New DME Suppliers on the Hot Seat for Fraud Investigations

CMS has durable medical equipment (DME) suppliers at the top of its list of potential fraud offenders and has openly said that it will be focusing on those suppliers when investigating fraud. But if CMS really wants to curtail fraud and abuse from Medicare suppliers of durable medical equipment, prosthetics, orthotics and supplies (DMEPOS), the Office of Inspector General (OIG) says that it needs to crack down even harder, according to a recently released report.

 In this most recent report on DME, OIG studied 229 new suppliers during their first year of enrollment in Medicare. And OIG discovered that 26 percent of high- and medium-risk suppliers of durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) and 2 percent of lower-risk suppliers required CMS enforcement actions, such as CMS either revoked the new DME supplier’s billing privileges or placed them on prepayment claims review.

 Thirteen percent of high- and medium-risk suppliers and four percent of low- or limited-risk suppliers left out ownership or management information on their applications. OIG’s public record review revealed that many suppliers left of the name of at least one owner or manager and OIG also detected that this information went undetected for over a year in 11 out of 20 of these cases.

 Also missing was information about criminal histories or adverse legal actions that was left out by four percent of high- or medium-risk suppliers. Examples of omissions include convictions for insurance fraud, theft by deception, and felony aggravated battery.

 OIG found that although the contractor responsible for enrollment of new DMEPOS suppliers conducted post-enrollment visits to new enrollees within the time required by CMS, suppliers had already received Medicare payments. Some of these were very significant payments, as OIG cited as an example one supplier who received close to $800,000 from Medicare before that contractor made its first post-enrollment site visit.

 Now, this isn’t to say that CMS isn’t doing anything to fight these problems with new DME suppliers. In 2010, the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148) strengthened the enrollment-screening process for all Medicare, Medicaid, and Children’s Health Insurance Plan providers, including DMEPOS suppliers. PPACA makes available an additional $350 million over 10 years to ramp up anti-fraud efforts, including increasing scrutiny of claims before they have been paid, investments in sophisticated data analytics, and more “feet on the street” law enforcement agents and others to fight fraud in the health care system.But clearly, the changes instituted by PPACA are not, by themselves, enough to combat the problem. CMS needs to be doing more to follow up.

In a recent fact sheet, CMS indicated that it is implementing new, stricter requirements for DME suppliers and that it plans to expand the DME Competitive Bidding program to an additional 91 areas of the country, including 21 areas that are the result of an expansion of DME competitive bidding under PPACA.  By 2013, CMS has indicated that the program will cover 100 areas of the country, and over 18 million Medicare fee-for-service beneficiaries living in these areas should save money through this new program, while continuing to have access to quality medical equipment from accredited suppliers they can trust.  CMS believes that the programwill save the Medicare program and beneficiaries approximately $28 billion during the next ten years, including more than $17 billion in savings for Medicare, and over $11 billion for beneficiaries as a result of lower coinsurance and premium payments.

 To close gaps that allow new suppliers to receive reimbursement before an initial site visit, OIG recommended to CMS that post-enrollment site visits be conducted even earlier in the process. The organization also recommended that appropriate action be taken in situations in which suppliers omit information on their applications.

 OIG indicated that it will forward to CMS the names of those suppliers that were identified as having either omitted the names of owners or managers or omitted information regarding the criminal histories of owners or managers and any adverse legal actions taken against these individuals, so that CMS can then determine whether the omissions were intentional and whether further action is needed.

 OIG requested that, in the future, when CMS determines that suppliers have inappropriately omitted required information from their Medicare enrollment applications, CMS should refer these individuals and suppliers to OIG for (if warranted) permissive exclusion.