WASHINGTON — In yet another blistering report on the
Centers for Medicare and Medicaid Services, the Government
Accountability Office found that 84.3 percent of the contract
awards and modifications made by CMS in 2008 did not include a "key
control" that would be a barrier to fraud, waste, abuse and

"We found pervasive deficiencies in internal control over
contracting and payments to contractors … The contract-level
and overall control environment weaknesses we found significantly
increase CMS' vulnerability to improper or wasteful contract
payments," the GAO said in its report, "Centers for
Medicare and Medicaid Services: Deficiencies in Contract Management
Internal Control Are Pervasive
," released Nov. 24.

The report added: "CMS also needs to strengthen its overall
contract management control environment, including developing
strategic workforce plans, establishing appropriate contract
management oversight procedures and maintaining reliable management
information." The study was based on a sample of 102 contract
actions totaling $140.7 million in fiscal 2008.

In its report, the GAO said that among other things, CMS had
failed to audit costs, maintain sufficient oversight of
contractors, certify invoices and maintain adequate

The report springs off a 2007 study by the GAO that cited
numerous deficiencies in CMS' internal controls. That study
recommended several steps to remedy the problems, but in its new
report, the GAO noted that CMS had satisfactorily completed only
two of the nine proposed actions.

The report also said that in 37.2 percent of the CMS contracts
studied, three or more key controls — described as methods
and procedures to prevent and detect fraud and errors, such as
reviewing an invoice prior to payment — were lacking.

"We found that many of our findings in this review could be, at
least in part, attributed to CMS management's lack of attention
given to resolving the control deficiencies," the GAO said.
Consequently, the agency recommended another 10 actions CMS should
take to address the deficiencies, among them monitoring the results
of contract audits and evaluations and documentation of the
resolution of issues identified during contract reviews.

"The continuing weaknesses in contracting activities and limited
progress in addressing known deficiencies raise questions
concerning whether CMS management has established an appropriate
'tone at the top' regarding contracting activities," the report
concluded. "Until CMS management addresses our previous
recommendations in this area, along with taking action to address
the additional deficiencies identified in this report, its
contracting activities will continue to pose significant risk of
improper payments, waste, and mismanagement…

"It is imperative that CMS take immediate action to address its
serious contract-level control deficiencies and take action on our
previous recommendations to improve contract-level and overall
environment controls or CMS will continue to place billions of
taxpayer dollars at risk of fraud, or otherwise improper contract

CMS and HHS concurred with the recommendations, the GAO
reported, and described steps to implement them. However, CMS
disagreed with the GAO's assessment of its actions on the previous
report's recommendations and "stated that a reasonable amount of
time had not yet elapsed since the issuance of our November 2007
report to allow for corrective actions to have taken place."

The report bolstered the home medical equipment industry's
long-held position that CMS has allowed its contractors to be lax
in their actions, thus permitting unscrupulous operators to obtain
supplier numbers and commit fraud.

Wayne Stanfield, president and CEO of the National Association
of Independent Medical Equipment Suppliers, said recently that the
answer to fraud in the HME sector is simple: "Don't give supplier
numbers to crooks," he said, noting that without a supplier number
no one can bill Medicare, let alone get paid by the agency.

Yet, he pointed out, CMS' contractor for issuing supplier
numbers persists in giving them to those who do not even have
locations or adhere to the other federal standards governing HME
providers. "Why is the contractor still issuing supplier numbers
after 16 years when every single report that has come out has said
that they have failed [to curb fraud and abuse from the front
end]?" he asked.

View the target="_blank">full GAO report as a PDF, including the list of
corrective actions recommended for CMS to take.