Necessary Insurance for Home Health Agencies
Minimize claim damage with the right policy
by Jeffrey S. Baird

As baby boomers age, the demands on our health care system will become more pronounced. This increasing demand—this irresistible force is running up against a limited amount of money (an immovable object). It is obvious that there is not enough money to cover the health care costs of the aging boomers.

Third party payers (Medicare fee-for-service, Medicare Advantage, state Medicaid programs, Medicaid Managed Care and commercial insurers) are aggressively taking steps to contain costs.

All health care providers (hospitals, physicians, pharmacies, home health agencies, durable medical equipment companies, labs, etc.) are feeling the constraints.

This interplay between demand and cost containment is an opportunity for home health agencies (HHAs). A key approach to cost containment is for health care to be delivered by providers other than hospitals and physicians. This magnifies the importance of HHAs.

As HHAs continue to grow in importance, they need to be aware that they live in the proverbial glass house.

If the HHA does something wrong, then someone knows about it. There are three areas in which the HHA can find itself in hot water:

  1. Government Investigations and Whistleblower Lawsuits—Because much of the revenue paid to HHAs comes from federal health care programs (FHCPs), the HHA must be careful not to violate the myriad federal anti-fraud statutes, including the federal anti-kickback statute (AKS), federal beneficiary statute, federal Stark physician self-referral statute, or the federal False Claims Act (FCA).


    If the HHA is doing something that violates one or more of these statutes, then such violation will likely come to the attention of the Department of Justice (DOJ) and Office of Inspector General (OIG) through claims analysis and/or a whistleblower.

    If an employee determines that the HHA is engaging in acts that violate an anti-fraud statute, then the employee can hire an attorney to file a lawsuit against the HHA. The lawsuit will be in the employee’s name and in the name of the United States. At this juncture, the employee becomes a “relator.” The lawsuit will be based on the FCA, which calls for large monetary damages. The lawsuit will initially “go under seal,” meaning that no one will know about the lawsuit except for the DOJ, the relator, and his or her attorney. A civil Assistant U.S. Attorney (AUSA) will review the lawsuit and will conduct an investigation. If the civil AUSA concludes that the lawsuit has merit, then the DOJ will intervene (i.e., take the lawsuit over). At that time, the lawsuit will be “unsealed.” Even if the DOJ does not take the lawsuit over, the relator and his or her attorney can still proceed with the lawsuit. If the civil AUSA believes that the facts are egregious, then the civil AUSA will hand the file to a criminal AUSA who will determine whether or not to bring a separate criminal case against the HHA.

  2. Post-Payment Audits—Like other health care providers, HHAs are targets of post-payment audits. Audits are often a game of “gotcha,” in which the payer looks for any reason to recover money previously paid to the HHA. For this reason, it is critical that the HHA implement a robust corporate compliance program that includes 1) conducting self-audits and 2) hiring an outside consultant to periodically come on-site to conduct audits.
  3. Negligence and Malpractice Claims—Negligence and malpractice are pretty much the same thing. The theory of liability is as follows: “Did the HHA act the way that a reasonable HHA would have acted under the same or similar circumstances?” Said another way, there is an accepted standard of performance in the HHA industry that the HHA must adhere to; if the HHA fails to meet that standard of performance, then it can be liable for damages to the patient and his or her family.


    For example, if a patient is under a home health plan of care and if there is a bad outcome, then there is a risk that the patient and his or her family will talk to a personal injury/malpractice attorney about suing the HHA for negligence. The allegation will be that the HHA failed to act the way that a reasonable HHA would act under the same or similar circumstances, and that such failure resulted in the bad outcome.

Insurance Protection

There are a number of actions that the HHA can take to lower the risk of the potential liabilities discussed above. For example, 1) the HHA should implement an effective corporate compliance program that includes the appointment of a compliance officer and the training of employees; 2) the HHA should implement a stringent documentation intake and retention policy; 3) the HHA should retain an experienced health care attorney to advise the HHA on a proactive basis; and 4) the HHA should purchase the necessary insurance coverage. The question becomes: What kind of insurance should the HHA have?

Liability Insurance—This type of insurance covers the HHA for any negligent acts committed by an employee of the HHA. A common example is if an HHA employee is driving his or her automobile to a patient’s home and the employee causes an accident. The insurance should cover any claims, resulting from the accident, asserted against the HHA and against the employee.

Another example is if the HHA employee is lifting a patient out of bed and accidentally drops the patient. The liability insurance should cover any claims asserted against the HHA and the employee. Let’s say that, in providing services to the patient, the HHA nurse fails to adhere to the plan of care prepared by the treating physician, resulting in harm to the patient. The insurance should cover a claim asserted against the HHA and the nurse.

If the liability insurance policy is broad enough, it might cover acts as diverse as libel, slander and sexual harassment.

Malpractice Insurance—This is a form of liability insurance and is often included in liability insurance. However, malpractice insurance can also be a separate policy. While general liability insurance covers all manner of liability (e.g., causing an automobile accident), malpractice insurance is limited to clinical actions. (Did the physician make a bad decision? Did the nurse make a bad decision?) The malpractice insurance needs to 1) cover the acts of all clinicians (physicians, nurses, therapists, etc.) and 2) cover both the HHA and the individual clinicians.

Errors and Omissions Insurance—This is sometimes known as director’s liability insurance. If a stockholder, a creditor, a governmental agency (e.g., the DOJ), or another type of plaintiff sues the HHA and its officers and directors for damages allegedly arising out of decisions made by the directors and officers, then this insurance will cover both the HHA and the individual officers and directors.

For example, if the DOJ brings a civil or criminal action against the HHA, its officers and directors, in which the action is based on alleged violation of a federal anti-fraud statute, then depending on the wording of the policy, the insurance may cover the HHA, its officers and directors. Depending on the wording of the policy, this type of insurance may cover the defense and settlement of a whistleblower lawsuit.

Property and Casualty Insurance—This type of insurance covers the business property of the HHA from theft or damage due to fire, flood, other “Acts of God” and from man-made acts.

Workers Compensation Insurance—This insurance covers medical bills and lost wages for employees of the HHA who are injured on the job. The types of accidents covered by workers compensation insurance include 1) being involved in an automobile accident while driving to or from a patient’s home; 2) an employee hurting his or her back while lifting or moving a patient; and 3) a slip and fall at a patient’s home.

Guard Against:

  • Government Investigations and Whistleblower Lawsuits
  • Post-Payment Audits
  • Negligence and Malpractice Claims