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Home Health Agency Declares Bankruptcy, Blames Medicare

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NOVEMBER 10, 2003 VOLUME 11, NUMBER 19

Home health care benefits available through the Medicare program have been curtailed in recent years. The effect of the government’s crackdown on home health care costs has been felt not only by patients, but also by health care providers themselves.

Take, for example, the case of Idaho’s Community Home Health agency (CHH). The company had been serving about 500 patients. Then Congress passed the Balanced Budget Act of 1997, directing Medicare to set limits on the costs which could be paid through for home care.

CHH, like other Medicare providers, had been paid a monthly amount based on an estimate of the number of patients it would see. These “periodic interim payments” would then be adjusted for the amount actually due the agency, with a smaller amount either paid or withheld from future payments once the bookkeeping was completed.

With the new law, however, CHH decided that it would not be able to serve the same number of patients. The agency dramatically cut its Medicare caseload in an attempt to anticipate the new government regulations. Its income would be slashed, but its costs would also be contained—or at least that was the theory.

Unfortunately, the agency continued to receive and cash checks based on its prior caseload. By the time CHH figured out it had a problem it had received overpayments of more than one million dollars. The agency told Medicare it needed to set up a plan to repay the money over time; Medicare first denied that there had been any overpayment, then threatened to withhold all payments until the account was corrected.

Although Medicare relented and offered a two-year repayment plan, CHH closed its doors and declared bankruptcy. Agency owners Gary and Verlene Kaiser, who had personally guaranteed CHH’s debts, also filed for bankruptcy. Meanwhile, Medicare investigators were allegedly telling other providers about the Kaisers and CHH, making it difficult for them to do any future business.

The Kaisers sued the government and Blue Cross of California, the “fiscal intermediary” which had handled CHH’s Medicare reimbursements. The Ninth Circuit Court of Appeals threw the lawsuit out, ruling that CHH and the Kaisers had to make their claims through Medicare’s administrative channels. The part of their claim alleging defamation and invasion of privacy was simply dismissed, since the government must give its consent to be sued. Kaiser v. Blue Cross, October 28, 2003.

CHH’s story provides a cautionary example to other providers. While government programs may provide a reliable cash flow, changes in the benefits can have a huge and unpredictable effect on the provider.

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Robert B. Fleming

Attorney

Robert Fleming is a Fellow of both the American College of Trust and Estate Counsel and the National Academy of Elder Law Attorneys. He has been certified as a Specialist in Estate and Trust Law by the State Bar of Arizona‘s Board of Legal Specialization, and he is also a Certified Elder Law Attorney by the National Elder Law Foundation. Robert has a long history of involvement in local, state and national organizations. He is most proud of his instrumental involvement in the Special Needs Alliance, the premier national organization for lawyers dealing with special needs trusts and planning.

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Elizabeth Noble Rollings Friman is a principal and licensed fiduciary at Fleming & Curti, PLC. Elizabeth enjoys estate planning and helping families navigate trust and probate administrations. She is passionate about the fiduciary work that she performs as a trustee, personal representative, guardian, and conservator. Elizabeth works with CPAs, financial professionals, case managers, and medical providers to tailor solutions to complex family challenges. Elizabeth is often called upon to serve as a neutral party so that families can avoid protracted legal conflict. Elizabeth relies on the expertise of her team at Fleming & Curti, and as the Firm approaches its third decade, she is proud of the culture of care and consideration that the Firm embodies. Finding workable solutions to sensitive and complex family challenges is something that Elizabeth and the Fleming & Curti team do well.

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Matthew is a law clerk who recently earned his law degree from the University of Arizona James E. Rogers College of Law. His undergraduate degree is in psychology from the University of California, Santa Barbara. Matthew has had a passion for advocacy in the Tucson community since his time as a law student representative in the Workers’ Rights Clinic. He also has worked in both the Pima County Attorney’s Office and the Pima County Public Defender’s Office. He enjoys playing basketball, caring for his cat, and listening to audiobooks narrated by the authors.