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Department of Health and Human Services

Office of Inspector General -- AUDIT

"OPERATION RESTORE TRUST: Review of Home Health Claims Submitted by First American Health Care, Inc., Pennsylvania," (A-03-95-00011)

November 15, 1996

Complete Text of Report is available in PDF format (919K). Copies can also be obtained by contacting the Office of Public Affairs at 202-619-1343.


This report provides you with the results of our review of Medicare home health claims submitted by First American Health Care, Inc., Pennsylvania (FAP), which is a home health agency (HHA) under First American Health Care, Inc., Brunswick, Georgia. The objective of our review was to determine whether home health services claimed by FAP were in accordance with Medicare coverage and reimbursement requirements. Preliminary results of this audit, which was performed at the specific request of Health Care Financing Administration (HCFA) program officials, were provided to HCFA in a memorandum dated February 28, 1996.

We randomly selected for review 100 claims submitted by FAP for Medicare reimbursement during the period January 1, 1995 through April 30, 1995. These claims were for 1,731 home health services provided to 99 Medicare beneficiaries. Our review disclosed that 324 services (18.7 percent of the services in our sample) contained in 28 claims (28 percent of our sample claims) were ineligible for Medicare reimbursement.

These services included:

223 services (12.9 percent) which were provided to beneficiaries who did not require the care needed to qualify for home health benefits (skilled nursing care on an intermittent basis, or physical or speech therapy), or were not homebound, another prerequisite for home health benefits.

101 home health services (5. 8 percent) which, although provided to eligible beneficiaries, were ineligible for Medicare reimbursement because they were determined by intermediary medical experts to be medically unnecessary or excessive based on the medical condition of the beneficiaries, or not supported by medical documentation maintained by FAP.

During the period January 1, 1995 through April 30, 1995, FAP submitted to its Medicare intermediary 15,959 claims for home health services totaling an allowed amount of $22,641,822. Based on the results of our review, we estimate that at least $2,471,047 is ineligible for Medicare reimbursement and using the 90 percent confidence interval, we believe the overpayment is between $2,471,047 and $5,148,243.

We are not making any procedural recommendations directed to FAP because, at the time of our review, it was in the process of being sold and would no longer participate in the Medicare program under its present ownership. We had recommended that HCFA incorporate the recovery of the overpayments into the Fiscal Year (FY) 1995 year-end periodic interim payments (PIP) reconciliation. The FAP was reimbursed under the PIP method in level biweekly amounts. After First American was convicted of Medicare-related offenses and HCFA suspended the PIP to its subsidiaries, First American and its subsidiaries filed for bankruptcy protection. The Bankruptcy Court enjoined the suspension and ordered HCFA to renew the PIP. First American and HCFA then began negotiations regarding all alleged overpayments to First American and its subsidiaries from 1989 through 1996.

On August 14, 1996, HCFA responded to a draft of this report. In its comments HCFA concurred with our recommendation but indicated that it could not take administrative action regarding the overpayments because of the bankruptcy proceeding.

On October 4, 1996, First American entered into a civil settlement agreement with the United States which provided for the payment of approximately $232 million to HCFA over the course of several years. The settlement amount reflects the estimated overpayments to all First American subsidiaries over the cost report years 1989 through 1996, including those identified in this report. The settlement agreement releases First American from any further liability for Medicare overpayments from the period reflected in this audit report.