HHS Inspector General Report Finds Agency Significantly Underestimated Rate Of Improper Payments For Medicare Durable Medical Equipment

Main Category: Medicare / Medicaid / SCHIP
Also Included In: Medical Devices / Diagnostics
Article Date: 27 Aug 2008 - 9:00 PDT

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HHS Inspector General Daniel Levinson on Monday released a federal audit that found that Medicare officials underestimated the amount of incorrect payments for durable medical equipment in 2006 and that the miscalculation was caused by the agency's failure to have auditors follow CMS' policy for checking claims, the Wall Street Journal reports (Zhang, Wall Street Journal, 8/26). The HHS audit reviewed a sample of 363 Medicare DME claims to determine whether auditing contractor AdvanceMed had found all improper payments. CMS had estimated a payment error rate of 7.5%, or about $700 million in improper payments. The HHS audit found an "error rate" of nearly 29% for the sample of DME claims. The report cited 20 payment errors identified by the Medicare audit and 73 errors the contractor had not identified (Lee, Washington Post, 8/26). However, the HHS Office of Inspector General cautioned against applying these findings to the entire Medicare DME program because the sample was not entirely random, the Journal reports.

The report faults Medicare officials for allowing AdvanceMed to conduct the review without fully documenting claims from suppliers. According to the audit, more incorrect payments would have been identified if Medicare had told the contractor to follow the agency's written policy (Wall Street Journal, 8/26). Levinson in a cover letter for the report wrote, "We attributed these review discrepancies to the ... contractor's reliance on clinical inference rather than additional medical records available from health care providers, CMS' inconsistent policies regarding proof-of-delivery documentation, physicians' lack of understanding of documentation requirements and CMS's lack of procedures for obtaining information on high-risk DME items from beneficiaries."

Levinson also wrote that Medicare auditors should check a wider range of records related to claims, including physician records and other medical documents verifying the necessity of equipment. He also recommended requiring contractors to contact beneficiaries who allegedly receive devices considered to be at high risk for improper payments, such as motorized wheelchairs, and check to see if the devices were received and if they were medically necessary.

CMS CFO Timothy Hill said the agency implemented a requirement last year that more documentation be provided for wheelchairs (Washington Post, 8/26). A top Medicare official said there was no written policy requiring auditors to use medical records to count error rates in 2006. AdvanceMed spokesperson Chuck Taylor said the firm was prohibited by its contract from commenting on the issue without Medicare approval (Wall Street Journal, 8/26).

The report is available online.

Congress
Rep. Ileana Ros-Lehtinen (R-Fla.) on Monday sent a letter asking House Oversight and Government Reform Committee Chair Henry Waxman (D-Calif.) to hold hearings on the issue this fall. The letter stated, "I highly urge that the appropriations hearing be held in order to determine the cause of this alleged misreporting." Rep. Lincoln Diaz-Balart (R-Fla.) said he also will ask Waxman to hold hearings this fall. "It goes to trust in the government," he said, adding that Medicare fraud is "a big issue."

Acting CMS Coordinator Kerry Weems said, "Given its centrality to (Medicare's) financial oversight mission, we are eager to adopt any meaningful changes to the program that will help enhance measurement efforts in particular and our overall program integrity efforts in general" (Weaver, Miami Herald, 8/26).

Letter to the Editor
The home care industry "has favored accreditation as a fraud deterrent for decades," and the "action by Congress in July to delay and fix the deeply flawed [DME competitive] bidding program will not reduce or delay efforts to combat fraud," Tyler Wilson, president of the American Association for Homecare, writes in a New York Times letter to the editor. According to Wilson, "The exact opposite is true. Congress strengthened the accreditation requirements in the new Medicare law and closed a loophole that would have allowed nonaccredited providers to serve Medicare beneficiaries," adding, "We applaud those measures."

Wilson, responding to a recent Times article about Medicare DME fraud, writes that the industry also "applaud[s]" the Times' "effort to get to the bottom of the Medicare fraud numbers, but it was disappointing to see your article link two separate issues -- pricing through competitive bidding and fraud prevention." Wilson concludes, "We will continue to support efforts by Congress and federal agencies to find more effective ways of keeping criminals out of the Medicare program" (Wilson, New York Times, 8/24).

Reprinted with kind permission from http://www.kaisernetwork.org. You can view the entire Kaiser Daily Health Policy Report, search the archives, or sign up for email delivery at http://www.kaisernetwork.org/dailyreports/healthpolicy. The Kaiser Daily Health Policy Report is published for kaisernetwork.org, a free service of The Henry J. Kaiser Family Foundation.

© 2008 Advisory Board Company and Kaiser Family Foundation. All rights reserved.

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