GAO Report on DME Fraud Points Finger at CMS

WASHINGTON–Strong words from the Government Accountability
Office are again focused on DME fraud–but this time, the blame is
not falling solely on providers but rather on CMS and its DMEPOS
enrollment contractor.

“Health and Human Services (HHS) has acknowledged Centers
for Medicare and Medicaid Services’ (CMS) oversight of suppliers of
durable medical equipment … is inadequate to prevent fraud
and abuse,” the GAO report, released last week, states.
“Specifically, weaknesses in the DMEPOS enrollment and inspection
process have allowed sham companies to fraudulently bill Medicare
for unnecessary or nonexistent supplies.”

In a sting operation to test CMS’ oversight, the GAO established
two fictitious DME companies–one in Virginia and one in
Maryland–and submitted incomplete or false information about those
companies. But both companies were approved for Medicare billing
privileges “despite having no clients and no inventory,” the
GAO said.

CMS’ National Supplier Clearinghouse, the contractor responsible
for verifying that potential suppliers meet Medicare enrollment
standards, conducted a “limited verification” of the phony
companies and sham contracts, the report said. Despite on-site
visits and an initial denial of the applications, the contractor
ultimately did not detect that the companies were phony.

“We believe that, had our operation continued successfully, we
could have fraudulently billed Medicare for substantial
sums–potentially reaching millions of dollars,” the GAO said in
its report.

CMS recently awarded Palmetto GBA a continuing contract to act
as the NSC for one more year with four additional one-year options.
Palmetto has held the NSC contract since 1993. (See HomeCare Monday, July 28.)

Michael Reinemer, vice president of communications and policy
for the American Association for Homecare, said the GAO’s findings
should come as no surprise to the HME industry, where stakeholders
have complained for years about the lack of government policing in
the areas of fraud and abuse.

“Nothing was new. There were no surprises,” Reinemer
said of the report. “CMS has obviously not effectively used
its ample anti-fraud authority,” he said.

Following the national media attention brought by Associated
Press reporter Hope Yen’s Aug. 3 story on the GAO report,
Reinemer sent Yen a letter emphasizing the relatively small role
DMEPOS plays in Medicare spending and decrying CMS’ claims that it
is doing everything in its power to combat fraud and abuse.

“Our industry of course has zero tolerance for
fraud,” Reinemer wrote, noting that of the reported $70
billion in improper Medicare billing every year, $700 million–1
percent–comes from DME.

“Moreover, what is rarely addressed in the news coverage
is the fact that criminals allowed into Medicare have tainted the
entire durable medical equipment sector, the vast majority of which
is law-abiding and provides extremely cost-effective care for
seniors and people with disabilities who require medical devices,
services, and therapies in their homes,” Reinemer wrote.

According to Rose Schafhauser, executive director of the Midwest
Association of Medical Equipment Suppliers–which carried a strong
response to the GAO’s findings in its newsletter last week–the
report “shines a light on the flawed processes” of
CMS.

”For years, this industry has provided CMS with comments
on how to better detect fraud with one being more accountability of
CMS on their site surveys prior to and immediately after awarding a
supplier number. Site visits are done by a subcontractor for the
NSC, [and] there has been case after case of inexperienced
surveyors conducting these visits along with several
inconsistencies between surveyors,” said Schafhauser, who
also serves on the board of the NSC Advisory Committee.

The GAO investigation was conducted at the request of the Senate
Homeland Security and Governmental Affairs Subcommittee on
Investigations. Sen. Norm Coleman, R-Minn., the subcommittee’s
ranking member, told the AP the sting operation “proves
that there are gaps in the system and that scam artists can
exploit–and are exploiting–those gaps.”

Last month, a bipartisan report by the same Senate subcommittee
found that suppliers collected as much as $93 million in fraudulent
Medicare claims for DME based on prescriptions from dead
doctors.

On reviewing the GAO report, CMS acknowledged that the covert
tests “illustrate gaps in oversight that still require
improvement,” the GAO said. CMS has said that mandatory accredition
for DMEPOS suppliers, along with revised rules prohibiting the use
of cell phones and pagers as primary contact telephone numbers,
will aid in reducing fraud.

But the GAO warned that efforts by CMS to address the issue
“will only be successful if those tasked with ensuring compliance
exercise due diligence when conducting screenings and
inspections.

“Our covert tests clearly demonstrate that a simple peperwork
review is not sufficient. Unless CMS and its contractors scrutinize
suppliers to ensure that they are responsible, legitimate
businesses, DMEPOS fraud will continue to cost taxpayers billions
of dollars each year.”

To view the GAO report, click here.

To report suspected Medicare fraud, contact the Office of
Inspector General by calling 800/HHS-TIPS (800/447-8477); emailing
[email protected]; faxing 800/223-8164 (no more than
10 pages) or mailing the Office of Inspector General, HHS TIPS
Hotline, P.O. Box 23489, Washington, D.C. 20026.