Once deemed the bad apples of the industry, home healthcare was the lone provider group to successfully divert Congress' attention from fraud to the financial hiccups caused by Medicare cuts during the past year.
But this year, some members of Congress are reminding their colleagues that an important safeguard against Medicare fraud in home health was lost in that shuffle: surety bonds.
In 1997, Congress and HHS hailed surety bonds as a potent talisman against fraud, which appeared to be at its worst in the home health sector. One report by HHS' inspector general's office estimated that up to 40% of all home health billings could be fraudulent or medically unnecessary.
Requiring agencies to buy surety bonds, a form of business insurance, meant that the government could yet again shift some responsibility for home health agencies' legitimacy to the private sector. The Balanced Budget Act of 1997 required buying surety bonds as a condition of participating in Medicare (See chart).
The problems with surety bonds began with the home health regulations released by HCFA in early 1998, industry lobbyists said.
"It was ridiculous, because (HCFA) was requiring surety bonds not just for Medicare but for Medicaid," said Kathleen Dodd, chairman and chief executive officer of the Corridor Group, a Kansas City, Mo.-based home health consulting firm. "You had to purchase two separate policies, and those are huge costs for providers when they're seeing the ratcheting down of their cash flow (from Medicare)."
HCFA's regulations allowed the administration to use surety bonds to collect overpayments, something Congress did not intend, industry officials said. The agency also increased the financial pressures on the industry by requiring the bonds to be at least $50,000 or 15% of the agency's annual Medicare billings.
Lobbyists convinced even stalwart anti-fraud activists, such as Sen. Charles Grassley (R-Iowa), that such measures were too burdensome, especially for small to midsized agencies, a congressional aide said.
In response, last spring HCFA elected not to enforce the surety bond provision until something could be worked out.
Home healthcare then seized the opportunity to move for financial relief from the budget law cuts, armed with new information.
The lobbyists cite the closure of 2,500 agencies in the past two years, and claim no more than 5% of those closures constituted "fly-by-night" operations.
"The whole fraud thing was overblown," said Scott Lara, director of government affairs at the Homecare Association of America, Jacksonville, Fla., which represents about 250 freestanding agencies. "If there were questionable providers, it's because state licensure was so lax in states like Texas and Louisiana."
According to HHS' inspector general's office, Medicare improperly paid out $2.5 billion to home health agencies in fiscal 1997. The following year, that number shrank by 68% to $800 million.
It's not clear what led to the steep decline, but home health lobbyists blame Medicare cuts.
Congress is entertaining at least seven bills aimed at relieving home health of some of the steep Medicare cuts scheduled for 2000.
But it's also seen two bills pop up in the last month addressing the long-lost surety bond issue.
One, proposed June 23 by gung-ho fraud fighter Rep. Fortney "Pete" Stark (D-Calif.), would simplify surety bond requirements by requiring only one bond for both Medicare and Medicaid. It would also limit the bond to a $50,000 maximum and require bonds only for the first two years of Medicare participation.
Another bill, introduced one week after Stark's by Sens. Susan Collins (R-Maine) and Christopher Bond (R-Mo.), would provide mostly financial relief to the industry but also limit the use of surety bonds to recouping fraudulent claims, not overpayments.
Even President Clinton's Medicare plan, released a month ago, touches the issue, recommending that surety bond requirements be postponed until the home health prospective payment system takes effect in October 2000.
"We're supportive of barriers to entry (for fledgling providers), but we would rather see some accreditation, some demonstration of knowledge of (Medicare) rather than demonstrating the ability to pay," said Eric Sokol , assistant government affairs director at the National Association for Home Care.