Medicare Home Health Agencies: Certification Process Ineffective in
Excluding Problem Agencies (Letter Report, 12/16/97, GAO/HEHS-98-29).

Pursuant to a congressional request, GAO reviewed how the Health Care
Financing Administration (HCFA): (1) controls the entry of home health
agencies (HHA) into the Medicare program; (2) ensures that certified
HHAs continue to comply with Medicare's conditions of participation and
associated standards; and (3) decertifies HHAs that are not complying
with Medicare's requirements.

GAO noted that: (1) becoming a Medicare-certified HHA is relatively
easy-- probably too easy, given the large number of problem agencies
identified in various studies over the past few years; (2) if HHA owners
have not been previously barred from Medicare, they can obtain
certification without having any health care experience; (3) although
such entrepreneurs can hire qualified health care professionals,
Medicare's initial certification survey is so limited that it does not
provide a sound basis for judging an HHA's ability to provide quality
care; (4) although certified HHAs must be periodically recertified,
serious deficiencies in the process allow problems to go undetected; (5)
HCFA recertifies HHAs by screening them against a subset of the
conditions of participation, but when surveyors assessed 44 targeted
HHAs against all applicable conditions of participation, almost half had
problems serious enough to warrant decertification; (6) many HHAs
operate branch offices, but these offices are not subject to the same
oversight afforded the parent offices; (7) HHAs are resurveyed every 12
to 36 months, depending on a variety of factors, but rapid growth and
high utilization rates, which may indicate potential problem HHAs, are
not included among those factors; (8) once certified, HHAs have little
reason to fear that they will suffer serious consequences from failing
to comply with Medicare's conditions of participation and associated
standards; (9) few problem HHAs are terminated from the program; instead
they are provided repeated opportunities to correct their deficiencies,
even if the same deficiencies recur from one survey to the next; and
(10) moreover, HCFA has not implemented a range of penalties to sanction
problem HHAs, even though the Congress provided it the authority to do
so over 10 years ago.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  HEHS-98-29
     TITLE:  Medicare Home Health Agencies: Certification Process 
             Ineffective in Excluding Problem Agencies
      DATE:  12/16/97
   SUBJECT:  Patient care services
             Home health care services
             Institution accreditation
             Health care programs
             Quality assurance
             State-administered programs
             Federal/state relations
             Standards evaluation
IDENTIFIER:  Medicare Program
             HHS Operation Restore Trust
             Texas
             California
             Massachusetts
             Illinois
             Florida
             
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Cover
================================================================ COVER


Report to the Special Committee on Aging, U.S.  Senate

December 1997

MEDICARE HOME HEALTH AGENCIES -
CERTIFICATION PROCESS INEFFECTIVE
IN EXCLUDING PROBLEM AGENCIES

GAO/HEHS-98-29

Medicare Home Health Agencies

(101576)


Abbreviations
=============================================================== ABBREV

  CHAP - Community Health Accreditation Program
  HCFA - Health Care Financing Administration
  HHA - home health agency
  HHS - Department of Health and Human Services
  JCAHO - Joint Commission on the Accreditation of Healthcare
     Organizations
  LPN - licensed practical nurse
  OIG - Office of the Inspector General
  ORT - Operation Restore Trust
  OSCAR - On-line Survey, Certification and Reporting database
  OT - occupational therapy
  PT - physical therapy
  RN - registered nurse
  SNF - skilled nursing facility

Letter
=============================================================== LETTER


B-277914

December 16, 1997

The Honorable Charles E.  Grassley
Chairman
The Honorable John B.  Breaux
Ranking Minority Member
Special Committee on Aging
United States Senate

As a result of changes in Medicare law, regulations, and policy, more
Medicare beneficiaries are receiving more home health services and
for longer periods of time.  Home health care enables beneficiaries
with short-term, acute-care needs, such as recovery from a hip
replacement, as well as those with long-term, chronic conditions,
such as congestive heart failure, to receive care in their homes. 
The use of home health care has grown because of the liberalization
of the benefit as well as increases in the elderly population, longer
life expectancy, and the ability to deliver services in the home that
previously were provided only in hospitals or skilled nursing
facilities (SNF).  However, abusive billings for excessive care and
visits for noncovered services have inflated this growth to some
extent. 

The number of home health agencies (HHA) certified to care for
Medicare beneficiaries has increased rapidly--from 5,700 in 1989 to
nearly 10,000 at the beginning of 1997--and more than doubled in some
states.  During the same period, Medicare spending for home health
care jumped from $2.7 billion to about $18 billion and is estimated
to reach $21.9 billion in fiscal year 1998.  Home health care has
been, and continues to be, one of the fastest growing components of
the Medicare program. 

Only HHAs that are surveyed and certified as meeting Medicare's
conditions of participation and associated standards can be
reimbursed by Medicare for their services.  This survey and
certification process is administered by the Health Care Financing
Administration (HCFA), in the Department of Health and Human Services
(HHS), through state survey agencies, which are usually components of
state health departments.  These survey agencies assess whether HHAs
have the appropriate staff, policies, procedures, medical records,
and operational practices to deliver quality care.  Surveyors conduct
part of their work on site at HHAs and perform a variety of tasks,
such as reviewing clinical records, interviewing HHA staff, and
visiting patients in their homes. 

Because of your concerns about the rapid growth in the number of
certified HHAs and the effectiveness of the survey and certification
process, you asked us to determine how HCFA (1) controls the entry of
HHAs into the Medicare program and (2) ensures that certified HHAs
continue to comply with Medicare's conditions of participation and
associated standards.  We also looked at HCFA's process for
decertifying HHAs that are not complying with Medicare's
requirements.  This report expands on our July testimony before your
Committee, in which we presented the preliminary results of our
work.\1

To address these issues, we interviewed officials and gathered
pertinent data about survey and certification activities at HCFA,
state survey agencies, Medicare claims processing contractors, the
HHS Office of the Inspector General, and trade groups representing
the home health industry.  We concentrated our work in California,
Illinois, and Texas, which were among the original five states HCFA
targeted under Operation Restore Trust (ORT) for reviews addressing
home health agencies.\2 We conducted our work between March 1996 and
July 1997 in accordance with generally accepted government auditing
standards, with one exception.  We did not examine the internal and
automatic data processing controls related to the On-line Survey,
Certification and Reporting database (OSCAR), which HCFA and its
state surveyors use to manage the survey and certification process
for HHAs.  Further details on our scope and methodology are provided
in appendix I. 


--------------------
\1 Medicare Home Health Agencies:  Certification Process Is
Ineffective in Excluding Problem Agencies (GAO/T-HEHS-97-180, July
28, 1997). 

\2 ORT initially was a 2-year multiagency effort that targeted fraud
and abuse in three areas of Medicare--HHAs, SNFs, and durable medical
equipment suppliers.  This effort was conducted in the five states
(California, Florida, Illinois, New York, and Texas) that represented
about 40 percent of all Medicare and Medicaid beneficiaries.  In May
1997, the HHS Secretary announced that the ORT effort would continue
for another 2 years and include projects in 12 additional states. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

Becoming a Medicare-certified HHA is relatively easy--probably too
easy, given the large number of problem agencies identified in
various studies over the past few years.  If HHA owners have not been
previously barred from Medicare, they can obtain certification
without having any health care experience.  Although such
entrepreneurs can hire qualified health care professionals,
Medicare's initial certification survey is so limited that it does
not provide a sound basis for judging an HHA's ability to provide
quality care. 

Although certified HHAs must be periodically recertified, serious
deficiencies in the process allow problems to go undetected.  HCFA
recertifies HHAs by screening them against a subset of the conditions
of participation, but when surveyors assessed 44 targeted HHAs
against all applicable conditions of participation, almost half had
problems serious enough to warrant decertification.  Also, many HHAs
operate branch offices, but these offices are not subject to the same
oversight afforded the parent offices.  HHAs are resurveyed every 12
to 36 months, depending on a variety of factors, but rapid growth and
high utilization rates, which may indicate potential problem HHAs,
are not included among those factors. 

Once certified, HHAs have little reason to fear that they will suffer
serious consequences from failing to comply with Medicare's
conditions of participation and associated standards.  Few problem
HHAs are terminated from the program:  Instead, they are provided
repeated opportunities to correct their deficiencies, even if the
same deficiencies recur from one survey to the next.  Moreover, HCFA
has not implemented a range of penalties to sanction problem HHAs,
even though the Congress provided it the authority to do so over 10
years ago. 


   BACKGROUND
------------------------------------------------------------ Letter :2

Medicare, the nation's largest health care payer, provides insurance
coverage to more than 38 million elderly and disabled Americans.  The
program provides protection under two parts.  Part A, the hospital
insurance program, covers inpatient hospital care, posthospital care
in skilled nursing homes, hospice care, and care in patients' homes. 
Part B, the supplementary medical insurance program, primarily covers
physician services but also covers home health care for beneficiaries
not covered under part A.  In 1996, Medicare paid approximately $17.7
billion for home health services under part A and $300 million under
part B.  HCFA uses six contractors (usually insurance companies) to
process and pay home health claims. 

At the inception of the Medicare program, the home health benefit
under part A provided limited posthospital care--up to 100 visits for
1 year, following a hospitalization of at least 3 days, and for the
same illness that required the hospitalization.  Similar requirements
applied to SNFs.  Part B had no prior hospitalization requirement and
covered up to 100 visits per year that were not covered by part A. 
However, legislative and regulatory changes in the 1980s (1)
dissolved the direct link to prior hospitalization under part A; (2)
abolished limitations on the number of covered visits; and (3) in
effect, expanded the home health care benefit to include long-term
home care for the chronically ill.  The Balanced Budget Act of 1997
(P.L.  105-33) defined the conditions under which part A or part B
will pay for home health care.\3

To provide home health services to Medicare beneficiaries, an HHA
must be certified by HCFA and assigned a provider number for billing
purposes.  In recent years, about 800 to 900 HHAs per year have been
initially certified to serve Medicare beneficiaries, and the demand
for initial certification continues.  HHAs may be freestanding or
hospital based, for-profit or not-for-profit, public or private. 
Some are associated with regional or national health care provider
organizations.  A growing number operate branch offices as a way of
expanding their operations.  As defined by HCFA, branch offices
provide services within the geographic area served by the parent
office and share administration, supervision, and services with the
parent office. 

Home health services covered by Medicare include part-time or
intermittent skilled nursing and home health aide services, physical
and occupational therapy, speech language pathology services, medical
social services, and the provision of certain medical supplies and
equipment.  With the exception of providing medical supplies and
equipment, no copayments or deductibles are associated with these
services.  To qualify for services, beneficiaries must be confined to
their homes; have a plan of care signed by a physician; and need
intermittent skilled nursing care, physical therapy, or speech
language pathology services. 

HCFA contracts with state health departments to survey HHAs and
determine if they comply with Medicare's conditions of
participation.\4 There are 12 conditions of participation covering
such topics as patient rights, acceptance of patients and plans of
care, skilled nursing services, and clinical records.  Most
conditions are subdivided into more detailed standards and
requirements.  For example, the "skilled nursing services" condition
of participation is divided into two broad standards that cover the
duties of a registered nurse and the duties of a licensed practical
nurse.  These standards, in turn, are further defined by 15
requirements:  8 for a registered nurse, 5 for a licensed practical
nurse, and 2 overall general requirements.  (See app.  II for a
complete list of conditions of participation.) Surveyors assess
whether an HHA is meeting the requirements and, ultimately, whether
the HHA is in compliance with the "skilled nursing services"
condition of participation.  Noncompliance with an overall condition
is considered a "condition-level" deficiency, and all other
deficiencies are considered "standard-level" deficiencies. 

HCFA proposed significant revisions to the conditions of
participation in March 1997.  The proposed new conditions emphasize
improving patient outcomes and establishing performance improvement
programs within HHAs.  HCFA is now assessing comments received on its
proposal. 

During an initial HHA survey, the surveyor conducts a "standard
survey" to assess the HHA's capacity to deliver quality care.  Once
an HHA passes its initial survey and meets certain other
requirements, HCFA certifies it as a Medicare provider and issues it
a provider number for billing purposes.  The HHA is then supposed to
be recertified every 12 to 36 months following the same survey
process, with the exact frequency dependent upon factors such as
whether HHA ownership changed and the results of prior surveys.  But
complaints about HHA services may trigger an earlier survey. 

Certified HHAs can lose their certification if they are out of
compliance with one or more conditions; for example, an HHA providing
substandard skilled nursing care that threatens patient health and
safety can be terminated.  If the deficiency jeopardizes patient
health and safety and is considered immediate and serious, the HHA is
placed on an accelerated termination timetable; otherwise, HCFA
follows a 90-day termination procedure.  HHAs can avoid termination
by implementing corrective actions that bring them back into
compliance with Medicare's conditions of participation.  An HHA can
continue to participate in Medicare even if multiple standards are
unmet, provided it has prepared an acceptable plan of correction. 


--------------------
\3 Beginning in 1998, for individuals covered by both parts A and B
of Medicare, part A will cover up to 100 home health care visits a
beneficiary receives following a minimum 3-day hospital stay, with
part B paying for any other visits, including those without an
associated hospitalization.  For individuals without part B coverage,
all home health care visits will be covered under part A, and no
prior hospitalization requirement will apply. 

\4 Alternatively, HHAs may elect to be surveyed and accredited by
either the Joint Commission on the Accreditation of Healthcare
Organizations (JCAHO) or the Community Health Accreditation Program
(CHAP).  A small number of HHAs that are surveyed according to HCFA's
prescribed survey frequency by either of these accrediting bodies and
that pass their surveys are "deemed" to meet Medicare's conditions of
participation.  JCAHO conducts more deeming surveys than CHAP.  We
previously reviewed HCFA's evaluation of these two accrediting
bodies' ability to ensure that HHAs adhere to Medicare's conditions. 
See Home Health Care:  HCFA Properly Evaluated JCAHO's Ability to
Survey Home Health Agencies (GAO/HRD-93-33, Oct.  26, 1992) and Home
Health Care:  HCFA Evaluation of Community Health Accreditation
Program Inadequate (GAO/HRD-92-93, Apr.  20, 1992). 


   HHAS EASILY OBTAIN MEDICARE
   CERTIFICATION
------------------------------------------------------------ Letter :3

Medicare's initial survey and certification process was not designed
to screen out potentially fraudulent or abusive billers, but rather
to assess whether an HHA is capable of delivering quality home health
services.  Therefore, it is not surprising that unscrupulous HHAs
obtain certification.  But although the certification process was
intended to screen out HHAs that are unlikely to deliver quality
care, it does not adequately do so.  HHAs do not need health care
experience to be certified by Medicare.  In addition, the
certification process covers fewer than half of Medicare's conditions
of participation, is carried out too soon after an HHA has begun
providing services, and does not involve a complete review of HHA
operations.  The overall result is that practically anyone who meets
state or local requirements for starting an HHA is virtually
guaranteed Medicare certification--a circumstance that probably
contributes to Medicare fraud and abuse.  Moreover, although Medicare
requires HHAs seeking certification to complete a form detailing
ownership and management information, HCFA has only recently begun
verifying the accuracy of that information.  It is unclear if or how
the proposed new conditions of participation would affect the initial
certification process and the problems we identified with this
process. 


      FEW REQUIREMENTS EXIST FOR
      HHAS SEEKING MEDICARE
      CERTIFICATION
---------------------------------------------------------- Letter :3.1

Practically anyone who meets state and local requirements for
starting an HHA can be almost certain of obtaining Medicare
certification.  It is rare for an HHA to not meet Medicare's three
fundamental certification requirements:  (1) being financially
solvent; (2) complying with title VI of the Civil Rights Act of 1964,
which prohibits discrimination; and (3) meeting Medicare's conditions
of participation.  HHAs self-certify their solvency, agree to comply
with the law, and undergo an initial certification survey that few
fail.  On September 15, 1997, the HHS Secretary announced a
moratorium on the entry of any new HHAs into Medicare while
regulations are written to address fraud in the home health industry. 
Among the actions announced by the Secretary, HCFA will require HHAs
to demonstrate experience and expertise in home care by serving a
minimum number of patients before seeking Medicare certification. 
Before September 1977, Medicare was certifying about 100 new HHAs
each month. 

HHAs face few other obstacles to becoming certified.  For example,
Medicare law does not require HHA owners to have health care
experience.  We identified one owner whose most recent work
experience was driving a taxicab, another who owned and operated a
pawn shop in addition to his HHA, and a third who was a realtor
specializing in ranch sales.  None had experience in the health care
field.  Further, until passage of the Balanced Budget Act of 1997, a
criminal background was not a deterrent to HHA certification unless
that criminal activity was related to Medicare, other federal health
programs, or illicit drugs.  The law now allows HHS to refuse
Medicare participation to HHA owners if they have a felony conviction
under federal or state law that is considered detrimental to the best
interests of the program or its beneficiaries. 

Regarding service delivery, Medicare law requires only that HHAs
provide skilled nursing services plus one other covered service and
that HHAs deliver one of their covered services exclusively by their
own staff.  Except for the one covered service that HHAs must provide
directly, HHAs may decide how to deliver their services--either
directly or by another individual or entity under contract with them. 
Such contractors do not have to be Medicare certified; the certified
HHA is responsible for supervising their work.  The one service
delivered directly does not have to be skilled nursing care, physical
therapy, or speech language pathology services--one of which
individuals must need in order to qualify for the home health
benefit.  In 1996, for example, Medicare certified a Massachusetts
HHA that delivered medical social services directly with one social
worker but relied upon 12 registered nurses from another entity to
deliver all of its skilled nursing services. 

While contracting for services can give HHAs certain advantages, such
as the flexibility to manage staffing as patient populations
fluctuate, it can also lead to problems.  For example, HHAs that rely
heavily on contractors may not exercise full control over the care
they provide, and excessive contracting may be an indication the HHA
is exceeding its capacity to effectively care for its patients. 
Further, heavy use of contractors may indicate that the HHA is a
"shell"--that is, little more than a fax machine and a nurse used to
bill Medicare for services.  HCFA regional office officials, for
example, told us that HHAs that rely extensively on contractors for
skilled nursing services often cannot provide a list of patients with
their diagnoses or their clinical records because the HHAs have
little contact with the contract nurses.  HCFA recognizes these
problems and has proposed under its new conditions of participation
that HHAs deliver at least half of their skilled services directly. 


      INITIAL SURVEYS PROVIDE
      LITTLE ASSURANCE THAT HHAS
      ARE CAPABLE OF FURNISHING
      QUALITY CARE
---------------------------------------------------------- Letter :3.2

Medicare's initial certification process does not provide a sound
basis for judging whether an HHA does or will provide quality care in
accordance with Medicare's conditions of participation.  Initial
surveys often cover fewer than half of Medicare's conditions of
participation, occur too soon after an HHA has begun providing
services, and do not involve a complete review of an HHA's
operations.  As a result, state surveyors and HCFA do not have
sufficient, adequate information to verify that the HHA is capable of
furnishing quality care for all its services or is in compliance with
all of the conditions of participation. 

During the initial certification process, surveyors conduct a
standard survey that is required by statute to assess the quality of
care and scope of services the HHA provides, as measured by
indicators of medical, nursing, and rehabilitative care.  The
standard survey addresses the HHA's compliance with 5 of the 12
conditions of participation--and with one standard associated with a
sixth condition--that HCFA believes best evaluate patient care. 
During the initial survey, according to HCFA officials, reviewing HHA
compliance with all of the conditions is often impractical because
some of them measure HHA activities over a period of time.  For
example, the "group of professional personnel" condition calls for an
advisory panel to meet frequently and participate in evaluating the
HHA's program; at the time of an HHA's initial survey, the panel may
not yet have met.  However, HCFA does not require HHAs to demonstrate
compliance with all conditions of participation at any point
following their initial certification, unless the surveyors find at
least one condition-level deficiency.\5

Medicare sets no minimum standards for how long HHAs must be
operational before being surveyed, and these surveys typically occur
soon after HHAs begin providing services.  As a result, surveyors
have limited information with which to judge the quality of care
provided by HHAs.  For example, HCFA certified a Massachusetts HHA
that had 1 month's operational experience at the time of its initial
survey, and a Texas HHA had been delivering care for 7 weeks when it
was initially surveyed.  Because of the short time period between
their opening and their initial certification survey, many HHAs have
treated few patients.  California, Massachusetts, and Texas surveyors
told us that it is not uncommon for HHAs to be caring for just one
patient at the time of their initial survey.  Several HCFA regional
offices recently issued guidance to their state survey agencies
suggesting that HHAs should have cared for at least 10 patients
before the initial survey.  Such a criterion is not required at the
national level.  HCFA central office officials said that imposing
such a requirement in rural states would create an access problem for
some beneficiaries if their HHA cared for only a few patients during
the year. 

We also found that, at the time of their initial survey, HHAs may not
have delivered all the services they will become certified to
provide.  For example, an HHA certified to provide physical therapy
services may not have cared for a patient that needed this service at
the time of its initial certification.  Further, surveyors do not
always conduct home visits to patients receiving care from HHAs,
although such visits are recognized by HCFA and state surveyors as
the best indicator of an HHA's performance.  Surveyors told us that
they prefer to conduct home visits when HHA staff are delivering
services, but patients may not always be scheduled to receive care
when the surveyors are on site at the HHA.  Also, the patient may
refuse a visit by the surveyor. 


--------------------
\5 If they find one or more condition-level deficiencies, surveyors
are required to conduct an extended survey and review compliance with
all conditions of participation. 


         LIMITATIONS OF
         CERTIFICATION PROCESS CAN
         LEAD TO QUALITY PROBLEMS
         AND FRAUDULENT PRACTICES
-------------------------------------------------------- Letter :3.2.1

The relative ease with which HHAs become certified has likely
resulted in certifying some HHAs that fail to provide high quality
care and that abuse or defraud Medicare.  For example: 

  -- An individual with no experience in health care started her
     Texas HHA in the pantry of her husband's restaurant.  Within 4
     months of the HHA's certification, state surveyors started
     receiving complaints that the HHA had been (1) enrolling
     patients who were either ineligible for the Medicare home health
     benefit or who had been referred for care without a physician's
     order and (2) hiring home health aides on the condition that
     they first recruit a patient.  Approximately 10 months after
     initial certification, state surveyors substantiated the
     complaints and also found that the HHA was not complying with
     four conditions of participation and multiple standards,
     including four standards that the HHA had been cited as not
     meeting during its initial survey.  The surveyors also
     identified 13 cases in which they suspected the HHA provided
     unnecessary services or served ineligible beneficiaries; the
     surveyors referred these cases to HCFA's claims processing
     contractor.  One month later, the surveyors conducted a
     follow-up survey and found that the HHA had implemented
     corrective actions, as it had following its initial survey.  No
     further surveys had been conducted at this HHA at the time of
     our review. 

  -- Another individual with no home health care experience started a
     California HHA, which was Medicare certified in 1992.  Within 1
     year of certification, state surveyors and HCFA's contractor
     received numerous complaints alleging that the HHA had served
     patients ineligible for the Medicare benefit, falsified medical
     records, falsified the credentials of the director of nursing,
     and used staff inappropriately.  A recertification survey about
     15 months after initial certification found that the HHA was not
     complying with multiple conditions of participation and had
     endangered patient health and safety.  By September 1993, after
     Medicare had paid the HHA over $6 million, the HHA had closed. 
     The owner, who was a former drug felon, and an associate later
     pleaded guilty to defrauding Medicare of over $2.5 million. 

HCFA regional office and state survey agency officials recognize that
the initial certification process provides little assurance that an
HHA can and will provide quality care to its patients in accordance
with Medicare's conditions of participation.  They believe that newly
certified HHAs should be resurveyed after several months of actual
operation, when they have treated a number of beneficiaries and
demonstrated the quality of their care.  They also said that the HHAs
should be assessed against all of Medicare's conditions of
participation at this time, thus providing assurance that an HHA is
in total compliance with Medicare's participation requirements.  HCFA
central office officials told us that, while they have the statutory
authority to assess new HHAs against all of the conditions of
participation at any time and that it would be desirable to resurvey
an HHA several months after initial certification, these actions
would require additional funding for state survey agencies, which is
currently unavailable. 


      NEW ENROLLMENT PROCESS
      REQUIRES VERIFICATION OF HHA
      INFORMATION
---------------------------------------------------------- Letter :3.3

HCFA recently established an enrollment process for different types
of health care organizations, including HHAs, that are seeking
initial entry into the Medicare program or whose ownership has
changed.  Starting in mid-1997, those owners of an HHA with a
5-percent or greater financial interest in the HHA began to be
required to supply HCFA with information, such as their names and
whether they had ever been excluded from participating in Medicare,
before an initial certification survey could be carried out.  The
Medicare claims-processing contractors are responsible for verifying
this information within 21 days of receipt; in particular, they
verify that (1) the owners, managing employees, and subcontractors
have not been sanctioned or otherwise excluded from participating in
the program; (2) the HHA, if applicable, is appropriately licensed by
the state;\6 and (3) on the basis of a check with the current or
prior Medicare contractor that dealt with these individuals, there
are no indications, or proof, of fraud or abuse committed by the
owners or managing employees. 

The Balanced Budget Act of 1997 strengthened the HHA enrollment
process further by requiring HHA owners to supply HCFA with their
Social Security numbers; before this legislation, HCFA asked HHA
owners for this information but could not require it.  Having owners'
Social Security numbers, Medicare contractors should be better able
to use various databases to determine if an owner has previously been
sanctioned by, or barred from, Medicare or other federal health
programs. 

If the enrollment process does not identify any problems, the
Medicare contractor notifies the state survey agency so that it can
conduct an initial certification survey of the HHA. 


--------------------
\6 As of 1996, nine states had no requirements for licensing HHAs. 


   MEDICARE'S RECERTIFICATION
   PROCESS CONTAINS SERIOUS
   WEAKNESSES
------------------------------------------------------------ Letter :4

Medicare's recertification process does not ensure that only those
HHAs that provide quality care throughout their operations and comply
with all of Medicare's conditions of participation retain
certification.  The process does not require HHAs to periodically
demonstrate compliance with all conditions of participation, nor does
it require a complete assessment of an HHA's branch operations. 
Thus, shortcomings with the recertification process may cause quality
of care issues to go undetected, to the potential harm of
beneficiaries. 

Rapidly growing HHAs are surveyed as frequently as other HHAs, even
though rapid growth is an indicator of compliance deficiencies with
Medicare's participation requirements.  Also, most state survey
agencies do not routinely receive information from HCFA contractors,
such as average number of services per patient provided by an HHA and
its average Medicare payments per patient, that would be useful to
them when surveying HHAs; recent ORT studies have demonstrated that
such information sharing would be advantageous to Medicare. 


      HHAS ARE NOT ASSESSED
      AGAINST ALL CONDITIONS OF
      PARTICIPATION
---------------------------------------------------------- Letter :4.1

HCFA recertifies most HHAs without requiring them to demonstrate
compliance with all the conditions of participation.  As in the
initial survey process, state surveyors conduct a standard survey and
assess HHAs against 5 of the 12 conditions plus one standard
associated with a sixth condition; if they find an HHA out of
compliance with one or more of these conditions, they must expand the
survey to check an HHA's compliance with all of the remaining
conditions.  Each year, on average, only about 3 percent of all
certified HHAs are cited for having one or more conditions out of
compliance.  Therefore, many HHAs function for years without ever
being assessed for compliance with all of Medicare's conditions of
participation.  As a result, neither HCFA nor beneficiaries know
whether HHAs are complying with the conditions not included in a
standard survey. 

HCFA believes that the standard survey effectively evaluates an HHA's
patient care and its compliance with Medicare's conditions of
participation.  Evaluating HHAs against all of the conditions on each
recertification survey would take additional resources that are not
available, according to HCFA officials.  However, legislation passed
in 1996 provides HCFA with increased flexibility, given existing
resources, to periodically evaluate HHAs against all conditions of
participation.  This legislation increased the allowed intervals
between recertification surveys to up to 36 months, from the previous
requirement of approximately every 12 months.  Because fewer existing
HHAs have to be recertified each year, the resources needed to assess
some against all of the conditions of participation might become
available. 

When selected HHAs were assessed against nearly all of Medicare's
conditions of participation in a recent ORT study in California,
surveyors identified significant quality-of-care problems that led to
terminating many of the HHAs.  During this ORT study, HCFA targeted
44 HHAs that provided unusually high numbers of services to their
patients and received high levels of Medicare payments, compared with
their peers.  HCFA and state surveyors evaluated these HHAs against
11 of the 12 conditions of participation\7 rather than the 5
conditions and one standard reviewed during a standard survey. 
Approximately 80 percent of the targeted HHAs, when first surveyed,
were out of compliance with at least one of the conditions not
covered in a standard survey, and 21 of these targeted HHAs either
voluntarily withdrew from Medicare or were terminated by HCFA from
the program.  The following examples describe some of the problems
identified in the California ORT that relate to conditions of
participation not covered in a standard survey. 

  -- Surveyors found an HHA out of compliance with all of the
     conditions they surveyed and identified the following quality of
     care issues:  (1) The HHA could not provide the surveyors with a
     list of active patients, did not know which patients would
     receive care on a particular day, and did not exercise control
     over the services provided by contractor staff; (2) HHA staff
     provided patients with medication that had not been ordered by a
     physician; and (3) the HHA failed to ensure that therapists were
     qualified and prepared progress notes.  HCFA subsequently
     terminated the HHA's Medicare certification. 

  -- Another HHA was found out of compliance with seven conditions,
     including four not covered in a standard survey. 
     Quality-of-care problems identified by the state surveyors
     included the following:  (1) The HHA failed to monitor or
     control laboratory services and ensure that they were provided
     as ordered, (2) nurses did not provide care as ordered and
     failed to initiate necessary revisions to patients' plans of
     care, and (3) the HHA failed to verify that therapists hired
     under contract were qualified to deliver therapy services.  HCFA
     terminated the certification of this HHA. 


--------------------
\7 The study did not check HHA compliance with the condition
regarding HHA qualifications to furnish outpatient physical or speech
pathology services because none of the targeted HHAs provided these
services. 


      MEDICARE'S RECERTIFICATION
      PROCESS DOES NOT FULLY COVER
      HHA BRANCH OFFICE OPERATIONS
---------------------------------------------------------- Letter :4.2

Since the mid-1980s, more and more HHAs have created branch offices
at increasingly greater distances from the parent office, with many
HHAs operating multiple branches.  In Texas, for example, we
identified 106 HHAs as of January 1997 with 3 or more branch offices,
including 1 HHA that had 25 branch offices.  Figure 1 shows that
there were nearly 5,500 branch offices in January 1997--over four
times the number that existed in November 1993. 

   Figure 1:  Growth in the Number
   of HHA Branch Offices, November
   1993-January 1997

   (See figure in printed
   edition.)

Source:  HCFA's OSCAR. 

HCFA considers branch offices integral parts of an HHA and,
therefore, does not require them to be surveyed and certified. 
Without such an investigation, however, HCFA has no way of knowing
whether a new site actually meets Medicare's definition of a branch
office or should more appropriately be classified as an independent
HHA, which must be surveyed and certified.  As a result, HHAs can
expand their operations by creating new branch offices and avoid the
scrutiny of the survey and certification process.  Further, HHAs may
open new branches before demonstrating their own capability for
providing quality care.  For example, a Massachusetts HHA planned to
open three branch offices in different parts of the state immediately
following its initial certification, which was based on care provided
to two patients. 

Significantly, Medicare does not require surveyors to conduct home
visits with patients served by any of the branch offices at the time
of an HHA's recertification.  This means that quality-of-care issues
within an HHA's overall operations may be missed, especially if the
branch offices care for a significant percentage of the HHA's
patients.  For example, as of October 1996, one Texas HHA cared for
49 patients at its parent office and 160 patients at a total of 10
branch offices; two of the branches each cared for more patients than
the parent office.  While HCFA's regulations recognize that surveyors
should visit patients served by a branch office when recertifying an
HHA, they do not actually require it or establish criteria for
defining which branches and their patients should be included in the
survey.  As a practical matter, surveyors told us that they sometimes
do not have time to conduct home visits with branch office patients
and still finish the survey within their allotted time and resources. 

According to HCFA officials, visiting patients treated by some or all
HHA branch offices is a resource issue and conducting home visits
with patients treated by each branch office would be impractical when
recertifying HHAs.  However, now that the time frame for
recertification has been relaxed, HCFA should have greater
flexibility to have surveyors conduct more home visits with branch
office patients.  Moreover, developing targeting criteria for
surveyors to follow in selecting which branch offices or patients to
visit would allow a more efficient use of HCFA's survey and
certification budget. 

By not surveying branch operations, significant problems can go
undetected.  This became evident when branch offices were surveyed
because the HHAs wanted to convert them into independent HHAs. 
Examples follow. 

  -- In California, surveyors found that one branch of an HHA cared
     for 581 patients over the 12 months ending September 1996--more
     than the average number of patients cared for by an entire HHA
     in the state during that time.  The branch was not complying
     with one condition of participation, and the surveyors
     recommended the branch office be denied certification as an
     independent HHA.  Among its problems was the fact that the
     branch office had no system in place to ensure that its
     contractor staff had the appropriate qualifications and
     licenses. 

  -- Similarly, a branch office of a Massachusetts HHA had cared for
     69 patients since the HHA's last survey.  The branch was denied
     initial certification as an independent HHA because it failed to
     meet nine standards associated with several conditions of
     participation.  For example, the surveyors found that the branch
     office, in 10 of 12 cases examined, did not follow the plan of
     care and provide services as frequently as ordered by a
     physician.  At the time of our review, the HHA had not yet
     submitted its correction plan, and the branch office had not
     been certified as an independent HHA. 

We also found that it is common for HHAs to have branch offices
located hundreds of miles from the parent office, which may result in
branch office staff receiving less direct supervision from their
parent office than is required by Medicare.  For example, one Texas
HHA has branch offices located over 300 miles from the parent office. 
A California HHA located near Sacramento operates four branch offices
in other parts of the state as far as 200 miles away.  HCFA does not
define how far a branch office can be located from the parent office
because, according to HCFA officials, a fair definition that applies
on a national basis would be difficult to develop because of
variations in geography and population throughout the country. 
However, some states have set limits.  For example, one state
requires that a branch office be located no more than 100 miles from
its parent office, while another restricts a branch to being no more
than 1 hour's drive from the parent office.  In 1996, an
administrative law judge addressed the issue in a California case
about whether an entity should be designated as a branch or an
independent HHA.  The judge ruled that parent offices must be capable
of sharing required functions on a daily basis with their branches
and that a branch office located approximately 50 miles from the
parent office, which could, in heavy traffic, be up to 2-1/2 hours'
driving time away, did not meet this criterion. 


      HCFA'S SURVEY FREQUENCY
      CRITERIA NEED TO BE EXPANDED
---------------------------------------------------------- Letter :4.3

Under HCFA's recertification criteria, HHAs are to be resurveyed
every 12 to 36 months, depending upon such factors as how long they
have been certified, results of prior surveys, and changes in
ownership.  Excluded from consideration are factors such as whether
an HHA is quickly increasing its patient population, receiving large
increases in Medicare payments, or experiencing high utilization
rates--factors that can affect an HHA's compliance with Medicare's
conditions of participation. 

Our work in California and Texas, in fact, suggests that HHAs that
have grown rapidly often have difficulty complying with Medicare's
participation requirements.  Nearly one-fourth of the HHAs initially
certified in 1993 in California and Texas received Medicare payments
exceeding $1 million in 1994--their first full year of Medicare
certification.  By their second year of operation, these HHAs
averaged about $3 million in Medicare payments, and the average
number of patients they treated more than tripled between 1993 and
1995.  Accompanying that growth, however, was noncompliance with the
conditions of participation.  Forty percent of the high-growth HHAs
in California did not meet one or more conditions of participation in
their latest survey--almost double the percentage of the other HHAs
certified that same year.  In Texas, about 11 percent of the
high-growth HHAs failed to comply with one or more conditions in
their latest survey, compared with about 6 percent of the other HHAs
certified in 1993. 

Without input from Medicare contractors, state surveyors must
generally wait until they survey the HHAs to obtain information about
the number of patients HHAs have and how much they are receiving in
Medicare payments.  In 1989, we recommended that HCFA establish a
procedure for its contractors to use in providing state surveyors
with information that could be useful in their assessments of HHA
compliance with the conditions of participation.\8 Until the advent
in 1995 of ORT activities, this information, which would help
surveyors better target their efforts toward problem HHAs, had not
been routinely shared by the contractors. 

The HHS Office of the Inspector General (OIG) recently reported that
HHAs that have abused or defrauded Medicare or misappropriated
Medicare funds tend to exceed national and state averages for the
number of visits and reimbursements per patient.\9 We found that HHAs
that exceed such state averages are also likely to experience
problems complying with Medicare's conditions of participation.  In
California, HCFA targeted 44 HHAs for inclusion in its ORT project,
largely on the basis of information supplied by the two contractors
processing home health claims for HHAs in the state.  Specifically,
the contractors developed a rank-order list of HHAs that had the
highest average number of visits per patient and Medicare payments
per patient.  In 1995, California HHAs averaged 45 visits per patient
and received approximately $4,000 per patient from Medicare.  In
contrast, one of the 44 targeted HHAs provided an average of 174
visits per patient that year and received an average Medicare payment
per patient of $15,700.  Another targeted HHA provided an average of
148 visits per patient and received an average of $12,700 per patient
from Medicare.  With this targeted approach, surveyors found most of
the 44 targeted HHAs out of compliance with multiple conditions of
participation, and almost half are no longer in the program.  Had the
HHAs in the following examples not been targeted for the ORT survey,
they would likely have continued providing substandard care for as
long as 3 years before they were resurveyed under HCFA's survey
frequency criteria. 

  -- A California HHA initially certified in 1988 more than doubled
     its Medicare payments between 1993 and 1994 to $7 million while
     increasing the number of patients it treated from 715 to 1,034. 
     This HHA's average Medicare reimbursement per patient in 1995
     was $7,613.  When surveyed under the ORT project, this HHA
     terminated its participation after being found out of compliance
     with six conditions of participation. 

  -- Another California HHA, initially certified in 1990,
     approximately doubled its Medicare payments to $6 million and
     increased its patient population almost 20 percent from 1993 to
     1994.  Its average Medicare reimbursement per patient in 1995
     was $5,867.  ORT surveyors initially found this HHA out of
     compliance with three conditions, but after a third follow-up
     survey, it was found to be in compliance with all conditions and
     therefore its certification was not terminated. 


--------------------
\8 Medicare:  Assuring the Quality of Home Health Services
(GAO/HRD-90-7, Oct.  10, 1989). 

\9 HHS, OIG, Home Health:  Problem Providers and Their Impact on
Medicare (OEI-09-96-00110) (Washington, D.C.:  HHS, July 1997). 


   ONCE CERTIFIED, FEW HHAS LOSE
   THEIR CERTIFICATION
------------------------------------------------------------ Letter :5

Once an HHA has been certified as a Medicare provider, it is
virtually assured of remaining in the program, with no penalty, even
if found to be repeatedly deficient in complying with Medicare's
conditions of participation.  An HHA's participation in the Medicare
program is not terminated on the basis of volume of deficiencies or
repeat deficiencies, but rather on the basis of surveyors' finding
lack of compliance with at least one condition of participation that
the HHA does not subsequently correct.  Even when an HHA is cited for
serious deficiencies and threatened with termination, termination
rarely occurs.  As explained by HCFA central office officials, once
the HHA takes corrective action to remove any immediate threat and is
thereby moved from the accelerated termination track to the 90-day
termination track, the HHA is virtually assured of remaining in the
Medicare program. 

Until the advent of ORT, a project that in 1995 began targeting
"high-risk" HHAs in several states on the basis of suspected aberrant
billing practices, the likelihood that an HHA's Medicare
participation would be terminated by HCFA was remote.  In fiscal
years 1994, 1995, and 1996, about 3 percent of all certified HHAs
nationwide discontinued Medicare participation--most of them
voluntarily, as a result of either mergers or closures.  Terminations
initiated by HCFA as a result of uncorrected deficiencies identified
during the survey process were even more rare--ranging from about 0.1
percent of HHAs nationwide in 1994 to 0.3 percent in 1996.  In 1996,
however, as a result of its participation in ORT, California
accounted for almost one-half of the 32 HCFA-initiated terminations
nationwide, with 8 of its 15 terminations that year stemming from the
ORT project. 


      CORRECTIVE ACTIONS ARE OFTEN
      TEMPORARY
---------------------------------------------------------- Letter :5.1

For HCFA to terminate an HHA's Medicare certification, the surveyors
must find that it did not comply with one or more of the conditions
of participation and remained out of compliance 90 days after a
survey first identified the noncompliance.\10 If an HHA threatened
with termination takes corrective action and state surveyors verify
through site visits that this action has brought the HHA back into
compliance, HCFA will cancel the termination process.  An HHA,
however, can subvert the termination process by taking corrective
action for a short time, reverting to noncompliance by the next
survey, taking corrective action again, and so on and still remain
certified almost indefinitely--or at least until a patient is
seriously harmed. 

While surveyors return to an HHA to verify that noncompliance with
conditions has been corrected, this is not always the case when the
noncompliance is limited to standards.  For standard-level
deficiencies, just submitting an acceptable plan of correction may be
enough.  For example, Illinois surveyors did not revisit 13 of 21
HHAs included in its ORT project because they had submitted plans to
correct their violations of Medicare's standards.  Moreover,
surveyors do not always review prior survey reports to better focus
on problematic areas before beginning a new survey.  In one state,
for example, we found one group of surveyors that always prepared for
a survey by reviewing previous survey reports in order to identify
the types of deficiencies previously found and the extent of
complaints received involving the HHA or its branch operations.  In
that same state, however, another group of surveyors intentionally
did not review prior reports in order to avoid biasing the current
survey. 

Even when surveyors visit HHAs and verify that corrective actions
have been taken, HHAs may not sustain their corrective efforts over
time.  For example, after a Massachusetts HHA was initially certified
in 1989, surveyors found it out of compliance with one or more
conditions in 1991, 1993, 1994, and 1996. 

To some extent, HCFA has relied on HHAs to police themselves between
surveys, with questionable results.  For example, one condition of
participation requires a group of professional personnel to establish
and annually review HHA policies and operations.  This group is to
meet frequently to advise the HHA on professional issues, program
evaluation, and liaison with other health care providers.  Another
condition requires an overall evaluation of the HHA's program at
least once a year by the group of professional personnel, HHA staff,
and consumers.  This evaluation must assess the extent to which the
HHA's program is appropriate, adequate, effective, and efficient. 
Also, health professionals must review a sample of active and closed
clinical records at least quarterly to determine whether established
policies are followed.  Neither of these conditions, however, is
reviewed as part of the standard survey process.  In fact, when HHAs
were actually surveyed against these conditions in the California ORT
project, most were found not in compliance with these two conditions. 

Given multiple opportunities to correct their deficiencies, it is not
unusual for HHAs to have conditions and standards out of compliance
from one survey to another and remain in the program, as the
following examples illustrate: 

  -- A California HHA's second recertification survey revealed that
     the HHA had deficiencies in meeting five standards and that
     three of the deficiencies had been identified in the previous
     year's survey and supposedly corrected.  Several months later,
     at this same HHA, an ORT survey team found eight conditions and
     numerous standards not met.  When the HHA was resurveyed 5
     months later, it was found to be back in compliance with all
     conditions, but it had yet to meet seven standards.  Most of
     these deficiencies in meeting standards had been cited in the
     preceding surveys, and some had existed for a long time.  For
     example, for the three most recent surveys, this HHA had been
     cited for not following physicians' orders in the written plan
     of care.  The HHA was still certified at the time of our work. 

  -- On a Texas HHA's first recertification survey, 1 year after
     initial certification, the state surveyor found four standards
     not met and referred several cases of possible fraud to the
     Medicare contractor.  Within 10 months of that survey, state
     surveyors resurveyed the HHA and found it was not in compliance
     with seven conditions of participation and the previously cited
     deficiencies in meeting standards had not been corrected.  HCFA
     issued a termination letter, but within 2 months of the last
     survey, the HHA had corrected its deficiencies, and the
     termination process was halted.  On a complaint investigation 6
     months after the deficiencies had been corrected, the surveyors
     found the HHA was again out of compliance with three of the same
     seven conditions.  On this most recent survey, the surveyors
     attributed the death of one patient directly to this HHA.  At
     the time her attorney advised her to surrender her state license
     and Medicare certification, the owner/operator of this HHA had
     already hired a nurse consultant to bring the HHA back into
     compliance so that it could remain certified. 

  -- State surveyors found deficiencies in 12 standards when
     conducting a California HHA's first recertification survey in
     1993.  At its next survey in 1995, the surveyors found nine
     standards out of compliance, three of which had been identified
     in the preceding survey.  In 1996, the ORT survey team found 10
     conditions and multiple standards out of compliance, including
     most of the standards cited in previous surveys.  The surveyor's
     report documented a case in which the HHA accepted a patient who
     had a surgical wound on the knee that had not healed properly. 
     Over a 5-week period, the HHA never reported the deteriorating
     condition of the patient's wound to the attending physician. 
     The patient was ultimately admitted to an acute-care hospital,
     where his leg was amputated.  As a result of this latest survey,
     HCFA notified the HHA that it would be terminated.  Before the
     effective date of termination, the HHA voluntarily surrendered
     its state license and Medicare provider number. 

Because of circumstances such as these, the threat of termination has
little, if any, deterrent value, and problem HHAs seem to operate
with impunity.  The Congress, recognizing that HCFA should have more
enforcement options than that of terminating an HHA, enacted
provisions in the Omnibus Budget Reconciliation Act of 1987 to
address this issue.  The act authorized the Secretary of HHS to
impose intermediate sanctions for a period not to exceed 6 months on
those HHAs found deficient, in lieu of terminating their
certification.  If the HHA was still found deficient after that
6-month period, it was to be terminated from the program.  The act
required the Secretary of HHS to develop and implement, not later
than April 1, 1989, a range of intermediate sanctions that was to
include civil monetary penalties for each day of noncompliance,
suspension of Medicare payments, and assumption of management of the
HHA.  The act also required that these regulations provide for
progressively more severe sanctions for repeated or uncorrected
deficiencies. 

HCFA proposed alternative sanctions for HHAs in August 1991 but never
finalized its implementing regulations.  HCFA officials told us that
they wanted experience with the SNF intermediate sanctions, which
became effective in July 1995, before implementing intermediate
sanctions against HHAs. 


--------------------
\10 If the deficiency jeopardizes patient health and safety and is
considered immediate and serious, HCFA places the HHA on an
accelerated termination timetable of 23 days. 


   CONCLUSIONS
------------------------------------------------------------ Letter :6

HHAs provide important needed services to an increasing number of
beneficiaries where they most desire to receive their care--in their
homes.  However, HCFA grants certification to HHAs without adequate
assurance that they provide quality care or meet Medicare's
conditions of participation.  There are few barriers to certification
once an HHA has been licensed by the state; and not all states
license their HHAs.  As a result, few HHAs are denied entry to the
program.  While most HHAs seek entry to Medicare with the intent of
providing quality care, some are drawn to Medicare because of the
relative ease with which they can become certified and partake in
this lucrative, fast-growing industry. 

There has been little use of targeting to focus surveys on potential
problem HHAs or those more likely to have difficulty meeting
Medicare's conditions of participation.  Targeting would lend itself
to identifying branch offices for survey, particularly when those
branches are serving more patients than the parent office.  By
considering such factors as growth, high costs per patient, and high
numbers of visits per patient, specific HHAs could be targeted for
more frequent or more comprehensive surveys.  HCFA contractors
develop information during their claims processing efforts that could
be used to flag potential quality-of-care problems at HHAs, but this
information is not routinely shared with state survey agencies. 

Once certified, there is little likelihood that an HHA will be
terminated from the program for not meeting Medicare's conditions of
participation.  Furthermore, because surveys do not always consider
an HHA's survey history, HHAs can have the same problems over and
over again and still remain in the program, provided they take
temporary corrective action.  HCFA has not implemented intermediate
sanctions and thus has no way to penalize deficient HHAs other than
threatening termination, a threat that can be defused through
corrective action plans. 


   RECOMMENDATIONS
------------------------------------------------------------ Letter :7

We recommend that the Administrator of HCFA take the following
actions: 

  -- Establish minimal requirements for how long an HHA must be
     operational and how many patients it must have treated before it
     is eligible to be surveyed and certified.  HCFA could grant
     exceptions to such a national policy for those situations in
     which HHAs treat few patients and access to home care is an
     issue. 

  -- Require that HHAs be certified to provide only those services
     for which they have been surveyed; the addition of a new service
     should prompt a recertification survey. 

  -- Establish targeting criteria to select HHAs for survey against
     all conditions of participation.  These criteria should ensure
     that all HHAs are periodically assessed against all conditions
     of participation. 

  -- Require that branch offices be periodically surveyed to ensure
     that they meet Medicare's definition of a branch office and
     provide quality care in accordance with the conditions of
     participation.  HCFA should develop criteria, such as the number
     of patients served by a branch office relative to the number
     served by the parent office, that would help surveyors select
     which branch offices should be surveyed as part of an HHA's
     recertification. 

  -- Monitor state surveyors to ensure that they conduct home visits
     with patients treated by HHA branch offices.  Additionally, HCFA
     should develop criteria defining how surveyors are to select
     branch office patients to visit. 

  -- Revise the survey frequency criteria to include consideration of
     other factors that may indicate problem HHAs, such as rapid
     growth and high utilization patterns.  As part of this effort,
     HCFA should establish procedures for contractors to routinely
     provide state survey agencies with information that would help
     them assess compliance with the conditions of participation. 

  -- Issue implementing regulations regarding the intermediate
     sanctions authorized by the Congress that allow for penalizing
     and terminating HHAs that are repeatedly out of compliance with
     Medicare's conditions of participation. 


   AGENCY COMMENTS AND OUR
   EVALUATION
------------------------------------------------------------ Letter :8

We provided the Administrator of HCFA a draft of this report for
comment.  With one exception, HCFA concurred with our recommendations
but also noted that implementing some of the recommendations could
require additional funding for certification surveys.  We recognize
that requiring more surveys is a resource issue, but options do exist
to provide additional funding for such activities.  Both the HHS OIG
and HCFA have supported charging fees for certification surveys.  We
also recently suggested that the Congress may wish to consider
enacting legislation directing HCFA to carry out a pilot
demonstration to address the issue of abusive billing practices by
HHAs.\11

Under such a demonstration, once improper billing that identified an
HHA as an abusive biller had been detected, follow-up audit work
would be conducted, the cost of which could be assessed against the
HHA.  Under a similar approach, HCFA could charge HHAs for all
surveys, except for those HHAs on the 36-month survey frequency
cycle.  Being placed on such a survey cycle would mean that the HHA
had been in compliance with the Medicare conditions of participation
for at least the past 3 years. 

HCFA did not agree with our recommendation that the addition of a new
service by an HHA should prompt a recertification survey.  HCFA
believes that if an HHA is in compliance with the conditions of
participation, it is responsible for ensuring that all services
provided to the patients are monitored and appropriately supervised. 
HCFA stated that our recommendation would place an unnecessary burden
on the survey process and budget and could result in patients' having
to wait for needed services. 

We disagree, for several reasons.  First, when state surveyors
conduct standard surveys of HHAs, they select a case-mix stratified
sample of records to review and patients to visit.  Using this
sample, the surveyors assess compliance with conditions of
participation for the services the agency actually provides--not
services the HHA may provide in the future.  Second, Medicare law
already provides that a change in HHA ownership, management, or
administration is sufficient reason to conduct a new survey to
determine whether such changes have resulted in any decline in the
quality of care furnished by the HHA, thereby potentially affecting
the HHA's compliance with Medicare's conditions of participation. 
Similarly, adding a new type of service should raise questions about
whether the HHA has the structure, resources, and qualified staff
needed to deliver that service.  Finally, although the large number
of HHAs already certified makes it unlikely that a patient would have
to wait for needed services, HCFA could allow agencies in areas in
which the needed services are not otherwise available to provide new
services until a recertification survey could be arranged. 

HCFA concurred with our recommendation that regulations on interim
sanctions be issued and stated that a final regulation was being
developed.  HCFA has had the authority to establish interim sanctions
for nearly 10 years, and it still has not indicated when it expects
to finalize this regulation. 

HCFA also made several technical comments, which we have addressed. 
HCFA's comments are included in their entirety as appendix III. 


--------------------
\11 See Medicare:  Need to Hold Home Health Agencies More Accountable
for Inappropriate Billings (GAO/HEHS-97-108, June 13, 1997). 


---------------------------------------------------------- Letter :8.1

As arranged with your office, unless you release its contents
earlier, we plan no further distribution of this letter for 30 days. 
At that time, we will make copies available to other congressional
committees and Members of Congress with an interest in these matters,
and the Secretary of Health and Human Services. 

This report was prepared by Robert Dee and Donald Hunter, under the
direction of William Reis, Assistant Director.  Please call me at
(202) 512-7114 or Mr.  Reis at (617) 565-7488 if you or your staffs
have any questions about this information. 

William J.  Scanlon
Director, Health Financing and
 Systems Issues


SCOPE AND METHODOLOGY
=========================================================== Appendix I

In developing information for this report, we interviewed officials
at the Health Care Financing Administration's (HCFA) central office
in Baltimore as well as at its regional offices in Boston, Chicago,
Dallas, and San Francisco; the Department of Health and Human
Services' (HHS) Office of the Inspector General (OIG); five
contractors that process and pay home health claims for HCFA:  Blue
Cross of California, the Associated Hospital Service of Maine, the
Health Care Service Corporation, Palmetto Government Benefits
Administrators, and IASD Health Services Corporation; state survey
agencies in California, Illinois, Maine, Massachusetts, and Texas;
and the National Association for Home Care, the California
Association of Health Services at Home, and the Home and Hospice
Association of California, which are home health agency (HHA) trade
associations.  We concentrated our work in California, Illinois, and
Texas--three states that have been actively involved in conducting
Operation Restore Trust (ORT) studies directly related to the HHA
survey and certification process.  Additionally, these states are
among the 10 states with the highest numbers of certified HHAs.  We
also performed limited work in Maine and Massachusetts--two states
that use the traditional survey and certification process and were
not part of the original ORT effort. 

To determine how HCFA controls the entry of HHAs into Medicare, we
met with HCFA central office and regional officials to determine
HCFA's roles and responsibilities, reviewed legislation and pertinent
regulations, reviewed and analyzed Medicare's conditions of
participation, interviewed state survey agency officials, determined
the roles and responsibilities of HCFA's contractors, interviewed HHS
OIG officials, interviewed trade association representatives,
reviewed related reports and the literature, and kept abreast of
pending changes to the conditions of participation and provider
enrollment processes. 

To determine how HCFA ensures that certified HHAs continue to comply
with Medicare's conditions of participation and provide quality care,
we reviewed HCFA's On-line Survey, Certification and Reporting
(OSCAR) database to determine the extent to which HHAs (1) do not
meet Medicare's conditions of participation during surveys, (2) have
repeated violations of Medicare's conditions and associated standards
over time, and (3) create branch offices.\12 Through meetings with
HCFA and state survey agency officials and a review of survey
reports, we determined the type of problems that the survey and
certification process identifies.  Further, we reviewed survey
reports and other documents prepared for the ORT studies in
California, Illinois, and Texas and determined HCFA's process for
targeting HHAs during these studies.  We met with HCFA contractor
officials to discuss their involvement in the ORT studies and the
processes they have in place to identify HHAs suspected of fraud and
abuse. 

To examine HCFA's process for decertifying HHAs, we analyzed HCFA
information related to the number of HHA terminations and the reasons
for them.  We also met with a representative of the HHS Office of the
General Counsel to determine Medicare's termination process and
reviewed Medicare's termination regulations.  We also discussed
issues related to this objective with trade association
representatives and obtained related reports. 


--------------------
\12 OSCAR contains such information about certified HHAs as names,
addresses, provider numbers, survey results, and terminations. 


CONDITIONS OF PARTICIPATION,
STANDARDS, AND UNDERLYING
REQUIREMENTS FOR HHAS
========================================================== Appendix II

Conditions of
participation          Standards                         Underlying requirements
---------------------  --------------------------------  --------------------------------
Patient rights         Notice of rights                  HHA provides patient written
                                                         notice of rights.

                                                         HHA maintains documentation of
                                                         compliance with patient rights.

                       Exercise of rights and respect    Patient has right to exercise
                       for property and person           rights as a patient of HHA.

                                                         Patient has right to have
                                                         property treated with respect.

                                                         Patient has right to voice
                                                         grievances regarding treatment
                                                         or care without reprisal.

                                                         HHA must investigate complaints
                                                         regarding treatment or care.

                       Right to be informed and to       Patient has right to be informed
                       participate in planning care and  in advance about care and
                       treatment                         changes in care.

                                                         Patient has right to participate
                                                         in planning care.

                                                         HHA maintains policies and
                                                         procedures regarding advance
                                                         directives.

                       Confidentiality of medical        Patient has right to
                       records                           confidentiality of clinical
                                                         records.

                                                         HHA must advise patient of
                                                         record disclosure policies and
                                                         procedures.

                       Patient liability for payment     Patient has right to be advised
                                                         of cost of care before care is
                                                         initiated.

                                                         HHA must inform patient orally
                                                         and in writing of who will pay
                                                         for services.

                                                         Patient has right to be informed
                                                         of changes in the cost of care
                                                         or in who pays for the care no
                                                         later than 30 days after the
                                                         change.

                       Home health hot line              Patient has right to be advised
                                                         of availability of toll-free HHA
                                                         hot line.

Compliance with        Compliance with federal, state,   HHA and staff must comply with
federal, state, and    and local laws and regulations    federal, state, and local laws
local laws;                                              and regulations.
disclosure and
ownership
information; and
accepted professional
standards and
principles

                       Disclosure of ownership and       HHA must comply with disclosure
                       management information            of ownership and management
                                                         information requirements.

                                                         HHA must disclose ownership and
                                                         management information for each
                                                         survey and whenever changes are
                                                         made.

                       Compliance with accepted          HHA and staff must comply with
                       professional standards and        accepted professional standards
                       principles                        and principles.

Organization,          \a                                Delegation of responsibility is
services, and                                            clearly set forth in writing.
administration
                                                         Administrative and supervisory
                                                         functions are not delegated to
                                                         another HHA.

                                                         All services not provided
                                                         directly are monitored and
                                                         controlled by the parent HHA.

                                                         Administrative records for each
                                                         subunit are maintained by the
                                                         parent HHA.

                       Services furnished                HHA must provide skilled nursing
                                                         services and at least one other
                                                         therapeutic service, one of
                                                         which the HHA must provide with
                                                         its own staff.

                       Governing body                    Governing body assumes full
                                                         legal authority and
                                                         responsibility for the HHA.

                                                         Governing body appoints
                                                         qualified administrator.

                                                         Governing body arranges for
                                                         professional advice.

                                                         Governing body adopts and
                                                         periodically reviews written by-
                                                         laws.

                                                         Governing body oversees
                                                         management and fiscal affairs of
                                                         HHA.

                       Administrator                     Administrator organizes and
                                                         directs HHA functions.

                                                         Administrator employs qualified
                                                         personnel and ensures adequate
                                                         staff education and evaluation.

                                                         Administrator ensures accuracy
                                                         of public information materials
                                                         and activities.

                                                         Administrator implements an
                                                         effective budgeting and
                                                         accounting system.

                                                         Qualified person is authorized
                                                         in writing to act in absence of
                                                         administrator.

                       Supervising physician or          Services furnished are under the
                       registered nurse (RN)             supervision of a physician or
                                                         RN.

                                                         Supervisor or alternate is
                                                         available during operating
                                                         hours.

                                                         Supervisor participates in
                                                         activities relevant to furnished
                                                         services.

                       Personnel policies                HHA has written personnel
                                                         policies, and personnel records
                                                         include staff's current licenses
                                                         and qualifications.

                       Personnel under hourly or per-    Hourly and per-visit personnel
                       visit contracts                   have written contracts.

                       Coordination of patient services  Personnel providing services
                                                         coordinate effectively.

                                                         Coordination of patient services
                                                         is documented in the clinical
                                                         records or minutes of case
                                                         conferences.

                                                         Written summary report for each
                                                         patient is sent to attending
                                                         physician every 62 days.

                       Services under arrangements       Services for which the HHA
                                                         contracts are subject to a
                                                         written contract.

                       Instructional planning            Annual operating budget and
                                                         capital expenditure plan are
                                                         prepared.

                                                         Plan and budget are prepared
                                                         under direction of governing
                                                         body.

                                                         Plan and budget are reviewed and
                                                         updated at least annually.

                       Laboratory services               If HHA provides laboratory
                                                         testing or refers specimens
                                                         elsewhere, it must comply with
                                                         the requirements of the Clinical
                                                         Laboratory Improvement
                                                         Amendments of 1988.

Group of professional  \a                                Group includes physician, RN,
personnel                                                and professionals from other
                                                         appropriate disciplines.

                                                         Group establishes and annually
                                                         reviews HHA policies.

                       Advisory and evaluation function  Group meets frequently to advise
                                                         agency on professional issues.

                                                         Meetings are documented by dated
                                                         minutes.

Acceptance of          \a                                Patients are accepted on basis
patients, plan of                                        of reasonable expectation that
care, and medical                                        needs can be met at home.
supervision
                                                         Written plan of care is
                                                         established and periodically
                                                         reviewed by physician.

                       Plan of care                      Plan of care covers all
                                                         diagnoses, required services,
                                                         visits, and so on.

                                                         Physician is consulted to
                                                         approve modifications to plan.

                                                         Orders for therapy services
                                                         specify procedures and
                                                         modalities to be used and their
                                                         amount, frequency, and
                                                         duration.

                                                         Therapist and other personnel
                                                         participate in developing plan.

                       Periodic review of plan of care   Plan is reviewed by attending
                                                         physician and HHA personnel as
                                                         necessary, but at least every 62
                                                         days.

                                                         HHA staff promptly alert
                                                         physician to changes that
                                                         suggest need to alter plan.

                       Conformance with physician's      Drugs and treatment are
                       orders                            administered only as ordered by
                                                         physician.

                                                         RN or therapist records and
                                                         signs oral orders and obtains
                                                         physician countersignature.

                                                         Staff check all medicines to
                                                         identify ineffective drug
                                                         therapy, adverse reactions, drug
                                                         allergies, and so on and report
                                                         problems to physician.

Skilled nursing        \a                                Skilled nursing services are
services                                                 furnished by or under
                                                         supervision of an RN.

                                                         Skilled nursing services are
                                                         furnished in accordance with
                                                         plan of care.

                       Duties of the RN                  RN makes initial evaluation
                                                         visit.

                                                         RN regularly reevaluates patient
                                                         nursing needs.

                                                         RN initiates plan of care and
                                                         necessary revisions.

                                                         RN furnishes services requiring
                                                         substantial or specialized
                                                         nursing care.

                                                         RN initiates appropriate
                                                         preventive or rehabilitative
                                                         procedures.

                                                         RN prepares notes, coordinates
                                                         with physician and other staff,
                                                         and informs physician and other
                                                         staff of changes.

                                                         RN counsels patient and family
                                                         in meeting nursing and related
                                                         needs.

                                                         RN participates in in-service
                                                         program and supervises and
                                                         teaches staff.

                       Duties of the licensed practical  LPN furnishes services in
                       nurse (LPN)                       accordance with HHA policy.

                                                         LPN prepares clinical and
                                                         progress notes.

                                                         LPN assists physician and RN in
                                                         performing specialized
                                                         procedures.

                                                         LPN prepares equipment and
                                                         materials observing aseptic
                                                         techniques.

                                                         LPN assists patient in learning
                                                         self-care techniques.

Therapy services       \a                                Therapy services are given by a
                                                         qualified therapist, or
                                                         qualified therapist assistant
                                                         under supervision of qualified
                                                         therapist, in accordance with
                                                         the plan of care.

                                                         Therapist helps physician
                                                         evaluate functional level and
                                                         helps develop plan of care.

                                                         Therapist prepares clinical and
                                                         progress notes.

                                                         Therapist advises and consults
                                                         with family and other HHA
                                                         personnel.

                                                         Therapist participates in in-
                                                         service programs.

                       Supervision of physical therapy   Services provided by a PT or OT
                       (PT) assistant and occupational   assistant must be supervised by
                       therapy (OT) assistant            a qualified PT or OT.

                                                         PT and OT assistants help
                                                         prepare clinical notes and
                                                         progress reports.

                                                         PT and OT assistants participate
                                                         in educating patient and family
                                                         and in in-service programs.

                       Supervision of speech therapy     Speech therapy is furnished only
                       services                          by, or under the supervision of,
                                                         a speech pathologist or
                                                         audiologist.

Medical social         \a                                Services are provided by a
services                                                 qualified social worker or
                                                         social worker assistant.

                                                         Social worker participates in
                                                         developing the plan of care.

                                                         Social worker prepares clinical
                                                         and progress notes.

                                                         Social worker works with
                                                         family.

                                                         Social worker uses appropriate
                                                         community resources.

                                                         Social worker participates in
                                                         discharge planning and in-
                                                         service programs.

                                                         Social worker consults with
                                                         other HHA personnel.

Home health aide       \a                                Home health aides are selected
services                                                 according to personnel
                                                         qualifications specified in
                                                         regulations.

                       Home health aide training         Aides must have at least 75
                                                         hours of training in specific
                                                         subject areas; 16 hours must be
                                                         supervised practical training.

                                                         Aides must have at least 16
                                                         hours of classroom training
                                                         before beginning practical
                                                         training.

                                                         Aides must have good
                                                         communication skills; ability to
                                                         observe, report, and document
                                                         care; and ability to recognize
                                                         emergency situations and needs
                                                         of patients.

                                                         Any organization may conduct
                                                         training except an HHA that,
                                                         within the past 2 years, has not
                                                         complied with Medicare
                                                         requirements, has been penalized
                                                         by Medicare, or has had Medicare
                                                         payments suspended.

                                                         The practical portion of
                                                         training must be supervised by,
                                                         or carried out under the
                                                         supervision of, an RN with at
                                                         least 2 years' experience, 1 of
                                                         which is in home health.

                                                         Other individuals may provide
                                                         instruction under the
                                                         supervision of a qualified RN.


                                                         Aide training must be
                                                         documented.

                       Competency evaluation and in-     Aides may furnish services only
                       service training                  after successfully completing a
                                                         competency evaluation program.

                                                         HHA is responsible for ensuring
                                                         its aides meet the competency
                                                         evaluation requirements.

                                                         Competency evaluations must meet
                                                         specific requirements specified
                                                         in the regulations.

                                                         HHA must complete a competency
                                                         evaluation of each aide at least
                                                         every 12 months.

                                                         Aides must receive at least 12
                                                         hours of in-service training
                                                         each year.

                                                         Competency evaluations may be
                                                         provided by any organization
                                                         except an HHA that, within the
                                                         past 2 years, has not complied
                                                         with Medicare requirements, has
                                                         been penalized by Medicare, or
                                                         has had Medicare payments
                                                         suspended.

                                                         Competency evaluation must be
                                                         performed by an RN, and in-
                                                         services must be supervised by
                                                         an RN.


                                                         Performance in specified subject
                                                         areas must be evaluated by
                                                         observation; for others,
                                                         evaluation may be by observation
                                                         or oral or written examination.

                                                         Aides may not continue to
                                                         perform tasks evaluated as
                                                         unsatisfactorily carried out.

                                                         An aide has not passed the
                                                         competency evaluation if
                                                         performance in more than one
                                                         required area is considered
                                                         unsatisfactory.

                                                         Competency evaluation must be
                                                         documented.

                                                         HHA may use only aides who meet
                                                         competency requirements.

                       Assignment and duties of the      Aides are assigned to a specific
                       home health aide                  patient by an RN.

                                                         Written instructions for patient
                                                         care are prepared by an RN or a
                                                         therapist.

                                                         Duties of an aide include
                                                         performing simple procedures as
                                                         an extension of therapy,
                                                         providing personal care,
                                                         assisting in exercise, carrying
                                                         out household services, and
                                                         assisting with self-
                                                         administered medications.

                                                         Aides report changes in patient
                                                         care and needs.

                                                         Aides complete appropriate
                                                         records.

                       Supervision                       Aides must be supervised.

                                                         When only aide services are
                                                         being provided, an RN must make
                                                         a supervisory visit to patient's
                                                         home at least once every 60
                                                         days.

                                                         Supervisory visit must occur
                                                         when aide is furnishing care.

                                                         When skilled nursing or therapy
                                                         services are also being
                                                         provided, an RN must make a
                                                         supervisory visit to patient's
                                                         home at least every 2 weeks
                                                         whether the aide is present or
                                                         not.

                                                         When therapy services are being
                                                         provided--without aide or
                                                         skilled nursing services--a
                                                         skilled therapist may make the
                                                         supervisory visits.


                       Personal care attendant--         Individuals hired only to
                       evaluation requirements           provide personal care services
                                                         under Medicaid must be found
                                                         competent by the state.

Qualifying to furnish  \a                                HHA providing outpatient therapy
outpatient physical                                      services on its own premises
therapy or speech                                        must meet all pertinent
pathology services                                       conditions for an HHA as well as
                                                         additional specified health and
                                                         safety requirements.

Clinical records       \a                                Clinical records containing past
                                                         and current findings must be
                                                         maintained for each patient in
                                                         accordance with accepted
                                                         professional standards.

                       Retention of records              Clinical records must be
                                                         retained for at least 5 years
                                                         after the applicable cost report
                                                         is filed with the contractor.

                                                         A copy of the clinical record or
                                                         abstract is sent with patient
                                                         when transferred to another
                                                         health facility.

                       Protection of records             Clinical records are safeguarded
                                                         against loss or unauthorized
                                                         use.

                                                         Written procedures govern the
                                                         use and removal of records and
                                                         conditions for release of
                                                         information.

                                                         Patient's written consent is
                                                         required for release of
                                                         information not authorized by
                                                         law.

Evaluation of the      \a                                Written policies require an
HHA's program                                            annual evaluation of the HHA's
                                                         total program.

                                                         Evaluation consists of an
                                                         overall policy and
                                                         administrative review and a
                                                         clinical record review.

                                                         Evaluation assesses the
                                                         appropriateness, adequacy,
                                                         effectiveness, and efficiency of
                                                         the HHA's program.

                                                         Results of the evaluation are
                                                         reported to and acted upon by
                                                         those responsible for operating
                                                         the HHA.

                                                         Results of the evaluation are
                                                         maintained separately as
                                                         administrative records.

                       Policy and administrative review  Evaluation includes a review of
                                                         policies and administrative
                                                         practices of the HHA.

                                                         Mechanisms are established in
                                                         writing to collect data for the
                                                         evaluation.

                       Clinical record review            Appropriate health professionals
                                                         must review a sample of active
                                                         and closed clinical records
                                                         quarterly to ensure policies are
                                                         being followed.

                                                         Active clinical records must be
                                                         reviewed every 62 days to assess
                                                         adequacy of plan of care and
                                                         appropriateness of continuing
                                                         care.
-----------------------------------------------------------------------------------------
\a No standard was specified for these requirements. 

Source:  HCFA. 




(See figure in printed edition.)Appendix III
COMMENTS FROM THE HEALTH CARE
FINANCING ADMINISTRATION
========================================================== Appendix II



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)

RELATED GAO PRODUCTS

Medicare Home Health Agencies:  Certification Process Is Ineffective
in Excluding Problem Agencies (GAO/T-HEHS-97-180, July 28, 1997). 

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

Medicare:  Allegations Against ABC Home Health Care (GAO/OSI-95-17,
July 19, 1995). 

Home Health Care:  HCFA Properly Evaluated JCAHO's Ability to Survey
Home Health Agencies (GAO/HRD-93-33, Oct.  26, 1992). 

Home Health Care:  HCFA Evaluation of Community Health Accreditation
Program Inadequate (GAO/HRD-92-93, Apr.  20, 1992). 

Medicare:  Increased Denials of Home Health Claims During 1986 and
1987 (GAO/HRD-90-14BR, Jan.  24, 1990). 

Medicare:  Assuring the Quality of Home Health Services
(GAO/HRD-90-7, Oct.  10, 1989). 

Medicare:  Need to Strengthen Home Health Care Payment Controls and
Address Unmet Needs (GAO/HRD-87-9, Dec.  2, 1986). 

Savings Possible by Modifying Medicare's Waiver of Liability Rules
(GAO/HRD-83-38, Mar.  4, 1983). 

The Elderly Should Benefit From Expanded Home Health Care But
Increasing These Services Will Not Insure Cost Reductions
(GAO/IPE-83-1, Dec.  7, 1982). 

Medicare Home Health Services:  A Difficult Program to Control
(GAO/HRD-81-155, Sept.  25, 1981). 

Response to the Senate Permanent Subcommittee on Investigations'
Queries on Abuses in the Home Health Care Industry (GAO/HRD-81-84,
Apr.  24, 1981). 

Home Health Care Services--Tighter Fiscal Controls Needed
(GAO/HRD-79-17, May 15, 1979). 


*** End of document. ***