CMS to Assess Providers’ ‘Potential for Fraud’

BALTIMORE — In a transmittal issued on New Year’s Eve, CMS
said the National Supplier Clearinghouse Medicare Administrative
Contractor will begin a “fraud potential analysis” of all DMEPOS
applicants and current providers.

According to the 27-page document, the NSC MAC will develop a “fraud
level indicator” representing “the potential for fraud and/or
abuse” of each provider, using four levels ranging from low risk to
high risk.

CMS gave the following examples of the risk level
indicators:

1. Low Risk (e.g., national drug store chains);
2. Limited Risk (e.g., prosthetist in a low fraud area);
3. Medium Risk (e.g., midsize general medical provider in a high
   fraud area);
4. High Risk (e.g., very small space diabetic supplier with low
   inventory in a high fraud area whose owner has previously had a
   chapter 7 bankruptcy). High fraud areas shall be determined by
   contractor analysis with concurrence of the NSC MAC’s project
   officer.

In assigning a fraud level indicator, CMS said factors to be
considered would include experience as a DMEPOS provider with other
payers, prior Medicare experience, the geographic area, the fraud
potential of products and services listed, site visit results,
inventory observed and contracted and accreditation.

Based on the fraud level indicator, a “review plan” will be set
up including the frequency of unscheduled site visits, maximum
billing amounts before recommendation for prepay medical review and
maximum billing spike amounts before recommendation for payment
suspensions/prepay medical review, etc.

The fraud level indicator will be updated annually for each
enrolled supplier. The NSC MAC will also monitor geographic trends
to assess areas with a higher potential “for having criminals
posing as legitimate HME providers,” the instruction said.

A special alert code will be used for any provider that meets
the supplier standards “but appears suspect in one of the areas
that are verified by the NSC MAC,” according to the document. The
alert will be shared with the DME MACs and with Medicare’s Program
Safeguard Contractors (PSCs) and Zone Program Integrity Contractors
(ZPICs), and “notifies the contractors that a supplier may be
inclined to submit a high percentage of questionable claims.”

Additional alert codes will be used for circumstances such as
violation of the supplier standards or a sanction by the Office of
Inspector General. A note in the transmittal said while the alert
codes will have no effect on claims payment, the DME MACs may use
them as guidance in their review of claims payment or any
claims-related initiatives or investigations.

With its instruction to take effect Feb. 2, CMS said an MLN
Matters article on the new fraud level indicators would be
available shortly.

View the Dec. 31
transmittal.