Medicare Home Health Moratorium Is Lifted: New Rules and Procedures Established to Stop Fraud And Abuse

With new protections in place to prevent fraud, including a new requirement for surety bonds to protect consumers and the Medicare trust fund, the Department of Health and Human Services today lifted the moratorium on enrolling new home health agencies in the Medicare program.

President Clinton announced the moratorium last September 15, saying it would remain in effect while fundamental changes were made in the way Medicare does business with home health agencies. New regulations implementing many of these changes have now been published, and other actions have been put in place over the past three months.

"We now have more new rules in place that will fight fraud and abuse by keeping unprepared and fly-by-night home health operators out of Medicare," said HHS Secretary Donna E. Shalala. "Our beneficiaries need to know that the home health agencies who do business with Medicare are sound and reliable. And taxpayers need to know that their dollars are being used effectively to deliver needed care."

Home health has been one of the fastest growing expenditures in Medicare, rising from just 2.9 percent of all payments in 1990 to nearly 9 percent now. In that same time, the average number of visits per beneficiary doubled from 33 to 76 per year, and total home health spending increased from $3.1 billion in 1990 to $16.7 billion in 1996. While much of this growth is warranted, given the increasing number of elderly Americans seeking an alternative to costly nursing homes, investigations by the HHS Inspector General have also found significant fraud and abuse in this program.

At the same time, efforts to prevent fraud and abuse have already helped to slow home health spending growth.

"The new regulations are part of much broader efforts to fight fraud and abuse, which is one of our top priorities," said Nancy-Ann Min DeParle, administrator of HHS' Health Care Financing Administration, which runs Medicare. "The growth rate for home health was just 5.4 percent in 1997, which is down from rates that exceeded 25 percent each year from 1990 through 1995. Our work to prevent fraud and abuse accounts for an important part of that reduction in growth."

The new regulations require all home health agencies serving Medicare to obtain surety bonds of $50,000 or 15 percent of annual Medicare payments received, whichever is greater. Agencies must obtain bonds covering them from the period beginning Jan. 1, 1998, and they must certify to Medicare that they have these bonds by Feb. 27, 1998. Surety bonds also soon will be required for durable medical equipment suppliers.

The regulations also establish minimum capital requirements to make certain that new home health agencies have enough funds to operate for at least three months before they start caring for Medicare patients.

HHS Inspector General June Gibbs Brown added that "a number of important steps have been taken to clean out fraud, abuse and waste in the home health industry, which will help protect beneficiaries and taxpayers alike. In addition, HCFA is stepping up its review of home health payments to assure that the services provided are appropriate and the payments are correct."

Other recent HCFA actions against waste, fraud, and abuse in home health care include:

More Scrutiny Before Entry

Home health agencies are now being asked about whether they have any "related business interests" before they are admitted into Medicare, to help determine if they have histories of fraud and abuse and to ferret out any future questionable billing patterns. This will also ensure that they do not use shaky financial transactions to exploit Medicare, such as billing through companies that do not exist or are unauthorized to bill Medicare for services (a loophole that allowed one home health agency to defraud Medicare of $16.5 million before being found and convicted);
As of Jan. 1, 1998, home health agencies must have provided quality care to at least 10 patients before being allowed to provide care to Medicare patients. At least seven of these patients must be receiving active care at the time the agency applies for entry into Medicare so that surveyors can assess the quality of the care they provide.

More Scrutiny Of Claims

The number of claims reviews is up 25 percent, and the number of cost report audits is being doubled with an additional $10 million set aside by Medicare;
Medical directors have been hired by every regional contractor processing Medicare home health claims to advise claims processors and educate providers about medically necessary care they can bill to Medicare.

Loopholes Closed

Home health care must now be billed based on where care is provided. Medicare in September, 1997 sent instructions to contractors processing home health claims to close a loophole which allowed agencies to provide care in low cost rural areas, but bill for it at higher urban rates where agency offices are based;
Patients who only need blood drawn will no longer automatically qualify for other home health services after February 5, 1998. This closes a loophole which allowed agencies to bill for services when they were not medically necessary.

Payment Reform

A new payment system creates incentives for agencies to provide care more efficiently. An interim payment system is being implemented, and a full prospective payment system should be in place by late 1999.

Upcoming Actions

Regulations should be issued this summer to require criminal background checks for all home health aides and make other improvements in the Conditions of Participation that agencies must adhere to in order to care for Medicare patients;
Regulations are being developed to require home health agencies to re-enroll every three years, which will help Medicare check on quality and integrity and exclude problem providers;
Regulations are being developed to allow Medicare to bar payment to convicted health care felons, as well as to exclude family members of sanctioned providers so that they can no longer simply take over when Medicare takes action against the provider.

Since 1993, the Clinton Administration has focused unprecedented attention on the fight against fraud, abuse and waste in the Medicare and Medicaid programs. Today, the result is a series of investigations, indictments and convictions, as well as new management tools to identify wasteful mispayments to health care providers.

In FY 1997, HHS identified $1.2 billion for collection in total fines, restitutions, settlements, and recoveries -- the most ever identified in one year. The FY 1997 total was six times higher than recoveries for FY 1996, and over three times higher than the previous best year for recoveries. In addition, criminal and civil prosecutions totaled 1,340 cases in FY 1997 -- double the number for FY 1996, and more than five times the total number in FY 1995. Over 2,700 health care providers and entities were excluded from doing business with Medicare, Medicaid, and other federal and state health care programs for engaging in fraud or abuse of the programs -- an 86 percent increase from the 1,400 exclusions in FY 1996. Since 1993, actions affecting HHS programs alone have saved taxpayers more than $20 billion and increased health care fraud convictions by 240 percent.

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