Legal Speak

Bracing for Florida Fraud Cases Fallout

• By Asela Cuervo
• Jul 01, 2007

In May, the Department of Justice (DOJ) announced that 38 people had been arrested in the first phase of a targeted enforcement effort against individuals and companies committing fraud against Medicare. The arrests took place in South Florida and were the result of a multi-specialty task force that combines resources from the Department of Health and Human Services (HHS), including the Office of Inspector General (OIG), the Centers for Medicare & Medicaid Services (CMS), the DOJ and the FBI. The targeted individuals and companies included suppliers of DME items and respiratory medications.

In one of the alleged fraudulent schemes, law enforcement officials claimed that medically unnecessary compounded respiratory drugs were furnished to Medicare beneficiaries. The authorities also alleged that fraudulent suppliers are purchasing Medicare numbers from beneficiaries and using them to submit fraudulent claims.

Most of this criminal activity has been focused in South Florida. Interest in Florida as a hub for illicit DME suppliers began with a December visit to the area by HHS Secretary Mike Leavitt. Leavitt made unannounced visits to more than 1,500 DME suppliers to determine whether suppliers were complying with current enrollment standards. As a result of those visits, more than 300 suppliers had their supplier numbers revoked. Leavitt found that many companies were not operational — the doors were locked and no staff was present even after repeated visits. According to HHS, the companies at these locations represented millions of dollars in fraudulent billings for DME to Medicare.

Although the widely publicized cases took place mostly in Florida, they will nonetheless affect law-abiding suppliers. The message from the authorities is clear: The Medicare DME benefit is rife with abuse. All suppliers will see the repercussions from this activity.

At the news conference announcing the Florida arrests, Leavitt stated that HHS was committed to combating DME fraud. Working with federal and state law-enforcement agencies, CMS and the OIG will implement measures to strengthen supplier standards — in other words, it will be harder to obtain Medicare billing privileges in the first place — and increase ongoing oversight of suppliers. This program of new measures focuses primarily on the DME benefit and is estimated to cost around $20 million each year, but is estimated to save as much as $2.5 billion over the same period.

Citing regulatory reasons, the secretary declined to announce the specifics of the program during the May news conference. In other testimony, however, CMS and OIG officials discussed some of the initiatives under consideration, including the increase of unannounced site visits by the National Supplier Clearinghouse and other agencies, implementation of the surety bond requirement mandated by the Balanced Budget Act of 1997, and increase of front-end edits in claims processing. Importantly, CMS will begin to enforce state licensing requirements and accreditation through the billing process. Medicare billing privileges will correspond to those items and services for which the supplier meets state licensing or certification requirements and is accredited. Suppliers who are not properly licensed or accredited to provide a line of service, such as respiratory products, will not be able to bill Medicare for those items.

Finally, suppliers will see the expansion of the recovery audit contractor (RAC) program designed to identify incorrectly paid claims.  

These initiatives will be in addition to the requirement to comply with quality standards accreditation that is currently under way. Respiratory product suppliers will need to pay close attention to ensure ongoing compliance with Medicare program and billing requirements because the regulatory climate is likely to change significantly in the coming year.

This article originally appeared in the Respiratory Management July/Aug 2007 issue of HME Business.