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HHS Secretary Donna E. Shalala today announced an unprecedented moratorium on the entry of any new home health agencies into Medicare. During the time-out, regulations will be written to take aim at the fraud that has become so prevalent in the home health industry.

Secretary Shalala also said she will increase the number of claims her agency reviews from 200,000 per year to 250,000. She also will double the number of home health agency audits her department will conduct. This action is part of a continuing effort against waste, fraud and abuse in Medicare and Medicaid that began in 1993.

"There is an urgent need to make fundamental changes in the way this program does business with home health providers," Secretary Shalala said. "We identified the home health benefit as a target for fraudulent activities. So we asked for and got greater authority from Congress to fight this problem."

The temporary moratorium was recommended by the HHS Inspector General. While it is in effect, the Department will implement program safeguards included in the Balanced Budget Act, and work on important changes in requirements for home health agencies.

One key change that will be implemented immediately by the Health Care Financing Administration (the agency which runs Medicare) is a requirement that home health agencies supply information about related businesses they own. Often, unscrupulous home health agencies funnel fraudulent activities through subsidiaries or front companies that don't really exist. This new requirement will make those kinds of scams harder to carry out.

The Department also plans to propose regulations that will require home health agencies to re-enroll in Medicare every three years. As part of the re-enrollment process, agencies will have to submit an independent audit of their records and practices. If the agency does not meet the strict new enrollment requirements, they will not be renewed as providers in Medicare.

Further, HCFA will require agencies to serve a minimum number of patients prior to seeking Medicare certification. Serving private-pay patients will demonstrate experience and expertise in the field before an agency is allowed to serve Medicare and Medicaid's vulnerable populations.

HHS will implement the statutory requirement that home health agencies post $50,000 surety bonds before they are certified. A related rule (to be published as an interim final rule) will require new agencies to have enough funds on hand to operate for the first three to six months. These requirements will establish the financial stability of home health providers.

"The actions being taken today are another strong step in this Administration's efforts to fight waste, fraud and abuse in the home health industry," said HHS Inspector General June Gibbs Brown. "In particular, I support the moratorium on new entrants into this already crowded market. That action will allow HCFA to further 'clean house' by publishing new regulations and moving forward with the anti-fraud provisions of the Balanced Budget Act that the President proposed last March. The steps announced today will build on Secretary Shalala's previous efforts to protect beneficiaries and save the taxpayers' money."

In addition to today's announcement, HHS also is implementing other authorities won in the balanced budget agreement signed by President Clinton in August.

"The moment the President's pen hit the paper we began taking action on these provisions," said Shalala.

The new anti-fraud provisions include:

• The ability to bar convicted health care felons from ever receiving Medicare payments again, and to exclude the family members of sanctioned providers so they can't simply transfer the business to a relative and stay in operation;
  
  
• The authority to require providers to report their Social Security and Employer Identification Numbers so that checks for a history of health fraud can be conducted;
  
  
• The ability to establish a prospective payment system that will pay providers a flat rate, in advance, for a patient's care, eliminating incentives for providing unnecessary care. It also will end "periodic interim payments" that are made in advance and not justified until the end of each year;
  
  
• A clear definition limiting the hours and days that home care can be provided;
  
  
• A clear definition of skilled services so agencies can no longer provide the full range of home health services for patients who need only to have blood drawn;
  
  
• Billing based on the location of service delivered rather than the location of the agency, so providers will no longer get high urban reimbursement rates for care delivered in low-cost areas; and,
  
  
• Authority to develop standards and deny payment to agencies that bill for services in excess of these standards.
  

"These reforms are long overdue. Without them we simply haven't been able to do all that we must do to fight fraud and abuse in home health care," Secretary Shalala said.

The balanced budget law also includes important structural reforms to help control growth of home health care. Generally, home care services not directly related to hospital stays now will be paid by Medicare's Part B, which covers physicians and other non-hospital services. These services tend to be for chronic conditions, and are very different from home care services needed for convalescence and rehabilitation following a hospital stay. Separating these two benefits will allow for better payment control.

Other ongoing initiatives that help fight home health fraud are being accelerated. Operation Restore Trust is expanding to 12 new states. In the five original states, Operation Restore Trust identified $23 for every $1 invested in tracking down waste, fraud, and abuse. A proposed regulation to require home health agencies to conduct criminal background checks of the aides they hire, and to be more accountable for the care they provide, is nearly complete. And new videos and brochures are being distributed to teach beneficiaries how to detect and report fraud and abuse.