U.S. investigation hits L.A.'s home health providers.

L.A.'s burgeoning home health care industry is being hit hard by the nationwide federal investigation into Medicare fraud, resulting in stepped-up scrutiny of providers here and, in some cases, closure of operations.

The U.S. Health Care Financing Administration has terminated the Medicare licenses of 23 home health care agencies in California in the past two years, with more than half of those believed to be in the Los Angeles area, according to HCFA associate regional administrator Janice Caldwell.

Another 22 home health care agencies statewide were forced to provide more detailed billing information to the federal government as part of the federal crackdown known as Operation Restore Trust.

All were allowed to continue billing for Medicare patients, but many hired lawyers to guard their interests.

"This has been devastating for the owners of these agencies," said Gina Reese, a health care attorney with Century City-based Hooper, Lundy and Bookman. which represents several Los Angeles-area home health care agencies.

One agency, CSM Home Health Services Inc., had its license revoked but was later cleared of wrongdoing.

"We had served the poor and minority populations in South Central Los Angeles for 13 years, surviving riots and quakes," said Gene Murphy, CSM's former administrator. "But we don't have a powerful lobby to fight for us and we couldn't on our own fight a government that just doesn't care."

CSM filed for bankruptcy protection last month and laid off 300 employees.

Caldwell said the investigation is necessary to stop runaway fraud in the home health care industry.

"The way the rules for Medicare have been set up, it is too easy for anyone to set up a home health care agency, bill Medicare for work not done properly or not done at all and then, when the game is up, shut down and take the money with them," Caldwell said.

The licensing terminations represent just one piece of the federal investigation into home health care fraud in the Los Angeles region.

Nineteen investigators from the Department of Health and Human Services, along with several FBI agents, U.S. Postal Service inspectors and assistant attorneys from the U.S. Attorney's office in Los Angeles, are following up on tips generated during the two-year probe.

"This whole investigation has had a chilling effect on all home health care agencies," said James Murray, deputy counsel for the National Association for Home Care, a trade group representing the home health care industry. "They are now being extra cautious in treating people and are denying care to many Medicare patients who need the care."

Operation Restore Trust, launched by the Clinton administration at the urging of Congress, was prompted by the rapid run-up in Medicare reimbursements for home health care and widespread reports of fraud and abuse within the industry.

In 1990, Medicare paid out $3.7 billion in reimbursements; that figure ballooned to $16.7 billion in 1996 and, according to Congressional testimony by Health and Human Services Inspector General June Gibbs Brown, nearly $20 billion in fiscal 1997, which ended Sept. 30.

A whopping 40 percent of all Medicare payments for home health care services in California, New York, Illinois and Texas were improper, according to Congressional testimony by HHS's Brown.

Murray of the industry group said problems have been exaggerated, and that more than half of the Medicare denials for reimbursements were reversed upon appeal to administrative law judges within the Health Care Financing Administration, which administers the Medicare program.

Even so, Operation Restore Trust has prompted several hundred federal investigators to comb through audits and billing records of home health care agencies in California, Florida, Illinois, New York and Texas.

The HHS Inspector General's office has assigned 31 agents to California, according to spokesman Curtis Wilkins. About 19 of them are assigned to the Los Angeles field office. FBI officials would not disclose how many of their agents are working on home health care cases. However, home health care fraud "is in the forefront of our investigations," said Daniel Martino, special agent for the Los Angeles division.

"Home health care fraud is an emerging problem with many layers," Martino said. "There are so many ways in which you can juggle the fraud.

"On the claims and billing side, we've had cases in which agencies knowingly provided home care to non-home-based patients, falsified physician signatures, misrepresented the services provided and reported services that were not rendered," Martino said.

Some health care agencies, he added, shifted non-Medicare expenditures to the Medicare side or put ghost employees on their payrolls.

But Operation Restore Trust is not without its critics, particularly within the home health care industry.

"The investigators have gone beyond their mandate," Reese said. "The Health Care Financing Administration tried to decertify the home health care agencies as their way to satisfy those in Congress who want Medicare costs brought under control. The initial mandate of ferreting out fraud went out the window."

HHS associate regional administrator Caldwell dismissed this charge as nonsense.

"If we were going to find ways to save money, decertifying these facilities one by one, risking court action with each case, is definitely not the way to go," Caldwell said.

But Reese pointed to the case of CSM Home Health Services, which was decertified from the Medicare program last year by Blue Cross of California personnel acting under contract with the Health Care Financing Administration.

Reese said the Blue Cross intermediaries alleged that CSM lacked quality assurance, and had poor annual self-evaluations and contracts for services outside Medicare.

"CSM was doing everything by the book, following the industry standards," Reese said. "The regulators couldn't explain any of these and when we supplied them with the documentation, they always came back and said, 'That's not good enough.'"

What's more, Reese said, the Blue Cross intermediaries told CSM's owners that they owed HCFA more than $1 million because HCFA had disallowed some of the expenses CSM had billed and had been reimbursed on an interim basis.

Jeffrey Vicker, Blue Cross's Medicare program compliance administrator for fraud and abuse, acknowledged his company made a "simple math" mistake that resulted in the erroneous billing.

And in October 1996, an administrative law judge ruled that HCFA lacked the evidence to decertify CSM Home Health Services and ordered the certification reinstated. That decision was upheld on another appeal this summer.

However, the rulings were too late for CSM. After transferring its patients to another home health care agency, CSM had no income.

Facing a prolonged period without receiving home health care reimbursements if they reopened, Reese said the owners of CSM opted instead to file for bankruptcy protection last month.

Caldwell and Blue Cross officials said they were merely doing their jobs in reviewing the cost reports and audits.

"We are tasked with safeguarding the Medicare program," said Jacqueline Anderson. Blue Cross general manager for Medicare. "That means looking at all the forms submitted to us and checking for accuracy of the data. If there is anything missing, we go back and request more data. The decision of whether to terminate a license is made by HCFA."