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Miami, Chicago hit with freeze on new agencies.

Two years after finalizing its power to impose a temporary moratorium on Medicare pro-vider enrollment in high-risk fraud areas, CMS is using the authority for the first time. And to no one’s surprise, the home care industry is serving as the guinea pig.

The Centers for Medicare & Medicaid Services has imposed "a temporary moratorium on the enrollment of home health agencies in Miami-Dade and Cook counties as well as selected surrounding areas … to prevent and combat fraud, waste, and abuse," the agency says in a notice published in the July 31 Federal Register. A moratorium also applies to ground ambulance providers in the Houston area.

Who’s affected: As of July 30, CMS and state officials in Illinois and Florida are denying "all new or pending applications for Medicare, Medicaid and CHIP enrollment from home health providers with practice locations in Cook, DuPage, Kane, Lake, McHenry and Will counties in Illinois" and "Miami-Dade and Monroe counties in Florida," CMS says in two fact sheets about the moratorium.

The temporary moratorium will last six months. CMS may extend the moratorium for subsequent six-month periods if it chooses.

CMS used "both qualitative and quantitative factors" to decide whether and where to impose the moratoria, it says in the Federal Register notice. It depended on CMS and law enforcement experience — particularly via the HEAT program — and data mining to make the decision. (See box, p. 210, for data specifics.)

For example: One data point CMS considered was the "churn rate — the rate of providers entering and exiting the program," the agency says in the notice. "When some providers and suppliers incur a substantial debt to Medicare, they then exit the Medicare program or shut down operations altogether, and attempt to re-enroll through another vehicle or under a new business identity. The moratoria are intended to curtail this churning of pro-viders to new enrollments."

In addition to preventing shady new enrollees, the moratorium simply reduces the number of HHAs Medicare must oversee. The more agencies to supervise, the harder the job is, notes financial consultant Dave Macke with VonLehman in Ft. Mitchell, Ky. The freeze will help with that volume issue.

"We are putting would-be fraudsters on notice that we will find and stop them before they can attempt to bill Medicare, Medicaid and CHIP," says CMS Acting Administrator Marilyn Tavenner in a release.

Reps, Lawmakers Applaud Freeze

Industry representatives are greeting the freeze with open arms. "We fully support the action taken by CMS," Val Halamandaris with the Na-tional Association for Home Care & Hospice says in a statement. "NAHC has long supported program integrity measures such as this."

The Visiting Nurse Associations of Amer-ica "has been a staunch advocate for a home health and hospice moratorium, recognizing the fraud and abuse in Medicare was hurting vulnerable populations and safety net providers," VNAA says in a release. As recently as April, VNAA urged the Department of Health and Human Services to implement a home health and hospice moratorium, it says.

Republican senators Orrin Hatch (Utah), Chuck Grassley (Iowa) and Tom Coburn (Okla.) also have issued a notice welcoming the moratorium. "While it’s certainly better late than never, it’s unfortunate that it took CMS three years to use the tools it’s had to protect seniors, who rely on Medicare, from fraud and abuse," says Hatch, Rank-ing Member of the Senate Finance Committee.

"It’s good to see the Administration at last using this new tool to fight fraud," Grassley adds.

That fact that CMS took more than two years from the final regulation to use its new power demonstrates "that CMS has a very calculated ap-proach to implementing a moratorium," observes attorney Troy Brooks with Brooks Acevedo in Houston. The agency is showing some restraint with the move, particularly since it doesn’t affect existing providers.

Unlucky Agencies Will Take Their Lumps

Losers: This moratorium is going to prove costly to certain agencies in the Medicare approval process. "The moratorium does not apply to an enrollment application that a CMS contractor has already approved, but has not yet entered into the Provider Enrollment Chain and Ownership System (PECOS) at the time the moratorium is imposed," CMS allows in the notice.

"However, new providers could be pretty far along in the process of becoming certified an HHA, with a significant investment in time and money already having been made," when the moratorium applies to them, warns financial consultant Rick Ingber with VantaHealth Consulting in Plymouth Meeting, Pa.

Plus: The moratorium applies to Medicaid and CHIP providers too, points out Washington, D.C.-based health care attorney Elizabeth Hogue. "Private duty agencies that want to contract with Medicaid in the Miami and Chicago areas will be unable to do so," Hogue tells Eli.

HHAs planning to wait out the moratorium may be disappointed. "Some applicants will be in a very tough situation," expects regulatory consultant Rebecca Friedman Zuber in Chicago, Ill. "They will lose lots of money as I suspect the moratorium will not be lifted any time soon."

The moratorium gives authorities breathing room to conduct investigations of existing providers, notes Macke. And they are likely to want more than six months for that.

Winners: Existing HHAs in the area will face less competition as the population that needs home care services expands, Hogue says. Although due to the high number of agencies in the area, "it seems like the population must expand a lot before competition is diminished," she notes.

The Miami and Chicago area markets are so oversaturated that the moratorium probably won’t make much of a difference in competition level, Macke agrees.

The moratorium may increase the value of agencies in the area, Hogue says.

That’s what agencies in Texas saw when the Texas Department of Aging and Disability Services stopped conducting initial certification surveys for new HHAs, Brooks relates. "The merger and acquisition market increased in volume and market value of Medicare certified HHAs rose dramatically. In some markets, the average value increased over 100 percent."

"I would expect to see a similar market reaction to this moratorium, given that it does not affect all HHA changes in ownership," Brooks predicts. The moratorium applies only to CHOWs that require an initial enrollment, CMS specifies in the notice.

Keep in mind: Small agencies will remain less likely acquisition targets regardless of the freeze, Hogue expects.

Note: The notice is at — scroll down to the CMS entry.