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Poor Oversight Squanders Medicare Money

August 5, 2008

Congressional investigators say the government is squandering millions of dollars by approving the fictitious sellers of wheelchairs, prosthetics and other medical supplies to submit reimbursement claims with only limited review.

The Government Accountability Office conducted the study, which followed up on oversight gaps that have plagued the Centers for Medicare and Medicaid Services since at least 2005.

During the past year, the investigation found that CMS approved two companies for Medicare billing privileges that the GAO had set up as sham businesses. The companies did not have clients or medical inventory to sell prospective Medicare patients.

It’s estimated roughly $1 billion of the $10 billion in annual Medicare payments the government makes for medical equipment are later deemed improper.

These fake suppliers, based in Maryland and Virginia, won privileges even though GAO investigators deliberately gave the government sketchy information and false documents. They tried to cast the companies in a bad light.

“This sting operation proves that there are gaps in the system and that scam artists can exploit – and are exploiting – those gaps,” said Minnesota Sen. Norm Coleman, the top Republican on the Senate Homeland Security and Governmental Affairs subcommittee that requested the report.

The center agreed there were problems with its enrollment procedures, upon hearing the findings. The agency said it recently put in place new standards that require medical suppliers to be certified. The goal is to help ensure medical suppliers meet quality standards before they receive Medicare billing privileges.

Other changes include requiring suppliers to keep support paperwork from doctors, limiting the use of cell phones and pagers as a supplier’s primary business number, and setting up a new competitive bidding process for medical equipment.

Investigators said CMS had made promises since at least 2005 to fix problems in its supply program and achieved only limited success.

The GAO said the government’s approval of their two sham companies was alarming because once a supplier attains Medicare billing privileges; it easily can get a doctor’s ID code fraudulently and begin submitting claims.

“If real fraudsters had been in charge of the fictitious companies, they would have been clear to bill Medicare from the Virginia office for potentially millions of dollars worth of nonexistent supplies,” according to the GAO report.

Investigators wrote, the new oversight procedures “will only be successful if those tasked with ensuring compliance exercise due diligence when conducting screenings and inspections”.

During December 2006, another report by the Health and Human Services Department found almost one-third of the 1,581 medical suppliers it visited in south Florida did not have an office at the business address they provided Medicare. The businesses had submitted claims for hundreds of millions of dollars.

The GAO cited several recent fraud cases to highlight the problem, including a Florida businessman who submitted claims from three fake medical supply companies in excess of $5.5 million from October 2006 through March 2007. He received $77,000 from Medicare.

Another alarming example is a company who used a utility closet as its address; HHS investigators found buckets of sand mix and road tar, but no medical files, office equipment or telephone. Upon further investigation, it was found the owner also stole personal ID numbers from doctors. He was sentenced to 37 months in prison for conspiracy to commit health care fraud and made to forfeit his Miami home and Rolls Royce.

The GAO study is the latest to detail potential fraud and waste in the billion-dollar government-run health program for the elderly and disabled. Last month, a bipartisan report by the same Senate subcommittee found that medical suppliers collected as much as $93 million in fraudulent Medicare claims based on prescriptions from dead doctors.




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