Oversight of Medicare Medical Equipment Suppliers Inadequate, GAO Report Finds

Medical equipment suppliers that defraud Medicare or operate without a proper license and are suspended from the program "have little trouble regaining billing privileges so they can do it all over again," according to a report released on Wednesday by the Government Accountability Office, the AP/Las Vegas Sun reports. According to the report, CMS paid medical equipment suppliers about $8.8 billion in fiscal year 2004 (Freking, AP/Las Vegas Sun, 10/12). Improper payments accounted for an estimated $900 million of the total, Senate Finance Committee Chair Chuck Grassley (R-Iowa) said.

CMS contracts with the National Supplier Clearinghouse to monitor medical equipment suppliers and ensure that they meet 21 specific standards before they can bill Medicare (CQ HealthBeat, 10/12). However, according to the GAO report, the standards are not adequate to eliminate fraud and many medical equipment suppliers that violate the standards resume participation in Medicare after only a short suspension.

Based on a review of records from Florida, Illinois, Louisiana and Texas by GAO investigators, the report found that 1,038 medical equipment suppliers were suspended from Medicare in 2003, in most cases for violations of multiple standards. As of May 31, 2004, 192 of those medical equipment suppliers had resumed participation in Medicare after an average suspension of three months, the report found. In the report, GAO investigators cited examples in which medical equipment suppliers were suspected of Medicare fraud "just months after they had been suspended" from the program, the AP/Sun reports.

According to the AP/Sun, the report did not indicate the overall financial impact of the Medicare fraud but recommended that Congress consider legislation to implement specific waiting periods before suspended medical equipment suppliers can resume participation in the program. "Suppliers whose previous performance was poor or that demonstrated a lack of integrity should not be allowed to quickly re-enter the program," the report said, adding, "Having weak standards for suppliers helps individuals intent on defrauding Medicare to obtain billing privileges and be paid for fraudulent claims" (AP/Las Vegas Sun, 10/12).

Grassley said that NSC should rely less on self-reported information from medical equipment suppliers and more on onsite inspections and that the group does not adequately check state licensure of suppliers. He added that he has asked HHS Secretary Mike Leavitt and CMS Administrator Mark McClellan to report to him "on exactly what is being done to address problems with the contractor and the resulting improper payments" (CQ HealthBeat, 10/12).

Grassley said, "Complacency by the watchdogs hurts both 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."

CMS said that NSC has begun to conduct more onsite inspections of medical equipment suppliers in "vulnerable areas of the country," such as Los Angeles and Miami. McClellan also said that CMS will seek regulatory changes to improve standards for medical equipment suppliers (AP/Las Vegas Sun, 10/12).

The report is available online. Note: You must have Adobe Acrobat Reader to view the report.