Medicare Home Health Fraud: How Much, Where, and Who?

How much fraud is there in Medicare and who commits it? We provide an answer for Medicare home health, a setting widely considered especially rife with fraud. We define a home health agency (HHA) as fraudulent if it was prosecuted by a federal strike force. Combining Medicare claims data on all HHAs with hand-collected prosecution records from the nine federal judicial districts where strike forces operated between 2009 and 2013, we train a machine learning model to predict, out of sample, the probability that each HHA in the remaining 85 districts would have been prosecuted had a strike force been present. We estimate that in 2008, 3.4% of Medicare home health spending — about $520 million — was billed by fraudulent HHAs. The strike forces were well-targeted: their nine districts contained only 40% of home health spending but 65% of fraudulent spending. Fraudulent HHAs display intuitive characteristics: they are more likely to rely on extremely high-volume referring physicians, to exhibit unusually uniform patterns of care, and to serve healthier-than-average patients.