Posts Tagged ‘Community Home Health’

Home Health Agency Declares Bankruptcy, Blames Medicare

NOVEMBER 10, 2003 VOLUME 11, NUMBER 19

Home health care benefits available through the Medicare program have been curtailed in recent years. The effect of the government’s crackdown on home health care costs has been felt not only by patients, but also by health care providers themselves.

Take, for example, the case of Idaho’s Community Home Health agency (CHH). The company had been serving about 500 patients. Then Congress passed the Balanced Budget Act of 1997, directing Medicare to set limits on the costs which could be paid through for home care.

CHH, like other Medicare providers, had been paid a monthly amount based on an estimate of the number of patients it would see. These “periodic interim payments” would then be adjusted for the amount actually due the agency, with a smaller amount either paid or withheld from future payments once the bookkeeping was completed.

With the new law, however, CHH decided that it would not be able to serve the same number of patients. The agency dramatically cut its Medicare caseload in an attempt to anticipate the new government regulations. Its income would be slashed, but its costs would also be contained—or at least that was the theory.

Unfortunately, the agency continued to receive and cash checks based on its prior caseload. By the time CHH figured out it had a problem it had received overpayments of more than one million dollars. The agency told Medicare it needed to set up a plan to repay the money over time; Medicare first denied that there had been any overpayment, then threatened to withhold all payments until the account was corrected.

Although Medicare relented and offered a two-year repayment plan, CHH closed its doors and declared bankruptcy. Agency owners Gary and Verlene Kaiser, who had personally guaranteed CHH’s debts, also filed for bankruptcy. Meanwhile, Medicare investigators were allegedly telling other providers about the Kaisers and CHH, making it difficult for them to do any future business.

The Kaisers sued the government and Blue Cross of California, the “fiscal intermediary” which had handled CHH’s Medicare reimbursements. The Ninth Circuit Court of Appeals threw the lawsuit out, ruling that CHH and the Kaisers had to make their claims through Medicare’s administrative channels. The part of their claim alleging defamation and invasion of privacy was simply dismissed, since the government must give its consent to be sued. Kaiser v. Blue Cross, October 28, 2003.

CHH’s story provides a cautionary example to other providers. While government programs may provide a reliable cash flow, changes in the benefits can have a huge and unpredictable effect on the provider.

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