Medicare
CMS's Program Safeguards Did Not Deter Growth in Spending for Power Wheelchairs Gao ID: GAO-05-43 November 17, 2004Medicare spending for power wheelchairs--one of the program's most expensive items of durable medical equipment (DME)--rose more than fourfold from 1999 through 2003, while overall Medicare spending rose by about 11 percent for the same period, according to the Centers for Medicare & Medicaid Services (CMS). This spending growth has raised concerns that some of the payments may have been improper. In May 2003, the Department of Justice indicted several power wheelchair suppliers in Texas alleged to have fraudulently billed Medicare. GAO was asked to examine the early and more recent steps taken by CMS and its contractors to respond to improper payments for power wheelchairs.
Starting in 1997 and over the next 6 years, CMS's contractors repeatedly communicated with CMS officials about escalating spending for power wheelchairs, and the contractors took steps to respond to improper payments for this Medicare benefit. In 1997, one contractor warned the agency about rapid increases in power wheelchair spending. In 1998 and in 2000, medical directors at the four contractors that pay DME claims suggested steps that could be taken and sought CMS's help in curbing power wheelchair spending growth. However, while contractors continued to conduct in-depth medical reviews of claims for power wheelchairs and to investigate cases of suspected fraud, CMS did not begin to assume an active role in addressing the identified problems until September 2003. Problems included Medicare supplier standards that did not provide adequate guidance on appropriate marketing practices and the predictability of visits to screen suppliers, which made it relatively easy for illegitimate suppliers to prepare for, and pass, site inspections. Since September 2003, CMS has taken steps to prevent fraudulent suppliers from entering the Medicare program, clarify coverage policy, ensure appropriate pricing for power wheelchairs, provide education on coverage rules, conduct detailed claims reviews where power wheelchair fraud was prevalent, and coordinate with law enforcement agencies. Although CMS has made progress, it has not implemented a revised form to collect better information for power wheelchair claims review, clarified guidance for suppliers on appropriate marketing, or required its contractor to routinely conduct less predictably timed site visits. Further, CMS's response to power wheelchair spending highlighted the lack of a process within the agency to rapidly address indications of potentially improper DME payments.
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Director: Team: Phone:GAO-05-43, Medicare: CMS's Program Safeguards Did Not Deter Growth in Spending for Power Wheelchairs
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Report to the Chairman, Committee on Finance, U.S. Senate:
United States Government Accountability Office:
GAO:
November 2004:
Medicare:
CMS's Program Safeguards Did Not Deter Growth in Spending for Power
Wheelchairs:
GAO-05-43:
GAO Highlights:
Highlights of GAO-05-43, a report to the Chairman, Committee on
Finance, U.S. Senate:
Why GAO Did This Study:
Medicare spending for power wheelchairs”one of the program‘s most
expensive items of durable medical equipment (DME)”rose more than
fourfold from 1999 through 2003, while overall Medicare spending rose
by about 11 percent for the same period, according to the Centers for
Medicare & Medicaid Services (CMS). This spending growth has raised
concerns that some of the payments may have been improper. In May 2003,
the Department of Justice indicted several power wheelchair suppliers
in Texas alleged to have fraudulently billed Medicare. GAO was asked to
examine the early and more recent steps taken by CMS and its
contractors to respond to improper payments for power wheelchairs.
What GAO Found:
Starting in 1997 and over the next 6 years, CMS‘s contractors
repeatedly communicated with CMS officials about escalating spending
for power wheelchairs, and the contractors took steps to respond to
improper payments for this Medicare benefit. In 1997, one contractor
warned the agency about rapid increases in power wheelchair spending.
In 1998 and in 2000, medical directors at the four contractors that pay
DME claims suggested steps that could be taken and sought CMS‘s help in
curbing power wheelchair spending growth. However, while contractors
continued to conduct in-depth medical reviews of claims for power
wheelchairs and to investigate cases of suspected fraud, CMS did not
begin to assume an active role in addressing the identified problems
until September 2003. Problems included Medicare supplier standards
that did not provide adequate guidance on appropriate marketing
practices and the predictability of visits to screen suppliers, which
made it relatively easy for illegitimate suppliers to prepare for, and
pass, site inspections.
Since September 2003, CMS has taken steps to prevent fraudulent
suppliers from entering the Medicare program, clarify coverage policy,
ensure appropriate pricing for power wheelchairs, provide education on
coverage rules, conduct detailed claims reviews where power wheelchair
fraud was prevalent, and coordinate with law enforcement agencies.
Although CMS has made progress, it has not implemented a revised form
to collect better information for power wheelchair claims review,
clarified guidance for suppliers on appropriate marketing, or required
its contractor to routinely conduct less predictably timed site visits.
Further, CMS‘s response to power wheelchair spending highlighted the
lack of a process within the agency to rapidly address indications of
potentially improper DME payments.
National Medicare Power Wheelchair Spending
[See PDF for image]
Note: Medicare spending includes federal payments and beneficiary cost
sharing.
[End of figure]
What GAO Recommends:
GAO recommends that CMS develop a process to analyze trends in Medicare
spending and develop and implement strategies to address possible
improper DME payments, implement revisions to provide clearer
information for power wheelchair claims adjudication, strengthen the
standards that suppliers must meet to obtain or retain their Medicare
billing privileges, and direct its contractor to routinely conduct site
visits to suppliers that are not predictable in their timing. CMS
agreed with the recommendations and noted that it has undertaken
several efforts to curb the abuse of the power wheelchair benefit in
the last year.
www.gao.gov/cgi-bin/getrpt?GAO-05-43.
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Leslie G. Aronovitz at
(312) 220-7600.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
Steps Taken by CMS and Its Contractors Did Not Deter Improper Payments
for Power Wheelchairs:
Recent Actions May Help Control Improper Power Wheelchair Payments:
Conclusions:
Recommendations for Executive Action:
Agency Comments:
Appendix I: Scope and Methodology:
Appendix II: DME Regional Carriers' Jurisdiction:
Appendix III: Internet Advertisement for Power Wheelchairs:
Appendix IV: Comments from the Centers for Medicare & Medicaid
Services:
Tables:
Table 1: Contractors' Key Safeguard Activities for DME Payments:
Table 2: Clinical Information Questions on the CMN, Power Wheelchair
Coverage Criteria, and CMN Limitations:
Table 3: CMS's Actions to Address Improper Payments for Power
Wheelchairs and Other DME Items:
Figures:
Figure 1: National Medicare Power Wheelchair Spending:
Figure 2: Medical Review Funding for Each $100 in Submitted Claims for
Palmetto and the Other Three DME Regional Carriers:
Figure 3: Regional Medicare Power Wheelchair Spending:
Abbreviations:
CMN: certificate of medical necessity:
CMS: Centers for Medicare & Medicaid Services:
DME: durable medical equipment:
HHS: Department of Health and Human Services:
MMA: Medicare Prescription Drug, Improvement, and Modernization Act of
2003:
NSC: National Supplier Clearinghouse:
OIG: Office of Inspector General:
SADMERC: statistical analysis durable medical equipment regional
carrier:
United States Government Accountability Office:
Washington, DC 20548:
November 17, 2004:
The Honorable Charles E. Grassley:
Chairman:
Committee on Finance:
United States Senate:
Dear Mr. Chairman:
In 2003, Medicare and its beneficiaries spent more than $1 billion for
power wheelchairs, one of the program's most expensive individual items
of durable medical equipment (DME).[Footnote 1] According to the
Centers for Medicare & Medicaid Services (CMS),[Footnote 2] the agency
responsible for managing the Medicare program, spending for power
wheelchairs rose more than fourfold from 1999 through 2003. In
contrast, CMS's records show that overall Medicare spending increased
by about 11 percent during the same period. Concerns have been raised
that the millions of dollars in increased spending for power
wheelchairs was fueled by improper payments to suppliers that submitted
fraudulent claims to Medicare. Improper power wheelchair payments can
be due to mistakes on the part of suppliers, beneficiaries, or
beneficiaries' physicians, fraudóintentional misrepresentation, and
abuse. For example, improper payments can occur when suppliers submit
claims on behalf of beneficiaries who do not meet the Medicare coverage
criteria. Such improper payments have been a problem for other DME
items paid by Medicare.[Footnote 3]
Medicare pays about $5,000 for each power wheelchairónot including
accessoriesómaking them an attractive target for those who would
defraud the program and its beneficiaries. In May 2003, the Department
of Justice began indicting some physicians and wheelchair suppliers in
Texas that were alleged to have billed Medicare for power wheelchairs
that beneficiaries never received.
Prompted by concerns about fraud and abuse in Medicare's power
wheelchair benefit, your committee held a hearing on this issue in
April 2004. We testified before your committee on how CMS and its
contractors that administer Medicare DME fee-for-service claims
addressed problems with power wheelchair payments.[Footnote 4] After
the hearing, you requested that we report in more detail on early and
more recent steps taken by CMS and its contractors to respond to
improper payments for power wheelchairs.
In preparing this report, we reviewed DME claims payment data from 1997
through 2003; DME claims payment data analysis reports from CMS's
statistical contractor; written policies and procedures from CMS and
its contractors, including the four DME regional carriers that process
power wheelchair claims; budget and expense data for contractor
activities; Medicare coverage policies, which explain the criteria for
covering power wheelchairs; and CMS's recent actions, including its
September 2003 action plan and its April 2004 initiatives, for
responding to payment problems with Medicare's power wheelchair
benefit. We also interviewed CMS and contractor officials, suppliers,
industry representatives, manufacturers, and representatives from
beneficiary advocacy groups. For DME claims payment data covering 1997
to 2003, we reviewed CMS and contractor internal control procedures to
help determine whether these data were accurate, timely, and complete.
We determined that these data were sufficiently reliable for addressing
the issues in this report. Contractor budget and expense data are self-
reported by CMS or the contractors, and we did not validate these data.
Appendix I includes a more detailed discussion of our scope and
methodology. We conducted our work from February through November 2004
in accordance with generally accepted government auditing standards.
Results in Brief:
Over a 6-year period beginning in 1997, CMS's contractors repeatedly
communicated with CMS about escalating spending for power wheelchairs
and conducted program safeguard activities to respond to improper
payments for this benefit, but CMS did not lead a coordinated effort to
address the underlying problems. For example, in 1997, a CMS contractor
tasked with analyzing Medicare data warned the agency about rapid
increases in power wheelchair spending. Further, in 1998, and again in
2000, reacting to the continuing rise in power wheelchair spending,
medical directors at the four DME regional carriers sent joint
memorandums to CMS officials outlining steps that could be taken and
sought CMS's support. For example, the medical directors expressed
concerns about the certificate of medical necessity (CMN)--a document
completed by physicians to provide information with which contractors
make payment decisions. They noted that the CMN for power wheelchairs
does not provide sufficient information for determining if claims for
power wheelchairs should be paid, but CMS did not respond by revising
the CMN at that time. During this period, contractors also took other
actions, including conducting medical reviews of claims and
investigating suspected instances of power wheelchair fraud. However,
the amount of funding CMS allotted to them for medical review declined
in relation to the rise in Medicare payments. Additional problems
related to the power wheelchair benefit surfaced during this period.
For example, inspectors had difficulty enforcing two of the broad
standards used to screen suppliers before they obtain or renew their
Medicare billing privileges. Because supplier standards do not
adequately describe what constitutes an acceptable physical location
and sufficient inventory, CMS's contractor had difficulty interpreting
and enforcing these two standards. In addition, Medicare standards for
suppliers do not address certain misleading or abusive marketing
practices that were a factor in increased utilization of power
wheelchairs in Texas. Finally, CMS officials did not address weaknesses
in the site visits that are used to assess suppliers' compliance with
Medicare standards. For example, the predictability of visits made it
relatively easy for illegitimate suppliers to prepare for, and pass,
site inspections.
Since September 2003, CMS has led an effort to improve the processes
for responding to improper payments for power wheelchairs. The agency's
actions are in different stages of completion and focus on preventing
fraudulent suppliers from entering the Medicare program; clarifying the
coverage policy; ensuring appropriate pricing for power wheelchairs;
educating physicians and beneficiaries on coverage rules; conducting
detailed claims reviews in Texas, where power wheelchair fraud was
prevalent; and coordinating with law enforcement agencies. Although CMS
has made progress, it has not completed a revision to the CMN,
clarified guidance on appropriate marketing to beneficiaries, or
directed its contractor to conduct less predictably timed site visits
to suppliers on a routine basis. Further, CMS's response to power
wheelchair spending highlighted the lack of a process within the agency
to rapidly respond to indications of potentially improper DME payments.
To help ensure that improper payments are identified and addressed in a
timely manner and that Medicare pays properly for power wheelchairs and
other items of DME, we recommend that the Administrator of CMS take
four actions. We are recommending that CMS (1) establish a process to
more quickly respond to indications of potentially improper DME
spending, (2) finalize revisions to the CMN to make it a more effective
tool for claims adjudication, (3) develop a more prescriptive supplier
standard on appropriate marketing practices, and (4) amend the supplier
inspection process to require that out-of-cycle inspections be
routinely conducted. CMS agreed with our recommendations and stated
that it has undertaken several efforts to curb the abuse of the power
wheelchair benefit in the last year.
Background:
Most Medicare beneficiaries purchase part B insurance, which helps pay
for certain physician, outpatient hospital, laboratory, and other
services; medical supplies and DME (such as oxygen, wheelchairs,
hospital beds, and walkers); and certain outpatient drugs. Medicare
covers a wide variety of DME items--including power wheelchairs.
Medicare covers power wheelchairs when they are medically necessary,
the beneficiary would be bed-or chair-confined without one, and the
beneficiary can operate a power wheelchair, but not a manual
wheelchair. Medicare part B pays for most medical equipment and
supplies based on a series of state-specific fee schedules. Medicare
pays 80 percent, and the beneficiary pays the balance, of either the
actual charge submitted by the supplier or the fee schedule amount,
whichever is less. If a beneficiary has supplemental insurance, the
insurance may cover the 20 percent co-payment.
CMS contracts with four insurance companies, referred to as DME
regional carriers, which review and pay claims submitted by outpatient
providers and suppliers on behalf of beneficiaries residing in specific
parts of the country.[Footnote 5] (See app. II for the states under
each DME regional carrier's jurisdiction.) For example, Palmetto
Government Benefits Administrators is responsible for processing claims
for beneficiaries permanently residing in region C, which encompasses
14 states, Puerto Rico, and the Virgin Islands. In 2002, Palmetto made
about two-thirds of Medicare's payments for power wheelchairs. In
addition, the DME regional carriers and other CMS contractors conduct
program safeguard activities to identify and respond to improper
payments for DME claims (see table 1). CMS oversees contractors'
activities through various means, such as performing yearly on-site
evaluations, reviewing planned activities, monitoring data and periodic
reports, and conducting regular conference calls with the contractors.
Table 1: Contractors' Key Safeguard Activities for DME Payments:
Responsibility: Analyze billing and report trends;
Contractor: Statistical analysis DME regional carrier (SADMERC);
Safeguard activities: The SADMERC conducts ongoing data analysis and
reporting for the DME regional carriers and CMS. Its reports are used
to identify trends in payment and potential fraud by item, geographic
region, supplier, and physician.
Responsibility: Analyze billing and report trends;
Contractor: TriCenturion, LLC[A] and DME regional carriers for regions
B, C, and D;
Safeguard activities: TriCenturion and the DME regional carriers for
regions B, C, and D analyze claims payment data to identify improper
payments and to investigate and develop fraud cases.
Responsibility: Review claims against coverage criteria;
Contractor: TriCenturion and DME regional carriers for regions B, C,
and D;
Safeguard activities: These contractors are responsible for conducting
medical reviews of submitted claims either before or after payment to
determine if the claims should be, or should have been, paid. Claims
are reviewed to see if the beneficiaries‘ conditions meet the Medicare
coverage criteria. If medical review identifies claims that should not
have been paid, the DME regional carrier that paid the claim is
responsible for collecting overpayments and educating the supplier
about appropriate billing.
Responsibility: Investigate potential fraud;
Contractor: TriCenturion and DME regional carriers for regions B, C,
and D;
Safeguard activities: These contractors investigate cases of suspected
fraud, which can involve conducting a more detailed analysis of claims
and other investigative steps. Once a case has been developed, it is
referred to the Department of Health and Human Services‘ (HHS) Office
of Inspector General (OIG) or to law enforcement for prosecution.
Responsibility: Enroll suppliers;
Contractor: National Supplier Clearinghouse (NSC);
Safeguard activities: CMS contracts with NSC to screen and enroll
suppliers and assign Medicare supplier numbers. NSC is responsible for
verifying information on supplier applications to ensure that suppliers
meet 21 supplier standards and that only valid suppliers bill Medicare.
NSC also maintains a central database of information on DME suppliers,
reenrolls active suppliers every 3 years, and assists with fraud and
abuse investigations.
Source: GAO.
[A] TriCenturion, LLC is a specialized program safeguard contractor
responsible for reviewing claims and investigating and developing fraud
cases for claims processed by region A.
[End of table]
These key safeguard activities help ensure that the more than 10
million claims the DME regional carriers process each year for power
wheelchairs and other items are properly paid. For example, medical
reviews can alert the DME regional carriers to potential cases of
fraudulent billing, which they may refer to their respective fraud
investigation units. The DME regional carriers use both automated
medical reviews and complex medical reviews to make decisions to pay or
deny claims based on coverage criteria. Automated medical reviews are
computerized checks of claims using available electronic information.
Complex medical reviews are conducted by clinical staff, such as a
nurse or doctor, who examine additional documentation provided by the
supplier or the beneficiary's physician.
A key responsibility of CMS and its contractors is constraining
improper program spending, while ensuring that beneficiaries who
qualify for items and services have access to them. In the case of
power wheelchairs, spending for claims processed by the DME regional
carriers rose markedly from 1997 through 2003, as shown in figure 1. A
number of factors other than improper payments may have contributed to
it, including increased demand due to technological improvements or a
growing number of beneficiaries who may meet the Medicare coverage
criteria.
Figure 1: National Medicare Power Wheelchair Spending:
[See PDF for image]
Note: Medicare spending includes federal payments and beneficiary cost
sharing.
[End of figure]
Steps Taken by CMS and Its Contractors Did Not Deter Improper Payments
for Power Wheelchairs:
Beginning in 1997 and continuing over the next 6 years, CMS's
contractors repeatedly communicated their concerns to the agency about
rapid increases in Medicare spending for power wheelchairs. One area of
concern focused on the CMN, which did not provide sufficient
information to adjudicate claims, according to medical directors.
During this period, the contractors, however, took a variety of steps,
including conducting medical reviews of claims and investigating
suspected instances of power wheelchair fraud. Other issues related to
improper payments for power wheelchairs surfaced concerning the process
for verifying the legitimacy of Medicare suppliers. However, CMS did
not begin to lead efforts to address the underlying problems
contributing to potentially improper payments for power wheelchairs
until September 2003.
CMS Did Not Act on Contractors' Early Warnings about Escalating Power
Wheelchair Payments:
In 1997, CMS's SADMERCóits data analysis contractoróalerted CMS and the
DME regional carriers about rapid increases in the spending for, and
utilization of, power wheelchairs in the Medicare program. As part of
its data monitoring efforts, the SADMERC noted that Medicare spending
for power wheelchairs had grown from almost $8 million in October 1995
to about $24 million in March 1997. For the next several years, the
SADMERC's quarterly reports continued to highlight rapid growth in
power wheelchair spending and utilization, identifying the states and
the suppliers for which claims volume was particularly high. Although
the SADMERC's reports were sent to agency officials responsible for
ensuring that program funds are safeguarded, CMS staff told us that
they did not take action because the DME regional carriers have primary
responsibility for responding to data indicating rapid increases in
utilization. CMS officials acknowledged that the agency was not
proactively identifying trends in data related to Medicare spending,
developing strategies to address concerns about possible improper
payments tied to spending increases, and implementing actions to
address these concerns.
After reviewing the SADMERC data in 1997, the four DME regional
carriers' medical directors found cause for concern and identified
possible approaches to address what they described as ìtremendous
growthî in Medicare power wheelchair spending. In a joint April 1998
memorandum sent to CMS officials, the medical directors requested CMS's
assistance in addressing power wheelchair spending growth and proposed
implementing changes in the coverage policy for power wheelchairs.
However, because of competing demands, the DME regional carrier medical
directors never completed the policy revision, nor did CMS direct them
to do so.
Power wheelchair fraud had already surfaced as a serious problem in
Florida and in other southeastern states. In 1996, Palmetto began a
major investigation of power wheelchair suppliers, during which it
uncovered fraudulent activities such as billing for services not
provided or not medically necessary, or delivering a less expensive
power-operated vehicle--commonly called a "scooter,"[Footnote 6] while
charging Medicare for a more expensive power wheelchair. Palmetto
developed a fraud alert for other contractors and investigative
agencies, which explained the schemes that suppliers were using to
obtain inappropriate payments for power wheelchairs. CMS issued the
fraud alert in June 1998.[Footnote 7] Fraud alerts are intended to
increase external awareness of potential vulnerabilities and help the
agency direct its efforts to address potential fraud. However, the June
1998 fraud alert did not prompt CMS to require the DME regional
carriers to specifically scrutinize power wheelchair claims or to
undertake any other efforts to identify fraudulent billing for this
item.
In June 2000, the DME regional carriers' medical directors sent a
second jointly signed memorandum to CMS officials. The medical
directors identified several problems tied to the provision of power
wheelchairs and again asked for CMS's assistance in addressing them.
Despite this second warning from the medical directors, CMS officials
did not begin to lead a coordinated effort to address escalating
spending for power wheelchairs until September 2003.
One problem cited in the June 2000 memorandum concerned the CMN, a
document that the physician is required to complete and sign to order a
power wheelchair for a beneficiary. DME regional carriers do not
routinely obtain beneficiaries' medical records when deciding whether
to pay wheelchair claims. Instead, DME regional carriers rely on
information contained on the CMN. However, the medical directors of the
four DME regional carriers noted that the CMN for power wheelchairs
does not ask about the beneficiary's functional abilities and
limitations in sufficient detail for them to be able to determine if
the Medicare coverage criteria are met. These criteria provide guidance
on whether and under what conditions Medicare will coveróand help pay
foróa power wheelchair for a beneficiary.[Footnote 8]
Our comparison of the CMN and the Medicare coverage criteria
highlighted limitations in this document. (See table 2, which provides
information on the clinical questions on the power wheelchair CMN, the
Medicare coverage criteria, and limitations of the CMN.) For example,
the CMN does not include a question about the beneficiary's capability
to safely operate the controls of a power wheelchair, although having
that capability is required by the Medicare coverage criteria. CMS did
not change its CMN in response to the medical directors' 2000
memorandum that outlined their concerns with the CMN. In written
comments on a draft of this report, CMS stated that it has a revised
CMN under development, which it anticipates having in use in
2005.[Footnote 9]
Table 2: Clinical Information Questions on the CMN, Power Wheelchair
Coverage Criteria, and CMN Limitations:
Information solicited by the CMN concerning medical necessity: What is
the estimated length of need for a power wheelchair?
What is the diagnosis code for patient's condition?
The Medicare coverage criteria for power wheelchairs[A]: The patient's
condition is such that a wheelchair is medically necessary;
Limitations of the CMN: The CMN asks for the patient's diagnosis, but
it does not ask for information on the extent or severity of the
patient's clinical condition, to indicate that a power wheelchair is
medically necessary.
Information solicited by the CMN concerning medical necessity: Does the
patient require and use a wheelchair to move around in his or her
residence?
The Medicare coverage criteria for power wheelchairs[A]: The patient's
condition is such that without the use of a wheelchair, the patient
would otherwise be bed-or chair-confined;
Limitations of the CMN: The CMN is more open to interpretation as to
when a patient would require a power wheelchair than the coverage
criteria.
Information solicited by the CMN concerning medical necessity: The CMN
does not solicit information about a patient's capability to safely
operate the controls of a power wheelchair;
The Medicare coverage criteria for power wheelchairs[A]: The patient is
capable of safely operating the controls for the power wheelchair;
Limitations of the CMN: The CMN does not ask if the patient is capable
of safely operating the controls for the power wheelchair.
Information solicited by the CMN concerning medical necessity: Is the
patient unable to operate any type of manual wheelchair?
Does the patient have severe weakness of the upper extremities due to a
neurologic, muscular, or cardiopulmonary disease/condition?
The Medicare coverage criteria for power wheelchairs[A]: The patient is
unable to operate a manual wheelchair;
Limitations of the CMN: There are no limitations because the CMN
elicits information that can be used to determine that the Medicare
coverage criteria concerning the patient's ability to operate a power
wheelchair are met.
Source: GAO analysis.
Note: Information from Coverage Issues Manual, rev. 36, Section 60-9,
www.cms.gov/manuals/06_cim/ci60.asp, accessed July 29, 2004; DME
regional carrier coverage guidance; and Department of Health and Human
Services, Centers for Medicare & Medicaid Services, Certificate of
Medical Necessity, Motorized Wheelchairs, DMERC Form 02.03A.
[A] A power wheelchair is covered when all the Medicare coverage
criteria are met.
[End of table]
The HHS OIG recently testified that the CMN for power wheelchairs,
which does not list coverage guidelines and is not completely
consistent with coverage policy, is one of the reasons that DME
regional carriers have paid claims for power wheelchairs for
beneficiaries who did not qualify for them under Medicare coverage
rules.[Footnote 10] In a related report, the OIG discussed the findings
of an independent medical review contractor, which the OIG retained to
review 230 medical records for beneficiaries for whom Medicare claims
for power wheelchairs were submitted in 2001.[Footnote 11] The
independent reviewer found that only 13 percent of the claims met the
Medicare coverage criteria for a power wheelchair. The reviewer also
found that 31 percent of the claims did not meet the Medicare coverage
criteria for any type of power wheelchair or scooter, while an
additional 45 percent did not meet the criteria for a power wheelchair,
but may have met the criteria for another type of wheelchair or
scooter.[Footnote 12] The HHS OIG recommended that CMS educate
physicians and beneficiaries about the Medicare coverage criteria for
power wheelchairs and develop coverage policy to include specific
information about the medical conditions for which Medicare will cover
different types of power mobility equipment.
Funding for Claims Review Declined as Power Wheelchair Spending Rose:
Because annual funding for the DME regional carriers to conduct medical
reviews declined, while power wheelchair spending rose, the DME
regional carriers' capacity to conduct medical review was affected. CMS
decreased the total funding for the medical review of claims submitted
to the four DME regional carriers by about 22 percent, comparing fiscal
year 1999 and fiscal year 2003.[Footnote 13] Consistent with the
decrease in funding, the number of claims for all items undergoing
complex medical review in regions B, C, and D fell by about 39 percent
from fiscal year 2001 through fiscal year 2003.[Footnote 14] These
funding decreases can weaken program safeguard efforts. For example,
three of the four DME regional carriers told us that conducting medical
review on a larger number of claims would allow them to better address
improper Medicare billing. Furthermore, Palmetto officials said that
the funding they received for medical review did not equip them to
handle the level and type of fraudulent power wheelchair billing that
was discovered in Texas in 2002. In addition, they told us that they
were also addressing fraudulent billing related to other items for
which they had made payments.
The decline in funding for medical review is even more dramatic when
weighed against claims submitted to the DME regional carriers. Overall,
the amount of medical review funding from CMS per $100 in total
submitted claims dropped over 50 percent from fiscal year 1999 through
2003 for total claims submitted to the four DME regional carriers.
Palmetto's funding dropped from about 8 cents per $100 in submitted
claims in 1999 to less than 4 cents per $100 in submitted claims in
2003.[Footnote 15] Compared to the other three DME regional carriers,
Palmetto was allocated less medical review funding per $100 in total
submitted claims each year from fiscal year 1999 through 2003, as
figure 2 shows.
Figure 2: Medical Review Funding for Each $100 in Submitted
Claims for Palmetto and the Other Three DME Regional Carriers:
[See PDF for image]
Note: Based on CMS data on medical review funding and submitted claims.
[End of figure]
Despite the relatively low funding allotted by CMS to Palmetto for
medical review, Palmetto more than tripled the number of power
wheelchair claims on which it conducted complex medical review from
fiscal years 2000 to 2002. Nevertheless, Palmetto still reviewed less
than 3 percent of its power wheelchair claims in 2002,[Footnote 16]
while it paid about $550 million to suppliers for this item.
The reduction in medical review funding for Palmetto is of particular
interest because Palmetto had already found significant power
wheelchair fraud in its region in the late 1990s. Further, from 1997
through 2003, spending growth for power wheelchairs in Palmetto's
region surpassed that of the three other regions combined, as shown in
figure 3.
Figure 3: Regional Medicare Power Wheelchair Spending:
[See PDF for image]
Note: Medicare spending includes federal payments and beneficiary cost
sharing.
[End of figure]
Palmetto Conducted Fraud Investigations in Texas to Address Improper
Payments:
In early 2002, Palmetto officials became concerned that some power
wheelchair suppliers in Harris County, Texas, and other parts of the
state had submittedóand Palmetto had paidófraudulent power wheelchair
claims. Specifically, a Palmetto fraud analyst had identified highly
aberrant billing behavior for one supplier, which he began to monitor.
Palmetto analysts also discovered that some suppliers were billing for
a power wheelchair or for power wheelchair accessories multiple times
on behalf of a single beneficiary.
Also in 2002, legitimate power wheelchair suppliers in Harris County,
Texas, became increasingly suspicious about the activities of some
suppliers in their area. For example, representatives of two suppliers
with whom we spoke learned that Medicare had paid other suppliers for
power wheelchairs that beneficiaries had never received. Suppliers told
us that they, other suppliers, and beneficiaries reported their
suspicions to the Palmetto fraud unit, the Medicare fraud hotline, the
Federal Bureau of Investigation, and the HHS OIG. The suppliers'
suspicions were supported by data indicating that in 2002, 14 percent
of Medicare's power wheelchair spending was for beneficiaries in Harris
County, although only 1 percent of Medicare beneficiaries lived in that
area in 2001. During January 2003, Palmetto referred 22 Harris County
area suppliers suspected of fraud in their billing for power
wheelchairs to the Dallas office of the HHS OIG for potential
prosecution.[Footnote 17] Palmetto officials estimated that at least
200 individuals in region C were involved in fraudulent power
wheelchair schemes and that Medicare had improperly paid at least $20
million in its region for fraudulent claims from fiscal year 2000
through fiscal year 2003.
Fraud Investigations and Supplier Inspections Highlighted Weaknesses in
Verifying the Legitimacy of Suppliers:
NSC, which is the CMS contractor responsible for DME supplier
enrollment, noted in 2002 that Texas had an unusually high number of
suppliers compared to the number of beneficiaries residing in the
state. At CMS's request, NSC stationed one of its inspectors in the
Harris County area to conduct supplier site visits. During these site
visits, which began in September 2002, NSC's inspector found instances
where suppliers lacked appropriate places of business or had moved
their businesses without giving NSC the required forwarding addresses.
Based on these findings, NSC's inspector subsequently led site visits
of every active supplier that had not been inspected since January 2003
in the Harris County, Texas, area. These out-of-cycle site visits of
about 1,300 suppliers were conducted from August 2003 through January
2004, and identified instances where suppliers did not meet required
Medicare standards, i[Footnote 18]ncluding lacking appropriate
inventory and insurance. Due to problems identified during regular and
out-of-cycle site visits, NSC revoked 367 supplier billing numbers for
power wheelchair suppliers in the Harris County, Texas, area, from
September 2002 through March 2004.
Many suppliers, whose billing numbers were later revoked, gained entry
into the Medicare program because of three weaknesses in the enrollment
process. First, NSC did not always verify submitted documents. NSC
officials told us that they had routinely accepted copies of key
documents, such as liability insurance forms, at face value without
verifying them. Failure to verify the accuracy of these documents had
enabled supplier applicants to submit falsified papers and still become
enrolled as Medicare suppliers. NSC officials indicated that they began
verifying suppliers' liability insurance forms in September 2003.
Second, the 21 standards that NSC uses to evaluate suppliers lack the
specificity needed to screen out illegitimate suppliers and do not
provide guidance on appropriate marketing practices. For example, the
supplier standards are not specific about the characteristics of a
physical location or the amount or type of inventory that would be
expected, given the items the supplier intends to provide to Medicare
beneficiaries. According to NSC staff, the broad language used in these
standards is difficult to interpret and enforce. CMS and NSC are in the
process of developing additional guidance concerning supplier
standards, including prescribing how existing standards on physical
location and inventory should be interpreted.
In addition, the 21 standards do not address certain misleading or
abusive marketing practices, including offers to routinely waive
beneficiaries' co-payments and certain types of personal solicitations.
Individuals with whom we spoke contended that misleading and abusive
marketing practices have escalated nationwide utilization of power
wheelchairs and were a factor in increased utilization of power
wheelchairs in Texas. For example, CMS officials told us of instances
of suppliers promising free power wheelchairs to beneficiaries in
Texas. We also found supplier advertisements on the Internet, in print,
and on television, that used the words ìfreeî or ìno cost to youî in
connection with beneficiaries receiving power wheelchairs. Appendix III
shows an example of an Internet advertisement that appears to illegally
offer to waive Medicare co-payments. [Footnote 19]CMS officials also
reported suppliers canvassed beneficiaries door-to-door in Texas to
solicit their business. By statute, Medicare suppliers are not
permitted to offer free wheelchairs by waiving beneficiary co-payments
routinely or as part of an advertisement or solicitation.[Footnote 20]
Furthermore, the Medicare statute generally prohibits suppliers from
canvassing beneficiaries by telephone to solicit their
business.[Footnote 21] While the 21 supplier standards reflect the
statutory restriction on telephone solicitations, they do not prohibit
door-to-door solicitation. Furthermore, the standards do not reflect
the prohibition on waiving co-payments routinely or as part of an
advertisement or solicitation. CMS has statutory authority to specify
additional supplier requirements, but has not used this authority to
modify the 21 standards to ensure that suppliers' marketing practices
are not misleading or abusive.[Footnote 22]
A third weakness in the enrollment process concerns the predictability
of NSC's initial and subsequent site visits to suppliers. CMS requires
NSC to conduct a site visit to assess compliance with the 21 supplier
standards before authorizing a new supplier to bill Medicare. NSC is
also required to conduct a site visit to assess the supplier's
continued compliance with the standards every 3 years, when suppliers
must reenroll in order to retain their Medicare billing privileges.
[Footnote 23]Because the timing of such visits is predictable, a
supplier that is intent on committing fraud can anticipate a site visit
and present an illusion of legitimacy for the purpose of passing the
initial inspection, fully understanding that an inspector is not likely
to return for 3 years, even if beneficiaries complain of potential
fraud. For example, the person convicted of Medicare fraud who
testified before your committee on April 28, 2004, stated that although
a fraud analyst contacted her after a beneficiary complained about
nondelivery of a power wheelchair billed to Medicare, no inspector
visited the facility. According to this individual, she was able to
bill Medicare $50,000 for power wheelchairs in the next month without
any further scrutiny, though her operation rarely delivered the power
wheelchairs billed.[Footnote 24]
The experience in Harris County, Texas, suggests that conducting out-
of-cycle site visits was valuable to uncover fraud and suppliers that
were not complying with required standards. Nevertheless, CMS does not
require NSC to routinely conduct out-of-cycle site visits, maintain
data on the number of out-of-cycle visits that NSC may choose to
conduct, or report on the results of such visits. According to an NSC
official, NSC may choose to conduct an out-of-cycle visit to a supplier
when a complaint is lodged or when data analysis of the supplier's
claims indicate that there is a potential problem. In its written
comments on a draft of this report, CMS reported that, in the summer of
2003, NSC had conducted over 600 out-of-cycle site inspections and had
found more than 300 suppliers out of compliance with supplier
standards.
Recent Actions May Help Control Improper Power Wheelchair Payments:
CMS has recently taken steps, including issuing an action plan in
September 2003 and announcing additional initiatives in April 2004,
that should strengthen the processes the agency and its contractors use
to identify and respond to improper payments for power wheelchairs and
other DME items. While some of these activities addressed fraud, abuse,
and utilization issues in Harris County, Texas, others focused on
clarifying the Medicare coverage criteria for adjudicating power
wheelchair claims. Still others were in response to requirements in the
Medicare Prescription Drug, Improvement, and Modernization Act of 2003
(MMA).[Footnote 25] As shown in table 3, CMS's and its contractors'
actions to respond to rising spending for power wheelchairs are in
different stages of completion and focus on supplier enrollment;
coverage policy; pricing; provider and beneficiary education; actions
to address concerns in Harris County, Texas; and law enforcement.
Table 3: CMS's Actions to Address Improper Payments for Power
Wheelchairs and Other DME Items:
Supplier enrollment; Action: Prevent fraudulent suppliers from
enrolling in Medicare for the purpose of receiving inappropriate
payments;
Explanation: CMS stated it would begin to aggressively scrutinize all
new applications; NSC stopped issuing new supplier numbers in Harris
County, Texas, in March 2003 and nationally in September 2003. NSC
began issuing supplier numbers again in November 2003;
Status[A]: Since October 2003, NSC had received over 5,800 new
applications from potential Medicare suppliers and had approved over
4,000 of these applications. During the same period, over 8,000
supplier numbers were inactivated and 4,000 were reactivated.
Supplier enrollment; Action: Identify and prevent inappropriate
enrollment of suppliers by providing a more detailed screening process,
allowing CMS the time needed to properly review applications, and
providing sanctions against suppliers abusing the enrollment process;
Explanation: CMS stated its intent to publish regulations to enhance
its ability to screen new supplier applications; MMA requires CMS to
establish quality and consumer service standards for suppliers. MMA §
302(a)(1), 117 Stat. 2223 (to be codified at 42 U.S.C. § 1395m(a)(20));
Status[A]: CMS plans to establish quality and consumer service
standards for suppliers by January 2005.
Supplier enrollment; Action: Clarify existing supplier enrollment
standards;
Explanation: CMS is currently working with NSC on clarifying the
existing 21 supplier standards;
Status[A]: CMS planned to implement the clarified 21 supplier standards
by October 2004.
Supplier enrollment; Action: Implement an accreditation process to
determine if suppliers meet quality standards, which MMA requires CMS
to establish;
Explanation: This action is required by MMA. MMA § 302(a)(1), 117
Stat. 2223 (to be codified at 42 U.S.C. § 1395m(a)(20));
Status[A]: The agency has not developed a schedule for this action.
Coverage policy for power wheelchairs; Action: Ensure national policy
accurately defines the conditions under which Medicare will cover
mobility products;
Explanation: CMS stated it would promulgate regulations revising
coverage policy for power wheelchairs and scooters. The coverage policy
will implement the MMA provision requiring medical providers to conduct
face-to-face examinations of patients before prescribing wheelchairs.
MMA § 302(a)(2), 117 Stat. 2224 (to be codified at 42 U.S.C. § 1395m(a)
(1)(E)(iv));
Status[A]: CMS developed a proposed rule that would require medical
providers to conduct face-to-face examinations of patients prior to
prescribing wheelchairs and scooters. In July 2004, the proposed rule
was under review; on August 5, 2004, it was published.
Coverage policy for power wheelchairs; Action: Accurately portray the
clinical conditions for which mobility products are reasonable and
necessary, and facilitate correct billing and payment for mobility
devices;
Explanation: CMS stated that DME regional carriers would immediately
adopt local medical review policies to educate suppliers and
beneficiaries on the Medicare coverage criteria for wheelchairs;
Status[A]: In December 2003, the DME regional carriers published an
educational bulletin to clarify coverage criteria. It explained how
claims would be reviewed and should be coded and how the beneficiary's
medical need for the item should be documented. This information has
since been removed from their Web sites, in response to concerns raised
by suppliers, beneficiary representatives, and industry groups. As part
of its April 2004 initiatives, CMS convened an interagency work group
to develop guidance on power wheelchair coverage policy.
Coverage policy for power wheelchairs; Action: When national billing
and utilization trends are identified, ensure that only claims that are
reasonable and necessary are paid and resolve national billing problems
consistently;
Explanation: CMS stated that the DME regional carriers would adopt a
consistent approach to medical review;
Status[A]: Each DME regional carrier has assured CMS that it is
consistently using local and national policy guidance when reviewing
claims.
Coverage policy for power wheelchairs; Action: Establish an interagency
work group, including clinicians from CMS, the National Institutes of
Health, the Department of Veterans Affairs, and the National Institute
on Disability and Rehabilitation Research;
Explanation: This group of clinicians will develop guidance on
implementing power wheelchair coverage policy;
Status[A]: CMS will provide for a public comment period, and then issue
guidance by the end of 2004.
Power wheelchair pricing; Action: Ensure that Medicare is paying
appropriately for power wheelchairs;
Explanation: CMS stated it would develop guidelines to implement its
payment rate adjustment process for most part B services (called
inherent reasonableness) and apply this process first to power
wheelchairs;
Status[A]: CMS officials indicated that the agency would issue
guidelines for implementing an inherent reasonableness process soon.
Once the guidelines are issued, CMS can use them to determine whether
payment amounts for power wheelchairs should be adjusted.
Power wheelchair pricing; Action: Develop a new set of power wheelchair
billing codes. The DME regional carriers use billing codes to identify
power wheelchairs and other items billed by a supplier on a
beneficiary's behalf;
Explanation: These codes will provide more specificity in
differentiating the various power wheelchairs on the market;
Status[A]: CMS will consult with other experts and solicit public
comments before finalizing its coding changes. When new codes are
established, CMS will develop payment ceilings for each new code.
Power wheelchair pricing; Action: Implement competitive bidding, and
include power wheelchairs in this process;
Explanation: MMA requires CMS to begin a Medicare competitive bidding
program for medical equipment and supplies in 2007. Under this program,
suppliers will compete by offering bids or amounts they will accept to
supply DME products to beneficiaries, and CMS will use the bid
information to set payments and choose suppliers (MMA § 302(b), 117
Stat. 2224);
Status[A]: CMS may consider including power wheelchairs in its
competitive bidding effort as early as 2007.
Provider and beneficiary education; Action: Provide physicians and
beneficiaries with the necessary information about Medicare coverage
policies for power wheelchairs;
Explanation: CMS stated that it would work with physicians to clarify
their prescribing responsibilities. It would also educate physicians,
beneficiaries, and suppliers on the Medicare coverage criteria for
power wheelchairs;
Status[A]: The DME regional carriers provided an online tutorial to
physicians and suppliers to better educate them about the power
wheelchair benefit. The DME regional carriers have also provided one-
on-one and group education to suppliers.
Focus on Harris County, Texas; Action: Address what CMS called
"rampant" fraud and abuse in the Harris County, Texas, area;
Explanation: CMS stated, effective with plan's issuance, all payments
for power wheelchairs in the Harris County, Texas, area would be
individually approved by CMS staff in the Dallas regional office;
Status[A]: CMS has continued to have medical professionals in its
Dallas regional office review all claims for power wheelchairs from
Harris County, Texas, that have been approved for payment, but
anticipated phasing out this review.
Focus on Harris County, Texas; Action: Ensure that all suppliers of
manual wheelchairs, scooters, and power wheelchairs in Harris County,
Texas, know and understand Medicare coverage rules;
Explanation: CMS stated that it would require all wheelchair suppliers
in the Harris County, Texas, area to attend mandatory training on
wheelchair coverage and medical review policies;
Status[A]: Palmetto and the CMS Dallas regional office sponsored
mandatory training for all Houston-based suppliers of manual
wheelchairs, scooters, and power wheelchairs, which was completed in
October 2003. Employees representing 328 suppliers attended the
training. CMS plans to take administrative action against, and has not
paid claims from, any of the 53 suppliers that did not attend.
Law enforcement; Action: Quickly identify and punish fraudulent
suppliers and work collaboratively with law enforcement to process
fraud cases;
Explanation: CMS, DME regional carriers, and law enforcement agencies
will collaborate to process criminal prosecutions. CMS also indicated
that it would use payment suspension against suppliers referred to law
enforcement, as needed, to prevent loss of Medicare funds;
Status[A]: Since September 2003, 179 fraud cases involving 296
suppliers had been referred to law enforcement officials. In addition,
the DME regional carriers had 121 active investigations under way.
Source: GAO analysis.
Note: Based on CMS's September 2003 action plan, April 2004
initiatives, and other status information provided by CMS.
[A] Information on status as of July 2004, unless otherwise noted.
[End of table]
Conclusions:
Fraud, abuse, and misapplication of Medicare rules in the program's
power wheelchair benefit highlight four areas of concern relating to
how CMS and its contractors safeguard Medicare program dollars. First,
while contractors repeatedly communicated concerns about potential
problems to the agency, CMS was slow to react to rising spending. Some
of this spending was on behalf of beneficiaries who met all of the
Medicare coverage criteria, but millions of dollars were spent on power
wheelchair claims submitted by suppliers intent on defrauding the
Medicare program. CMS's failure to take an early leadership role
underlines the need for a more proactive response by the agency in the
future when there appears to be disproportionate and suspicious
spending for DME items provided to Medicare beneficiaries.
A second area of concern centers on the CMN. CMS is in the process of
revising the CMN for power wheelchairs, but has not implemented a
version that provides sufficient information to allow DME regional
carriers to correctly adjudicate power wheelchair claims. Until it does
so, its DME regional carriers will continue to be hampered in their
efforts to properly pay power wheelchair claims.
Third, fraud that occurred among suppliers in Harris County, Texas,
highlights significant weaknesses in the supplier enrollment
processóespecially standards covering suppliers' physical locations,
required inventory, and marketing. Other than constraining suppliers'
communications with beneficiaries by telephone, the 21 supplier
standards do not provide guidance on appropriate marketing practices.
For example, they do not include language reflecting the statutory
provision that prohibits suppliers from waiving beneficiaries' co-
payments when offered as part of an advertisement or solicitation.
While CMS is working on more specific guidance relating to a supplier's
physical location and inventory, it has not modified the 21 supplier
standards to ensure that marketing practices are not misleading or
abusive. Such marketing practices include offering to waive
beneficiaries' co-payments, using the words ìfreeî or ìno cost to youî
in relation to provision of Medicare items to beneficiaries, and using
door-to-door solicitations.
Fourth, site visits, which can help ensure compliance with supplier
standards, are less effective in screening potential suppliers because
they are highly predictable. Despite evidence that out-of-cycle site
visits proved useful in identifying fraudulent suppliers in Harris
County, Texas, CMS does not require its contractor to conduct such site
visits on a routine basis across the country.
Recommendations for Executive Action:
To help ensure that improper payments are identified and addressed in a
timely manner and that Medicare pays properly for power wheelchairs and
other items of DME, we recommend that the Administrator of CMS take
four actions:
* Develop a process within CMS to focus on trends in Medicare spending
and disproportionate or suspicious Medicare payments; develop
strategies to address the trends that may indicate possible improper
payments for DME; and take timely action, when warranted.
* Implement a revised CMN that incorporates key elements of power
wheelchair coverage criteria to help DME regional carriers properly
adjudicate claims.
* Strengthen the standards for Medicare DME suppliers to include
prohibiting certain misleading or abusive marketing practices.
* In addition to conducting the currently required initial and
reenrollment site visits, direct NSC to routinely conduct out-of-cycle
site visits to suppliers that are suspected of billing improperly and
to maintain data on these visits and their results.
Agency Comments:
In its written comments on a draft of this report, CMS agreed with our
recommendations and stated that it had undertaken several efforts to
curb the abuse of the power wheelchair benefit in the Medicare program
within the last year. CMS mentioned its September 2003 power wheelchair
initiative, which focused on aggressive claims review, enforcement, and
supplier training, and its April 2004 initiative, which targeted
coverage, payment, and the quality of suppliers of power wheelchairs.
In response to the draft report's discussion on the decline in annual
funding for the DME regional carriers to conduct medical reviews, CMS
indicated that it agreed that funding had decreased when fiscal year
1999 is compared to fiscal year 2003. However, CMS noted that funding
had increased steadily before it began to decrease. In response to
CMS's comment, we revised the report to provide additional information
on funding changes from fiscal year 1999 to fiscal year 2003. CMS also
stated that it continues to request additional funding for Medicare
Integrity Program efforts and that legislative caps on that funding had
affected medical review spending. CMS was referring to funding for the
Medicare Integrity Program, which was provided by the Health Insurance
Portability and Accountability Act of 1996 (HIPAA).[Footnote 26]
Medicare Integrity Program activities include medical review of claims,
investigation of potential fraud cases, and provider education and
training to combat Medicare fraud, waste, and abuse. Beginning in
fiscal year 1997, HIPAA appropriated an increasing level of funding
through fiscal year 2003 and permanent funding at the 2003 level
thereafter.
CMS agreed with our recommendation that it develop a process to focus
on trends in Medicare spending and disproportionate or suspicious
Medicare payments; develop strategies to address the trends that may
indicate possible improper payments for DME; and take timely action,
when warranted. CMS indicated that it is building on its current
program integrity efforts to implement a new data-driven approach to
detect improper payments and potential areas of fraud and abuse in the
Medicare program. In response to our recommendation that CMS implement
a revised CMN for power wheelchairs, CMS stated that it anticipates
having a revised CMN in use in 2005, which it said should provide
useful information for more accurate and timely claims reviews. CMS
agreed with our recommendation on strengthening the standards for DME
suppliers by prohibiting certain misleading or abusive marketing
practices. The agency noted that it is examining whether its current
authorities allow it to address direct-to-consumer marketing beyond
telephone solicitations or if it needs to seek a legislative remedy to
amend the supplier standards to do so. However, CMS indicated that it
intended to further delineate appropriate marketing practices by DME
suppliers to beneficiaries. Finally, CMS agreed with our recommendation
to direct NSC to routinely conduct out-of-cycle site visits to selected
suppliers. CMS noted that NSC had conducted out-of-cycle site
inspections in 2003 and 2004, and the agency said that it has directed
NSC to continue these reviews in fiscal year 2005.
We have reprinted CMS's letter in appendix IV. CMS also provided us
with a technical comment, which we incorporated.
As agreed with your office, unless you publicly announce its contents
earlier, we plan no further distribution of this report until 30 days
after its date. We are sending copies of this report to the
Administrator of CMS, appropriate congressional committees, and other
interested parties. We will also make copies available to others upon
request. This report is also available at no charge on GAO's Web site
at http://www.gao.gov.
If you or your staff have any questions about this report, please call
me at (312) 220-7600 or Sheila K. Avruch at (202) 512-7277. Other key
contributors to this report are Sandra D. Gove, Joy L. Kraybill, Lisa
S. Rogers, and Craig Winslow.
Sincerely yours,
Signed by:
Leslie G. Aronovitz:
Director, Health Care--Program Administration and Integrity Issues:
[End of section]
Appendix I: Scope and Methodology:
We assessed the early and more recent steps taken by the Centers for
Medicare & Medicaid Services (CMS) and its contractors to respond to
improper payments for power wheelchairs. First, we obtained reports on
national and regional annual Medicare claims payment data for power
wheelchairs from 1997 through 2003 from the statistical analysis
durable medical equipment regional carrier (SADMERC). These annual
reports included the paid claims data for power wheelchairs with dates
of service during a calendar year. They included all paid claims data
received by the SADMERC during that calendar year through March 31 of
the next calendar year. We reviewed CMS and contractor internal control
procedures to help ensure that these data were accurate, timely, and
complete. We determined that these data were sufficiently reliable for
addressing the issues in this report.
We reviewed actions taken by the SADMERC in identifying claims payment
trends and possible improper payments and informing the other durable
medical equipment (DME) regional carriers and CMS. To do so, we
reviewed SADMERC reports from 1997 to 2003 sent to DME regional carrier
and CMS staff that contained information on power wheelchair billing
and interviewed SADMERC, DME regional carrier, TriCenturion, and CMS
staff about SADMERC activities.
We reviewed actions taken by DME regional carriers in responding to
possible improper payments and informing CMS about potential issues. We
reviewed DME regional carrier and CMS documents, including memorandums,
a fraud alert, reports related to power wheelchair fraud activities,
the certificate of medical necessity for power wheelchairs, the
Medicare coverage criteria, and CMS budget documents for fiscal year
1999 through fiscal year 2003. From the budget documents provided by
CMS and submitted claims information provided by the SADMERC, we
analyzed funding for claims review activities. Contractor budget and
expense data are self-reported by CMS and the contractors, and we did
not validate these data. We also interviewed DME regional carriers and
TriCenturion staff, including their medical directors, and CMS
headquarters and regional staff with responsibility for overseeing, or
budgeting for, DME regional carrier and TriCenturion activities.
To review steps taken by the National Supplier Clearinghouse (NSC), we
reviewed CMS and NSC documents, such as the 21 supplier standards and
correspondence from NSC highlighting problems with the supplier
standards. We also interviewed CMS and NSC staff about power wheelchair
supplier issues; on-site review activities, particularly in Harris
County, Texas; and potential weaknesses in supplier verification
activities.
We assessed the steps taken by CMS to respond to improper payments for
power wheelchairs by reviewing CMS's action plan to combat improper
payments for power wheelchairs; relevant sections of the Medicare
Prescription Drug, Improvement, and Modernization Act of 2003 and the
Social Security Act; and other documents mentioned above. We
interviewed CMS officials with responsibility for safeguarding DME
payments and overseeing SADMERC, DME regional carrier, TriCenturion,
and NSC activities. We also interviewed SADMERC, DME regional carrier,
TriCenturion, and NSC staff; supplier representatives; beneficiary
advocates; and industry representatives. The beneficiary advocates whom
we interviewed included members of the Independence Through Enhancement
of Medicare and Medicaid Coalition. In addition, we interviewed
clinicians from the University of Pittsburgh. We also interviewed
representatives of manufacturers, suppliers, and a trade association,
including representatives from Hoveround, Invacare, Pride Mobility
Products Corporation, the Power Mobility Coalition, and two suppliers
in Harris County, Texas. We also participated in three "listening
sessions" on February 24, March 31, and June 14, 2004, that were
organized by CMS staff so that they could hear the viewpoints of
suppliers, beneficiary advocates, and industry representatives on the
actions taken by CMS and its contractors to address power wheelchair
issues. We performed our work from February through November 2004 in
accordance with generally accepted government auditing standards.
[End of section]
Appendix II: DME Regional Carriers' Jurisdiction:
[See PDF for image]
[End of figure]
[End of section]
Appendix III: Internet Advertisement for Power Wheelchairs:
[See PDF for image]
Note: This advertisement was downloaded from a supplier's Web site on
April 24, 2004. The supplier has since withdrawn this advertisement
from its Web site.
[End of figure]
[End of section]
Appendix IV: Comments from the Centers for Medicare & Medicaid
Services:
DEPARTMENT OF HEALTH & HUMAN SERVICES:
Centers for Medicare & Medicaid Services:
Administrator:
Washington, DC 20201:
DATE: OCT 22 2004:
TO: Leslie G. Aronovitz:
Director, Health Care - Program Administration and Integrity Issues:
Government Accountability Office:
FROM: Mark B. McClellan. M.D., Ph.D.:
Administrator:
SUBJECT: Government Accountability Office (GAO) Draft Report, MEDICARE
CMS 's Program Safeguards Did Not Deter Growth in Spending for Power
Wheelchairs (GAO-04-1032):
The Centers for Medicare & Medicaid Services (CMS) would like to thank
the GAO for reviewing this area of the Medicare program and making
recommendations to assist CMS in further safeguarding the Medicare
Trust Funds. This has been an issue of importance to CMS and we have
undertaken several efforts to curb the abuse of the power wheelchair
benefit in the Medicare Program within the last year alone.
On September 9, 2003, CMS launched a power wheelchair initiative aimed
at aggressive review, enforcement, and training of suppliers. On April
28, CMS announced a three-pronged approach focused on coverage,
payment, and quality of suppliers of power wheelchairs. And most
recently, on August 27, CMS announced a renewed approach to tackling
Medicare fraud and abuse in more data-driven, analytical ways. The
recommendations made in this report confirm the need for the Agency's
newest effort and we look forward to working collaboratively with the
GAO in the future to further address Medicare fraud and abuse issues.
Medicare covers power wheelchairs under limited circumstances;
specifically, when a beneficiary is 1) bed or chair confined; 2) unable
to operate a wheelchair manually; 3) able to safely operate a motorized
wheelchair; and 4) usually totally non-ambulatory. Medicare spending on
power wheelchairs grew dramatically since 1997, increasing from $145
million to over $1.2 billion in 2003. Between 1999 and 2003 spending on
power wheelchairs increased more than 300 percent compared to an
increase in total Medicare spending of slightly over 11 percent.
The CMS initially addressed this rapid growth in spending through
developing and operationalizing a 10-point plan called "Operation
Wheeler Dealer." Operation Wheeler Dealer implemented a coordinated
approach to enrolling suppliers, enforcing coverage rules, identifying
and prosecuting fraud, and educating suppliers, physicians and
beneficiaries. This coordinated approach was designed to assure
appropriate payments with little or no impact on access to care.
The CMS appreciates the level of effort that the GAO expended
conducting this review. We look forward to working collaboratively with
the GAO to protect the Medicare Trust Funds in the future. Attached are
CMS' specific comments to GAO's report and recommendations.
Attachment:
Centers for Medicare & Medicaid Services' Comments to the GAO Draft
Report: MEDICARE. CMS's Program Safeguards Did Not Deter Growth in
Spending for Power Wheelchairs (GAO-04-1032):
The GAO report states "CMS decreased the total funding for the medical
review of claims submitted to the four durable medical equipment (DME)
regional carriers by about 22 percent, comparing fiscal year 1999 and
fiscal year 2003." Although this may technically be the case, it is
important to note that durable medical equipment regional carrier
(DMERC) medical review funding steadily increased from fiscal year
1999-2002. Beginning in 2002 there was a decrease in funding as a
result of CMS' decision to move work to the Region A DMERC program
safeguard contractor and as a result of the Medicare Integrity Program
funding being held static since 2003, as prescribed in legislation. The
CMS continues to request additional funding for future Medicare
Integrity Program efforts.
GAO Recommendation:
CMS should develop a process within CMS to, focus on trends in Medicare
spending and disproportionate or suspicious Medicare payments, develop
strategies to address the trends that may indicate possible improper
payments, for DME, and take timely action, when warranted.
CMS Response:
The CMS agrees with this recommendation and is building on its current
program integrity efforts by implementing new steps to analyze program
data and detect improper payments and potential areas of fraud and
abuse in the Medicare program quickly and accurately. Our most recent
efforts include the recent opening of a Los Angeles satellite office
that will focus on identifying fraud and abuse in Southern California,
a hot spot for those who would defraud the Medicare program.
GAO Recommendation:
CM.S should implement a revised CMN that incorporates key elements of
power wheelchair coverage criteria to help DME regional carriers
properly adjudicate claims.
CMS Response:
As the report correctly noted, the revised Certificate of Medical
Necessity (CMN) is currently in the clearance process; it is
anticipated that it will be available for use in 2005. While we
recognize that no form can fully replace the seasoned, clinical review
of medical records, the revised CMN will provide useful information to
allow a more accurate and timely review of claims.
GAO Recommendation:
CMS should strengthen the standards for Medicare DME suppliers to
include prohibiting certain misleading or abusive marketing practices.
CMS Response:
The CMS agrees and is exploring whether or not our current authorities
allow us to effectively address direct-to-consumer marketing beyond
telephone solicitations. Currently, in the Social Security Act,
Congress implemented Section 1834(a)(17)-Prohibition Against
Unsolicited Telephone Contacts by Suppliers. If it is determined that
CMS cannot reasonably utilize this authority beyond telephone
solicitations, we would consider requesting a legislative remedy that
would aid CMS in pursuing an amendment to the supplier standards. It is
our intentions to further delineate appropriate marketing practices by
DME Suppliers to Medicare beneficiaries.
GAO Recommendation:
In addition to conducting the currently required initial and re-
enrollment site visits, CMS should direct the NSC to routinely conduct
out-of-cycle site visits to suppliers that are suspected of billing
improperly and to maintain data on these visits and their results.
CMS Response:
The CMS agrees with the recommendation, and has already taken steps to
implement this recommendation as detailed below.
The National Supplier Clearinghouse (NSC) initiated out-of-cycle on-
site reviews in the summer of 2003 and found this to be an effective
practice. During this time, over 600 suppliers received out-of-cycle
site inspections that resulted in finding 306 suppliers out of
compliance with the supplier standards. As a result of this increased
action, the number of revocations processed by the NSC almost doubled
over a period of only four months. The NSC has continued this practice
with field reviews in fiscal year 2004, conducting over 400 out-of-
cycle site inspections targeted specifically at high volume, non-chain
suppliers. These suppliers have been identified through our data
analysis as those who have submitted claims in the top five policy
groups, or suppliers that have common ties to suspected fraudulent
billing companies, as well as other suspect suppliers. The CMS has
directed the NSC to continue conduct these out-of-cycle reviews in
fiscal year 2005.
[End of section]
FOOTNOTES
[1] Medicare defines DME as equipment that may be prescribed by a
physician for a patient's use for an extended period. This equipment
serves a medical purpose, can withstand repeated use, is generally not
useful in the absence of an illness or injury, and is appropriate for
use in the home. 42 U.S.C. ß 1395x(n) (2000).
[2] Until July 1, 2001, CMS was called the Health Care Financing
Administration. We use the name CMS throughout this report.
[3] For example, see Janet Rehnquist, Inspector General, Department of
Health and Human Services, Medicare Reimbursement for Medical Equipment
and Supplies, testimony before the Senate Committee on Appropriations,
Subcommittee on Labor, Health and Human Services, and Education, 107th
Cong., 2nd sess., Washington, D.C., June 12, 2002.
[4] GAO, Medicare: CMS Did Not Control Rising Power Wheelchair
Spending, GAO-04-716T (Washington, D.C.: Apr. 28, 2004).
[5] The four DME regional carriers are HealthNow New York, Inc. (region
A), AdminaStar Federal (region B), Palmetto Government Benefits
Administrators (region C), and CIGNA HealthCare Medicare Administration
(region D). In this report, "states" refers to the 50 states, the
District of Columbia, U.S. territories, and the Commonwealth of Puerto
Rico.
[6] Scooters are used by patients who are unable to walk and are unable
to operate a manual wheelchair. A scooter has three or four wheels, is
powered by an electric motor, steered by means of a tiller, and
appropriate for indoor use. Scooters are more expensive than manual
wheelchairs, but less expensive than power wheelchairs.
[7] Centers for Medicare & Medicaid Services, Unrestricted National
Medicare Fraud Alert, UMFA 9802 (Baltimore, Md.: June 9, 1998, revised
Oct. 6, 1998).
[8] Items or services that are not reasonable and necessary for
diagnosis, treatment, or improvement of a bodily function, or are
otherwise excluded by statute, are not covered by Medicare. 42 U.S.C. §
1395y(a) (2000).
[9] A CMS official told us that the revised CMN would incorporate
information collected previously on three separate CMNs for manual
wheelchairs, scooters, and power wheelchairs. He stated that the
revised CMN would be structured to encourage the physician to consider
the least costly, medically acceptable wheelchair or scooter for the
beneficiary.
[10] Department of Health and Human Services, Office of Inspector
General, Medicare: Reimbursement for Power Wheelchairs and Scooters,
Testimony of Dara Corrigan, Acting Principal Deputy Inspector General,
before the U.S. Senate Committee on Finance, April 28, 2004.
[11] Department of Health and Human Services, Office of Inspector
General, Medicare Payments for Power Wheelchairs, OEI-03-02-00600
(Washington, D.C.: April 2004).
[12] For 11 percent of the claims, due to insufficient documentation,
the reviewer could not determine whether the beneficiaries' conditions
met coverage criteria.
[13] Our data include funding for medical review activities performed
by the four DME regional carriers and, starting in fiscal year 2001,
the program safeguard contractor for region A. From fiscal year 1999
through fiscal year 2001, total funding for the medical review of
claims submitted to these carriers increased from $10,806,376 to
$12,388,461. However, total funding for the medical review of claims
decreased from $9,472,076 in fiscal year 2002 to $8,432,894 in fiscal
year 2003.
[14] Regions B, C, and D conducted complex medical reviews on about
297,600 claims for all items in fiscal year 2001 and on about 180,600
claims in fiscal year 2003. This information was not available for
region A.
[15] In fiscal year 2003, Palmetto received $3.1 million for medical
review activities--about 15 percent less than it received in 1999.
[16] Palmetto reviewed about 4,400 of the approximately 158,000 claims
submitted for power wheelchairs in 2002.
[17] Palmetto conducted additional investigations and made referrals
throughout 2003, and, as of August 18, 2004, investigations were
continuing.
[18] Suppliers must meet 21 standards. 42 C.F.R. § 424.57(c)(1) - (21)
(2003) (in effect since December 11, 2000). Suppliers must be in
compliance with these standards in order to obtain and maintain their
Medicare billing privileges.
[19] The supplier has since withdrawn this advertisement from its Web
site.
[20] 42 U.S.C. § 1320a-7a(a)(5) and (i)(6)(A) (2000). As a result,
suppliers soliciting Medicare business by advertising that they can
provide a beneficiary with a free wheelchair may be subject to
penalties if they actually provide the beneficiary with a wheelchair at
no cost.
[21] 42 U.S.C. § 1395m(a)(17) (2000).
[22] 42 U.S.C. § 1395m(j)(1)(B)(ii)(IV) (2000).
[23] CMS does not require NSC to conduct a site visit to every
supplier. Suppliers that are Medicare-enrolled entities (hospitals,
skilled nursing facilities, home health agencies, physicians, and
ambulatory surgical centers) and existing supplier chains with 25 or
more locations are excluded from site visits.
[24] This individual reported that prior to submitting additional power
wheelchair claims, she did mail a refund check to Medicare for the
power wheelchair that the beneficiary complained about not receiving.
[25] Pub. L. No. 108-173, § 302, 117 Stat. 2066, 2223.
[26] Pub. L. No. 104-191, sec. 201(b), § 1817(k)(4), 110 Stat. 1936,
1995.
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