Home health care, once the province of small, community-based non-profit organizations, has grown rapidly over the last decade into a business accounting for more than $30 billion a year and one that is dominated by health care giants and hospitals.

Driven by cost-conscious managed care plans, new technologies, an aging population and an expansion of Medicare coverage, home care is now an integral part of health care for millions of Americans, especially here in Southern California, which has the highest proportion of managed care enrollees in the country.

"Home health care is one of the fastest-growing portions of the entire health care industry," said Phil Dalton, vice president of the Camden Group, an El Segundo consulting firm.

"The cost incentives now favor home health care," he said, referring to the practice by many managed care organizations of setting a fixed cost per patient, thus creating an incentive for providers to care for people at home rather than in the hospital.

The fastest growth of all has been in the Medicare area. In 1990, Medicare paid out about $3.7 billion in home health care reimbursements, accounting for about 20 percent of the entire home health care industry. Medicare payouts soared to nearly $20 billion for 1997 more than half of the total home health care industry, according to the federal Health Care Financing Administration, which administers Medicare.

But along with the explosive growth have come allegations of widespread fraud and abuse, especially in billing Medicare for reimbursement of services.

Department of Health and Human Services Inspector General June Gibbs Brown told Congress last July that as much as 40 percent of all Medicare home health care billings in California and four other states are fraudulent.

But representatives from the home health care industry say that figure is exaggerated and that about half of the claims initially rejected by Medicare are accepted on appeal.

For the last year, the nation's two largest home health care providers, Nashville, Tenn.-based Columbia/HCA Healthcare Corp. and Melville, N.Y.-based Olsten Corp., have been at the center of massive federal investigations of Medicare fraud and abuse. Numerous other home health care service providers have also been targeted by federal investigators as part of a massive two-year probe known as Operation Restore Trust.

As a result, the Clinton administration in September imposed a six-month moratorium on all new home health care providers entering the Medicare market, which accounts for about half of the entire home health care industry. The moratorium was designed to give federal regulators a chance to revamp the Medicare billing system, converting it from an essentially fee-for-service approach to one more closely resembling managed care, with caps on Medicare expenditures for certain types of chronic conditions.

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