[Federal Register Volume 60, Number 154 (Thursday, August 10, 1995)]
[Notices]
[Pages 40847-40851]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-19731]



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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Office of Inspector General


Publication of OIG Special Fraud Alerts: Home Health Fraud, and 
Fraud and Abuse in the Provision of Medical Supplies to Nursing 
Facilities

AGENCY: Office of Inspector General (OIG), HHS.

ACTION: Notice.

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SUMMARY: This Federal Register notice sets forth two recently issued 
OIG Special Fraud Alerts concerning fraud and abuse practices in the 
home health industry and in the provision of medical supplies to 
nursing facilities. For the most part, the OIG Special Fraud Alerts 
address national trends in health care fraud, including potential 
violations of the Medicare anti-kickback statute. These two Special 
Fraud Alerts, issued directly to the health care provider community and 
now being reprinted in this issue of the Federal Register, specifically 
address fraud and abuse in the provision of (1) home health services 
and (2) medical supplies to nursing facilities, including the 
submission of false claims and anti-kickback violations.

FOR FURTHER INFORMATION CONTACT: Joel J. Schaer, Office of Management 
and Policy, (202) 619-0089.

SUPPLEMENTARY INFORMATION:

I. Background

    The Office of Inspector General (OIG) issues Special Fraud Alerts 
based on information it obtains concerning particular fraudulent and 
abusive practices within the health care industry. These Special Fraud 
Alerts provide the OIG with a means of notifying the industry that we 
have become aware of certain abusive practices which we plan to pursue 
and prosecute, or bring civil and administrative action, as 
appropriate. The alerts also serve as a powerful tool to encourage 
industry compliance by giving providers an opportunity to examine their 
own practices.
    The Special Fraud Alerts are intended for extensive distribution 
directly to the health care provider community, as well as those 
charged with administering the Medicare and Medicaid programs. On 
December 19, 1994, the OIG published in the Federal Register the texts 
of 5 previously-issued Special Fraud Alerts, and announced the 
intention to publish in the same manner subsequent issuances as a 
regular part of distribution of these Special Fraud Alerts (59 FR 
65372).
    The first of these new Special Fraud Alert serves to point out the 
prevalence of certain types of home health care fraud, including (1) 
cost report frauds; (2) billing for excessive services or services not 
rendered; (3) use of unlicensed or untrained staff; (4) falsified plans 
of care; (5) forged physician signatures on plans of care; and (6) 
kickbacks that the OIG has uncovered.
    The second new Special Fraud Alert, focusing on the provision of 
medical supplies to nursing facilities, identifies some of the illegal 
practices that the OIG has recently uncovered. These include (1) the 
submitting of claims to Part B of Medicare for medical supplies and 
equipment that are not medically necessary; (2) submitting claims for 
items that are not provided as claimed; (3) double billings; and (4) 
paying or receiving kickbacks in exchange for Medicare or Medicaid 
referrals.
    These two issuances are the first in a series of new Special Fraud 
Alerts being developed by the OIG over the next year to heighten both 
the public's and industry's awareness of fraudulent health care 
practices. A reprint of both of these Special Fraud Alerts follows.

II. Special Fraud Alert: Home Health Fraud

(June 1995)
    The Office of Inspector General was established at the Department 
of Health and Human Services by Congress in 1976 to identify and 
eliminate fraud, abuse and waste in Health and Human Services programs 
and to promote efficiency and economy in departmental operations. The 
OIG carries out this mission through a nationwide program of audits, 
investigations and inspections.
    To help reduce fraud and abuse in the Medicare and Medicaid 
programs, the OIG actively investigates schemes to fraudulently obtain 
money from these programs and, when appropriate, issues Special Fraud 
Alerts which identify segments of the health care industry that are 
particularly vulnerable to abuse. This Special Fraud Alert focuses on 
the home health industry and identifies some of the illegal practices 
the OIG has uncovered.
What Is Home Health Care And Who Is Eligible To Receive It?

    Medicare's home health benefit allows people with restricted 
mobility to remain non-institutionalized and receive needed care at 
home. Home health services and supplies are typically provided by 
nurses and aides under a physician-certified plan of care.
    Medicare will pay for home health services if a beneficiary's 
physician certifies that he or she:
     is homebound--i.e., confined to the home except for 
infrequent or short absences or trips for medical care, and
     requires one or more of the following qualifying services: 
physical therapy, speech-language pathology, or intermittent skilled 
nursing.
    If a homebound patient requires a qualifying service, Medicare also 
covers services of medical social workers and certain personal care 
such as bathing, feeding, and assistance with medications. However, a 
beneficiary who needs only this type of personal or custodial care does 
not qualify for the home health benefit.

Fraud and Abuse in the Home Health Industry

    Home care is consuming a rapidly increasing portion of the federal 
health budget. This year, Medicare payments for home health will reach 
close to $16 billion, up from $3.3 billion in 1990--nearly a five fold 
increase. Home health care is particularly vulnerable to fraud and 
abuse because: 

[[Page 40848]]

     Medicare covers an unlimited number of visits per patient;
     Beneficiaries pay no co-payments except on medical 
equipment;
     Patients don't receive explanations of benefits (EOBs) for 
bills submitted for home health services; and
     There is limited direct medical supervision of home health 
services provided by non-medical personnel.
    The OIG has learned of several types of fraudulent conduct, 
outlined below, which have or could result in improper Medicare 
reimbursement for home health services.

False or Fraudulent Claims Relating to the Provision of Home Health 
Services

    The government may prosecute persons who submit or cause false or 
fraudulent claims for payment to be submitted to the Medicare or 
Medicaid programs. Examples of false or fraudulent claims include 
claims for services that were never provided, duplicate claims 
submitted for the same service, and claims for services to ineligible 
patients. A claim for a service that a health care provider knows was 
not medically necessary may also be a fraudulent claim.
    Submitting or causing false claims to be submitted to Medicare or 
Medicaid may subject a person to criminal prosecution, civil penalties 
including treble damages, and exclusion from participation in the 
Medicare and Medicaid programs. OIG has uncovered the following types 
of fraudulent claims related to the provision of home health services.

Claims For Home Health Visits That Were Never Made And For Visits to 
Ineligible Beneficiaries

    OIG has uncovered instances where home health agencies are 
submitting false claims for home health visits. These include:
     Claims for visits not made.
     Claims for visits to beneficiaries not homebound.
     Claims for visits to beneficiaries not requiring a 
qualifying service.
     Claims for visits not authorized by a physician.
    One home health agency billed Medicare for 123 home health visits 
to a patient who never received a single visit, and submitted claims 
for beneficiaries who were in an acute care hospital during the period 
the agency claimed to have provided home visits. Another agency 
provided a home health aide to a beneficiary so mobile that he 
volunteered at a local hospital several times a week.
    A third agency claimed nearly $26 million during one year in visits 
that were not made, visits to patients that were not homebound, and 
visits not authorized by a physician. OIG interviews indicated that 
beneficiary signatures were forged on visit logs and physician 
signatures were forged on plans of care. This agency had subcontracted 
with other entities to provide home health care to its patients, and 
claimed that the subcontractors falsely documented that visits were 
made and services were provided.
    Medicare permits a home health agency to contract with other 
organizations, including agencies not certified by Medicare, to provide 
care to its patients. However, the agency remains liable for all billed 
services provided by its subcontractors. The use of subcontracted care 
imposes a duty on home health agencies to monitor the care provided by 
the subcontractor.
    Home health agencies, as well as the physicians who order home 
health services, are responsible for ensuring the medical necessity of 
claims submitted to Medicare. A physician who orders unnecessary home 
health care services may be liable for causing false claims to be 
submitted by the home health agency, even though the physician does not 
submit the claim. Furthermore, if agency personnel believe that 
services ordered by a physician are excessive or otherwise 
inappropriate, the agency cannot avoid liability for filing improper 
claims simply because a physician has ordered the services.

Fraud in Annual Cost Report Claims

    In addition to submitting claims for specific services, home health 
agencies submit annual cost reports to Medicare for reimbursement of 
administrative, overhead and other general costs. For these costs to be 
allowable, Medicare regulations require that they be (1) reasonable, 
(2) necessary for the maintenance of the health care entity, and (3) 
related to patient care. However, the OIG has audited cost reports 
which include costs for entertainment, travel, lobbying, gifts, and 
other expenses unrelated to patient care such as luxury automobiles and 
cruises. One home health agency claimed several million dollars in 
unallowable costs during one cost reporting year. These included 
utility and maid service payments for the owner's condominium, golf pro 
shop expenses, lease payments on a luxury car for the owner's son at 
college, and payment of cable television fees for the owner's mother.
    Medicare also requires home health agencies to disclose in their 
cost reports the identity of related parties with whom they conduct 
business, in order to adjust costs that are likely to be inflated by 
health care providers who self-deal (i.e., purchase goods or services 
from related companies). A related party issue exists when there is 
common control or common interest between the provider and the 
organization with whom it is doing business. OIG has investigated home 
health agencies which failed to disclose ownership or other 
relationships with entities with whom they contracted for accounting 
services, management/consulting services, and medical supplies. These 
agencies billed Medicare unallowable amounts for marked-up supplies and 
services.

Paying Or Receiving Kickbacks In Exchange For Medicare or Medicaid 
Referrals

    Kickbacks in exchange for the referral of reimbursable home health 
services is another type of fraud that OIG has observed. The Medicare 
program guarantees freedom of choice to its beneficiaries in the 
selection of health care providers. Because kickbacks violate that 
principle and also increase the cost of care, they are prohibited under 
the Medicare and Medicaid programs. Under the anti-kickback statute, it 
is illegal to knowingly and willfully solicit, receive, offer or pay 
anything of value to induce, or in return for, referring, recommending 
or arranging for the furnishing of any item or service payable by 
Medicare or Medicaid.
    OIG is aware of home health providers offering kickbacks to 
physicians, beneficiaries, hospitals, and rest homes in return for 
referrals. Kickbacks have taken the following forms:
     Payment of a fee to a physician for each plan of care 
certified by the physician on behalf of the home health agency.
     Disguising referral fees as salaries by paying referring 
physicians for services not rendered, or in excess of fair market value 
for services rendered.
     Offering free services to beneficiaries, including 
transportation and meals, if they agree to switch home health 
providers.
     Providing hospitals with discharge planners, home care 
coordinators, or home care liaisons in order to induce referrals.
     Providing free services, such as 24 hour nursing coverage, 
to retirement homes or adult congregate living facilities in return for 
home health referrals.
     Subcontracting with retirement homes or adult congregate 
living facilities for the provision of home 

[[Page 40849]]
health services, to induce the facility to make referrals to the 
agency.
    Parties that violate the anti-kickback statute may be criminally 
prosecuted, and also may be subject to exclusion from the Medicare and 
Medicaid programs.

Marketing Uncovered Or Unneeded Home Care Services to Beneficiaries

    OIG has learned of high pressure sales tactics employed by some 
agencies in the home health community to maximize their patient 
population and their profits. These agencies target healthy 
beneficiaries on the street or in their homes and offer non-covered 
services, such as grocery shopping or housekeeping, in exchange for 
Medicare identification numbers. Physicians have also reported that 
some agencies attempt to pressure them to order unnecessary personal 
care services by informing them that their patients are requesting 
these services and will find another physician if their demands are not 
met.
    These abusive marketing practices can result in false claims 
liability on the part of agencies and/or physicians, and may also 
constitute illegal kickbacks.

III. Special Fraud Alert: Medical Supplies to Nursing Facilities

(August 1995)
    The Office of Inspector General was established at the Department 
of Health and Human Services by Congress in 1976 to identify and 
eliminate fraud, abuse and waste in Health and Human Services programs 
and to promote efficiency and economy in departmental operations. The 
OIG carries out this mission through a nationwide program of audits, 
investigations and inspections.
    To help reduce fraud and abuse in the Medicare and Medicaid 
programs, the OIG actively investigates schemes to fraudulently obtain 
money from these programs and, when appropriate, issues Special Fraud 
Alerts which identify segments of the health care industry that are 
particularly vulnerable to abuse. This Special Fraud Alert focuses on 
the provision of medical supplies to nursing facilities and identifies 
some of the illegal practices that the OIG has uncovered.

How Nursing Facility Benefits are Reimbursed

    Many nursing facilities receive reimbursement from Medicare and 
Medicaid for care and services provided to eligible residents. Under 
Medicare Part A, skilled nursing facility services are paid on the 
basis of cost, and compensate the provider for covered nursing stays of 
a limited length. For Medicaid-eligible residents, extended nursing 
facility stays may be reimbursed by state-administered programs 
financed in part by Medicaid. Nursing facility residents may be 
concurrently eligible for benefits under Medicare Part B. These 
benefits may include payment for medically necessary equipment, 
prosthetic devices and supplies.
    Nursing facilities and their residents have become common targets 
for fraudulent schemes involving medical supplies. The OIG has become 
aware of a number of fraudulent arrangements by which medical suppliers 
profit from inappropriate business dealings, in the name of unwitting 
nursing facility residents.
    Sometimes, nursing facility management and staff also are involved 
in these schemes.

False or Fraudulent Claims Relating to the Provision of Medical 
Supplies

    The government may prosecute persons who submit or cause the 
submission of false or fraudulent claims to the Medicare or Medicaid 
program. Examples of false or fraudulent claims include claims for 
items that were never provided or were not provided as claimed, 
duplicate claims submitted for the same item, and claims for items that 
the supplier knows are not medically necessary.
    Submitting or causing false claims to be submitted to Medicare or 
Medicaid may subject the individual or entity to criminal prosecution, 
civil penalties including treble damages, and exclusion from 
participation in the Medicare and Medicaid programs. The OIG has 
uncovered the following types of fraudulent transactions related to the 
provision of medical supplies to nursing facilities.

Claims for Medical Supplies and Equipment That Are Not Medically 
Necessary

     Many of the supplies and equipment used in the care of 
nursing facility residents are provided by the nursing facility and 
should be reflected in the facility's Medicare cost report. The OIG has 
uncovered numerous instances in which suppliers provide the nursing 
facility with general medical supplies such as tape, adhesive remover, 
skin creams and syringes, but rather than bill the facility, the 
supplier submits claims to Medicare Part B. The claims misrepresent 
that the items are medically necessary for individual beneficiaries and 
therefore reimbursable under Part B.
    For example, one supplier billed Part B for an ``oral/nasal hygiene 
program'' which consisted of supplies, such as saline solution, latex 
gloves and cotton swabs, marketed as prepackaged kits. Upon 
investigation, the OIG determined that these items, which were shipped 
to the facility in bulk quantities, were neither medically necessary, 
nor used for the care of the residents identified on the claims. In 
such a case, the supplier may be liable under criminal, civil and 
administrative laws for submitting fraudulent claims. The nursing 
facility may also be liable if the OIG determines that the nursing 
facility knew or should have known that the claims were false and 
participated in the offense.

Claims for Items That Are Not Provided as Claimed or Double Billed

     Many inappropriate transactions involve marketing of 
incontinence supplies. In one case, a supplier was found to have 
delivered adult diapers, which are not covered by Medicare Part B, and 
improperly billed these items as expensive prosthetic devices called 
``female external urinary collection devices.'' In another case, a 
supplier delivered only incontinence care products, such as lubricants 
and cleansers. These items are covered only as accessories to medically 
necessary prosthetic devices such as female external urinary collection 
devices. Medicare received bills for each accessory, even though the 
primary item was not provided.
     In some cases, multiple payments are made for particular 
items shipped to nursing facilities. For instance, a nursing facility 
ordered and accepted delivery of certain medical supplies for the 
facility's general use. The nursing facility appropriately claimed the 
supplies as expenses related to patient care on its Medicare cost 
report. However, the supplier also submitted separate claims to 
Medicare Part B on behalf of each resident in the facility. In order to 
receive Part B reimbursement, the supplier misrepresented its 
entitlement to payment, as well as the eligibility and coverage of 
individual beneficiaries. Other payment sources, such as Medicaid or 
private payers, may also have been billed by the supplier. The supplier 
may be liable under criminal, civil and administrative provisions if 
the supplier claimed falsely that the beneficiary met the required 
eligibility and coverage criteria. The nursing facility may also be 
liable for falsifying its Part A cost report if it knew or should have 
known of the duplicate billing and participated in the offense.

[[Page 40850]]


Paying or Receiving Kickbacks in Exchange for Medicare or Medicaid 
Referrals

    It is illegal under the anti-kickback statute to knowingly and 
willfully solicit, receive, offer or pay remuneration in cash or in 
kind to induce or in return for referring, recommending or arranging 
for the furnishing of any item or service payable by Medicare or 
Medicaid.
    Violation of the anti-kickback statute may carry criminal 
penalties, program exclusion, or both. Immunity may be available where 
otherwise illegal conduct meets the criteria specified in ``safe 
harbor'' regulations published by the Secretary of the Department of 
Health and Human Services. These regulations may be found in 42 CFR 
part 1001.
     A supplier gives a nursing facility non-covered medical 
products at no charge, provided the facility assists in the ordering of 
Medicare-reimbursed products. For instance, incontinence care kits may 
consist of reimbursable supplies as well as non-reimbursable items, 
such as disposable underpads or adult diapers. The OIG has identified 
instances where suppliers have billed the program for providing nursing 
facilities with thousands of medical supplies contained within 
incontinence kits which were not medically necessary for the care of 
the patients. The nursing facilities accepted delivery of the kits, 
removed the diapers and other items useful in general patient care, and 
discarded the remainder of the kits. At the same time, the supplier 
received Medicare reimbursement for shipment of products which were not 
medically necessary and often not used.
    Both the supplier and the nursing facility may be liable for false 
claims as in the previous examples. However, both parties may also be 
liable under the anti-kickback statute, if one purpose of providing the 
free diaper was to induce the nursing facility to arrange for the 
procurement of items paid for by Medicare or Medicaid.

Other Examples of Fraudulent Practices

    The OIG has received many complaints from nursing facility 
administrators and staff about suppliers that deliver unordered goods 
which are billed to Medicare. Analysts and investigators also have 
found that many nursing facilities do not always report such abuses, 
perhaps because the nursing facilities may gain a benefit from the use 
of these ``free'' supplies. In other cases, nursing facilities actively 
solicit unauthorized deliveries or other items of value, such as cash 
and in-kind rewards. In exchange, the nursing facility offers the 
equipment supplier access to patients' medical records and other 
information needed to bill Medicare.

    Note: Under 42 CFR 483.10(e), it is a violation of a resident's 
rights, and therefore of the facility's conditions of participation, 
to make unauthorized disclosures from the resident's medical 
records.

     The OIG has investigated suppliers who supply nursing 
facilities with low-cost items, but submit Part B claims for high-
priced items. For instance, one supplier provided simple restraining 
devices, but claimed that custom-made orthotic body jackets were 
provided to specified Part B beneficiaries.
     The OIG also has investigated a case in which a supplier 
gathered information on the death of nursing facility residents. 
Immediately thereafter, the supplier back-dated orders of medical 
supplies in quantities consistent with Medicare's 30-day limitation on 
after-death shipments.

What To Look For in Nursing Facility Supply Transactions

    Suppliers engaged in the fraudulent schemes described above attempt 
to avoid detection in a variety of ways. Nursing facility 
administrators and staff aware of supplier fraud may be bribed through 
the payment of kickbacks and other illegal remuneration. Also, 
beneficiaries may be kept unaware of fraudulent billings if a supplier 
routinely ``waives,'' or fails to collect, co-payments from the 
residents for Part B items. The following factors may also indicate 
improper supply transactions:
     Excessive volumes of medical supplies delivered to, or 
solicited by, nursing facilities and kept as inventory for lengthy 
periods.
     Items provided directly to nursing facility residents that 
are unordered, unnecessary or unused.
     Unusually active presence in nursing facilities of medical 
supply sales representatives who are given, or request, unlimited 
access to patient medical records.
     Questionable documentation for medical necessity of 
supplies.

IV. Contacting the OIG About Fraud and Abuse

    The following common language is set forth in both OIG Special 
Fraud Alerts:

What To do If You Have Information About Fraud and Abuse Against the 
Medicare and Medicaid Programs

    If you have information about the types of activities described 
above, contact any of the regional offices of the Office of 
Investigations of the Office of Inspector General, U.S. Department of 
Health and Human Services, at the following locations:

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          Regions                  States served            Telephone   
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Boston....................  MA, VT, NH, ME, RI, CT....      617-565-2660
New York..................  NY, NJ, PR, VI............      212-264-1691
Philadelphia..............  PA, MD, DE, WV, VA........      215-596-6796
Atlanta...................  GA, KY, NC, SC, FL, TN,         404-331-2131
                             AL, MS (No. District).                     
Chicago...................  IL, MN, WI, MI, IN, OH,         312-353-2740
                             IA, MO.                                    
Dallas....................  TX, NM, OK, AR, LA, MS          214-767-8406
                             (So. District).                            
Denver....................  CO, UT, WY, MT, ND, SD,         303-844-5621
                             NE, KS.                                    
Los Angeles...............  AZ, NV (Clark Co.), So. CA      714-836-2372
San Francisco.............  No. CA, NV, AZ, HI, OR,         415-556-8880
                             ID, WA.                                    
Washington, D.C...........  DC and Metropolitan areas       202-619-1900
                             of VA & MD.                                
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[[Page 40851]]

    To Report Suspected Fraud, Call or Write: 1-800-HHS-TIPS, 
Department of Health and Human Services, Office of Inspector General, 
P.O. Box 23489, L'Enfant Plaza Station, Washington, D.C. 20026-3489.

    Dated: August 4, 1995.
June Gibbs Brown,
Inspector General.
[FR Doc. 95-19731 Filed 8-9-95; 8:45 am]
BILLING CODE 4150-04-P