Medicare Compliance & Reimbursement

Audit suggests CMS contractor not up to speed in all fraud-fighting areas.

The Senate's top fraud hawk is now taking aim at the Centers for Medicare and Medicaid Services for not doing enough to protect the Medicare program from the fraudulent and abusive billing of prosthetics, orthotics and other medical equipment.

At Sen. Chuck Grassley's (R-IA) request, the Government Accountability Office audited CMS and the National Supplier Clearinghouse's efforts to deter the fraudulent billing practices that led to CMS improperly paying $900 million last year for durable medical equipment. The audit found that NSC, the contractor Medicare officials hired to verify that suppliers meet 21 standards, relies too heavily on self-reported information from suppliers rather than on-site inspections and fails to effectively check suppliers' state licensure.

In fact, CMS was unaware that NSC did not conduct all the required inspections and had suspended 605 on-site inspections, Grassley wrote in an Oct. 12 letter to Health and Human Services Secretary Mike Leavitt and CMS Administrator Mark McClellan. The GAO report also determined that NSC is not sufficiently reviewing DME suppliers' state licensure requirements.

As an example, Grassley points to a case in fiscal year 2004 where CMS improperly paid Florida suppliers more than $56.3 million for custom-fabricated orthotics and prosthetics--even though 46 of these suppliers were already under investigation for fraud. CMS paid these claims anyway and allowed the fraudulent suppliers to provide services to beneficiaries.

"Complacency by the watchdogs hurts both the taxpayers and beneficiaries. Money is wasted or lost to fraud, and quality of care can be jeopardized when products and services come from con artists rather than qualified suppliers," said Grassley, who is the Senate Finance Committee's chairman.

Responding to the report, McClellan said that over the last year, NSC has already begun surprise inspections in high-risk cities around the country, including Miami and Los Angeles. CMS is also pursuing regulatory changes to strengthen supplier standards, he said.

Waiting Periods For Billing Numbers Are Necessary

In its report, the GAO also suggested that Congress consider making non-compliant suppliers wait a specified period of time before it reissues the billing numbers. McClellan should improve the NSC's licensure verifica-tion and on-site inspections, and CMS needs to improve supplier standards and oversight of the NSC, the GAO said.

"Medicare dollars have gone to pay bills from suppliers that aren't properly licensed and who may be under investigation for fraud," Grassley said. "There are cases where Medicare has re-enrolled suppliers in its system even when those same suppliers had their billing privileges revoked by Medicare just three months previously."

In a letter last week, Grassley asked both Leavitt and McClellan to report to him on exactly what they are doing to address the problems with the contractor and the improper payments.