Your CMS Fraud Profile

What were you doing New Year’s Eve 2008? If you were CMS, you were launching a “fraud potential analysis” program that, in some ways, directs the National Supplier Clearinghouse to go after DMEPOS fraud by “profiling” suppliers according to their location, product lines and history.

The program will require the NSC to analyze all current DMEPOS providers, as well as all applicants. The NSC will engage in a “fraud potential analysis” of all suppliers by utilizing a numeric “fraud level indicator.” This numeration is supposed to represent each DMEPOS supplier’s potential for committing fraud or abuse.

In discussing these indicators, CMS gives examples of what sorts of business decisions generate low, limited, medium or high risk of potential fraud or abuse. These categorizations are illuminative. Here are some lessons:

• Geography matters If you are located in a “high fraud area,” you will be scrutinized more frequently and more closely. South Florida is one example. You should evaluate expansions in these markets carefully.
• Financial commitment matters Providers who incur larger expenditures for inventory are less likely to be scrutinized. Ditto for those who utilize a lot of retail space. It appears that CMS is correlating the risk of fraud or abuse with the degree of financial commitment to the business enterprise.
• History matters A company with an owner who previously had a bankruptcy would be subject to greater scrutiny, as would a company with a history of government investigation. CMS indicates that a provider’s experience with commercial payers will also be a factor in determining the fraud level indicator, as will site visit results. Presumably, companies with a history of overpayments would fall into this category as well. Providers considering whether to dispute overpayment demands or NSC challenges should factor into their decision-making the likelihood that a finding of wrongdoing may lead to greater ongoing scrutiny.
• Product lines matter A diabetic provider will be more prone to scrutiny than will be a prosthetist. A power mobility provider will be more subject to scrutiny than a provider of walkers, commodes and crutches, etc. When expanding into new product lines, consider the costs of greater scrutiny as part of your decision process.

It is interesting that “national drug store chains” are considered low-risk suppliers (absent bad history, etc.). Is this because they are public companies, subject to Sarbanes-Oxley and SEC scrutiny? Is it because they presumably have in place good compliance programs with adequate personnel to run them? At this point we do not know.

However, I expect your ability to maintain an effective compliance plan and a successful accreditation history will be important factors, because they demonstrate a commitment to doing things the right way as well as greater transparency in business operations.

According to CMS, the indicators will be used to determine “review plans” by the NSC that will establish billing ceilings (after which prepay medical review will be required), unscheduled site visits, maximum billing “spikes” (to avoid triggering payment suspensions or prepay review) and so forth. When a provider “appears suspect,” it will be issued a special alert code to be shared with the MACs, the program safeguard contractors (PSCs) and the zone program integrity contractors (ZPICs).

What proactive lessons can we learn from this?

First and most obvious, a well run, well enforced internal compliance program, including audit and monitoring functions, is important because it minimizes errors and other problems, and because it helps to demonstrate a commitment to following the rules.

Second, your business plan should incorporate the costs and consequences of government scrutiny when evaluating where, how and when to grow. Such scrutiny will increasingly affect the cost of doing business.

These alert codes will be intended to “notif[y] the contractors that a supplier may be inclined to submit a high percentage of questionable claims.”

I am bothered by this profiling activity, allocating investigative activities on the basis of geography and product line. But, this can be a cost-effective approach to getting the most value from our government resources in combating fraud. In theory, a supplier can evaluate the likelihood of intensive NSC scrutiny when evaluating whether, how or where to expand services, by understanding this new program and the “fraud level indicators.” Will our industry make intelligent decisions with this knowledge? That remains to be seen.

Read more Compliance University columns.

Neil Caesar is president of the Health Law Center (Neil B. Caesar Law Associates, PA), a national health law practice in Greenville, S.C. He also is a principal with Caesar Cohen Ltd., which offers compliance training, outsourcing and consulting and the author of the Home Care Compliance Answer Book. You can reach him at 864/676-9075 or [email protected].

Materials in this article have been prepared by the Health Law Center for general informational purposes only. This information does not constitute legal advice. You should not act, or refrain from acting, based upon any information in this presentation. Neither our presentation of such information nor your receipt of it creates nor will create an attorney-client relationship.

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