Mid-Atlantic Health Law TOPICS

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Home Health Update

Throughout 1997 and into 1998, the home health industry has been bombarded with new legislative and regulatory initiatives. These initiatives were fueled by concerns about: (1) the increasing volume of Medicare dollars spent on home health care; (2) home health billing practices; and (3) substandard providers. Some of the most significant new rules are described below.

A. Revised Conditions of Participation

On March 10, 1997, the federal Health Care Financing Administration (HCFA) proposed revisions to the conditions that home health agencies (HHAs) must meet to participate in the Medicare and Medicaid programs. The proposed requirements focus on patient-centered care and the outcome of care.

B. HHA Moratorium/Surety Bonds

In an unprecedented move on September 15, 1997, President Clinton announced a moratorium on the Medicare certification of any new home health agencies. The moratorium was intended to give HCFA an opportunity to develop and to implement new regulations designed to combat fraud in the industry.

In that regard, on January 5, 1998, HCFA published a rule requiring each HHA, by February 27, 1998, to secure a surety bond for $50,000 or 15% of annual Medicare payments, whichever is greater. The surety bonds are payable to the government in case the government overpays the HHA. The new regulations also establish minimum capital requirements for HHAs participating with Medicare or Medicaid for the first time after January 1, 1998, to assure that such HHAs have sufficient funds to operate for at least three months.

With these new protections in place, the moratorium was lifted on January 13, 1998.

C. Balanced Budget Act

The Balanced Budget Act of 1997 provides that each Medicare HHA serving a Medicare patient's residence must be listed in the hospital's discharge plan for that patient, upon the request of that HHA. Furthermore, the discharge plan must disclose if the hospital has a financial interest in any of the listed HHAs, and the plan may not specify that a particular HHA must provide the needed post-hospital services.

In addition, Balanced Budget Act regulations, which should become effective in the summer of 1998, will require hospitals, which have direct or indirect financial relationships with HHAs, to disclose to HCFA (1) the nature of such financial interests, (2) the number of hospital patients discharged who require home health services, and (3) the percentage of such individuals who received home health services from entities with which the hospital has a financial relationship.

As a stepping stone to implementation of a prospective payment system for HHAs in 1999, the Balanced Budget Act implemented an interim payment system effective for cost reporting periods beginning October 1, 1997. Additional reimbursement changes will be phased in over the next 2 to 5 years. The prospective payment system will apply to cost reporting periods beginning on or after October 1, 1999.

In addition, the Balanced Budget Act provides that: (1) payment for home health benefits will be transitioned from Medicare Part A to Part B; and (2) the Secretary of Health and Human Services will (a) develop normative standards regarding frequency and duration of home health services, and (b) prepare a recommendation by October 1, 1998, concerning the present requirement that individuals qualifying for home health Medicare benefits must be "homebound."

D. Other New HCFA Actions

Other related recent HCFA actions include:

1. Querying HHAs about whether they have any "related business interests" before they are admitted into Medicare, to help determine if they have histories of fraud and abuse and "to ferret out any future questionable billing patterns;"

2. Requiring HHAs, as of January 1, 1998, to have provided quality care to at least ten patients before being allowed to provide care to Medicare patients;

3. Increasing the number of claims reviews by 25 percent, and doubling the number of cost report audits; and

4. Proposing new rules creating stricter standards for all DME suppliers who wish to participate in Medicare.

The volume of new laws affecting HHAs is staggering, and accordingly, HHAs need to be especially vigilant in this rapidly changing regulatory environment.


March 21, 1998




Rosen, Barry F.


Health Care