A former home health care executive's admission in federal court this week that she was involved in a fraud scheme that resulted in nearly $1.5 million in improper payments highlights vulnerabilities in a fast-growing segment of Minnesota's health care system with hundreds of millions of dollars at stake.

In Minnesota, the risk for abuse and fraud is something the home health care industry has been grappling with for years in the face of demands of an aging population that wants to stay in their homes.

Lori Jo Mueller, 48, of Apple Valley, pleaded guilty Monday to stealing during six years that she worked for Edelweiss Home Health Care company. She now faces up to 30 years in prison upon sentencing for wire fraud and 10 years for health care fraud.

And just last month, a former home health care operator from Brooklyn Park was sentenced to 18 months in prison after he admitted to defrauding Medicaid of more than $500,000 in false billing claims. Also in January, a couple running a St. Paul home care business were charged with falsely billing the state for services not provided.

"We expect home health services to grow," said Jerry Kerber, inspector general for the state Department of Human Services (DHS). "If there are more people receiving home health services, we expect to see more of these type cases."

Last year, DHS fraud investigators handled 104 cases involving personal care provider organizations and four cases involving home health care agencies, which accounted for about one in three fraud investigations handled by the agency. The year before, the agency investigated 191 cases involving personal care provider organizations and six involving home health agencies.

Kerber said the DHS has several proposals before the Legislature to shore up accountability weaknesses in the home health system.

They include:

• Increased oversight of unlicensed personal care agencies. These are often small agencies with employees making $10 or $12 an hour who help vulnerable people in their homes. The state wants to start visiting these businesses before and after they are enrolled to assess their capabilities and detect potential problems.

• Hire more investigators to root out fraud across a state health care system that has more than 800,000 clients, including many who receive home health services. The DHS unit has 10 fraud investigators and proposes hiring six more investigators.

• Increase collection efforts when fraud of public funds is detected. The state wants to increase surety bond requirements for unlicensed agencies and strengthen debt collection efforts through the Department of Revenue.

Fraudulent billings

According to the plea agreement in Mueller's case, she stole about $840,000 between June 2006 and June 2012, using the money to pay credit card bills and other personal expenses.

Mueller, who began working for Edelweiss in 2002 and was promoted to vice president of operations, was responsible for the review and payment of corporate invoices, bookkeeping and other financial matters. This access allowed her to issue company checks to herself.

Also, from March 2010 until June 2012, she defrauded Medica by submitting false claims to various insurers seeking reimbursement for services provided by Edelweiss nursing staff.

In some instances, Mueller billed multiple insurance providers for the same services. The false billings brought more than $631,000 to Edelweiss in fraudulent proceeds.

An official with Edelweiss said that Mueller's tenure with the company ended soon after the scheme was discovered.

Poor state oversight

Leaders in the home health care industry say the vast majority of providers are good, honest businesspeople providing critical services within a rapidly changing health care system. They blame much of the abuse on a lightly regulated segment of the home health industry.

In some license classes, providers can go as many as eight years without ever receiving an inspection, said Jennifer Sorensen, executive director of the Minnesota Home Care Association.

Poor state oversight was a problem identified by Legislative Auditor James Nobles in a 2009 review of the publicly funded personal care assistance program. That program grew 164 percent over a five-year period ending in 2007, with annual expenses exceeding $400 million.

Nobles said Tuesday the complexity of home health care and other types of services that provide care to vulnerable people in the community can make it difficult to detect fraud.

"It's an area fraught with challenges and potential difficulties," Nobles said. "It's just a lot of money. You always have to be concerned about inappropriate use of that money ranging from error to fraud."

Staff writer Paul Walsh contributed to this story. Brad Schrade • 612-673-4777