In 2006, the top managers at Amedisys gathered for another company meeting. On the agenda was a PowerPoint presentation called “Help With Reports.”
To an onlooker, the slideshow was, in most respects, just as mundane as the title implied. Clip art of a stethoscope across the top of each page, bold arrows and occasional twisted type served as the only relief from a barrage of bullet points and tiny charts.
But to the U.S. Senate Committee on Finance, the presentation to the firm’s directors of office operations served as critical evidence in an investigation into Medicare abuse and fraud.
At issue is whether the Baton Rouge-based firm—one of the nation’s largest home health care providers—and others in the industry altered the course of patient care treatment to trigger a higher federal reimbursement.
Prior to 2008, Medicare provided a substantial bonus when a home health agency provided at least 10 therapy visits. Providing 10 visits—as opposed to nine—increased reimbursement on average 97.5%, or more than $2,000. For a company like Amedisys, which relies on Medicare for 85% of its revenue, those extra visits can add up.
In particular, investigators honed in on a bullet point on one of the PowerPoint slides that reads: “Look for patients that have 7, 8, 9 visits and try to get the 10 visits to make therapy threshold.”
The Senate inquiry has ended, but the U.S. Department of Justice and the Securities and Exchange Commission are continuing their investigations into the matter. Though the Senate committee’s report stops short of concluding Amedisys and three competitors—LHC Group of Lafayette, Gentiva Health Services of Atlanta and Almost Family of Louisville, Ky.—committed outright fraud, it does allege that the companies “encouraged therapists to target the most-profitable number of therapy visits, even when patient need alone may not have justified such patterns.”
“The reimbursement policy encourages gaming, and gaming is what’s occurred,” says Sen. Charles Grassley of Iowa, the committee’s senior Republican member. “The federal government needs to fix the policy that lets Medicare money flow down the drain.”
Though Amedisys continues to cooperate with the other investigations, the company stands by its actions. Its own compliance policy prohibits clinicians from providing any services that are not medically necessary, including therapy services intended to meet a reimbursement threshold.
“Amedisys stands by our company’s integrity, ethics and patient care practices,” Chief Operating Officer Mike Snow says. “We cooperated with the Senate Finance Committee’s requests, and although we are disappointed with their conclusions, we are pleased the committee has concluded its investigation.”
William Borne started as an emergency room and operating room nurse. In 1983, he left that position and took out a second mortgage to start his own hospital consulting business, which eventually morphed into a nurse staffing business.
A decade later, Borne took his company public through a reverse merger, and the business flourished from there. In 1998, however, Medicare overhauled its reimbursement system, switching from cost-plus to a flat rate determined in part by the patient’s diagnosis.
Almost overnight, Amedisys was on the verge of collapse, asked to return $17 million in revenue and pay $10 million in vendor bills. Borne couldn’t even afford to file for bankruptcy.
He turned it around by selling off his other businesses—surgery and infusion centers, physician practice management and nurse staffing—and focused solely on home care for Medicare patients. In November 2004, Forbes named him Entrepreneur of the Year, putting his face on the magazine cover.
Today, Amedisys is the largest home health-care provider and one of the nation’s fastest-growing companies, with annual revenues that more than doubled from $698 million in 2007 to $1.6 billion in 2010. Its stock soared from less than $1 per share in 2000 to $60 in April 2010.
Just as Amedisys was ascending to new heights, however, The Wall Street Journal published a story that called into question how the company managed to earn some of that revenue. The newspaper analyzed Medicare payments to Amedisys and some of its competitors, and found a curious trend: the number of in-home therapy visits seemed to track Medicare financial incentives.
As the Journal explained, Medicare reimbursements are determined in part by the number of at-home therapy visits each patient receives, with an extra fee kicking in as soon as a patient reaches a certain number of visits. From 2000-07, Medicare paid companies a flat fee of about $2,200 for up to nine home-therapy visits; it paid an additional reimbursement of $2,200 if the therapy surpassed nine visits.
The incentive was designed to prevent agencies from stinting on therapy visits to save money. But even the Centers for Medicare and Medicaid Services, the agency that runs Medicare, recognized in its original rulemaking that a 10-visit threshold was “susceptible to manipulation.”
According to the Journal’s analysis, Amedisys provided many of its patients just enough therapy visits to trigger the extra $2,200 payment. In 2007, for example, only 2.9% of patients received nine visits, while 28.5% received 10 to 12 visits. Those visits are highly profitable because they cost the company less than $80 per visit.
Medicare changed its reimbursement rules in January 2008 to reduce the apparent incentive it had created, eliminating the $2,200 bonus payment at 10 visits and instead paying a smaller extra fee at six, 14 and 20 therapy visits. The newspaper reported that a new pattern at Amedisys emerged: That same year, patients getting 10 visits dropped by 50%, while those who got six visits increased 8%, 14 visits 33% and 20 visits 41%.
Snow says the data shows that Amedisys’ therapy visits are consistent with standard ranges of therapy utilization in the industry, as well as those published in The Guide to Physical Therapy Practice and other recognized sources.
“We believe the Wall Street Journal article was based upon an incomplete understanding of a very complex industry and the ever-changing population that we serve,” he adds, “and overlooked some important facts, which we have pointed out to the Senate Finance Committee throughout their inquiry.”
Not long afterward, the Senate Committee on Finance, the Justice Department and the Securities and Exchange Commission launched investigations into the charges made in the article.
The committee uncovered a number of actions Amedisys took, allegedly to bolster its profits once Medicare changed its reimbursement practices in 2008.
During a June 2007 conference call, a document entitled “Data Mining Strategies Handout” was distributed. It ranked medical diagnoses by average profit per episode, and laid out a comprehensive strategy to increase therapy visits that were beneath key financial thresholds.
The document noted that replacing skilled nursing visits with physical therapy in wound care would bring about added revenue of $1.4 million. A training document issued several months later noted that if the company added only six therapy visits to 3% of certain congestive heart failure patients, the net revenue to the company would be nearly $500,000.
At a July 2007 company board meeting at Las Ventanas al Paraiso resort in Los Cabos, Mexico, Chief Information Officer Alice Ann Schwartz reported the firm had formed a committee called the A-Team, whose purpose was to develop strategic clinical programs and cost-cutting and efficiency measures to address the pending changes.
Three months later, Borne outlined his strategic plan to the board, noting that the revision in rules “provides an opportunity for Amedisys to refine internal practices in order to enhance shareholder value despite the payment changes.”
And in February 2008, an email from Dan Cundiff, Amedisys’ vice president of Florida operations, to managers in that state lamented that the firm “still drove to a 10 therapy threshold … and thus, our values per episode were hammered. We must stop thinking that 10 therapies maximizes our reimbursement. The new upper level threshold is now 14 therapy visits. When clinically appropriate, let’s drive to that number. From 10-13 visits, we become significantly less profitable. …”
In a statement at the time the report was released, 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.”
But Snow notes that a congressional inquiry doesn’t constitute a verdict. He says Amedisys “provides critical care to elderly patients in this country, and we do so in a very cost-effective manner, where patients want to be cared for: in their home.”
The investigation, coupled with a proposed cut in reimbursement rates averaging 4.7% in 2012 that could be even tougher on Amedisys, hasn’t been kind. The company lost more than three-quarters of its market value in 18 months, according to a Reuters report.
But Snow insists the company maintains a strong balance sheet. As of June 30, Amedisys had more than $28 million in cash, more than $230 million available through its line of credit and debt of $180 million.
He says the company is now focused on diversification, and is having some success negotiating better rates for non-Medicare business. The strategy is intended to make the firm less susceptible to sudden reimbursement changes.
“Our wholesale customers [hospitals, health systems and managed care companies] are increasing in importance to our business,” Snow says. “We still plan to be an acquirer of home health and hospice companies, but we will be more focused from a geographic standpoint to align with wholesale customers, and will be more focused on joint ventures with hospitals. Ultimately, we feel we are in a great place long-term.”