Give Me A Break

I need to rant. I suppose you could call it “offering acerbic observations about the home medical equipment industry in 2008” if that will make my words more appropriate. But after 27 years as a lawyer for the home care industry, I hope I am entitled to a rant.

I realize there are a lot of pundits out there taking potshots at us. Overrun with ne’er-do-wells and ignoramuses, selling fungible products that could always be obtained cheaper, blah, blah, blah. I do not dispute that there are many in our industry who perhaps should not be here, either because of their skewed moral compass or their poor attitude about doing things the right way.

But these types of people have been in our industry all along. I’m not even sure the number of “problem” suppliers has increased. Something has changed, however. And that is the attitude of the federal government.

The government has always been a recurring thorn in the side of HME suppliers. That is both inevitable and, I suppose, appropriate. But CMS and its agents — the National Supplier Clearinghouse, the various DME MACs and so on — have rarely been as hard to deal with, as unyielding in their attitudes nor as antagonistic toward our industry as they seem to be these days.

There are many, many hardworking, professional and skilled civil servants and contracted agents who work for CMS. This article is not about them. But the organizations themselves are very difficult and frustrating.

I don’t want merely to rant; I have a point or two to make. Sometimes, we make our relationship with CMS and its agents worse by not thinking through the consequences of our words or actions. Sometimes we demand reform without realizing the extra burdens it will bring upon us. Sometimes we point fingers without remembering that old adage that three other fingers will be pointing right back at us.

Sometimes we forget that when we criticize the government, it will likely react in predictable ways. Prick an 800-lb. gorilla with a thorn and you’ll get his attention. Poke him with a sharp stick and you may make him angry.

When the Feds Get Angry, the Feds Get Even

The Government Accountability Office recently stated in a report that CMS’ “oversight of suppliers of durable medical equipment … is inadequate to prevent fraud and abuse.”

The GAO report, released the week of Aug. 4, goes on: “Specifically, weaknesses in the DMEPOS enrollment and inspection process have allowed sham companies to fraudulently bill Medicare for unnecessary or non-existent supplies.” The report then describes in detail a sting operation against the NSC that the GAO conducted to reach its scathing conclusion.

Much as I would like to join in the choruses of “CMS bad! NSC bad!,” I have serious problems with the GAO investigation. I think the GAO report implies that the NSC should be far more intrusive than it currently is, and may lead to more burdensome supplier standards than currently exist. It illustrates one of “Caesar’s Rules of Conduct:” When the government is angry, reasonableness won’t get in the way of scapegoats.

The report details how the GAO set up two fictitious DME companies to test the NSC’s oversight in policing Medicare enrollment. The two companies were approved to bill Medicare even though neither had inventory nor customers. First, the report states that GAO set up two fictitious companies “using undercover names and bank accounts.”

But wait a minute! An “undercover name” is just a fictitious name. Legitimate companies operate with fictitious names all the time. Legitimate companies set up bank accounts under those names all the time. Is this somehow wrong now? The only distinction I can see is that the GAO’s secret intent was to cheat. Their actions, however, were commonplace.

Second, the report also notes that “to appear legitimate, we rented 100-sq.-ft. commercial offices … Both rentals cost approximately $1,000 per month, and came complete with Internet, phone and fax service and a shared secretary.”

But wait a minute! The GAO rented legitimate space and paid fair market value for it, including necessary support services. This is what all legitimate companies do as well. How did this suddenly become wrong? The only difference I can see is that the GAO had a secret intent to cheat. Operationally, everything not only appeared normal, but was normal.

Third, the GAO report tells how they created Web sites, brochures and business cards; paid an outside company to help them obtain business licenses, sales tax licenses, etc.; obtained employer identification numbers (EIN) from the Internal Revenue Service and National Provider Identification (NPI) numbers from CMS; created signage listing hours of operations; staffed the offices with undercover agents posing as sales reps; and purchased approximately $3 million worth of general liability insurance.

But wait a minute! I ask again: What is wrong with this? Isn’t that what all legitimate suppliers are supposed to do?

Fourth, here’s where some cheating did occur: The GAO “purchased a few ‘props’ to be prepared for on-site inspections, including a wheelchair and a bedpan.”

It also “created phony contracts with two fictitious DMEPOS wholesale suppliers to demonstrate that we had the capacity to supply equipment and supplies to clients.” (The GAO also created two phone lines that bounced to a remote location, but this problem is already addressed in new supplier standards proposed earlier this year, so I will leave it alone for now.)

I appreciate that these inventory items and contracts were fake. But they looked real. Do we really want the NSC to be required to demand that a supplier show all of its inventory? Do we really want the NSC to make us verify that all of our contracts are real? Suppose CMS fixes that problem by requiring the NSC to have verification from the wholesaler that a contract is legitimate. Might not a cheater just get around that requirement by obtaining phony verification, perhaps from a phony wholesaler?

What, exactly, does the GAO want CMS to do? More important, why are we so sure that would be a good thing?

Fifth, in both cases the NSC inspected the two locations, using a checklist in each case to ensure that the facility was fulfilling the supplier quality standards. In both cases, the GAO undercover agents gave “deliberately vague” answers, and both were required to send follow up information. The NSC later called the undercover telephone numbers and left messages requiring additional information, to which the GAO undercover agent again left vague messages in response. At least one item on the checklist concerning the suppliers’ repair policies was never probed by the inspector.

I acknowledge that this rather cursory inspection was problematic, as were the inspectors’ acceptance of the vague answers.

The report does not indicate how much phony inventory was purchased, so I cannot evaluate whether the inspector should have been suspicious of inadequate inventories. But for the sake of argument, let’s assume that the inspectors did not see shelves and shelves of equipment and supplies. My reading of the GAO report is that it found deficiencies with far more than these items.

What Do We Really Want?

By my calculations, the GAO paid $2,000 monthly for space, paid for licenses and insurance, plus the costs of keeping both offices staffed for quite some time while awaiting inspection. To me, that is a considerable sum of money. It is not what someone would do if they were casually trying to perpetrate an obvious and easily discovered fraud.

Further, in both cases, the NSC demanded additional information. In other words, neither scam worked until the GAO agents submitted some additional information, and in the report’s own words, “repeatedly called the NSC and its subcontractors to determine the status of our application and corrective action plan.”

The applications were finally approved. The GAO started this process in April and May 2007, and did not receive supplier numbers until Jan. 30 and Feb. 13, 2008.

The GAO report focused on the fact that, despite their fraudulent intent, the agency finally received supplier numbers for its fake companies. The rest of us, however, may wish the GAO had instead focused on why it took the NSC well over eight months to complete its review. Frankly, that is where most of us would like to see the NSC do a much, much better job. The GAO evidently found this to be a minor point.

After receiving its numbers, the GAO began billing Medicare. They entered fictitious dates of service, DMEPOS item codes and charges for fake equipment and services and “physician identification numbers that we found on the Internet.” These claims were rejected!

The report states that the undercover agents then called CMS’ help desk for assistance and learned that they had to input their billing number on one of the CMS-related Web sites, noting “there had been no instructions in the billing packet indicating that this was a required step.”

The rest of us may wish the GAO had addressed CMS’ penchant for requiring suppliers to comply with rules that were never communicated. The GAO evidently found this to be a minor point, also.

The bottom line, according to the GAO report: “After establishing two fictitious DMEPOS storefronts with no inventory and no clients, our undercover investigators were able to successfully complete the Medicare enrollment process.”

I am truly sorry that the GAO was able to implement successfully a phony sting operation. It cost the agency thousands of dollars, dozens or hundreds of hours of its time and at least nine months before fraudulent claims were accepted by CMS. Except for a few legitimate points of contention where the NSC should have done a more diligent job in verifying information (like how much inventory was on site), I really do not see what the NSC did incorrectly. I am far from a fan of the NSC, so I make this observation somewhat reluctantly.

But the truth remains. For the most part, the GAO sting operation consisted of the GAO doing everything a supplier was supposed to do, the way it was supposed to do it (although to the minimal degree required), and then blaming CMS for not seeing behind the surface to identify GAO’s fraudulent intent.

Are we sure that we want this problem to be fixed in a manner that prevents it from recurring? That fix will be extremely burdensome and intrusive for legitimate suppliers who comprise the vast majority of our industry.

Plus, it would not work. There will always be fraud. While we can reduce it, we cannot prevent it.

Fraud dollars from the DME sector comprise a tiny fraction of fraud revenues within the health care industry overall. Do we really want to condemn the NSC and applaud the GAO because it did not require two suppliers to produce 100 percent unassailable information to demonstrate the authenticity of each and every document and statement it provided?

Might the cure be worse than the problem? I’m not sure. Clearly the GAO’s investigation resulted from criticism of CMS and its often sloppy process for allowing fraudulent providers to slip through the system. But I also know that, when the government goes on the hunt, it will do whatever is necessary to catch the bad guy, including holding the NSC to what I believe was an unreasonable standard.

We have already seen these sorts of overcompensating consequences, ironically, from the NSC itself. I have many clients who have fallen victim to the NSC’s evident rule that any imperfection constitutes a violation of supplier standards. The opportunity to fix minor infractions without penalty seems largely to have fallen by the wayside. Every flaw is now grounds for revocation. Perfection is the new standard. If you want the NSC to get stricter, it will do so by nitpicking every supplier.

Are you sure this is what we want?

Lessons Learned

I think there are at least two lessons we can learn from this story. First, we must be careful what we wish for. If you call the government incompetent, it will react, and its reaction will affect all of us, not just the bad guys. The rules will be more severe and exceptions will be fewer.

Second, consider this. Our industry is commencing a public relations campaign to redeem our reputation. We intend to point out that HME has been unfairly made a scapegoat for the health care industry. We represent a small portion of health care expenditures, and money lost to HME fraud is a tiny portion of revenues paid wrongly.

But while this PR campaign may be effective for Congress and for the public, I do not know that it will have much impact on the federal bureaucracy. CMS does not care that DME represents only 4 percent of total health care spending. Different personnel and different budgets focus on hospital issues, physician issues, long-term care and home care.

CMS gets a lot of mileage from touting our industry as being rife with crooks. I believe some people at CMS, perhaps many, actually believe this hype. If your job is to go after crooks in 4 percent of the industry, then, by gum, that’s what you will do. It is easier to act aggressively and justify the action subsequently. Why? The answer, if you are the government, is because you can.

You may not like these rules. I sure don’t. But to ignore them and their implications is to set yourself up for an ongoing cycle of disappointment.

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.

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 [email protected] or by phone at 864/676-9075.