

Are HHAs Headed For a Fall?

Back in the mid 1990s, agencies were opening left and right and spending for home care services rose exponentially. Following close on the heels of the boom was Operation Restore Trust - a severe crack-down on the industry - and the interim payment system that put one-third of HHAs out of business in the late 1990s.

Then came PPS in 2000, and a relative breather from fraud and abuse scrutiny while both the industry and Medicare adjusted to the new payment system.

Now that the authorities are used to PPS, a case of fraud like the one reported in California might be enough to push the industry into the fraud-fighting zone again, observers fear.

Under ORT, "the fraud of the few became the burden of many," laments Dombi. And the same may happen again if CMS slaps new regulatory burdens on HHAs.

For example, in response to the California case, the agency has raised the idea of reinstating the requirement for an HHA surety bond to keep bad actors out of the Medicare system. But real fraudsters will just circumnavigate that rule, obtain a bond under false pretenses, and go on to bilk Medicare for millions, Dombi protests.

"It doesn't make sense to overregulate" to deal with criminal conduct, he says. Instead, NAHC suggests CMS work with providers to identify program "weak spots" and how to protect them, among other steps.

Currently, Medicare oversight via state surveyors focuses on clinical issues, not business practices such as those alleged in the Los Angeles and Las Vegas areas, notes clinical and regulatory consultant Jan Austin of Austin & Associates in Nevada. Financial issues "are just not part of the survey process," Austin points out.

"The current survey system is not set up to monitor anything financial," says the owner of a Las Vegas HHA. "They look at charts, that's it," notes the owner, who says his referral stream has been affected by the alleged kickbacks in the area.

Intermediaries and PSCs are in the best position to ferret out financial fraud, Dombi expects. But in the California case, $100 million in billings were allowed to go through before the system picked it up and put a stop to it, he points out.

And now compliant HHAs may pay the price for Medicare's inability to catch such fraud at the outset, industry veterans worry.

If a surety bond requirement or other additional regulatory burden is added to HHAs' plates, it will be law-abiding providers who suffer while real fraudsters can go undetected, they charge.

West Coast Boom Draws Unwanted Attention

Even if a national tightening of regulations doesn't take place, HHAs in Nevada and California can probably count on receiving increased scrutiny. The suspected fraud in the area combined with the increasing numbers of HHAs applying for Medicare numbers in the locations is likely to draw authorities' attention.

"Everybody and their dog is getting a Medicare number," complains the Las Vegas HHA owner. "There aren't enough patients to support the agencies here."

"There is a huge influx of new HHAs," agrees Austin. And many of those new providers have come from other, non-health-care settings.

That means often those newcomers are out of compliance with regulations and don't even have any idea that kickbacks, or "rewarding referral sources," is prohibited under Medicare, she laments.

That could bring a whole new round of criticism on the industry, she worries.