The Truth about Fraud

Our industry gets a bad rap these days. Government officials rage over allegedly rampant malfeasance within the DMEPOS industry. Reimbursements are subject to cuts and more cuts, in part because there is allegedly so much waste that we not only can handle the cuts but deserve them.

Competitive bidding is characterized in part as an anti-fraud initiative, even though legislative history shows that it is nothing of the sort. Whenever CMS wants to get some positive ink in the Federal Register, it just tightens the screws on providers in Florida or one of its other go-to states.

Is this fair? Is this true? I think not, at least as a matter of degree. But it is a reality. There are valuable lessons to learn when we explore the real truth about DME fraud and malfeasance.

CMS’ Office of the Actuary released a report recently that confirms what most of us have said for years: DME is the smallest segment of health care spending. These figures, from 2007, show that our national expenditure for health care services was $2.24 trillion. Of this, DME spending was $24.5 billion, about half that of its nearest neighbor.

DME for Medicare beneficiaries constitutes $7.5 billion, or about 3 percent of our total spending on DME from all payer sources. When you factor in another $2.3 billion from public spending on non-durable medical products, the total public spending to DME suppliers for 2007 becomes $9.8 billion. This is about 14 percent of the total payments to suppliers of durable and non-durable medical products. This is also about 2 percent of the total Medicare budget.

Now let’s look at the fraud number reflected in the report. CMS set total Medicare waste, fraud and abuse at about $70 billion, with DME’s portion at about $700 million — less than 1 percent of the total. The report shows that the DME industry contributes a lesser percentage to Medicare waste, fraud and abuse than do the other health care sectors on average.

Let’s look at this another way. Medicare expenditures for 2007 were approximately $453 billion. Total waste, fraud and abuse in Medicare was about $70 billion, or about 15.4 percent of total Medicare expenditures. DME spending for Medicare was about $9.8 billion, of which about $700 million was attributed to waste, fraud and abuse, or approximately 7 percent of total Medicare spending for DME.

I draw several insights from this analysis.

First, the DME industry gets a bad rap from CMS and the press for waste, fraud and abuse allegations. Our numbers, (as a percentage) are far better than those for the health care sector as a whole.

Second, wholesale reform of the DME industry would be a drop in the bucket in consequent overall Medicare cost reductions.

Third, we must be very careful when utilizing this information. If we simply say, “Stop picking on us, the rest of the health care industry is much worse,” we invite the response, “Do you suggest we ignore fraud?” We must avoid direct challenges, and we must never belittle the importance of reducing waste, fraud and abuse.

Fourth, only about 30 percent of total DME spending relates to public programs, and if you add in the public spending on non-durable medical products, only about 11 percent of revenues available to DME suppliers comes from public spending. Certainly, some revenues from non-durable goods are paid to retail pharmacies, supermarkets and other non-Medicare-certified suppliers. But suppliers who bemoan how they are prisoners of the Medicare program, with virtually all of their revenues coming from public sources, should remember these numbers when considering how to expand their revenues.

Fifth, the discrepancy between the perception and reality of DME fraud and abuse highlights the importance of becoming engaged in the political process. We must learn how to lobby at the local level, with our own state and federal representatives. Those are the sorts of conversations where you can best educate decision-makers about the differences between fact and propaganda.

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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