Medicare Home Health Agencies: Closures Continue, With Little Evidence
Beneficiary Access Is Impaired (Letter Report, 05/26/99,
GAO/HEHS-99-120).

Pursuant to a congressional request, GAO provided information on the:
(1) distribution of Medicare home health agencies' (HHA) closures across
urban and rural counties and the characteristics of closed agencies; and
(2) effect of closures on beneficiary access to home health services.

GAO noted that: (1) prior to the HHA closures that have attracted
widespread attention, both the number of HHAs and utilization of home
health services had grown considerably; (2) although 14 percent of
agencies closed between October 1, 1997, and January 1, 1999,
beneficiaries are still served by over 9,000 HHAs, approximately the
same number that were available in 1996; (3) 40 percent of the closures
were concentrated in three states that had experienced considerable
growth in the number of HHAs and had utilization rates well above the
national average; (4) furthermore, the majority of closures occurred in
urban areas that still have a large number of agencies to provide
services; (5) the pattern of HHA closures suggests a response to the
interim payment system (IPS); (6) the IPS revenue caps would prove
particularly stringent for agencies that provided more visits per user,
for smaller agencies, and for those with less ability to recruit
low-cost patients; (7) closing agencies were also about half the size of
agencies that remained open, and they had been losing patients before
the implementation of IPS; (8) attention had been focused on the number
of Medicare-certified HHAs available to provide home health care, but
the more important issue is whether beneficiaries have access to
Medicare-covered home health services; (9) evidence shows that overall
home health utilization in the first 3 months of 1998 had declined since
1996, but it was about the same as a comparable period in 1994--the year
that serves as the base for IPS limits; (10) moreover, the sizeable
variation in utilization between counties with high and low use has
narrowed; (11) these changes are consistent with IPS incentives to
control utilization; (12) in counties without a HHA, both the proportion
of beneficiaries served and the visits per user declined slightly during
the first 3 months of 1998 compared with a similar period in 1994, but
these counties' levels of utilization remained above the national
average; (13) GAO's interviews in 34 primarily rural counties with
substantial closures indicate that beneficiaries continue to have access
to services; (14) overall, the 130 stakeholders GAO interviewed in 34
counties with significant closures or declines in utilization reported
few access problems; and (15) however, those interviews also suggest
that as HHAs change their operations in response to the IPS,
beneficiaries who are likely to be costlier than average to treat may
have increased difficulty obtaining home health care.

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

 REPORTNUM:  HEHS-99-120
     TITLE:  Medicare Home Health Agencies: Closures Continue, With
	     Little Evidence Beneficiary Access Is Impaired
      DATE:  05/26/99
   SUBJECT:  Patient care services
	     Health care programs
	     Health resources utilization
	     Home health care services
	     Health care cost control
	     Beneficiaries
IDENTIFIER:  Medicare Program
	     Medicare Interim Home Health Payment System

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Cover
================================================================ COVER

Report to Congressional Requesters

May 1999

MEDICARE HOME HEALTH AGENCIES -
CLOSURES CONTINUE, WITH LITTLE
EVIDENCE BENEFICIARY ACCESS IS
IMPAIRED

GAO/HEHS-99-120

Home Health Access

(101795)

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

  BBA - Balanced Budget Act of 1997
  HCFA - Health Care Financing Administration
  HCIS - HCFA's Customer Information System
  HHA - home health agency
  HIPAA - Health Insurance Portability and Accountability Act of 1996
  IPS - interim payment system
  OASIS - Outcome and Assessment Information Set
  ORT - Operation Restore Trust
  OSCAR - On-Line Survey, Certification, and Reporting system
  PPS - prospective payment system
  RHHI - regional home health intermediary

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

B-282147

May 26, 1999

The Honorable William V.  Roth, Jr.
Chairman
The Honorable Daniel Patrick Moynihan
Ranking Minority Member
Committee on Finance
United States Senate

The Honorable Thomas J.  Bliley, Jr.
Chairman
The Honorable John D.  Dingell
Ranking Minority Member
Committee on Commerce
House of Representatives

The Honorable William M.  Thomas
Chairman
The Honorable Fortney H.  (Pete) Stark
Ranking Minority Member
Subcommittee on Health
Committee on Ways and Means
House of Representatives

Until 1998, home health care was one of Medicare's fastest growing
benefits.  Dramatically rising expenditures resulted in home health
care consuming about $1 of every $12 of Medicare outlays in fiscal
year 1997 compared with $1 of every $40 in 1989.  This growth was
primarily due to more beneficiaries receiving services and more home
health visits being provided to each user.  While changes in practice
patterns and in the need for home health care contributed to this
increased utilization, the inappropriate delivery of services as well
as fraudulent billing practices also added to Medicare's spending. 

Concerns about rising spending, fraud and abuse, and inadequate
oversight led the Congress and the administration to implement a
number of initiatives to better control Medicare's home health care
costs.  In particular, the Balanced Budget Act of 1997 (BBA) mandated
major changes to the home health benefit.\1 To slow spending, for
example, the act required the Health Care Financing Administration
(HCFA), the agency responsible for administering the Medicare
program, to move away from a cost-based method of payment and
implement a prospective payment system (PPS) of fixed, predetermined
rates for home health services.  Until that system is developed, home
health agencies (HHA) are using an interim payment system (IPS),
which imposes limits on agencies' cost-based payments.\2 \ The limits
give HHAs incentives to control per-visit costs and the number and
mix of visits provided to users. 

Since its implementation on October 1, 1997, concerns have been
raised about the IPS.\3 Industry representatives have claimed that
the system's cost limits are too stringent, causing some HHAs to
close, which in turn has reduced access to home health services.  We
reported to you last September that neither agency closures through
June 1998 nor the IPS had significantly affected the industry's
capacity to provide services.\4

Although we found that HHA closures had accelerated, the rapid growth
in the number of agencies over the past several years overshadowed
the recent retrenchments.  Furthermore, the number of
Medicare-certified HHAs alone is a poor measure of capacity. 
Remaining agencies are often able to absorb the patients and staff of
closing HHAs so that beneficiary access is not impaired.  Since we
issued that report, the industry has continued to express concern
about the impact of closures on beneficiary access.  In response to
this sustained concern, you asked us to (1) update our September
analysis on closures, paying particular attention to the distribution
of closures across urban and rural counties and to the
characteristics of closed agencies, and (2) assess the effect of
closures on beneficiary access to home health services.\5 We analyzed
HCFA data on changes in the number and characteristics of
Medicare-certified HHAs through January 1, 1999.  We also examined
beneficiary utilization during the first quarter of 1998, the most
recent data available, and compared it with similar periods in 1994
and 1996.  To complement this analysis, we interviewed stakeholders
during February 1999 in a sample of primarily rural counties that had
experienced significant closures.  These stakeholders are parties
with an interest in or knowledge of these issues and included HHA
managers, hospital discharge planners, advocacy groups, and others. 
Our work was completed in accordance with generally accepted
government auditing standards between January and April 1999.  (For a
detailed discussion of our scope and methodology, see app.  I.)

--------------------
\1 P.L.  105-33, title IV, chapter I, 111 Stat.  251, 466. 

\2 BBA mandated that the PPS for HHAs be implemented in fiscal year
2000.  The Omnibus Consolidated and Emergency Supplemental
Appropriations Act, 1999 (P.L.  105-277, sec.  5101(c), 112 Stat. 
2681, 2681-914.) postponed implementation until fiscal year 2001. 

\3 IPS implementation was phased in according to HHAs' cost reporting
year.  Sixty-one percent of the HHAs came under the IPS by January 1,
1998, and the remainder by September 30, 1998. 

\4 Medicare Home Health Benefit:  Impact of Interim Payment System
and Agency Closures on Access to Services (GAO/HEHS-98-238, Sept.  9,
1998). 

\5 The term "county" encompasses parishes (Louisiana), some census
areas (Alaska), and certain independent cities (such as Baltimore,
Md.). 

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

Prior to the HHA closures that have attracted widespread attention,
both the number of HHAs and utilization of home health services had
grown considerably.  Although 14 percent of agencies closed between
October 1, 1997, and January 1, 1999, beneficiaries are still served
by over 9,000 HHAs, approximately the same number that were available
in 1996.  Forty percent of the closures were concentrated in three
states that had experienced considerable growth in the number of HHAs
and had utilization rates (that is, visits per user as well as users
per thousand fee-for-service beneficiaries) well above the national
average.  Furthermore, the majority of closures occurred in urban
areas that still have a large number of agencies to provide services. 
The pattern of HHA closures suggests a response to the IPS.  The IPS
revenue caps would prove particularly stringent for agencies that
provided more visits per user, for smaller agencies, and for those
with less ability to recruit low-cost patients.  For example,
agencies that closed had provided over 40 percent more services per
user than agencies that remained open.  Closing agencies were also
about half the size of agencies that remained open, and they had been
losing patients before the implementation of IPS. 

Attention has been focused on the number of Medicare-certified HHAs
available to provide home health care, but the more important issue
is whether beneficiaries have access to Medicare-covered home health
services.  Evidence shows that overall home health utilization in the
first 3 months of 1998 had declined since 1996, but it was about the
same as a comparable period in 1994the year that serves as the base
for IPS limits.  Moreover, the sizeable variation in utilization
between counties with high and low use has narrowed.  These changes
are consistent with IPS incentives to control utilization.  In
counties without an HHA, both the proportion of beneficiaries served
and the visits per user declined slightly during the first 3 months
of 1998 compared with a similar period in 1994, but these counties'
levels of utilization remained above the national average.  Our
interviews in 34 primarily rural counties with substantial closures
indicate that beneficiaries continue to have access to services. 
Overall, the 130 stakeholders we interviewed in 34 counties with
significant closures or declines in utilization reported few access
problems.  However, those interviews also suggest that as HHAs change
their operations in response to the IPS, beneficiaries who are likely
to be costlier than average to treat may have increased difficulty
obtaining home health care.  Confusion about eligibility for services
also contributed to the perception that there were access problems. 
Some of this reduced utilization, particularly for services that do
not meet Medicare coverage criteria, could be shifted to and paid for
by Medicaid. 

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

The Medicare home health benefit consists of skilled nursing,
therapy, and related services furnished by a Medicare-certified
HHA.\6 To qualify for services, a beneficiary must be homebound and
require skilled nursing care or physical or speech therapy on a
part-time or intermittent basis.\7 The services must be furnished
under a plan of care prescribed and periodically reviewed by a
physician.  If these criteria are met, Medicare will pay for home
health visits provided by

  -- a registered nurse or a physical, occupational, or speech
     therapist (or a person under their supervision);

  -- social workers necessary to resolve social or emotional problems
     that are impediments to a beneficiary's recovery; and

  -- a home health aide who delivers hands-on personal care.\8

Medicare will pay for home health care as long as it is reasonable
and necessary for the management of a beneficiary's illness or
injury.  There are no limits on the number of visits or length of
coverage, and no copayments or deductibles apply.  A beneficiary with
no need for skilled care and who only requires custodial or personal
care, however, does not qualify for the Medicare home health benefit. 

--------------------
\6 These services include physical, speech, and occupational therapy;
medical social services; and home health aide services. 

\7 A beneficiary is homebound when he or she has a condition that
results in a routine inability to leave home except with considerable
and taxing effort, and when absences from home are infrequent or of
relatively short duration, or are attributable to receiving medical
treatment.  Part-time or intermittent means that the services are
needed on fewer than 7 days each week, or for fewer than 8 hours per
day for periods of 21 days or less. 

\8 Home health aide services include (1) personal care services, such
as assistance with eating, bathing, and toileting; (2) simple
surgical dressing changes; (3) assistance with some medications; (4)
activities to support skilled therapy services; and (5) routine care
of prosthetic and orthotic devices. 

      GROWTH IN HOME HEALTH
      UTILIZATION
---------------------------------------------------------- Letter :2.1

During much of the 1990s, home health care was one of Medicare's
fastest growing benefits.  Expenditures rose from 3.2 percent ($3.7
billion) of total Medicare spending in 1990 to 9 percent ($17.8
billion) in 1997.  This translates into an average annual growth rate
of 25.2 percent, compared with 8 percent for the overall program. 
The number of Medicare home health users per 1,000 beneficiaries
increased from 57 to 109 over the 1990 to 1997 period, and the
average number of visits per user went from 36 to 73.\9 Concomitant
with this stepped-up use was the almost doubling in the number of
Medicare-certified HHAs to 10,524 in 1997. 

This growth can be attributed to many factors, but the relaxation of
coverage guidelines is one of the most notable.  At Medicare's
inception, home health care was a posthospital benefit with an annual
limit on the number of visits covered for each beneficiary.  The
limitation on visits was removed by the Omnibus Reconciliation Act of
1980,\10 but utilization did not increase appreciably because of
HCFA's relatively stringent interpretation of the coverage and
eligibility criteria.  A court case in 1988 challenged HCFA's
interpretation, and the decision led to modification of HCFA's
coverage guidelines.\11 To accommodate the court decision, the
benefit was transformed from one focused on patients needing
short-term care after a hospitalization to one that serves chronic,
long-term-care patients as well. 

Also contributing to the historical rise in spending were a payment
method that provided few incentives for efficiency and lax Medicare
oversight of claims for reimbursement.  The substantial geographic
variation in the provision of home health care suggests that at least
some visits may be of marginal value.  For example, in 1996, the
average number of visits per user in the West South Central region
(which includes Arkansas, Louisiana, Oklahoma, and Texas) was 129
compared with 47 in the Middle Atlantic region (New York, New Jersey,
and Pennsylvania).\12 (See app.  II.) Agencies could boost revenues
by providing more services to more beneficiaries, a strategy that
could actually help HHAs avoid Medicare's limits on payments per
visit.  Finally, Medicare oversight declined at the same time that
spending mounted.  The proportion of claims that were reviewed
dropped sharply, from about 12 percent in 1989 to 2 percent in 1995,
while the volume of claims almost tripled.\13

--------------------
\9 These numbers reflect Medicare fee-for-service beneficiaries only. 

\10 P.L.  96-499, sec.  930, 94 Stat.  2599, 2631. 

\11 Duggan v.  Bowen, 691 F.  Supp.  1487 (D.D.C.  1988). 

\12 This geographic variation was evident when controlling for
diagnoses.  Medicare:  Home Health Utilization Expands While Program
Controls Deteriorate (GAO/HEHS-96-16, Mar.  27, 1996). 

\13 Our 1997 analysis of a small sample of high-dollar claims found
that over 40 percent of these claims should not have been paid by the
program.  See Medicare:  Need to Hold Home Health Agencies More
Accountable for Inappropriate Billings (GAO/HEHS-97-108, June 13,
1997.)

      EFFORTS TO CONTROL HOME
      HEALTH EXPENDITURES
---------------------------------------------------------- Letter :2.2

Beginning in 1995, the Congress and the administration implemented
several initiatives to curb home health spending by constraining
fraud and abuse and modifying payment methods. 

Fraud and Abuse.  A major anti-fraud campaign known as Operation
Restore Trust (ORT) was launched in 1995 and is credited with
contributing to the recent slowdown in Medicare home health
spending.\14 ORT employed a number of approaches to uncovering fraud,
including the use of interdisciplinary teams to review individual
HHAs providing an unusually large number of Medicare services.  The
Health Insurance Portability and Accountability Act of 1996 (HIPAA)
also contained measures to control fraud and abuse by HHAs.\15 For
example, it provided that any physician who falsely certifies a
patient as eligible for home health care services is liable for a
civil monetary penalty.  HIPAA also provided more funding for claims
review by Medicare's claims processing contractors, including the
five regional home health intermediaries (RHHI) that process and pay
claims and review and audit cost reports. 

Several changes to the participation rules designed to screen out
problem providers were initiated in 1997.  These included heightened
reporting requirements for owners and increased standards for
providers.  The administration imposed a capitalization requirement
for home health providers enrolling on or after January 1, 1998, and
required that an HHA serve at least 10 patients before seeking
Medicare certification.  This contrasts with the previous requirement
that only a single patient had to have been served.  HCFA also
clarified that HHA branches must generally be located sufficiently
close to the parent agencyapproximately 1-1/2-hours driving timeso
that administration, supervision, and services are provided in a
manner that makes it unnecessary for the branch to be independently
certified as an autonomous organization.\16

Payment Limits.  Before the BBA, HHAs were paid on the basis of their
costs, up to preestablished limits.  The limits were set for each
type of visit but were applied in the aggregate; that is, costs above
the limit for one type of visit would still be paid if costs were
sufficiently below the limit for other types of visits.  In order to
slow spending, the BBA mandated key changes to Medicare's method of
paying for home health services.  Most importantly, HCFA is required
to establish a PPS by October 2000a fixed, predetermined payment per
unit of service, adjusted for patient characteristics that affect the
cost of care.  Until that time, HHAs are paid under the IPS.  The IPS
lowered the visit payment limit and subjects HHAs to a Medicare
revenue cap that is based on an aggregate per-beneficiary amount.\17
For agencies that had a full 12-month cost report for the fiscal year
ending October 1, 1994, the aggregate per-beneficiary amount is
calculated as 98 percent of a blend of 75 percent of its own fiscal
year 1994 per-beneficiary payments and 25 percent of the comparable
regional average.\18 For new agenciesthose that had not participated
in Medicare for a full year by October 1994the per-beneficiary
amount is based on the national median of these amounts for
established agencies.  Thus, utilization and spending are constrained
to 1994 patterns.  Finally, the BBA will further constrain payments
with the PPS.  PPS rates will be set so that Medicare expenditures
are equivalent to what would have been spent under the IPS, with
limits reduced by 15 percent from those in effect on September 30,
2000. 

Through the application of the payment limits, the IPS attempts to
control the costs and amount of services provided to beneficiaries. 
The per-visit limit controls the cost per visit.  The aggregate
revenue cap reins in the growth in the number of visits provided to
beneficiaries and constrains the average cost of the services
provided to users.  Agencies can use several methods to keep costs
below the revenue cap.  These include balancing their mix of low- and
high-cost patients, reducing their costs overall, increasing the
proportion of low-cost patients they treat, or some combination of
these activities.  These limits will prove more of a constraint for
agencies that have provided more visits or have higher costs than the
average.  Low-volume agencies with few low-cost patients or with
costly treatment patterns may also find the limits particularly
stringent. 

--------------------
\14 In 1997, the rate of increase for home health care expenditures
was lower than in previous years.  Although final data are not yet
available for 1998, HCFA expects expenditures to actually decrease
for 1998 compared with 1997. 

\15 P.L.  104-191, title II, 110 Stat.  1936. 

\16 HHAs are characterized as either parents, subunits, or branches. 
A parent develops and maintains administrative controls of subunits
and branches and also delivers services.  A subunit is a
semiautonomous organization serving patients in a geographic area
different from the parent and must independently meet the conditions
of participation and be certified.  A branch is not an autonomous
unit, but shares administration, supervision, and services with the
parent and does not have to be independently certified. 

\17 Under the IPS, the per-visit limit was based on 105 percent of
the national median per-visit cost.  The IPS was revised by section
5101(b) of the Omnibus Consolidated and Emergency Supplemental
Appropriations Act, 1999 (P.L.  105-277, 112 Stat.  2681, 2681-914),
which increased the per-visit limit to 106 percent of the national
median cost. 

\18 The Omnibus Consolidated and Emergency Supplemental
Appropriations Act, 1999 (P.L.  105-277, sec.  5101(a), 112 Stat. 
2681, 2681-913) made several changes to the revenue cap.  For HHAs
with per-beneficiary amounts less than the national median, limits
were increased by one-third of the difference between their amount
and the national median.  The cap for new HHAs (as classified by the
BBA) was increased from 98 percent to 100 percent of the national
median.  Further, HHAs that opened after October 1, 1998, have
per-beneficiary limits equal to 75 percent of the wage-adjusted
national median, reduced by 2 percent. 

   PATTERN OF HHA CLOSURES
   SUGGESTS RESPONSE TO NEW
   FINANCIAL INCENTIVES
------------------------------------------------------------ Letter :3

Substantial growth in the number of HHAs between 1990 and 1997 has
been followed by the closure of about 14 percent of HHAs between
October 1997 and January 1999.  Agencies that closed shared many of
the characteristics of agencies that opened in the 1990sthey were
disproportionately urban, freestanding, and for profit.\19 However,
agencies that closed also tended to be newer, treated a smaller
number of beneficiaries, and provided more services per user than
agencies that remained open.  Such agencies are the types of HHAs
that would have difficulty adjusting to the revenue caps in the IPS,
suggesting that the system is reducing the number of
high-utilization, low-volume HHAs.  The recent spate of closures has
been concentrated in a few states that had the most growth in HHAs
and that had utilization experience above the national average.  All
of the closures occurred in 555 counties--about 23 percent of the
counties that had an HHA.  The majority of counties with HHAs
experienced no net reduction in the number of agencies, and the
number of counties with one or two agencies remained fairly constant. 

--------------------
\19 HHAs may be either freestanding (not part of a facility) or
facility based, that is, operated as part of an acute-care hospital,
a rehabilitation facility, or a skilled nursing facility.  Ownership
of HHAs is classified as government, voluntary (not for profit), or
proprietary (for profit.)

      FOLLOWING A DECADE OF HIGH
      INDUSTRY GROWTH, HHA
      CLOSURES HAVE ACCELERATED
---------------------------------------------------------- Letter :3.1

The home health industry experienced tremendous growth from 1990
through 1997.  During this period, the number of Medicare-certified
HHAs almost doubled to 10,524.  The expansion was concentrated in
particular geographic areas and among certain types of HHAs.  Most
notably, freestanding and urban agencies doubled, while the number of
proprietary agencies tripled.  (See table 1 and app.  II.)

                          Table 1
          
           Medicare-Certified HHAs, 1990 and 1997

                     Number of     Number of    Percentage
                    HHAs, Oct.    HHAs, Oct.       growth,
                       1, 1990       1, 1997       1990-97
----------------  ------------  ------------  ------------
All HHAs                 5,642        10,524            87

Type
----------------------------------------------------------
Freestanding             3,675         7,607           107
                         (65%)         (72%)
Facility based           1,967         2,917            48
                         (35%)         (28%)

Control
----------------------------------------------------------
Proprietary (for         2,038         6,119           200
 profit)                 (36%)         (58%)
Government and           3,604         4,405            22
 voluntary (not          (64%)         (42%)
 for profit)

Location
----------------------------------------------------------
Urban                    3,442         7,038           105
                         (61%)         (67%)
Rural                    2,200         3,486            59
                         (39%)         (33%)
----------------------------------------------------------
Source:  GAO analysis of HCFA's On-Line Survey, Certification, and
Reporting system (OSCAR) data. 

Between October 1, 1997, and January 1, 1999, 1,436
Medicare-certified HHAs stopped serving Medicare beneficiaries.\20
However, because of growth in the industry since 1990, there were
still 9,263 Medicare-certified HHAs in January 1999--500 fewer
agencies than in October 1996.  While HHAs closed in the past,
closures were not as numerous and were obscured by the number of new
entrants.\21 In contrast, recent closures are now being accompanied
by relatively few openings.  (See fig.  1.)

   Figure 1:  Change in Number of
   Medicare-Certified HHAs,
   October 1, 1995 Through January
   1, 1999

   (See figure in printed
   edition.)

Source:  GAO analysis of HCFA's OSCAR data. 

Closures have occurred disproportionately in the very segments of the
home health industry that experienced the greatest growth during the
1990s.  (See table 2.) For example, the number of proprietary
agencies tripled between 1990 and 1997, representing 84 percent of
the new agencies.  They also made up 83 percent of the closures from
October 1997 through January 1, 1999.  Similarly, freestanding
agencies increased 107 percent from 1990 to 1997 to constitute 81
percent of the new agencies.  In the period that followed, they
represented 86 percent of the closures.  Although three-quarters of
the agencies that closed between October 1, 1997, and January 1,
1999, were located in urban areas, urban beneficiaries continued to
be served by 6,088 HHAs. 

                          Table 2
          
           Comparison of Active and Closed HHAs,
          October 1, 1997, Through January 1, 1999

                      Share of                 HHAs closed
                      industry   Active HHAs  between Oct.
                       growth,    on Oct. 1,  1, 1997, and
                       1990-97          1997  Jan. 1, 1999
----------------  ------------  ------------  ------------
All agencies              100%      Number =      Number =
                                      10,524         1,436

Type
----------------------------------------------------------
Freestanding               81%           72%           86%
Facility based             19%           28%           14%

Control
----------------------------------------------------------
Proprietary                84%           58%           83%
Government and             16%           42%           17%
 voluntary

Location
----------------------------------------------------------
Urban                      74%           67%           74%
Rural                      26%           33%           26%

Tenure in Medicare
----------------------------------------------------------
New (under 5               75%           48%           64%
 years)
Established (5+            25%           52%           36%
 years)
----------------------------------------------------------
Source:  GAO analysis of HCFA's OSCAR data. 

Most of the HHAs that stopped serving Medicare beneficiaries had been
in operation for fewer than 5 years.  Moreover, agencies that closed
were much smaller--serving less than half the number of
beneficiaries--and getting smaller.  Finally, they were providing
more visits to each user than remaining agencies.  Compared with the
average of 479 beneficiaries served by their counterparts that
remained open, closed agencies served only 216 beneficiaries while
providing 44 percent more visits per beneficiary (see table 3). 
Furthermore, closed agencies had experienced an 8-percent decline in
the number of beneficiaries served compared with the previous year. 

                          Table 3
          
           Volume and Utilization Rates of Active
              and Closed Home Health Agencies,
                Calendar Years 1996 and 1997

                    Average number of       Visits per
                      beneficiaries        beneficiary
                    ------------------  ------------------
Agencies                1996      1997      1996      1997
------------------  --------  --------  --------  --------
Active agencies on       487       479        66        64
 or before Jan. 1,
 1996, and still
 in business
Agencies closed          235       216        95        92
 during calendar
 year 1998
----------------------------------------------------------
Source:  GAO analysis of HCFA's Standard Analytical File, claims data
for home health services, 1996 and 1997. 

The profile of closed agencies is consistent with the incentives
created by the IPS to control the volume of services provided to
beneficiaries.  The revenue cap is applied to an agency's total
Medicare payments; it does not limit payments for any specific
beneficiary.  HHAs need to average costs over all beneficiaries to
stay within the cap.  Low-volume agencies may have less ability to
stay below their caps:  a few high-cost patients can affect them more
because they have a smaller pool of beneficiaries over which to
average their costs.  Similarly, agencies that provide a higher
number of visits per user would face the IPS constraints because of
their higher average costs.  Agencies that typically provide greater
than the average number of services per user will need to change
their service patterns or mix of beneficiaries.  These changes could
be challenging for small agencies that may have less flexibility or
experience in managing service use. 

Finally, new agencies may face tighter payment restrictions than
their established counterparts because their payment limits are based
on average national utilization rather than their own experience. 
Agencies that opened after October 1994, and provide more services
per beneficiary, may be constrained under the IPS, particularly if
they are located in a region where utilization exceeds the national
average. 

--------------------
\20 Throughout this report we use the term "closure" to identify HHAs
that either no longer participate in the Medicare program or have
merged with another Medicare-certified agency. 

\21 For example, a total of 797 Medicare-certified HHAs closed in
fiscal years 1996 and 1997, while the number of certified agencies
increased by 2,392. 

      CLOSURES ARE CONCENTRATED IN
      THREE HIGH-UTILIZATION,
      HIGH-GROWTH STATES
---------------------------------------------------------- Letter :3.2

About 40 percent of agency closures since October 1997 were in three
states--Louisiana, Oklahoma, and Texas.\22 These states had 2,286
HHAs in January 1999--about 25 percent of the remaining agencies
nationwideto serve 9 percent of Medicare's fee-for-service
beneficiaries.  In each of these states, the number of HHAs per
Medicare beneficiary far exceeded the national average of one agency
per 3,509 beneficiaries.\23 For example, Texas had about three
agencies serving that number of beneficiaries. 

Utilization in these three states was not only higher than the
national average in 1994 but grew considerably between then and the
implementation of the IPS.  For example, in each of these states,
visits per user rose between 1994 and 1997 at rates more than double
the national average (ranging from 28 percent to almost 45 percent,
compared with the 10.5-percent increase nationwide).  Furthermore, by
1997, HHAs in these states served 20 percent more users per 1,000
fee-for-service beneficiaries and provided twice the number of visits
per user compared with the national average.  (See table 4.)

                                         Table 4
                         
                         Decline in HHAs and Utilization in Three
                                     High-Use States

                                             People served per
                                            1,000 Medicare fee-
                                           for-service enrollees      Visits per user
                                           ----------------------  ----------------------
                             HHA closures
                                     as a
                  Number of    percentage
                  Medicare-     of active
                  certified   agencies as
                 HHAs, Jan.    of Oct. 1,              Percentage              Percentage
                    1, 1999          1997  1994  1997      change  1994  1997      change
-------------  ------------  ------------  ----  ----  ----------  ----  ----  ----------
Nationwide            9,263         -14.0  94.2  109.        15.9  66.0  72.9        10.5
                                                    2
Louisiana               407         -21.6  138.  157.        13.5  125.  161.        28.0
                                              6     3                 8     0
Oklahoma                299         -23.2  108.  131.        21.1  105.  147.        39.1
                                              9     9                 7     0
Texas                 1,580         -20.1  106.  133.        25.1  97.4  141.        44.8
                                              9     7                       0
-----------------------------------------------------------------------------------------
Sources:  GAO analysis of HCFA's OSCAR data and Medicare enrollment
data. 

--------------------
\22 In contrast, some states such as Alabama, Kentucky, New Jersey,
and Washington had fewer than four closures between October 1997 and
January 1999.  No closures occurred in Georgia.  Each of these states
had HHAs serving more Medicare fee-for-service beneficiaries than the
national average--that is, they had fewer HHAs per Medicare
fee-for-service beneficiary.  (App.  III contains the number of
active and closed HHAs and the number of Medicare fee-for-service
enrollees per remaining HHA by state.)

\23 We report the number of Medicare fee-for-service enrollees
because HCFA data on service use exclude those enrolled in managed
care plans. 

      MAJORITY OF CLOSURES
      OCCURRED IN URBAN COUNTIES
---------------------------------------------------------- Letter :3.3

HHA closures were concentrated in 23 percent of the counties (555)
that had agencies as of October 1, 1997.  Even fewer counties
experienced significant reductionsthat is, five or more agencies
(primarily urban counties) or 50 percent or more of their agencies
(primarily rural counties).  The 205 counties are widely scattered
across the country (see fig.  2).  Because of the concentration of
closures, the majority of counties (77 percent) that had agencies
experienced no reduction in the number of HHAs.  Furthermore, only a
4-percent increase occurred in the number of counties with only one
or two agencies.  (See app.  IV.)

   Figure 2:  Counties With
   Significant Reductions in HHAs
   Between October 1, 1997, and
   January 1, 1999

   (See figure in printed
   edition.)

   (See figure in printed
   edition.)

Note:  Counties that lost five or more HHAs tended to be urban, while
those losing 50 percent or more were predominately rural.  Three
counties that met both criteria were classified in the latter
category. 

Source:  GAO analysis of HCFA's OSCAR data for October 1, 1997,
through January 1, 1999. 

Closures in urban areas accounted for 74 percent of the reduction in
HHAs.  Nevertheless, because of the concentration of HHAs in urban
areas, beneficiaries still generally have a choice of agencies. 
California's experience is illustrative.  Between October 1, 1997,
and January 1, 1999, California lost 145 HHAs, primarily in seven
urban counties--Los Angeles, San Diego, San Francisco, and four
adjacent counties (see app.  V).  However, even after these closures,
the seven counties still had 450 Medicare-certified HHAs.  The
California home health association told us that, in reality, much of
what appeared to be closures were actually mergers or consolidations
of HHAs, and capacity may not have actually decreased.  California's
experience is not unique.  For example, about 68 percent of the net
reduction in HHAs in Texas occurred in 14 primarily urban counties. 

   MEDICARE BENEFICIARIES CONTINUE
   TO RECEIVE HOME HEALTH CARE
   SERVICES
------------------------------------------------------------ Letter :4

Although attention has been focused on the number of HHAs that have
closed, a more important issue is whether beneficiaries have access
to home health care services.  Our analysis of the limited
utilization data available for 1998 (the first 3 months) indicates
that a slightly larger share of beneficiaries received home health
services and users received about the same number of services as in
1994, the base year for the IPS.  Utilization, both in terms of
beneficiaries served and visits per user were below the peak levels
reached in 1996.  In addition, a large variation continued in
utilization rates across areas, but the range narrowed.  Indeed,
utilization in low-use counties actually increased above 1994 levels. 
Together these patterns suggest that the IPS design is producing the
desired result--controlling utilization and reducing its extreme
variation.  Unfortunately, it is not possible to tell from the
aggregate picture whether only visits of marginal value or those that
were inappropriate were forgone. 

Our interviews with officials at seven state survey agencies
responsible for certifying HHAs that serve Medicare beneficiaries and
operating beneficiary hotlines suggest that closures are a market
correction.  Moreover, survey agency hotlines in these same states
have received few beneficiary complaints.  In 34 primarily rural
counties of these seven states--counties that have experienced
significant HHA closures--most hospital discharge planners reported
having little difficulty placing beneficiaries compared with previous
years.  Similarly, most HHA managers told us that they were unaware
of access problems in their counties.  In response to IPS and other
initiatives, however, HHAs told us that they are changing how they
operate.  Some of these changes may create future access barriers for
beneficiaries who need intensive or long-term skilled care. 

      UTILIZATION HAS RETURNED TO
      1994 LEVELS
---------------------------------------------------------- Letter :4.1

There has been a substantial decline in utilization nationwide since
1996, and visits per beneficiary have now returned to about the same
level as 1994, the base year for the IPS revenue caps.  Home health
use had been growing steadily since 1988, so 1994 represents a
relatively high level of use, though not the peak.\24 The decline in
visits per user between 1996 and 1998 is consistent with IPS
incentives and does not necessarily imply a beneficiary access
problem.  Furthermore, variation in utilization between high- and
low-use counties has narrowed. 

The percentage of fee-for-service beneficiaries receiving home health
care nationwide increased 22 percent between 1994 and 1996 and then
declined 13 percent between 1996 and 1998.  Despite this recent
decline, the proportion of beneficiaries receiving services was 7
percent higher in 1998 than in 1994 (see table 5).  Visits per user
followed a similar pattern of growth and decline, but by 1998 they
were essentially at the 1994 levels30.8 and 30.5 visits,
respectively.  We cannot determine whether the reductions involved
visits that were of marginal value, were for services that did not
meet home health coverage criteria, or were indeed valuable services. 
These patterns are consistent, however, with the IPS incentives to
constrain the costs of care for each beneficiary, but not necessarily
the number of users.\25

The difference in visits per user between high- and low- utilization
counties narrowed over this period, but it is still substantial. 
From 1994 to 1998, high-utilization counties showed a small decrease
in both the percentage of fee-for-service beneficiaries served (a
decline of 1.5 percent) and the number of visits per beneficiary (a
2.2-percent decline).  In contrast, HHAs in low-utilization counties
served more beneficiaries (11 percent more) and provided more visits
per beneficiary (15.9 percent more) over this same time period.  In
1998, visits per beneficiary still varied widely, from an average of
19 visits in low-utilization counties to over 44 in high-utilization
counties.  The difference, however, has narrowed.  The precise
reasons for this historical variation are not known, but there is no
reason to assume that it was warranted.  The drop in visits per user
in high-utilization areas suggests that practice patterns are
changing in response to the IPS incentives. 

                                         Table 5
                         
                          Changes in Utilization of Home Health
                         Services Among low-, Middle-, and High-
                         Utilization Counties, First Quarters of
                                   1994, 1996, and 1998

                                   Percentage of fee-
                                      for-service
                                  beneficiaries served       Visits per person served
                                 ----------------------  --------------------------------
                                                                                 Percenta
                         Number   First   First   First   First   First   First        ge
                             of  quarte  quarte  quarte  quarte  quarte  quarte   change,
                       counties  r 1994  r 1996  r 1998  r 1994  r 1996  r 1998   1994-98
---------------------  --------  ------  ------  ------  ------  ------  ------  --------
Nationwide\a              3,141     4.6     5.6     4.9    30.8    35.1    30.5      -1.0
Low-utilization             624     3.5     4.3     3.9    16.4    20.0    19.0      15.9
 counties\b
Middle counties           1,870     4.3     5.2     4.7    27.5    31.1    27.5         0
High-utilization            624     6.8     8.2     6.7    45.4    52.0    44.4      -2.2
 counties\b
-----------------------------------------------------------------------------------------
\a Includes 23 counties where beneficiaries received no services in
1994. 

\b Low-utilization counties are those with the lowest 20-percent
utilization for the first 3 months of 1994 while high-utilization
counties have the highest 20-percent utilization for the same time
period.  The middle counties are the remaining 60 percent. 

Source:  GAO analysis of HCFA's Standard Analytical File, claims data
for home health services, 1994, 1996, and 1998. 

--------------------
\24 Medicare Payment Advisory Commission, Report to Congress: 
Context for a Changing Medicare Program (Washington, D.C.:  Medicare
Payment Advisory Commission, June 1998), p.  108. 

\25 While the IPS does not create incentives to control the number of
home health users, the various fraud and abuse initiatives may have
the effect of reducing the number. 

      STATE REPRESENTATIVES
      GENERALLY VIEWED HHA
      CAPACITY AS ADEQUATE
---------------------------------------------------------- Letter :4.2

We interviewed officials at state survey agencies in seven states
about potential closure-related access problems and beneficiary
complaints.  Each of these states had counties that experienced
significant reductionsthat is, five or more agencies or 50 percent
or more of their agencies.  In general, few access problems were
identified.  The small number of complaints received by state
hotlines appears to suggest that most beneficiaries were not having
difficulty accessing Medicare home health care, despite significant
HHA closures in certain counties. 

Most of the state survey agency representatives we interviewed told
us that adequate capacity exists despite HHA closures.  Only Texas
representatives were unable to comment.  A representative of Oregon's
state survey agency said that areas with closures still have
sufficient options for beneficiaries to obtain home health services,
as did a representative from Indiana.  California's representative
was not aware of any beneficiary access problems resulting from
closures.  A few state survey agencies went so far as to characterize
closures as a market correction in response to an oversupply of HHAs. 
For example, Colorado's survey agency told us that, with the
exception of the home health association, most stakeholders believed
there had been too many HHAs chasing too few eligible beneficiaries. 
Missouri's state survey agency pointed out that there were no access
problems before the sharp increase in HHAs in the last 3 years and
that, despite the closures, Missouri now has the same number of HHAs
that it had 3 years ago.  A survey of state association members
appears to support the Missouri state survey agency's perspective: 
eighty percent of members responded that capacity was still
sufficient in areas that had experienced closures. 

State survey agencies are required to operate hotlines that field
beneficiary complaints.  Hotlines in the seven states have received
few complaints about access to Medicare home health care.  Officials
we interviewed in five of the seven states had a total of four
complaints.  In three statesIndiana, Missouri, and Oregonno
complaints were registered by consumers about Medicare home health
care.  California's state survey agency had one confirmed complaint
about premature discharge from a Medicare-certified HHA.  Colorado's
state survey agency generally attributed three complaints about home
health to BBA changes.

State officials in Florida were not always able to distinguish access
complaints received by the hotline from other types of complaints
about home health care.  Florida's state survey agency reported 14
confirmed complaints about inappropriate discharges from HHAs. 
However, these were not necessarily problems with Medicare coverage,
because the agencies in question also served other clients.  In
Texas, because of the broad categories used to classify complaints,
officials were unable to distinguish complaints related to home
health access. 

We inquired about whether reductions in Medicare utilization are
actually a transfer to other payers, particularly Medicaid. 
Beneficiaries who are eligible for both Medicare and Medicaid
services, for example, may receive more Medicaid-funded services as
Medicare home health expenditures are constrained.  Medicaid
officials from two study states told us that they believed their
programs were experiencing such shifts; other states expected, but
had not yet seen, an impact.  Some state officials we talked with had
not collected data to substantiate these trends. 

      BENEFICIARIES IN MORE
      VULNERABLE RURAL COUNTIES
      ALSO NOT EXPERIENCING HHA
      ACCESS PROBLEMS
---------------------------------------------------------- Letter :4.3

Closures in rural areas can be a major concern because of the small
number of HHAs located there and the potential for closures to
drastically reduce capacity.  Although rural counties lost only about
9 percent of their agencies, 32 rural counties lost their only HHA
and an additional 97 lost 50 percent or more of their agencies.\26
Our interviews in 34 primarily rural counties, however, generated
little evidence that access had been impaired by closures.  In those
counties that lost their only HHA, hospital discharge planner
supervisors as well as managers of nearby HHAs told us that access is
not a problem because services are available from HHAs in neighboring
counties or from branch offices located in the county.  The results
from our analysis of utilization data for counties that had no HHA
are consistent with the information collected from the stakeholders
we interviewed in seven counties with no HHA. 

Our interviews underscore the limitations of using the presence or
absence of an HHA as an access indicator.  Six of the 34 primarily
rural counties in our sample had recently lost their only HHA,
according to HCFA tracking data.  A seventh county had never had an
HHA.  Hospital representatives and HHA managers in all seven counties
told us that beneficiaries had access to services from either a
branch\27 or an agency in an adjacent county.  HCFA data on closures
track parent agencies and not the branch agencies that served many of
these counties.  The following information describes the counties
identified in HCFA tracking data as having no HHAs and the reported
availability of HHAs according to information we received during
interviews. 

  -- Wright County, Missouri:  Three HHAs had offices located in the
     county, and at least three more from outside the county were
     serving county beneficiaries. 

  -- Montezuma County, Colorado:  Two HHAs had offices located in the
     county, and one to two were serving beneficiaries from outside
     the county. 

  -- Modoc County, California; Hamilton County, Florida; and Clay
     County, Indiana:  Each county had one HHA office located in the
     county. 

  -- Columbia County, Oregon:  No HHA was located in the county, but
     five HHAs were serving beneficiaries from outside the county. 

  -- Trinity County, Texas:  No HHA located in the county, but four
     HHAs in adjacent counties serve beneficiaries. 

We also examined utilization data for 715 primarily rural counties
identified as having no HHA between October 1997 and January 1999.\28
About 1.7 million fee-for-service Medicare beneficiaries (or 5.4
percent of all fee-for-service beneficiaries) lived in those
counties.  Beneficiaries in all but 16 of these counties used home
health services in 1998.  Although counties with no HHA experienced a
larger decline in visits than the national average, a higher
proportion of beneficiaries continued to be served and to be provided
slightly more services than the national average.  (See tables 5 and
6.)

                                         Table 6
                         
                          Changes in Utilization of Home Health
                           Services in Counties Without an HHA,
                          First Quarters of 1994, 1996, and 1998

                                   Percentage of fee-
                                      for-service          Visits per person
                                  beneficiaries served           served
                                 ----------------------  ----------------------
                                                                                 Percenta
                                                                                       ge
                         Number   First   First   First   First   First   First    change
                             of  quarte  quarte  quarte  quarte  quarte  quarte    (1996-
                       counties  r 1994  r 1996  r 1998  r 1994  r 1996  r 1998       98)
---------------------  --------  ------  ------  ------  ------  ------  ------  --------
Nationwide                3,141     4.6     5.6     4.9    30.8    35.1    30.5      -1.0
Counties that had no        715     5.5     6.5     5.4    33.3    36.1    31.1      -6.6
 HHAs during the Oct.
 1, 1997-Jan. 1,
 1999, period
-----------------------------------------------------------------------------------------
Source:  GAO analysis of HCFA's Standard Analytical File, claims data
for home health services, 1994, 1996, and 1998. 

According to hospital discharge supervisors and HHA managers in the
majority of the other 27 counties in our sample, most beneficiaries
eligible for Medicare home health care are not experiencing
difficulty accessing services.  The majority of hospital
representatives told us that they were not having difficulty finding
home health care for Medicare beneficiaries compared with their
experience before the IPS.  Hospitals in two of the three California
counties and one of the seven Missouri counties reported recent
problems placing Medicare beneficiaries in home health care.  Two of
these three hospitals operated their own HHA.  In addition, in all
but 3 of the 27 counties, HHAs reported no access problems.  Of the
six HHAs in three counties reporting access difficulties, four were
in an urban county and cited problems for patients with diabetes or
wounds.  The remaining two HHAs were in rural counties and cited
rural issues, such as distance or the lack of informal caregivers
nearby. 

--------------------
\26 Rural counties account for 2,290 of the 3,141 counties in the
United States. 

\27 In a few instances, we were told that the agency was a parent
agency not reflected in the HCFA tracking data.  We did not attempt
to verify these assertions. 

\28 On October 1, 1997, 732 counties lacked HHAs.  By January 1,
1999, new HHAs had opened in 17 of those counties.  In addition, 42
other counties lost all of their agencies; consequently, by January
1, 1999, a total of 757 counties had no HHAs. 

      CHANGES IN THE WAY HHAS
      OPERATE COULD CREATE FUTURE
      ACCESS PROBLEMS FOR
      HIGH-COST BENEFICIARIES
---------------------------------------------------------- Letter :4.4

According to HHAs, IPS and other federal initiatives or requirements
have changed the way HHAs operate.  (See app.  VII.) Managers of HHAs
we interviewed told us that they are trying to lower their operating
costs by cutting staff, reducing supply and overhead costs, and
providing more education to staff about the implications of the
revenue caps.  However, other operational changes are more focused on
beneficiary receipt of services and may reduce visits or admissions,
particularly for beneficiaries with an intense or long-term need for
skilled nursing services.  Four national advocacy groups told us that
they have received complaints about access to home health services
from such beneficiaries, but these complaints are hard to evaluate. 

Although most HHAs told us that they have not officially changed
their admission or discharge policies, they have made operational
changes.  In admitting beneficiaries, they (1) screen them more
carefully to determine eligibility and the amount of care needed (2)
assess whether the HHA has the capacity to provide that care, and (3)
monitor patients' needs during treatment to ensure that they are
discharged when appropriate.  Frequent comments from HHAs that they
compare patient need and agency capacity may reflect that HHAs are
trying to manage their average costs per beneficiary to stay within
the revenue caps.  This balancing act could entail ensuring that they
have enough short-term patients to adequately reduce average costs to
compensate for any higher-cost patients served.  Indeed, 10 HHAs
volunteered that they balance their low- and high-cost patients to
stay within their revenue limits.  HHAs also told us that they
educate beneficiaries or families in self-care sooner and make a
greater effort to use community resources, including Medicaid
services. 

While many HHAs indicated that they continue to accept all Medicare-
eligible beneficiaries, they acknowledged that they are more careful
about accepting expensive, long-term patients.  This comment may
indicate a potential access problem for these types of beneficiaries. 
HHAs most frequently mentioned wound patients and diabetics unable to
administer insulin themselves as types of beneficiaries they are
careful about accepting or reluctant to accept.  Most HHAs told us
they continue to treat patients who need more services than
originally estimated and continue to treat long-term patients for
whom they cannot find another alternative, such as care provided
informally by family or neighbors. 

Four of the five national advocacy groups we interviewed have
received access complaints focused on individuals with chronic
illnesses or conditions such as Alzheimer's disease, multiple
sclerosis, and quadriplegia.  Similarly, the Area Agencies on Aging
we interviewed reported that beneficiaries in need of long-term care
were having difficulty obtaining Medicare-covered home health care. 
These access complaints, however, may reflect uncertainty about who
is eligible for the Medicare home health care benefit.  It is not
clear that the types of individuals cited by advocacy groups actually
required skilled care and therefore were eligible for Medicare home
health.  Some advocacy groups we interviewed believed that home
health care should be a long-term-care benefit available to any
beneficiary with chronic conditions, regardless of the specific
eligibility criteria in the statute.  In the past, some beneficiaries
who received home health services were not really eligible for
Medicare coverage, and others are no longer eligible because of
recent changes in the benefit.  In five of the seven states we
studied, one or more HHAs reported that referrals from closing
agencies included beneficiaries who were ineligible for Medicare home
health care.  In one state, an HHA manager told us that only 4 of 78
referrals were eligible.  Thus, reported access problems may actually
reflect appropriate targeting of services, given Medicare's coverage
criteria. 

   CONCLUSIONS
------------------------------------------------------------ Letter :5

Although approximately 14 percent of HHAs have closed and the number
of visits provided to Medicare beneficiaries has declined since 1997,
we found little evidence that appropriate access to Medicare's home
health benefit has been impaired.  The substantial increases in the
number of HHA beneficiaries using this benefit and visits per user
over the past several years have outstripped the recent reductions. 
As a result, the number of remaining agencies as of January 1, 1999,
and utilization as of March 1998 mirror patterns in 1994, the year
designated as the basis of the IPS HHA revenue caps.  Our interviews
with key stakeholders in areas most affected by the HHA closures
confirmed the overall impression that the recent spate of HHA
closures has not impaired beneficiary access.  Moreover, information
we gathered indicates that beneficiaries who are not eligible for
Medicare home health care because they do not need skilled care may
have been the likeliest candidates for service reductions. 

The changes in the number of HHAs and home health utilization are
consistent with the incentives of the IPS.  That the majority of
closures occurred in areas with many HHAs and were smaller agencies
indicates that beneficiaries still have access to services.  The
declines in visits per beneficiary signal HHAs' response to the IPS
incentives to reduce the average costs of caring for their patients. 
Following years of substantial increases in home health visits, the
IPS has curbed the growth in home health spending.  Whether services
will be reduced to inappropriately low levels or access will be
limited for beneficiaries who are likely to require more visits than
the average is not known, but we found little evidence that this is
occurring now.  Furthermore, the pending implementation of the PPS,
which will adjust payments to account for costlier patients, could
ameliorate any future access problems.  However, it is critical that
the payments under the PPS be adequate and appropriately account for
variation in patient resource needs.  Thus, we will continue to
monitor beneficiary access to home health care through the IPS and,
as payments are changed, under the PPS. 

   AGENCY AND INDUSTRY COMMENTS
------------------------------------------------------------ Letter :6

In its comments on a draft of this report, HCFA agreed with our
findings that HHA closures have continued with little evidence of
impaired beneficiary access.  HCFA also provided technical comments,
which we incorporated in the final report as appropriate.  HCFA's
written comments are included as appendix VIII. 

We also obtained oral comments on a draft of this report from home
health care industry representatives, including the American
Association of Homes and Services for the Aging, American Federation
of Home Care Providers, American Hospital Association, Home Health
Services and Staffing Association, National Association for Home
Care, and Visiting Nurses Association of America.  In general,
industry representatives agreed with our finding that beneficiaries
who are likely to be costlier than average to treat are most at risk
under the IPS.  They stressed the need to quickly implement a PPS
that adjusts payments to account for costlier patients to ameliorate
any future access problems.  Industry representatives did not dispute
our findings on changes in home health utilization but pointed out
that the only available utilization data since implementation of the
IPS is already a year old and may not reflect more recent experience. 
Furthermore, they stated that it is not possible to determine if 1994
utilization levels were appropriate or inappropriate.  Although the
most recent data only account for the first 3 months of 1998, we did
conduct interviews in February 1999 to complement the analysis and
found little evidence of impaired beneficiary access.  As soon as
more complete data for 1998 are available, we plan to update our
utilization analysis.  We agree that available data do not permit the
establishment of a baseline of appropriate use of home health care,
especially in light of the fraud and abuse identified in the program. 
Finally, industry representatives suggested that the few complaints
by beneficiaries may reflect a lack of awareness of Medicare home
health coverage and their right to appeal decisions.  We agree that
there is confusion about eligibility for the home health benefit. 
However, many HHA managers told us that they are helping to better
educate beneficiaries and their families about qualifying for
services. 

---------------------------------------------------------- Letter :6.1

We will send copies of this report to the Honorable Donna E. 
Shalala, Secretary of Health and Human Services; the Honorable
Nancy-Ann Min DeParle, Administrator of HCFA; appropriate
congressional committees; and other interested parties.  We will also
make copies available to others upon request. 

If you or your staffs have any questions, please call me or Laura
Dummit, Associate Director, at (202) 512-7114.  Other major
contributors to this report include Carol Carter, Roger Hultgren,
Sally Kaplan, Walter Ochinko, Carmen Rivera-Lowitt, and Shari Sitron. 

William J.  Scanlon
Director, Health Financing and
 Public Health Issues

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

We analyzed data from the Health Care Financing Administration's
(HCFA) On-Line Survey, Certification, and Reporting system (OSCAR) on
the growth in HHAs since 1990, the characteristics of agencies that
opened and closed during this period, and the number of closed and
active agencies through January 1, 1999.  To assess the effect of
closures on beneficiary access, we analyzed the limited data
available on beneficiary utilization since the implementation of the
interim payment system (IPS) and conducted in-depth interviews with
stakeholders in areas that had a substantial number of HHA closures
since October 1997. 

We compared utilization in the first 3 months of 1998 with comparable
periods in 1994 and 1996 using HCFA's Standard Analytical File
(version G).  We selected 1994 as a point of comparison because the
IPS revenue caps were based on the cost and utilization experience
from that year.  We looked at how many beneficiaries received
services (the percentage of fee-for-service beneficiaries served) and
how many services they received (the number of visits per user.) It
is important to note that many Medicare home health care users
receive services for considerable periods so visits per user based on
3 months of data significantly understate the actual use for the
average user.  Moreover, agencies may not have responded to the
revenue cap until they had more information on their own long-term
users.  Finally, since IPS was phased in, not all agencies were under
the new payment system during the first 3 months of 1998.  Sixty-one
percent of agencies were under the IPS by January 1, 1998.  HCFA is
concerned that changes in billing requirements that took effect later
in the year may have affected data for the first quarter of 1998 as
well.\29 In addition, these data do not reflect the full effect of
closures reported here because the majority occurred after March
1998.  Nonetheless, these are the most complete current utilization
data available and we believe they provide an accurate picture of use
at that time. 

We used OSCAR data to identify counties that had lost 40 percent or
more of their Medicare-certified HHAs between October 1, 1997, and
January 1, 1999.  We further focused on county-level analyses in
seven states that had counties that met these closure criteria and
that varied along several dimensions, including geographic area, home
health utilization experience, and approaches to controlling the
number of agencies providing services (see table I.1).  Our sample
consisted primarily of rural counties because the number of HHAs in
urban counties remained high even in those counties with many
closures.  To examine the potential impact of HHA closures on
beneficiaries' utilization of services, we used data from HCFA's
Customer Information System (HCIS) to select an additional six
counties.  These 6 counties were among the 100 counties nationwide
with the greatest percentage decline in visits per user from 1996 to
1998, and with Medicare populations of more than 50 and less than
10,000.  Table I.2 lists the 34 counties and the number of HHAs in
these counties. 

We conducted structured interviews with stakeholders in a sample of
seven states (California, Colorado, Florida, Indiana, Missouri,
Oregon, and Texas).  These interviews were conducted in a sample of
34 counties--28 were primarily rural counties that had experienced a
substantial reduction in the number of HHAs (one of these counties
had never had an HHA).  We augmented this sample with six counties in
which home health visits had declined notably between the first 3
months of 1996 and a comparable period in 1998. 

In each sample state, we interviewed officials at (1) state Medicaid
agencies; (2) state home health associations; (3) state agencies
responsible for the survey and certification of HHAs serving Medicare
beneficiaries and for maintaining hotlines that collect data on
beneficiary complaints; and (4) beneficiary advocacy groups such as
local Area Agencies on Aging and chapters of the American Association
of Retired Persons.  In each county, we interviewed hospital
discharge planner supervisors and HHA managers.  Overall, we
interviewed representatives of 54 HHAs, 40 hospitals, and 42 advocacy
groups.\30 At the national level, we also spoke with officials at six
home health associations and five advocacy groups. 

Finally, because representatives of the home health industry question
the accuracy of the OSCAR data, we attempted to verify the number of
closures in our state sample with personnel from state survey and
certification offices and health care providers.  However, we were
told in most cases that the state survey and certification data were
no more up to date than the OSCAR data we were using. 

                                        Table I.1
                         
                          Characteristics of States in Interview
                                          Sample

                                              Characteristics
                   ----------------------------------------------------------------------
                                           How new
                                           agency
                                           revenue     Ratio of
                                           limits      Medicare
                                           compare     beneficiar
                                           with those  ies per                 Does state
                               Average     for         HHA to                  restrict
                               visits per  establishe  national    ORT\a       number of
State              Region      user, 1997  d agencies  average     state?      HHAs?
-----------------  ----------  ----------  ----------  ----------  ----------  ----------
California         West        Low         Above       Average     Yes         No

Colorado           West        Medium      About the   Low         Yes         No
                                           same

Florida            South       Medium      Below       High        Yes         Yes

Indiana            Midwest     Medium      About the   Average     No          No
                                           same

Missouri           Midwest     Low         Above       Average     Yes         No

Oregon             West        Low         Above       High        No          No

Texas              South       High        Below       Low         Yes         No
-----------------------------------------------------------------------------------------
\a Operation Restore Trust (ORT) is HCFA's antifraud campaign. 

Sources:  GAO analyses of data from various sources, including HCFA's
OSCAR; Medicare beneficiary enrollment data; Department of Health and
Human Services, ORT; and the National Association for Home Care. 

                         Table 1.2
          
          Counties Selected for In-Depth Analyses

                                         Number of HHAs on
State               Counties selected         Jan. 1, 1999
------------------  ------------------  ------------------
California          Amador                               1
                    Modoc                                0
                    San Mateo                            6
Colorado            Chaffee                              1
                    Douglas                              1
                    Huerfano                             2
                    Las Animas                           1
                    Montezuma                            0
Florida             Gulf                                 2
                    Hamilton                             0
                    Okeechobee                           1
                    Suwannee                             1
                    Walton                               1
Indiana             Clay                                 0
                    Daviess                              1
                    Fayette                              1
                    Greene                               1
                    Noble                                1
Missouri            Howard                               1
                    Iron                                 1
                    Jefferson                            2
                    Laclede                              1
                    St. Francois                         3
                    Washington                           1
                    Wright                               0
Oregon              Columbia                             0
                    Curry                                1
                    Lane                                 5
                    Washington                           3
Texas               Jasper                               5
                    Polk                                 1
                    Potter                               5
                    Trinity                              0
                    Winkler                              1
----------------------------------------------------------
Source:  GAO's analysis of HCFA's January 1999 OSCAR data. 

--------------------
\29 Although changes in billing requirements went into effect after
the first quarter of 1998, HCFA expressed concern that these data
could be affected. 

\30 We interviewed representatives from 54 HHAs, because when we made
contacts in the counties selected, we found operating HHAs or
branches of HHAs in some counties where OSCAR data told us there were
no HHAs. 

USE OF HOME HEALTH SERVICES BY
STATE, CALENDAR YEARS 1994 AND
1997
========================================================== Appendix II

                 Medicare home health users
                 per 1,000 fee-for-service
                         enrollees              Visits per person served
                ----------------------------  ----------------------------
                                  Percentage                    Percentage
State              1994     1997      change     1994     1997      change
--------------  -------  -------  ----------  -------  -------  ----------
Alabama           119.4    128.1        7.3%    113.4    120.7        6.4%
Alaska             61.8     71.0        14.9     43.4     45.7         5.3
Arizona            66.7     79.3        18.9     56.2     58.8         4.6
Arkansas           98.9    106.5         7.7     76.0     77.2         1.6
California        100.1    109.5         9.4     46.1     48.7         5.6
Colorado           93.7    104.1        11.1     59.8     67.4        12.7
Connecticut       107.4    128.4        19.6     72.9     81.2        11.4
Delaware           90.8     93.4         2.9     43.4     49.8        14.7
District of        77.7     94.8        22.0     42.1     52.9        25.7
 Columbia
Florida           118.0    124.6         5.6     75.9     74.7        -1.6
Georgia           109.2    109.5         0.3    102.1     98.9        -3.1
Hawaii             39.0     47.8        22.6     41.0     38.8        -5.4
Idaho              84.1     99.8        18.7     54.2     59.9        10.5
Illinois           91.7    107.1        16.8     51.9     50.3        -3.1
Indiana            80.4     95.6        18.9     72.5     71.7        -1.1
Iowa               70.3     83.3        18.5     46.4     49.0         5.6
Kansas             71.0     88.4        24.5     55.8     63.5        13.8
Kentucky           92.1    116.4        26.4     64.8     73.7        13.7
Louisiana         138.6    157.3        13.5    125.8    161.0        28.0
Maine              96.2    119.6        24.3     64.1     68.2         6.4
Maryland           78.3     92.0        17.5     37.1     37.4         0.8
Massachusetts     127.9    152.2        19.0     87.0     96.5        10.9
Michigan           87.8    104.0        18.5     44.7     50.1        12.1
Minnesota          55.7     72.2        29.6     37.8     47.1        24.6
Mississippi       140.8    153.3         8.9    113.5    119.7         5.5
Missouri          107.2    120.2        12.1     49.5     53.5         8.1
Montana            70.9     87.0        22.7     51.6     52.2         1.2
Nebraska           66.3     84.9        28.1     40.9     45.2        10.5
Nevada             72.8     87.2        19.8     68.1     63.2        -7.2
New Hampshire     105.8    122.1        15.4     56.8     63.6        12.0
New Jersey         77.4     96.6        24.8     39.7     43.2         8.8
New Mexico         79.1     99.0        25.2     56.0     74.4        32.9
New York           75.8     93.9        23.9     44.6     52.6        17.9
North Carolina     86.3    104.9        21.6     57.3     54.8        -4.4
North Dakota       69.6     81.6        17.2     41.5     43.4         4.6
Ohio               79.5     96.4        21.3     50.7     50.4        -0.6
Oklahoma          108.9    131.9        21.1    105.7    147.0        39.1
Oregon             79.7     94.4        18.4     39.7     33.7       -15.1
Pennsylvania      104.3    125.1        19.9     43.0     47.0         9.3
Rhode Island      109.9    143.6        30.7     60.7     71.6        18.0
South Carolina     84.6     99.4        17.5     66.8     63.2        -5.4
South Dakota       61.2     78.3        27.9     39.2     48.4        23.5
Tennessee         134.4    132.4        -1.5    116.4    108.7        -6.6
Texas             106.9    133.7        25.1     97.4    141.0        44.8
Utah              102.9    103.4         0.5     98.4    115.1        17.0
Vermont           134.0    144.4         7.8     61.4     68.1        10.9
Virginia           79.6     96.9        21.7     49.0     57.1        16.5
Washington         72.7     80.9        11.3     38.4     32.4       -15.6
West Virginia      86.9    106.0        22.0     51.0     59.9        17.5
Wisconsin          59.7     68.8        15.2     41.6     43.1         3.6
Wyoming            89.0     92.5         3.9     77.0     71.7        -6.9
Nationwide         94.2    109.2       15.9%     66.0     72.9       10.5%
--------------------------------------------------------------------------
Source:  HCFA, Office of Information Services.  Data are from the
Medicare Decision Support System and data developed by the Office of
Strategic Planning for calendar years 1994 and 1997. 

MEDICARE-CERTIFIED HHAS AND
MEDICARE FEE-FOR-SERVICE ENROLLEES
PER HHA, BY STATE, FOR SELECTED
PERIODS
========================================================= Appendix III

                                              Number of
                                            Medicare fee-
              Number of     Changes, Oct.    for-service
              Medicare-      1, 1997, to    enrollees per
            certified HHAs   Jan. 1, 1999        HHA
            --------------  --------------  --------------
              Oct.    Jan.             New    Oct.    Jan.
                1,      1,  Closur  openin      1,      1,
State         1997    1999      es      gs    1997    1999
----------  ------  ------  ------  ------  ------  ------
Alabama        183     181       2       0   3,541   3,548
Alaska          27      18       9       0   1,181   1,874
Arizona        131     112      22       3   3,163   3,640
Arkansas       205     195      11       1   2,112   2,207
California     848     703     165      20   2,805   3,394
Colorado       200     161      42       3   1,615   1,934
Connecticu     116     101      17       2   4,016   4,159
 t
Delaware        21      18       3       0   4,736   6,004
District        21      22       1       2   3,409   3,247
 of
 Columbia
Florida        398     365      47      14   5,271   5,654
Georgia         97     103       0       6   9,009   8,461
Hawaii          28      21       7       0   3,953   5,247
Idaho           77      62      16       1   1,982   2,436
Illinois       393     362      35       4   3,873   4,149
Indiana        292     248      49       5   2,852   3,367
Iowa           211     195      19       3   2,234   2,412
Kansas         221     187      34       0   1,702   1,992
Kentucky       111     116       2       7   5,375   5,178
Louisiana      519     407     112       0   1,040   1,255
Maine           52      46       9       3   4,125   4,708
Maryland        81      78       3       0   6,894   7,235
Massachuse     199     183      18       2   3,950   4,097
 tts
Michigan       230     223      11       4   5,993   6,104
Minnesota      266     262       9       5   2,053   2,184
Mississipp      70      69       1       0   5,992   6,115
 i
Missouri       273     221      56       4   2,866   3,443
Montana         62      60       4       2   2,194   2,266
Nebraska        83      76       8       1   2,962   3,213
Nevada          54      41      14       1   2,827   3,817
New             46      43       3       0   3,420   3,576
 Hampshire
New Jersey      57      55       3       1  18,780  18,795
New Mexico     118      95      23       0   1,586   2,000
New York       227     223       5       1  10,276  10,218
North          162     174       6      18   6,708   6,287
 Carolina
North           35      35       1       1   2,989   2,989
 Dakota
Ohio           465     426      43       4   3,302   3,409
Oklahoma       388     299      90       1   1,226   1,570
Oregon          91      74      18       1   3,418   4,237
Pennsylvan     381     370      22      11   4,438   4,292
 ia
Rhode           30      29       5       4   4,830   4,089
 Island
South           82      77       5       0   6,656   7,335
 Carolina
South           57      53       5       1   2,121   2,292
 Dakota
Tennessee      232     206      26       0   3,486   3,889
Texas        1,948   1,580     392      24   1,001   1,209
Utah            89      72      19       2   1,945   2,753
Vermont         13      13       0       0   6,682   6,737
Virginia       233     226      15       8   3,585   3,722
Washington      68      66       3       1   8,154   8,406
West            92      91       4       3   3,442   3,514
 Virginia
Wisconsin      176     164      13       1   4,344   4,637
Wyoming         65      56       9       0     966   1,144
==========================================================
Nationwide  10,524   9,263   1,436     175   3,133   3,509
----------------------------------------------------------
Note:  The count of HHAs includes only those agencies with Medicare
provider numbers.  Therefore, it includes parents or home offices and
subunits but does not include branch offices.  Numbers of Medicare
fee-for-service enrollees per HHA are based on Medicare enrollment
data as of September 1997 and December 1998 and the number of HHAs
within the states as of October 1, 1997, and January 1, 1999. 

Sources:  GAO analysis of HCFA's OSCAR data and Medicare enrollment
data for 1997 and 1999. 

COUNTIES WITH MEDICARE-CERTIFIED
HHAS, OCTOBER 1, 1997, AND JANUARY
1, 1999
========================================================== Appendix IV

              Number of counties
                  with HHAs
            ----------------------
                                                Percentage
                                                 change in
                                    Percentage   number of
                                            of   counties,
Number of                            counties,   Oct. 1997
HHAs per       Oct. 1,     Jan. 1,     Jan. 1,     to Jan.
county            1997        1999        1999        1999
----------  ----------  ----------  ----------  ----------
0                  732         757         24%          3%
1                  956       1,005          32           5
2                  548         558          18           2
3                  304         288           9          -5
4                  153         147           5          -4
5                   98          91           3          -7
6                   60          52           2         -13
7                   52          47           1         -10
8                   31          26           1         -16
9                   32          20           1         -38
10                  16          11           0         -31
11-15               60          52           2         -13
16-20               26          23           1         -12
21-50               56          54           2          -4
51-100              11           6           0         -45
101-150              2           1           0         -50
151-200              1           0           0        -100
Over 200             3           3           0           0
Total no.        3,141       3,141      100.0%
 of
 counties
Number of       10,524       9,263
 HHAs
----------------------------------------------------------
Source:  GAO analysis of HCFA's OSCAR data for October 1, 1997,
through January 1, 1999. 

Appendix V CALIFORNIA COUNTIES
WITH SIGNIFICANT DECLINE IN NUMBER
OF HHAS BETWEEN OCTOBER 1, 1997,
AND JANUARY 1, 1999
========================================================== Appendix IV

   (See figure in printed
   edition.)

Note:  Numbers indicate HHA closures. 

Source:  GAO analysis of HCFA's OSCAR data for October 1, 1997,
through January 1, 1999. 

COUNTIES WITH NO HHAS ON JANUARY
1, 1999
========================================================== Appendix VI

   (See figure in printed
   edition.)

Source:  GAO analysis of HCFA's OSCAR data for October 1, 1997,
through January 1, 1999. 

OTHER POLICIES HAVE AFFECTED HHA
COSTS AND REVENUES
========================================================= Appendix VII

During interviews with industry representatives in seven states, we
were consistently told that closures are not only due to the IPS but
also to policy changes that may have decreased utilization and thus
affected HHA revenues or increased their operating costs.  According
to stakeholders, the concurrent changes increased pressure on many
HHAs at the same time they were adjusting to the IPS, that is,
attempting to manage their costs to their new revenue limits.  We did
not attempt to verify these assertions. 

FACTORS CITED AS REDUCING HHA
REVENUES

During our interviews, we were told that two developments have
affected HHAs' caseloadsa drop in physician referrals and a change
in coverage of venipuncture (drawing blood).\31 The Health Insurance
Portability and Accountability Act of 1996 (HIPAA) imposed a civil
monetary penalty on physicians falsely certifying patients as
eligible for home health care.\32 In a fraud alert dated January 1999
and sent to medical societies, trade associations, and HCFA, the
Office of the Inspector General, Department of Health and Human
Services, reminded providers about the penalty.  Another factor
reportedly reducing home health care is the BBA change in Medicare
home health coverage:  venipuncture is no longer considered a
qualifying skilled nursing service, that is, the need only for
venipuncture does not qualify a beneficiary for home health services. 
HHAs in six of the seven states reported that patient volume had
dropped significantly as a result of the change, especially in rural
areas.  However, there are no readily available estimates of the
number of beneficiaries affected by the venipuncture change. 

In addition to the impact of fewer patient referrals on revenue, we
were told that the combination of increased claim reviews and changes
in billing have impeded the cash flow of some HHAs.  More frequent
regional home health intermediary (RHHI) requests for additional
documentation to support claims have created a growing backlog of
unpaid bills.  This increased scrutiny is a result of concern about
fraud and abuse and additional funding for claims review provided by
HIPAA. 

Another policy change may have reduced revenues for some HHAs.  The
BBA changed the billing rules so that the location of the
beneficiary, not the HHA billing office, determined the wage
adjustment applied to the Medicare payment to adjust for differences
in labor costs across locations.\33 This may have reduced the
incentive for HHAs to operate branches.  Previously, it may have been
financially advantageous for an agency to use a parent office,
located in an urban area with high wage costs, for Medicare billing
purposes, but to actually provide services out of a branch office in
a low-wage area. 

HCFA fiscal intermediary officials maintain that delays in
implementing the IPS revenue caps have increased overpayments to
HHAs.  As a result, more HHAs have had to reimburse Medicare for
payments that were too high.  Some contend that the repayment of
these overpayments has placed hardships on some agencies and
contributed to closures.\34 Although Medicare overpayments to HHAs
are not unusual, both HCFA and RHHI representatives expected
overpayments for fiscal year 1998 to be both more frequent and higher
than in previous years.  The category of overpayments most likely to
be IPS-related has grown compared with 1996, both in the number of
HHAs with overpayments and the amount owed.  The extent to which the
repayment of overpayments has contributed to closures, however, is
not known. 

FACTORS CITED AS INCREASING THE
COST OF DOING BUSINESS

According to our interviews, new Medicare requirements, such as
surety bonds and the Outcome and Assessment Information Set (OASIS),
will also place additional administrative and financial obligations
on HHAs.  National and state associations criticized any increased
financial demands given the IPS reduction in revenues for HHAs. 
Although the details have not yet been announced, agencies will be
obligated to purchase a surety bond in 1999.\35 We were told that the
newly required OASIS, including its electronic transmission to HCFA,
necessitates that agencies train employees, in some cases purchase
new computer hardware, and conduct 1- to 2-hour patient assessments. 
It is not clear, however, if these requirements will represent a
major new cost.  First, conducting patient assessments is not a new
requirement.  Second, HCFA officials told us that OASIS simplifies
and systematizes the collection of data on patient characteristics
and conditions and, in the long run, will lower agency assessment
costs per claim.  Indeed, some agencies have already made the
necessary investments.  Finally, we were told that the change in the
definition of branch offices has increased the operating costs for
those agencies that no longer qualify as a branch and must operate
independently as a parent agency. 

(See figure in printed edition.)Appendix VIII

--------------------
\31 Section 4615 of the Balanced Budget Act (BBA) (111 Stat.  251,
475) eliminated venipuncture as a qualifying service for home health
care when it is the only skilled service provided.  According to
HCFA, Operation Restore Trust (ORT) had found that physicians were
using this procedure as the only skilled service to enable
beneficiaries to obtain home health aide services, resulting in
numerous visits for individuals who would not otherwise qualify for
Medicare home health. 

\32 The law imposed a fine of the greater of $5,000 or 3 times the
amount of Medicare payments made as a result of the false
certification (P.L.  104-191, sec.  232, 110 Stat.  1936, 2015). 

\33 Sec.  4604, 111 Stat.  251, 472. 

\34 During each fiscal year, HHAs receive interim payments based on
their projected per-visit cost and, in some instances, the projected
volume of services for Medicare beneficiaries.  At the end of the
year, an HHA submits a report on its costs and the services provided,
and the amount the HHA should have been paid is calculated.  If the
HHA has been overpaid, it must return the excess to Medicare. 
Otherwise, the program makes a supplemental payment to the agency to
make up the difference between the earned reimbursement and the
interim payments.  HHAs with overpayments as a result of the IPS will
have a longer period in which to repay Medicare.  According to HCFA,
HHAs must obtain permission from the RHHI to have 1 year to repay
their overpayments resulting from the IPS without incurring interest. 
They can obtain an additional 2-year extension with permission from
the HCFA regional office, but interest is charged on the unpaid
balance at a legally required rate, currently 13.75 percent per year. 
HCFA executives at headquarters must approve longer extensions. 

\35 Medicare Home Health Agencies:  Role of Surety Bonds in
Increasing Scrutiny and Reducing Overpayments (GAO/HEHS-99-23, Jan. 
29, 1999). 

COMMENTS FROM THE HEALTH CARE
FINANCING ADMINISTRATION
========================================================= Appendix VII

*** End of document. ***