Medicare: Need to Hold Home Health Agencies More Accountable for Inappropriate Billings

Published by the Government Accountability Office on 1997-06-13.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                  United States General Accounting Office

GAO               Report to the Ranking Minority Member,
                  Subcommittee on Labor, Health and
                  Human Services, Education, and Related
                  Agencies, Committee on Appropriations,
                  U.S. Senate
June 1997
                  Need to Hold Home
                  Health Agencies More
                  Accountable for
                  Inappropriate Billings

      United States
GAO   General Accounting Office
      Washington, D.C. 20548

      Health, Education, and
      Human Services Division


      June 13, 1997

      The Honorable Tom Harkin
      Ranking Minority Member
      Subcommittee on Labor, Health
        and Human Services, Education,
        and Related Agencies
      Committee on Appropriations
      United States Senate

      Dear Senator Harkin:

      Medicare, the nation’s health insurance program for the elderly and
      disabled, is the single largest payer for home health services. Between
      1988 and 1996 Medicare spending for home health grew from $2.1 billion
      to $18 billion and by the year 2000 is projected to exceed $21 billion. Along
      with increasing expenditures, the number of home health agencies has
      also increased—from about 5,800 to over 9,000.

      This growth and accompanying reports of overutilization of home health
      services have raised questions about Medicare’s ability to detect and
      prevent inappropriate payments for this component of the Medicare
      program. Congressional committees have held hearings this year on
      proposals to control the growth in home health billings. Under any
      proposal adopted, however, there would be a continued need to monitor
      Medicare payments effectively.

      At your request, we (1) examined the weaknesses of existing Medicare
      controls over the home health benefit, (2) identified lessons learned from
      examining private insurers’ controls over home health payments and
      recent federal antifraud initiatives, and (3) identified a management
      approach that could improve Medicare’s ability to avoid substantial
      payments attributable to abusive billing practices.

      To conduct our study, we selected a sample of 80 high-dollar home health
      claims that had been processed in May 1995 and had been approved
      without review. We asked a Medicare claims-processing contractor to
      review the sample for the appropriateness of the charges and services
      claimed. We also analyzed information obtained from officials of the
      Health Care Financing Administration (HCFA), the agency within the
      Department of Health and Human Services (HHS) responsible for
      administering Medicare; data obtained from Medicare’s claims-processing

      Page 1                         GAO/HEHS-97-108 Home Health Agency Accountability

                   contractors; and information from the HHS Office of the Inspector General.
                   In addition, we analyzed information obtained from officials of private
                   insurance companies and the Office of Personnel Management, which
                   oversees the Federal Employees Health Benefits Program. (See app. I for a
                   more detailed description of our scope and methodology.)

                   We and others have reported on several occasions about problems with
Results in Brief   Medicare’s review of home health benefits (see the list of related products
                   at the end of this report). Yet, in spite of the need for increased scrutiny
                   indicated by these reports and by the growth in home health expenditures,
                   Medicare’s review of home health claims decreased in the 1990s. In our
                   test of just 80 high-dollar claims that had been processed without review,
                   the Medicare claims-processing contractor, after examining each claim
                   and supporting documentation, denied more than $135,000 in charges
                   (about 43 percent of total charges) for 46 of the claims. The reasons for
                   the denials included failure to substantiate medical necessity, noncoverage
                   of services or supplies, and inadequate documentation, including the
                   absence of physician orders. These findings are consistent with prior
                   federal investigations, one of which estimated that in the month of
                   February 1993 alone, Medicare paid $16.6 million for home health claims
                   in Florida that should have been disallowed.

                   The five private insurers we contacted use controls that, although not
                   readily adaptable to Medicare’s coverage terms or billing rules, are
                   nevertheless instructive regarding the monitoring of claims. The insurers
                   employ professional staff, such as nurses, to determine in advance the
                   legitimacy of the request for home health services. In contrast, HCFA relies
                   on home health agencies’ compliance with administrative procedures,
                   such as obtaining a physician’s signature for ordered services, to safeguard
                   against the submission of improper claims. While Medicare does not have
                   sufficient administrative funds to undertake the intensity of claims
                   monitoring done by the private insurers we reviewed, the vigilance of
                   private insurers suggests the value of applying more scrutiny in this area.

                   Reduced funding for payment safeguards in recent years helps explain the
                   marked absence of adequate claims reviews by Medicare contractors. Ten
                   years ago, over 60 percent of home health claims were reviewed. In 1996,
                   Medicare intermediaries reviewed only 2 percent of all claims. New and
                   more stable funding provided through the Health Insurance Portability and
                   Accountability Act (HIPAA) of 1996 (P.L. 104-191) should help improve
                   Medicare’s performance in monitoring home health payments, but HCFA

                   Page 2                         GAO/HEHS-97-108 Home Health Agency Accountability

                              also needs an enforcement tool—a preventive approach—that will make
                              providers accountable for the propriety of their claims. Therefore, we are
                              suggesting that the Congress consider directing HCFA to test an approach
                              that would systematically identify and penalize providers that habitually
                              bill Medicare inappropriately. Under this approach, billing offenders
                              would be identified and, if found to have excessively high billing errors,
                              those offenders, rather than the taxpayer, would be required to shoulder
                              the cost burden of investigative claims reviews. We believe that such an
                              approach could also serve as a deterrent to future billing abuses.

                              Medicare is a health insurance program that covers over 38 million elderly
Background                    and disabled people. The program, authorized by title XVIII of the Social
                              Security Act, provides coverage under two parts. Part A, the hospital
                              insurance program, covers inpatient hospital services, posthospital care in
                              skilled nursing homes, and care in patients’ homes. Part B, the
                              supplementary medical insurance program, covers primarily physician
                              services but also a number of other services, including home health care
                              for beneficiaries not covered under part A. Almost all Medicare payments
                              for home health care are made under part A.

Beneficiary Eligibility for   Since the late 1980s when a court decision obligated HCFA to interpret
Home Health Benefit           more liberally Medicare’s eligibility and coverage criteria, beneficiaries
                              have more easily obtained home health coverage than previously. To
                              qualify, individuals must be confined to their residences (be
                              “homebound”), be under a physician’s care, and need part-time or
                              intermittent skilled nursing care and/or physical or speech therapy. In
                              meeting these requirements, beneficiaries are covered for visits by home
                              health aides, medical social workers, and occupational therapists.
                              Required medical supplies are also covered.

                              Services must be furnished under a plan of care prescribed and
                              periodically reviewed by a physician. As long as the care is reasonable and
                              necessary, there are no limits on the number of visits or length of
                              coverage. Medicare does not require copayments or deductibles for home
                              health care, except for durable medical equipment.

Home Health Agency            Medicare law requires that home health agencies be certified to serve
Participation Requirements    Medicare beneficiaries. The agencies obtain certification by meeting
                              specific requirements, commonly referred to as conditions of

                              Page 3                         GAO/HEHS-97-108 Home Health Agency Accountability

                           participation. These requirements cover the agency’s qualifications and
                           capacity to perform such administrative functions as appropriate
                           recordkeeping, including patient privacy protections, and such provider
                           functions as the administering of skilled nursing services.

                           Typically, HCFA contracts with state public health agencies to conduct
                           certification and recertification surveys of home health agencies.
                           Generally, home health agencies found to be out of compliance are
                           provided an opportunity to develop a corrective action plan. If the state
                           agency and HCFA approve the plan, the home health agency can continue to
                           participate in Medicare; it can maintain certification if the plan results in
                           correction of the problems identified.

Oversight of Home Health   Regional claims-processing contractors, called intermediaries, process and
Payments                   pay claims submitted by over 9,000 home health agencies, which are paid
                           on the basis of the costs they incur up to predetermined cost limits. In
                           1995, claims received from home health agencies represented about
                           14 percent of all part A claims and 13 percent of part A expenditures.

                           Intermediaries are responsible for ensuring that Medicare does not pay
                           home health claims when beneficiaries do not meet the Medicare home
                           health criteria, when services claimed are not reasonable or necessary, or
                           when the intensity of services exceeds the level called for in an approved
                           plan of treatment. They carry out these responsibilities through medical
                           reviews of claims.

                           Medical review can be performed either before or after a claim is
                           approved for payment and involves obtaining home health agency
                           documentation, such as the beneficiary’s plan of care and medical records.
                           Occasionally, intermediaries conduct site visits—a postpayment review at
                           the location of a home health agency, where reviewers can examine plans
                           of care and other medical documentation. Because of budgetary
                           constraints in recent years, intermediaries review only about 1 to 3 percent
                           of all claims. They typically only target providers that have high
                           unexplained utilization rates.

                           Page 4                         GAO/HEHS-97-108 Home Health Agency Accountability

                            Our work in recent years has shown that because of insufficient funding of
Medicare Lacks              payment safeguards, HCFA’s monitoring has been unable to keep pace with
Adequate Controls to        the increasing volume of home health claims submitted to Medicare. This
Effectively Monitor         situation may be one of the factors contributing to the rapid growth in
                            Medicare’s home health expenditures.
Home Health
Funding Constraints Limit   The relationship between funding levels and claims reviewed helps explain
Medical Review of Claims    Medicare’s current predicament. In 1985, legislation more than doubled
                            claims review funding, enabling intermediaries to review over 60 percent
                            of the home health claims processed in fiscal years 1986 and 1987. By
                            1995, however, when payment safeguard funding for part A medical review
                            had substantially declined (from $61 million in 1989 to $33 million in 1995),
                            the intermediaries’ claims review target had been lowered to 3.2 percent
                            for all part A claims (or even lower, depending on available resources, to a
                            required minimum of 1 percent).1 During this period, the number of home
                            health agencies participating in Medicare increased by more than a third,
                            and the volume of home health claims processed more than tripled. Figure
                            1 illustrates how the total number of claims processed by intermediaries
                            has risen since 1989, while the number of claims reviewed has generally

                             Because this review target is the minimum for part A claims as a group, the actual percentage of home
                            health claims reviewed could be higher or lower than the target level specified.

                            Page 5                                   GAO/HEHS-97-108 Home Health Agency Accountability

Figure 1: Numbers of Claims
Processed and Reviewed by
Intermediaries Since 1989

                              Note: Numbers are for all part A claims, including home health claims. Data for claims processed
                              are by fiscal year; data for claims reviewed are by calendar year.

                              Source: HCFA data.

                              In our March 1996 report on the deterioration of Medicare’s home health
                              payment controls, we noted the effects of reduced funding on efforts to
                              deter abusive billing.2 We found that the infrequency of the intermediaries’
                              medical review of claims and limited physician involvement in overseeing
                              home health agencies’ plans of care made it nearly impossible to
                              determine whether the beneficiary receiving home health services
                              qualified for the benefit, needed the care being delivered, or even received
                              the services being billed to Medicare. Also, because of the small
                              percentage of claims selected for review, home health agencies that billed

                              Medicare: Home Health Utilization Expands While Program Controls Deteriorate (GAO/HEHS-96-16,
                              Mar. 27, 1996).

                              Page 6                                  GAO/HEHS-97-108 Home Health Agency Accountability

                           for noncovered services were less likely to be identified than was the case
                           a decade earlier.

                           HIPAA, which now ensures funding for program safeguards through 2003,
                           allows HCFA to count on stable funding in the coming years. However,
                           per-claim expenditures for medical review and other controls will remain
                           below the 1989 level after adjusting for inflation. We project that in 2003,
                           payment safeguard spending as authorized by the act will be just over half
                           of the 1989 per-claim level, after adjusting for inflation.

Better Controls Over       In recent years, we have reported on the marked absence of HCFA guidance
Payments Needed            for intermediaries on monitoring high-dollar claims despite postpayment
                           reviews that have found Medicare paying substantial sums for claims not
                           satisfying key payment criteria. In a recent test, we asked one regional
                           intermediary—Blue Cross of California—to do medical reviews for a
                           sample of high-dollar home health claims that it had originally processed
                           and approved without review.

                           We selected 80 claims from the universe of home health claims processed
                           by the California intermediary in May 1995 (see app. I for a more detailed
                           description of how these claims were selected). The intermediary found
                           that 46 of the 80 claims submitted by 26 home health agencies should have
                           been partially or totally denied and subsequently did deny them. For the 46
                           claims totaling $313,655 in charges for services and supplies, about
                           43 percent, or $135,640, were denied. The intermediary’s reasons for the
                           denials included failure to substantiate medical necessity, noncoverage of
                           services or supplies, and inadequate documentation, including the absence
                           of physician orders. Specifically, the intermediary found the following:

                       •   Of $18,132 in charges for the care of a beneficiary’s decubitus ulcer (open
                           wound) for 30 days, 36 percent ($6,483) were denied, including charges for
                           almost half of the skilled nursing visits (four per day) that were not
                           considered medically necessary.
                       •   Of $4,100 in charges for supplies related to care provided over 4 weeks,
                           31 percent were not adequately documented in the medical records or
                           should have been part of the paid nurse’s visit and not billed separately.
                           About half of the amount denied was for supplies never received by the
                       •   Of $17,953 in charges for medical supplies related to the treatment of a
                           beneficiary’s salivary gland disease, the intermediary denied the entire
                           amount because the medical documentation and the itemized list of

                           Page 7                         GAO/HEHS-97-108 Home Health Agency Accountability

                                  supplies provided were not consistent and did not support the supplies the
                                  agency billed for.
                              •   Nine of the 80 claims—representing nearly half ($61,250) of the total
                                  dollars disapproved—were denied because the home health agencies did
                                  not submit any of the medical records the intermediary had requested for
                                  the review.

                                  The California intermediary also visited a home health agency where it
                                  reviewed supporting documentation for a random sample of 464 claims.
                                  The agency had been targeted for a comprehensive review because of its
                                  high billings. The review team found that the agency’s claims for $39,384
                                  were appropriate; however, claims for $27,834 were considered not
                                  medically necessary and were denied, and claims in the amount of
                                  $330,444 were denied for nonmedical reasons, including undated or
                                  otherwise invalid plans of care, no plan of care, and billing for supplies not

                                  The findings from our test sample of claims subjected to medical review
                                  are consistent with reports by the HHS Inspector General on home health
                                  agency fraud and abuse. A 1995 Inspector General report on home health
                                  services in Florida found that an estimated 26 percent of home health
                                  claims did not meet Medicare reimbursement requirements.3 On that basis,
                                  the Inspector General estimated that $16.6 million of the $78 million in
                                  claims approved for payment by intermediaries in February 1993 were
                                  unallowable. Claims did not meet reimbursement requirements because
                                  beneficiaries were not homebound, services were considered unnecessary,
                                  and visits were not documented in the medical records.

                                  The various approaches to control home health payments used by five
Private Insurers’                 private insurers we examined collectively underscore the importance of
Approaches and                    implementing measures to help prevent abusive billings and also hold
Federal Initiatives               providers accountable for services billed. Recent federal fraud-fighting
                                  efforts targeting abusive billers in the home health industry have also
Emphasize Need for                demonstrated the need for greater claims scrutiny.
Private Insurer Strategies        Because of differences in beneficiary population, claims volume, and
Instructive, but Not Easily       specific benefit provisions, the controls used by private insurers to contain
Adapted to Medicare               home health costs would not be easily adapted to the Medicare program.

                                    Results of the Audit of Medicare Home Health Services in Florida (HHS/OIG, A-04-94-02087, June 16,

                                  Page 8                                    GAO/HEHS-97-108 Home Health Agency Accountability

The five insurers we contacted use some combination of patient
cost-sharing (deductibles and copayments) and caps on the number of
allowed visits to help control home health utilization; however,
cost-sharing and preset utilization limits are not permissible under
Medicare’s home health benefit provisions.

In addition, all five of the insurers routinely verify the basis for proposed
plans of home care and oversee, using professional staff, how the care
plans are implemented. Company-employed or contract nurses typically
interview the home health agency’s nurses, the discharge planner (when
the patient has been hospitalized), the patient, and sometimes the family.
They attempt to determine in advance the legitimacy of the patient’s need
for home-based medical services. Often the insurers employ utilization
review nursing staffs or insurance company caseworkers to monitor and
approve visits on an incremental basis. For example, one insurer approves
visits in increments of 10 or fewer, or in time intervals of 2 to 4 weeks. For
high-cost cases, all the insurers we examined used some form of case
management that typically involved monitoring by nurses. As case
managers, they track the volume of services provided, the outcomes being
achieved, and the appropriateness of continuing care.

In contrast, the sheer volume of Medicare’s home health claims and scarce
funds for monitoring payments have resulted in an approach that relies
substantially on the home health agencies themselves. In 1996, more than
10 percent of Medicare beneficiaries—roughly 4 million people—received
home health services. To cope with this caseload, HCFA relies on the home
health agencies to rely, in turn, on attending physicians to monitor patient
progress, the proper development and periodic review of plans of care,
and the medical necessity of services delivered.

Unlike their private insurer counterparts, Medicare intermediaries are not
responsible for approving the plans of care developed by the home health
agencies. The physician’s signature on a plan of care is intended to serve
as a quality control, but in practice the certifying physician may not have
ever seen the patient for whom the care plan is designed. Moreover, the
intermediaries’ relatively few medical reviews of claims generally do not
include an independent verification of the documentation prepared and
submitted by the home health agencies. Likewise, although Medicare
requires home health agencies to update a beneficiary’s plan of care at
least every 62 days, the intermediary does not routinely review updated
plans. As for high-cost cases, nearly 40 percent of Medicare’s home health
beneficiaries receive more than 30 visits. Because of the prohibitive costs,

Page 9                          GAO/HEHS-97-108 Home Health Agency Accountability

                            intermediaries cannot systematically monitor such long-term or otherwise
                            expensive cases to ensure the care being delivered is appropriate to the
                            patients’ needs.

Federal Antifraud Efforts   Given the growth in Medicare spending for home health services, nursing
Target Home Health          home services, and medical equipment and supplies, the HHS Inspector
Payments                    General and other federal and state agencies banded together to target
                            fraudulent and abusive billing practices in these industries. This effort,
                            called Operation Restore Trust, was conducted initially in five states and
                            reported identifying almost $188 million in inappropriate payments in its 2
                            years of operation.

                            Among the lessons learned to date from Operation Restore Trust is the
                            importance of coordination among the various program and enforcement
                            agencies involved at the federal, state, and local levels. Coordination, for
                            example, between Medicare intermediaries and state surveyors in the
                            project’s several states resulted in the decertification of many of the
                            targeted home health agencies and in the recovery of substantial sums in
                            inappropriate payments.4

                            For example, in investigations conducted in Louisiana and Texas, the
                            Medicare intermediary trained state surveyors on billing and beneficiary
                            coverage issues. The intermediary also provided a list of agencies that it
                            believed to be billing improperly. In turn, the surveyors passed on to the
                            intermediary information obtained from their site visits to home health
                            agencies and beneficiaries. This exchange of information allowed the
                            intermediary to identify claims that (1) were made on behalf of
                            beneficiaries who were obviously not homebound, (2) billed for services
                            not provided, and (3) billed inappropriately for supplies. The Secretary of
                            HHS recently announced that Operation Restore Trust will be expanded to
                            12 additional states.

                            HCFA  also sponsored pilot projects as part of a “Home Health Initiative”
                            that assessed the extent to which the detection of abusive billing can be
                            fostered by educating beneficiaries about home health coverage and
                            eligibility and by formally notifying beneficiaries and physicians of
                            benefits provided.

                             State certification surveys generally do not look at coverage and eligibility issues, although state
                            surveyors can identify patients who are not homebound and services and supplies that are billed but
                            not provided.

                            Page 10                                   GAO/HEHS-97-108 Home Health Agency Accountability

                       HCFA’s education initiatives may improve beneficiary and physician
Medicare’s Existing    awareness of improper billing practices, but HCFA needs to hold home
Safeguard Apparatus    health agencies more directly accountable for submitting proper claims. In
Presents Opportunity   the past, when seeking recovery of inappropriate payments, intermediaries
                       have used two approaches to assess overpayment amounts. One is to audit
to Exercise Greater    a universe of claims submitted by the provider and total the charges
Accountability         disallowed. However, the large volume of claims submitted by the average
                       provider and the time involved in reviewing a claim make this approach
                       impractical in most cases. The second approach is to audit a statistically
                       valid sample of the provider’s claims and estimate total charges disallowed
                       by projecting the sampling results. Because of the scarcity of funds to
                       audit claims, it has been difficult to pursue either approach in recent

                       Currently, Medicare’s intermediaries are responsible for focusing medical
                       reviews on claims from home health agencies that seem likely to be billing
                       inappropriately.5 Given the funding provided under HIPAA, the expectation
                       is that HCFA will be better able to carry out these focused medical reviews.
                       However, this funding may not be sufficient to do the follow-up audit work
                       required once improper billing identifies an agency as an abusive biller and
                       to conduct enough focused reviews for other home health agencies also
                       deemed likely to be billing improperly. Consequently, Medicare would be
                       prevented from taking the steps necessary to recover a greater proportion
                       of payments that have been made inappropriately.

                       One option to help finance Medicare’s audits of claims would be to assess
                       home health agencies that are found to be abusive billers for the costs of
                       performing follow-up audit work. The home health agency could choose
                       whether to have a review based on the universe of its claims for a
                       particular period or a statistically valid sample. HCFA would estimate the
                       costs and withhold some percentage of the agency’s current Medicare
                       payments, unless the agency negotiated an alternative payment method, to
                       ensure that the audit costs (as well as any assessed overpayment) could be
                       recovered from the agency. By earmarking monies from the assessed audit
                       costs for payment safeguard activities, performing such claims audits
                       could be made financially feasible for HCFA. (Under current law, such
                       assessments would be returned to the general Treasury.)

                        Under sec. 202 of HIPAA, the HHS Secretary is authorized to enter into contracts with additional
                       entities to perform payment safeguard activities. Such activities would include, for example, medical
                       reviews on claims from home health agencies that seem likely to be billing inappropriately. This
                       authority became effective Aug. 21, 1996, but HCFA has not yet entered into any contracts of this type.

                       Page 11                                   GAO/HEHS-97-108 Home Health Agency Accountability

                       This option, which would require authorizing legislation, would build on
                       HCFA’s existing safeguard apparatus and should enable it to broaden its
                       claims reviews. The approach, which could be piloted in one or more
                       regions, would also require HCFA to establish procedures for identifying
                       abusive billers that would be required to reimburse HCFA for the costs of
                       additional claims reviews.

                       Given the rapid growth in Medicare home health spending, the importance
Conclusions            of careful vigilance over payments for this benefit cannot be overstated.
                       Some home health agencies continue to abuse the Medicare benefit by
                       providing services that do not meet program coverage requirements or are
                       not medically necessary. Limited oversight by HCFA allows abusive billings
                       from these home health agencies to go undetected.

                       Recent federal antifraud efforts illustrate the value of effective claims
                       oversight. Building on its current oversight efforts, HCFA could implement
                       an enforcement mechanism that would hold home health providers
                       accountable for meeting their responsibilities to provide beneficiaries with
                       only necessary and appropriate covered services. Such a mechanism
                       would include a means to recover from abusive billers some of HCFA’s
                       costs in conducting this oversight. This approach would not only help
                       finance claims audits but also help deter further abusive billing.

                       To hold home health agencies more directly accountable for billing
Matters for            Medicare appropriately, the Congress may wish to consider enacting
Consideration by the   legislation directing HCFA to carry out a pilot demonstration to address the
Congress               issue of abusive billing practices by home health agencies. Under such a
                       demonstration, once improper billing has been detected that identifies an
                       agency as an abusive biller, follow-up audit work would be conducted and
                       the cost of this follow-up work would be assessed against the home health
                       agency. To make such claims audits financially feasible, the Congress may
                       wish to earmark monies from the assessed audit costs for HCFA’s payment
                       safeguard activities.

                       On June 11, 1997, HCFA officials provided us with comments on a draft of
Agency Comments        this report. Those officials agreed that the concept presented in our report
                       could be effective. On the basis of our discussion, it appears that this
                       concept would fit well with HCFA’s current efforts to strengthen program
                       safeguards on the home health and skilled nursing facility benefits. They

                       Page 12                        GAO/HEHS-97-108 Home Health Agency Accountability

noted that a number of details would need to be worked out to increase
the likelihood that the demonstration project would be successful.

As arranged with your office, unless you announce its contents earlier, we
plan no further distribution of this report until 10 days after the date of
this letter. At that time, we will send copies of this report to the Secretary
and the Inspector General of HHS, the Administrator of HCFA, and other
interested parties. We also will make copies available to others upon

If you or your staff have any questions, please call me on (202) 512-6806 or
William Scanlon, Director of our Health Financing and Systems issue area,
at (202) 512-4561. Other major contributors to this report include Leslie
Aronovitz, Lisanne Bradley, Marco Gomez, Sam Mattes, Barry Tice, and
Don Walthall.

Sincerely yours,

Richard L. Hembra
Assistant Comptroller General

Page 13                         GAO/HEHS-97-108 Home Health Agency Accountability

Letter                                                                                             1

Appendix I                                                                                        16

Scope and
GAO Related Products                                                                              20

Figure                 Figure 1: Numbers of Claims Processed and Reviewed by                       6
                         Intermediaries Since 1989


                       HCFA      Health Care Financing Administration
                       HHS       Department of Health and Human Services
                       HIPAA     Health Insurance Portability and Accountability Act
                       OPM       Office of Personnel Management

                       Page 14                      GAO/HEHS-97-108 Home Health Agency Accountability
Page 15   GAO/HEHS-97-108 Home Health Agency Accountability
Appendix I

Scope and Methodology

             To examine and compare Medicare controls over the home health benefit
             with those used by private insurers and to identify Medicare initiatives
             associated with appropriate payments for home health services, we
             reviewed information obtained from officials at HCFA headquarters, its San
             Francisco regional office, and the regional home health intermediaries
             responsible for paying Medicare home health claims.

             We also reviewed information obtained from officials at the Office of
             Personnel Management (OPM), which administers the Federal Employees
             Health Benefits Program; five private health plans under contract with OPM
             to provide health care services;6 and three private companies that perform
             utilization review and case management for private health plans.
             Additionally, we reviewed relevant GAO, HHS Office of the Inspector
             General, Operation Restore Trust, and intermediary reports on controls
             over the use of Medicare’s home health benefit. We also reviewed manuals
             and criteria HCFA and private insurers use to administer and control the
             home health benefit.

             To gain insight into Medicare controls over the home health benefit, we
             visited two judgmentally selected home health intermediaries: Blue Cross
             of California and Palmetto Government Benefits Administrators. To
             supplement work performed at these locations and to broaden our areas
             of analysis, we obtained additional information on home health claims and
             controls from the remaining home health intermediaries.

             In addition, to determine whether the records supported the need for
             services or items billed to Medicare, we requested that one
             intermediary—Blue Cross of California—review the medical records, an
             itemized list of supplies, and other documentation for 80 high-dollar
             claims. The intermediary requested this supporting documentation from 26
             home health agencies. We limited our request to 80 claims so that we
             would not overburden the intermediary’s normal workload.

             To select the 80 claims to be reviewed, the intermediary identified the
             universe of home health claims processed from May 1 to May 31, 1995.
             From this universe, the intermediary identified the top 10 providers in
             terms of dollars billed, per beneficiary, for specific home health benefit
             categories (medical supplies, surgical dressings, physical therapy, and
             skilled nursing). For each of these providers, the 20 largest claims in terms
             of dollars billed per service category were identified. From the specific

             The five private plans are the Blue Cross and Blue Shield Service Benefit Plan, Mail Handlers,
             Government Employees Hospital Association, National Association of Letter Carriers, and the
             American Postal Workers Union plans.

             Page 16                                   GAO/HEHS-97-108 Home Health Agency Accountability
Appendix I
Scope and Methodology

service categories, we judgmentally selected 80 claims. In selecting the 80
claims for intermediary review, we considered information on total
charges, average per-day charge, total days charged, and diagnosis.

For each selected claim, the intermediary reviewed the total charges for all
services on the claim. Consequently, even though we did not specifically
select any claims for four types of home health services (speech therapy,
occupational therapy, medical social worker, and home health aide), many
of our selected claims had these services. Therefore, the intermediary also
reviewed the appropriateness of these services.

We performed our work between January 1996 and June 1997 in
accordance with generally accepted government auditing standards.

Page 17                        GAO/HEHS-97-108 Home Health Agency Accountability
Page 18   GAO/HEHS-97-108 Home Health Agency Accountability
Page 19   GAO/HEHS-97-108 Home Health Agency Accountability
GAO Related Products

              Medicare Post-Acute Care: Cost Growth and Proposals to Manage It
              Through Prospective Payment and Other Controls (GAO/T-HEHS-97-106, Apr. 9,

              Medicare: Home Health Utilization Expands While Program Controls
              Deteriorate (GAO/HEHS-96-16, Mar. 27, 1996).

              Medicare: Home Health Cost Growth and Administration’s Proposal for
              Prospective Payment (GAO/T-HEHS-97-92, Mar. 5, 1997).

              Medicare Post-Acute Care: Home Health and Skilled Nursing Facility Cost
              Growth and Proposals for Prospective Payment (GAO/T-HEHS-97-90, Mar. 4,

(101375)      Page 20                       GAO/HEHS-97-108 Home Health Agency Accountability
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