OIG: CMS Could Have Saved $192M with Stronger LUPA Oversight

Federal watchdogs are once again setting their sights on perceived improper billing practices by home health agencies.

In an audit report published last week, the U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) found that stronger oversight of Low Utilization Payment Adjustments (LUPAs) in home health care could have saved the government roughly $192 million in fiscal year 2017.

Instead, the Centers for Medicare & Medicaid Services (CMS) and the Medicare administrative contractors (MACs) it worked with allowed some agencies to shirk LUPA thresholds, receiving full reimbursement when they should have received a lesser, standardized per visit payment, according to OIG investigators.


To conduct its audit, OIG’s team looked at $1.25 billion in Medicare payments to home health agencies in 2017. It then selected a stratified, random sample of claims from 120 agencies that delivered just enough visits to avoid triggering a LUPA.

OIG’s audit occurred when the old Prospective Payment System (PPS) was in place. Under that now outdated payment methodology, a home health agency triggered a LUPA if it delivered four or fewer visits during an episode of care.

For any agency, being hit with a LUPA claim could mean hundreds or even thousands of dollars less in Medicare reimbursement.


“Because of the large payment increase starting with the fifth visit, [home health agencies] have an incentive to improperly bill claims with visits slightly above the LUPA threshold,” investigators wrote in their report.

That remains true under the new Patient-Driven Groupings Model (PDGM), which created a more complex framework for how LUPAs are handled.

While the old PPS included a universal threshold of “four or fewer visits,” PDGM moves the LUPA goalposts around depending on patient characteristics, referral sources and a variety of other factors. Today, every one of PDGM’s 432 case-mix groups has its own LUPA threshold, ranging from two to six visits.

Despite the change in payment methodology, OIG believes its findings that home health agencies are improper billing to avoid LUPAs would likely remain true under PDGM.

“The majority of the claims in our sample that did not comply with Medicare requirements under the previous PPS methodology would also have not complied with those requirements under the new methodology,” investigators observed.

OIG’s random sample of 120 claims all included five, six or seven visits in a payment episode — the bare minimum needed to avoid a LUPA in 2017. To determine whether those extra visits were actually needed, OIG enlisted an independent medical-review contractor to look at medical necessity and coding requirements.

Of the 120 sampled claims, 91 complied with Medicare requirements, meaning a full episodic payment was warranted.

But another 25 claims did not comply with requirements, according to the medical-review contractor. The remaining four claims did not have documentation available to make a compliance determination.

In one example, a home health agency was paid $3,131 for an episode of care that included seven visits. However, five of the seven visits did not meet Medicare requirements, meaning the agency should have been hit with a LUPA and only paid $389.

Delivering services to beneficiaries “who were not confined to the home” was the most common reason for agencies not meeting Medicare requirements, OIG investigators found.

OIG recommendations

In part, the alleged improper payments occurred because the MACs CMS worked with in 2017 did not aggressively look into home health agencies that delivered just enough visits to avoid a LUPA.

One MAC that did conduct reviews was instructed by CMS to instead focus on the Targeted Probe and Educate (TPE) program.

Moving forward, OIG recommends that CMS first direct MACs to recover all perceived overpayments made to home health agencies in its sampled claims — $41,613 in total. Additionally, OIG believes CMS should require all MACs to perform data analysis and risk assessments of claims with visits slightly above the applicable LUPA threshold and target these claims for further review.

More generally, MACs should also start educating home health agencies on properly billing for home health services with visits slightly above the applicable LUPA threshold.

CMS concurred with those recommendations.

Red flags and contradictions

There are multiple red flags and apparent contradictions within OIG’s LUPA report.

On a basic level, the OIG report does not take into consideration CMS’s messaging on LUPAs during the transition to PDGM.

In putting the payment overhaul together, CMS anticipated that home health agencies would do everything possible to “upcode” and avoid LUPAs whenever possible, for instance.

“CMS is almost giving people a license to add visits and code upwards — and that’s not conduct that should be encouraged,” National Association for Home Care & Hospice President William A. Dombi previously told Home Health Care News. “I think the message has been pretty clear to agencies.”

Moreover, a major issue OIG had in its audit was the “homebound requirement” in home health care — or the stipulation that home health patients need to be stuck at home and unable to leave unassisted to be eligible for service. For years, home health insiders viewed that homebound requirement as inherently flawed, hurting patients and providers alike by diminishing access to care.

Maine Senator Susan, a Republican, is among those who have criticized the homebound requirement.

“Right now under Medicare, the definition of homebound is extremely strict,” Collins told HHCN in March 2019. “It says that the patient cannot leave home without — I believe the phrase is — a considerable and taxing effort. There are other beneficiaries who could benefit from home health care if we did not apply such an onerous restriction.”

CMS loosened Medicare homebound requirements toward the start of the COVID-19 public health emergency.

Lastly, OIG’s report makes no mention of the fact many home health agencies have been financially devastated by skyrocketing LUPA rates since the start of the emergency.

A NAHC survey released in April suggested that more than 67% of all home health agencies have seen their LUPA rates double as a result of the coronavirus.

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