CMS Overestimated Savings From Medicare Fraud Crackdowns

CMS' 2006 claims that it had reduced Medicare durable medical equipment fraud to about $700 million were based on improper auditing and fell short of the actual amount of fraud, according to a draft report by the HHS Office of Inspector General, the New York Times reports.

According to the report, at issue is the auditing on which CMS based its fraud reduction claims.

The Times reports that CMS hired AdvanceMed, a subsidiary of Computer Sciences Corporation, to audit Medicare DME spending.

The report states that CMS officials told AdvanceMed to ignore an auditing program -- called Comprehensive Error Rate Testing, or CERT -- that is required by law. Under CERT, claims are randomly selected and auditors compare invoices to physicians' records to ensure the spending was justified.

The report says that AdvanceMed was told by CMS officials to only examine the invoices from DME suppliers.

The report found that in fiscal year 2006, CMS failed to detect that more than one-third of spending on DME was fraudulent. Using data from other Medicare reports, the undiscovered fraud would equal about $2.8 billion, according to the Times.

The report found that AdvanceMed auditing revealed 7.5% of Medicare DME claims were not supported by documentation. The OIG report states that AdvanceMed would have discovered that 31.5% of claims were not supported by documentation had it used CERT.

The draft report was obtained by the Times and likely will be released within the next week. OIG might change or edit its findings before the release, according to the Times.

CMS has been "lobbying the inspector to play down the report's conclusions," according to the Times.

CMS spokesperson Jeff Nelligan said, "Allegations of manipulation of this error rate are preposterous," adding, "The agency has aggressively targeted fraud and improper payments in the DME program."

A CMS spokesperson said that the fraud figures should have been higher than $700 million, but agency officials say the $2.8 billion figure is unsupported, the Times reports.

Some lawmakers and congressional staff members say that the report raises concerns about the credibility of other CMS figures.

Senate Finance Committee ranking member Chuck Grassley (R-Iowa) said, "This is outrageous," adding, "If heads don't roll, you can't change the culture of this organization."

House Ways and Means Health Subcommittee Chair Pete Stark (D-Calif.) said, "To look better to the public, you cook the books," adding, "This agency is incompetent" (Duhigg, New York Times, 8/21).