Michael T. Caracci and Cindy W. Caracci, et al. - Page 9




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          Mississippi, and it had a generally good reputation among                   
          Mississippi’s elderly population.  In 1993, the Sta-Home tax-               
          exempt entities were the first freestanding agencies in                     
          Mississippi to become accredited by the Joint Commission on                 
          Accreditation of Healthcare Organizations (JCAHO).  JCAHO                   
          accreditation required achieving or exceeding certain regulatory            
          standards, including conditions as to the quality of patient                
          care.  During 1995, the Sta-Home tax-exempt entities provided               
          834,596 home health care visits, and over 95 percent of the                 
          entities’ services were to Medicare beneficiaries.  The Sta-Home            
          tax-exempt entities also had several manuals that they had                  
          developed in-house regarding policies and procedures, including             
          personnel, nursing, home health aid, physical therapy, and social           
          work manuals.                                                               
               It was generally recognized that under the Medicare                    
          reimbursement system in place in 1995, there was no ability for             
          home health agencies to realize profits beyond costs and that the           
          reimbursement system provided little incentive for providing                
          services efficiently.  This situation prevailed because Medicare            
          reimbursed a home health agency only for “allowable” costs at its           
          discretion.  Therefore, any denied claim for reimbursement                  
          produced a cash outflow to the business.  The Sta-Home tax-exempt           










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