In-Home Health Care Providers Fall Under Heavy Scrutiny — Amedisys, LHC Group, Gentiva, Almost Family

By on July 9, 2010

An analysis conducted by the Wall Street Journal (WSJ) of Medicare payments to home health-care companies in recent years has raised questions about whether certain companies are taking advantage of the Medicare reimbursement system without disclosing the truth to investors. The companies at the center of the April 2010 Wall Street Journal article entitled Home Care Yields Medicare Bounty, include Amedisys, Inc. (Amedisys), LHC Group (LHC), Gentiva Health Services (Gentiva), and Almost Family (Almost Family).

In reaction to the analysis, on May 13, 2010, the Senate Finance Committee (SFC) launched an investigation into the practices of the four companies, specifically scrutinizing whether the companies deliberately boosted the number of home therapy visits to trigger higher Medicare reimbursements.  The SFC requested documents dating as far back as 2006, concerning data on therapy visits, lists of physicians with the highest patient referrals, and copies of all marketing materials.

As a result of the SFC investigation, shares of each company declined substantially.  Amedisys shares fell 7.97% ($125 million market capitalization loss), LHC shares fell 7.2% over two days ($40 million market capitalization loss), Gentiva shares fell 7.3% ($61 million market capitalization loss), and Almost Family shares fell 7.56% ($25 million market capitalization loss).

According to the WSJ article:

“Between 2000 and 2007, Medicare companies received a flat fee of $2,200 for up to nine home therapy visits.  It paid an additional reimbursement of roughly $2,200 if the therapy surpassed nine visits.”

Based on the analysis, the percentage of patients who received more than 9 visits spiked, thus permitting the home-care companies to receive an additional reimbursement.  A former Amedisys nurse from Tennessee said:

“I was told we have to have ten visits to get paid.  The tenth visit was not always medically necessary.”

Medicare changed its reimbursement rules in January 2008 in an attempt to eliminate the incentive for home health-care visits.  It eliminated the bonus payment at 10 visits and now pays an extra fee of a couple of hundred dollars at six, 14 and 20 visits.  Interestingly, visits in the 10 to 13 range dropped by about a third after the policy change and the number of therapy visits numbering six, 14 and 20 increased.

The analysis found the pattern of clustering visits at the reimbursement trigger points occurred industry wide.  In 2008, the percentage of Amedisys patients getting 10 visits dropped by 50%, while the percentage that got six visits increased 8%, the percentage of patients getting 14 visits rose 33%, and the percentage getting 20 visits increased 41%.  LHC Group saw the percentage of patients getting 10 visits drop by 64%, Gentiva Health fell 27%, and Almost Family declined 39%.

Shares of all four companies fell significantly on July 1, 2010, after Amedisys and Almost Family acknowledged that they were under a Securities and Exchange Commission probe concerning possible manipulation of Medicare payments.   Sheryl Skolnick, an analyst with CRT Capital Group, said, “The industry is especially adept at optimizing therapy visits in order to receive higher reimbursements.  We would not own share in this group and expect trading in these shares to reflect that view.”

If you are investor of Amedisys, Inc., LHC Group, Gentiva Health Services, and Almost Family and would like to receive more information, you may fill out the confidential form below.