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On the watch list
Home healthcare providers draw increasing scrutiny from anti-fraud enforcers

By Joe Carlson
Posted: July 20, 2013 - 12:01 am ET

The state of Illinois provided Dorothy Cooper with a Medicaid caregiver who was supposed to feed and bathe her in the home, and make sure her medical needs were met.

In the past, Cooper would have been treated in a nursing home for her medical condition. Instead, the Southern Illinois woman joined the growing number of Americans receiving their care at home, a national trend expected to accelerate rapidly because it's cheaper for payers and more comfortable for many patients.

Cooper also suffered one of the drawbacks of home healthcare—its particular susceptibility to fraud.

She died at age 62 from neglect in March 2013 as a shadow of her former self, according to court records and public officials. Malnutrition had shrunk her body from 200 lbs. to just 80, and authorities say she was left unwashed to the point that infections turned into sepsis. Her Medicaid caregiver, Lisa C. Luckett, was charged by federal authorities with healthcare fraud and by prosecutors in St. Clair County, Ill., with criminal neglect of an elderly person resulting in death.

Authorities say Luckett, 50, a personal care attendant not affiliated with a home-care firm, collected $78,336 in Medicaid home-care reimbursements between 2006 and 2013. She split some of the cash with conspirators but, according to prosecutors, providing no services beyond letting Cooper live in Luckett's home in Cahokia, Ill.

The life-and-death nature of the Luckett case is unusual, but recent history shows that home-care fraud is not. Luckett was among 15 people arrested and charged in separate cases with home healthcare fraud in Southern Illinois that same day, July 11. It was the second such round-up of alleged home-care fraudsters in just over a year in the southern end of the state.

“We will have more,” says Gerald Roy, special agent in charge of the Kansas City region of HHS' inspector general's Office of Investigations. “There is a very bright spotlight being shone on these programs.”

The home-care tab

That spotlight will have many potential targets in an industry where Medicare paid for $18.4 billion worth of home-based care in 2011 and state Medicaid programs paid $12.7 billion for beneficiaries' personal-care services. Home care is playing a growing role in U.S. healthcare as health plans and provider systems increasingly seek to manage patients with chronic conditions and keep them out of emergency rooms, hospitals and nursing homes.

Medicare has consistently overpaid providers for home health services, according to the Medicare Payment Advisory Commission, which calculated that the average home health agency posted a 14.8% profit margin on its Medicare business. Since 2002, almost all of the 5,100 new home-health companies have been for-profit entities.

Different types of groups and individuals provide a wide array of services that fall under the general description of home healthcare. For Medicare patients with acute-care needs, it often consists of skilled nursing and therapies to improve speech and movement, along with medical supplies and durable equipment. Many Medicaid home healthcare patients have chronic conditions that require treatments at home, such as diabetes. Medicare and other payers also pay for nonmedical “personal services” care, including help bathing and eating.

While nurses deliver the higher-end medical care, less-trained—and sometimes untrained—personnel can be paid to provide services as well.

In Medicaid programs, sometimes family members and friends are chosen by the beneficiary and can be paid to provide the care. That has frustrated efforts for universal background checks of lesser-skilled workers in some states because the people selected by beneficiaries might have criminal convictions.

Watchdog agencies and payers have long considered home healthcare inherently susceptible to fraud and abuse. HHS' inspector general's office recently found that as many as a quarter of all Medicare home health agencies had submitted “questionable” bills, and extraordinarily high use has been logged in places such as Miami-Dade County, Fla., and the Rio Grande Valley in South Texas.

In 2011, the CMS announced it would begin subjecting new home health providers to enhanced scrutiny allowed for “high-risk” providers under the Patient Protection and Affordable Care Act. The agency has also started using its new powers under the reform law to immediately cut off payments to home-health providers suspected of fraud, but only in coordination with other law-enforcement actions, according to a CMS e-mailed statement.

Separately, federal officials say they are using computer analytics for industries including home healthcare that will generate alerts in almost real-time about suspicious billing.

The fraud problem may be even worse on the Medicaid side. Exact figures are harder to find on the state-by-state program from the poor and disabled. But in 2012, the Government Accountability Office reported that 40% of all fraud convictions initiated by a group of Medicaid fraud-control units were for home health—the biggest category of providers convicted through the Medicaid units' efforts.

Matthew Curley, a former federal prosecutor in Nashville who is now an attorney with Bass Berry & Sims, says the key factor that makes home care so susceptible to fraud is the lack of outside oversight, both from regulators and other providers who would have access to patient records in a more institutional setting such as a hospital or skilled-nursing center. But that lack of scrutiny is changing.

“I think it certainly has the attention of the government in its enforcement efforts,” Curley says.

Still, the state Medicaid agencies seem in some cases slow to respond—even when there's direct information about ongoing violations.

Amy Nelson, owner of Accurate Home Care in Otsego, Minn., has personal experience with fraud, having reported a former employer to Minnesota authorities for claiming to have done work that was never performed. She says fraudsters can “fly under the radar” in states with little oversight, especially when the amount of money involved may not be large.

“It went on for seven years,” Nelson says of her former employer. “She got reported many times. The final thing was, the state said, 'We kept monitoring her until we had enough to prosecute her.' ”

Fraud cases

Claims of work that was never performed are a particular risk with home-care personal assistants such as Luckett, who are selected by the beneficiary and provide mainly nonmedical services covered by Medicaid.

The vulnerability of Medicaid's personal-care services program to fraud has been documented by HHS' inspector general. The total cost of the program soared 35% nationally between 2005 and 2011. Investigators showed clear shortcomings in how the program is run. In particular, states that allow Medicaid beneficiaries to select their caregivers face greater risk of overpayments, according to the inspector general's office.

Other abuses in home healthcare involve groups of people or companies that systematically defraud the home healthcare programs paid for by Medicare, Medicaid and private insurance companies.

In February 2012, the U.S. Justice Department stunned healthcare industry experts by charging Dr. Jacques Roy, 55, of Dallas with orchestrating a $375 million home-healthcare fraud scheme involving Medicare and Medicaid that allegedly relied on a network of more than 75 home-health agencies. Their licenses were suspended for “credible allegations of fraud,” according to the Justice Department. It remains one of the largest single alleged healthcare fraud conspiracies in the nation.

The case centers on a physician practice called Medistat Group Associates, which authorities say Roy ran from a location near Dallas. Between 2006 and 2011, Medistat certified that more than 11,000 patients needed Medicare and Medicaid home healthcare benefits. The practice certified more patients than any other clinic in the nation at the time.

Prosecutors say the conspiracy involved using patient recruiters who would find clients on government benefit programs who did not need home-care services, and then perform work on them and bill Medicare and Medicaid. In some cases, the patients in the home health scheme were homeless.

Roy certified more than 5,000 Medicare patients for care in 2010. In contrast, nearly every other doctor in the nation who referred patients for home-care services signed off on less than 100 in that same period. That disparity tipped off investigators, according to HHS Inspector General Daniel Levinson's written remarks at the time.

Roy has been denied bail and is being kept in a federal prison in Seagoville, Texas. He has pleaded not guilty and is slated for trial in 2014.

The announcement of the Medistat case came six months after one of the nation's largest home-care providers, Maxim Healthcare Services, Columbia, Md., admitted to systematically defrauding government healthcare programs of more than $61 million through a variety of schemes in which eight company employees and a patient also admitted guilt.

The schemes ran the gamut from falsifying records when unlicensed practitioners were delivering care to submitting claims for work that was never done. The company, which operates in more than 40 states, agreed to pay $150 million in criminal and civil penalties and to enter a deferred-prosecution agreement with the Justice Department that will erase the criminal charges from the company's record this September if it successfully meets its compliance goals.

“In the past, the company was very focused on growth and did not have the right controls in place,” says Jacqueline Baratian, a former attorney in HHS' inspector general's office who joined Maxim as chief compliance officer after the fraud allegations surfaced. “Now it is a much more balanced focus.”

In the wake of the company scandal, Maxim reconstituted its board of directors and hired a new CEO, chief operations officer, chief quality and medical officer, chief culture officer, chief compliance officer, chief financial officer, general counsel and vice president of human resources. Maxim has since beefed up its internal compliance programs and disclosed information to federal investigators that was critical to convicting some former employees.

South Texas

The next frontier in home health fraud enforcement might be South Texas.

For years, MedPAC has urged Medicare to beef up enforcement of home healthcare in the region after finding that half of the nation's top-spending counties for per capita Medicare home health spending are nestled in and around the Rio Grande Valley.

Duval County, a rural area with a population of about 13,000, holds the record of having had the nation's highest rate of Medicare home health use, with more than a third of beneficiaries who live in that county having Medicare home health claims in 2011. The national average for counties was 9.5%.

“The extraordinarily high utilization of home health care in certain counties suggests that fraud or abuse may be a significant factor driving spending in some areas,” MedPAC told Congress in its 2012 annual report on program spending. The 2013 report echoed that warning.

Use of home health by Medicaid recipients is also being closely monitored in the region.

Jack Stick, deputy inspector general for enforcement in the Office of Inspector General for the Texas Health and Human Services Commission, says he's well aware of Medicaid's home healthcare fraud problems in South Texas and elsewhere. “Overutilization in home healthcare and related services is a significant issue in Texas, with a substantial portion of that occurring in the Rio Grand Valley,” he says.

But stepping up enforcement has been politically tricky. Some state lawmakers have balked at the increased scrutiny, while providers around the state have protested the OIG's increasingly aggressive use of a rule in the Affordable Care Act that allows for suspension of payments if there are credible allegations of fraud.

The administrator of a private home health provider in Duval County says some physicians set up their own home health agencies under someone else's name, and then refer patients to those agencies—which could be construed as a violation of self-referral laws.

“I've seen some of the patients, and it's silly,” the administrator says. “This lady who drives to play bingo and is getting home health services, how do you justify that?”

Follow Joe Carlson on Twitter: @MHJCarlson


Home care is one of the fastest-growing sectors in the healthcare industry. Increasing business and higher spending also mean rising opportunities for fraud.



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