Reducing Fraud with More Stringent Medicare Standards
By Walter Gorski

A report calling for more stringent enrollment standards and enhanced screening to reduce fraud among DMEPOS suppliers was recently issued by the Government Accountability Office (GAO).

The report attributes the majority of the ongoing difficulties with fraudulent DMEPOS claims to insufficient oversight by the National Supplier Clearinghouse (NSC). The fraudulent billing that occurred for custom-fabricated orthotics and prosthetics in Florida in 2003 and 2004 is also addressed in the report.

These findings bolster CMS's efforts to develop and implement new quality standards and mandatory accreditation as called for by the Medicare Modernization Act of 2003 (see "From the Hill," November 2005 O&P Almanac).

According to the 53-page report, the 21 quality standards Medicare has in place—and the NSC is charged with enforcing—lack the strength to regulate DMEPOS suppliers sufficiently, making it easy for dishonest individuals to submit fraudulent claims.

In an April 2004 hearing before the Senate Finance Committee, a woman who pleaded guilty to Medicare fraud explained how she established a counterfeit business with only $3,000, despite lacking the experience or expertise necessary to maintain a genuine facility.

More careful oversight of suppliers by the NSC, including verification of state licensure and regular site visits, is necessary to curtail such activity, the GAO recommended.

The GAO study analyzed Medicare DMEPOS claims data collected in 2003 and 2004 in Florida, Illinois, Louisiana, and Texas. Those states were chosen because each has a state licensure requirement and a history of fraudulent claims.

In Florida, 73 suppliers billed Medicare for custom-fabricated orthotics and prosthetics without informing NSC of their intention to provide such items. This obvious lapse in oversight contributed to over $56.3 million in fraudulent O&P payments.

Those 73 unqualified suppliers were paid more than the total amount paid to the 262 suppliers who followed proper procedures. This widespread fraud led to a one-year increase of almost $75 million in O&P payments in Florida.

In Illinois and Texas, 28 suppliers were found to have been paid a total of $197,000 for custom-fabricated O&P without the proper qualifications.

The main weakness in NSC oversight of DMEPOS suppliers is a failure to verify a supplier's licensure and qualifications and the inability to perform consistent site visits.

The report estimates NSC neglected to perform on-site inspections of 605 suppliers in the four states studied, and the date of inspection was not recorded for an additional 3,079 facilities.

CMS must strengthen its standards for supplier enrollment and heighten scrutiny of suppliers and their facilities.

The report includes these eight recommendations:

• Check suppliers billing routinely for any items requiring licensure against items the suppliers declared they would supply. Suppliers billing for items not declared would result in the loss of supplier number.
• Require NSC to provide information from the billing history of a supplier prior to on-site inspection to determine if supplier inventory (or ability to provide inventory) meshes with submitted claims.
• Require NSC to evaluate the legitimacy of off-site inventory.
• Require inspectors to review patient records as part of site visits to determine whether documentation standards are followed.
• Oversee NSC to ensure that NSC is conducting on-site inspections and maintaining accurate data.
• Establish a minimum number of out-of-cycle inspections that NSC must perform each year.
• Develop standards that require suppliers to demonstrate their integrity and capability in alignment with standards for federal contractors.
• Revise current evaluation procedures to assess expected outcomes from the functions of SACU and NSC.

This report creates an opportunity for the O&P community to push for stricter qualified provider standards under the Benefits Improvement and Protection Act of 2000 (BIPA).

Such reports of fraud for O&P services could put us in an unfavorable position in the eyes of lawmakers and staff who do not know the real facts behind these inappropriate billings.

The GAO estimates that $900 million—or 10 percent—of the $8.8 billion in Medicare payments for DMEPOS items and services in FY 2004 was "inappropriate."

AOPA has launched a damage control effort to distinguish O&P from fraudulent DME providers culpable for much if not all of the fraud and abuse in Florida and other areas.

Walter Gorski is the director of legislative and regulatory affairs for the American Orthotic & Prosthetic Association (AOPA). AOPA is a not-for-profit trade association providing O&P-specific business services and products for professionals.Through government relations efforts, AOPA works to influence policies affecting the future of the O&P profession.

Questions? Call (471) 431-0876 or visit www.AOPAnet.org.

AOPA Government Affairs Assistant Nick Morse contributed to this article.