The House Government Reform and Oversight Human Resources and Intergovernmental Relations Subcommittee on Human Resources hosted George F. Grob during hearings on nursing home Medicare fraud.

Mr. Grob, Deputy Inspector General, Evaluation and Inspections of the US Department of Health and Human Services, gave testimony on the conditions of fraud, abuse and waste in nursing homes.

He began his testimony by telling the members that he would focus on the billings “gaming” by some unscrupulous suppliers of medical services and supplies and nursing home owners.

He would reveal, he told the members, how this gaming may take the form of fraudulent billings to unnecessary services to excessive prices for services and products. He emphasized it would call forth aggressive legislation and administrative action to put an end to these problems.

He explained just who the affected parties were in these incidents: what he called the “dually eligible” either low income elderly or disabled persons who qualify to receive benefits under both Medicare and Medicaid programs.

With regards to nursing homes, these residents’ nursing home bills are financed by Medicaid but at the same time, they receive medical services and supplies reimbursement through Medicare Part B.

He pointed out, however, that the problems arise in any case, even if the payments are made by private insurance or Medicare Part A. He stated his belief that the very complexity of multiple payers in this scenario creates the “vulnerabilities which I will describe”.

The information he shared resulted from a program called Operation Restore Trust. This two year project was designed to demonstrate new and innovative ways to fight waste, fraud and abuse in the Medicare program.

It looked at problems with hospices, home health, nursing homes and durable medical equipment suppliers in five states – California, Florida, Illinois, Texas and New York.

The Office of Inspector General, the Health Care Financing Administration, the Administration on Aging, the Department of Justice, and other law enforcement agencies worked together to get the evidence and data he would cite.

How Medicare and Medicaid Fund Nursing Homes

Almost three million people were in nursing homes, in 1996, whose bill was being footed by either Medicare or Medicaid. They received services ranging from personal assistance with bathing, dressing and eating to skilled therapy and nursing services. Room and board was also picked up by one of the two programs.

The cost? The two programs combined paid a total of $46 billion for all nursing care services in 1995. Broken down, it looked like this: $42 billion went to nursing homes; $4 billion went to a variety of providers of supplies and services for Medicare beneficiaries living in nursing homes.

Let’s examine the contributions made by Medicare.
Medicare Part A pays: 1. As much as 100 days after being hospitalized for skilled nursing home stays. However, the resident must pick up a $95/day co-pay after 20 days. 2. These payments break down into three components: a. per diem costs for routine nursing care, room and board and admin and overhead costs. These costs have a limit. b. Ancillary services such as lab costs, drugs, therapy and radiology. Although these payments have no limit, they are paid on the basis of a reasonable cost. c. Capital, also paid on a cost basis but not subject to a limit.

Medicare Part A payments have exploded, more than doubling to $9 billion in fiscal year 1995 from $3.7 billion in fiscal year 1992.

At the same time, beneficiaries ballooned to 1.2 million in 1996, from 779,000 in 1992. Along with home health services, this is one of the two fastest growing components of the Medicare program.

How does Medicaid Work In Nursing Homes?

Medicaid exists to help low income families and individuals and provides nursing home care for this group. Although eligibility requirements vary by state, Medicaid provides skilled and long term care but only in Medicaid-certified homes.

However it will provide care in intermediate care facilities as well. In the year 1996, Medicaid was footing the nursing home bill for 1.7 million individuals. Medicare Part B

Medicare Part B covers mostly medical supplies and services, doctor services, including services like wound care, lab services and psychotherapy.

How much does it pay? Typically the patient pays a once per year $100 deductible. Above and beyond that, Medicare Part B will pick up 80 percent of an approved amount based on a fee schedule, reasonable cost or charge. And if the beneficiary can’t pay the remaining 20%, Medicaid will pick up that amount. In 1995, Medicare Part B payments for both Medicare and Medicaid came to $4 billion for nursing home residents.

System Weaknesses

Grob pointed out that the most exposed and vulnerable members in this whole system are nursing home residents themselves. He claimed that many care practices and service delivery are often based as much on financial incentives as actual medical need.

He pointed out to another inherent point of abuse under Medicare Part B: supplies and services furnished to a nursing home are often billed by an outside entity rather than the home itself. In this setting, the home itself may have little oversight or control for the quantity or quality of these goods and services.

He cited wound care, as an example. Government inquiries found that questionable payments for wound care supplies may have contributed to as much as two-thirds of the $98 million in Medicare allowances from June 1994 through February 1995.

In one particularly absurd case, a patient was charged over $5,000 over six months for tape for wound care. This amounts to over ten miles of one-inch tape.

Similarly, another patient was billed for almost $12,000 for hydrogel wound filler, 99% of which was likely unnecessary.

As a sign of just how lucrative this class of supplies is, Grob’s reported that they found that 13 percent of nursing homes were offered financial incentives to allow wound care suppliers the contracts to supply their homes.

Another item in wide use in nursing homes is incontinence supplies. His group fund that up to half of allowances for these supplies involved questionable billing practices in 1993.

Another widely abused service in nursing homes is mental health services. Grob said a review his organization conducted indicated that over 30 percent of the records they reviewed revealed Medicare paid for unnecessary services. The figure? $17 million or 24 percent of all 1993 Medicare payments.

One particularly costly and recurring issue Grob pointed out was the excessive cost of Medicare Part A ancillary services. Since these services are not subject to the per diem limit, they are ripe for abuse.

He cited examples in the use of portable x-rays, enteral nutrition and I-V poles as examples. In some cases, these charges would be more appropriately billed under Medicare Part B with much tighter guidelines.

Hospice services marked another category that is open to rampant Medicare payment abuse. His group’s studies have shown up to 1 in 5 nursing home patients enrolled in these programs didn’t really belong in them.

Another problem is that nursing home patients in hospice programs often receive lesser benefits than hospice patients in their own homes. Equally, many of the treatments these nursing home patients received would have been provided by the nursing home anyway.

Another danger he pointed out is that patients enrolled in the hospice program automatically disqualify themselves from curative care. As a result, inappropriately enrolled patients could have their very lives endangered from this inappropriate enrolment.

Solutions to combat Nursing home Medicare fraud

Although he painted a glum picture of the widespread abuse of the system, Grob also offered hope to bring the ship right.

The previously mentioned Operation Restore Trust, in conjunction with the Office of the Inspector General and Health Care Financing Administration have initiated a number of programs. These include state teams, Medicaid fraud control groups with the assistance of Department of Justice and State attorneys and local law enforcement officials.

Grob pushes for legislative changes to rectify structural issues within the Medicare and Medicaid programs. For instance, he believes a move to a prospective payment system would go a long way to curb many of the abuses.

He also pushes for a more simplified categorization of payments. He said the complexities built into today’s system encourage unbundling of services and creative ways of sidestepping payment limits.

Every suggestion he made would create an environment where nursing home facilities would strive to achieve economy in the provision of goods and services, in opposition to the way many homes operate today, while still staying within the current laws and guidelines.

At the same time, Mr. Grob pointed out the necessity to keep patient care utmost in the discussion of any changes. He believes greater vigilance, cost-cutting and fraud reduction can co-exist very easily with the continued emphasis on patient care.

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