Senate finds home healthcare companies at fault

(Reuters) - The Senate Finance Committee said Amedisys , Gentiva Health and LHC Group , three of the biggest players in the home healthcare industry, altered the course of patient care treatment to receive more reimbursements.

However, analysts suggested the conclusion of the investigation should help the Centers for Medicare & Medicaid Services (CMS) better frame the final structure of reimbursement for home healthcare providers, which provide home-based nursing for the elderly with chronic diseases.

Last year, the Securities and Exchange Commission, the Justice Department, and the Senate committee, launched investigations into home healthcare billing practices, prompted by a media report that suggested providers intentionally increased therapy visits to trigger higher reimbursements.

"Therapy visit records for each company showed concentrated numbers of therapy visits at or just above the point at which a "bonus" payment was triggered in the prospective payment system," the committee said in its report.

The committee said it found internal documents and emails from the companies' management urging their therapists to increase patient visits to raise Medicare reimbursements after the proposed 2008 cut in payments.

"We took a financial hit for any therapy provided below 10 visits in the past," LHC Group chief executive Keith Myers wrote to a company manager in one of the emails, according to the report.

"Once you get to 6 visits, the more therapy visits provided the better, up to 20 visits," the report quoted from the email.

The report also quoted emails from the managements of Amedisys and Gentiva that exerted similar pressure on their employees to raise the number of therapy visits.

However, the committee noted that Almost Family Inc , another big industry player under scrutiny, did not push its therapists to raise the visit threshold, though it appeared to push for an increase in the number of patients receiving higher level of treatments.

Shares of Almost Family were down 7 percent at $15.51 on Nasdaq on Monday.

"We are disappointed with the committee's conclusions, and we stand by our company's integrity, ethics, and patient care practices," Amedisys said in a statement issued in response to the committee's report.

In a statement, Senate Finance Committee Chairman Max Baucus said "the gaming of Medicare represents serious abuse of the home health program. Elderly patients in the Medicare system should not be used as pawns to increase a company's profits."

Stephens Inc analyst Ellen Spivey said none of this means the companies have committed fraud.

"This report does not accuse the companies of fraud but rather it is interesting to see that two leaders of the committee specifically termed it "gaming the system," which is often code for we don't like what you did but technically it isn't illegal," Spivey said.

CLEARER PATH FORWARD

Spivey added that since this was the first update on the investigations that were launched a year and half ago, it could give some clarity to the investors who have been worried with all the uncertainties.

Shares of these top home health providers have dropped by 20-30 percent in the last six months, dragged down by the increased scrutiny and uncertainty about the reimbursement cuts.

"From an investor standpoint, it is the uncertainties that are really killing them right now," RBC Capital Markets analyst Frank Morgan said.

"I think getting these investigations out of the way or getting their conclusions out on the table can expedite the process of accessing all the changes that need to be made."

"What needs to happen now is that when CMS creates a perfect reimbursements system, these providers should operate in it," Morgan said.

CMS has proposed a 3.35 percent cut in its 2012 reimbursement rate to home health companies.