Legal Speak

Fraud & Abuse: A Look at the Year Ahead

• By Asela Cuervo
• Jan 01, 2008

Those outside the industry might characterize 2007 as the year of DME waste, fraud and abuse. Anyone who has not worked with legitimate DME suppliers could be excused for arriving at that conclusion given the unremitting focus on fraudulent DME suppliers throughout 2007.

Early in the year, officials from the Centers for Medicare & Medicaid Services (CMS), the Office of Inspector General for the Department of Health and Human Services, and the Department of Justice testified before Congress on ongoing "sting" operations in south Florida. Throughout the year, the law enforcement agencies and CMS issued press releases touting their successes at obtaining indictments and building a case for more government scrutiny of suppliers and tighter reins on spending.

The national media was quick to elaborate on the theme. National Public Radio aired one story that focused on criminal DME suppliers in south Florida, followed by a more balanced story highlighting a legitimate supplier. The New York Times published a story about waste in the oxygen benefit. "NBC Nightly News" also aired a segment called "Fake Companies Steal Billions from Medicare." As shocking as these stories are, they raise an important question: How does this type of fraud happen even when suppliers get an on-site visit from the NSC? One answer is that they are part of a true criminal enterprise and should be distinguished from the vast majority of legitimate suppliers who work hard to serve patients and stay compliant.

Unfortunately, every one of these incidents, and the media attention that magnifies them, contributes to the industry image of suppliers that are unprofessional, or worse, intentionally fraudulent. These incidents will drive the policies that affect legitimate suppliers in 2008. Predictably, the impact will be on reimbursement and on the cost of doing business.

At press time, it was uncertain whether Congress would act to modify the home oxygen benefit again. Earlier in the year, Congress introduced the Children’s Health and Medicare Protection Act of 2007, which proposed shortening the rental period for certain oxygen equipment to 18 months from the current 36-month rental. One rationale advanced in support of the legislation is that Medicare overpays for equipment in comparison to suppliers' costs.

Suppliers also may see new requirements imposed as a condition to enrolling in the Medicare program. CMS published a proposed rule last year that would require suppliers to obtain a surety bond to maintain their Medicare billing privileges. Suppliers that have not been in business for long or that have poor credit may be required to pay high premiums for a bond. The enrollment process also is likely to be more drawn out for everyone, but suppliers in Los Angeles and south Florida will be required to re-enroll within 30 days of receiving notice to do so from the NSC under a CMS demonstration that began last fall. Suppliers that fail to re-enroll within this timeframe will have their supplier numbers revoked. Some of these suppliers also will be required to become accredited within a specified deadline. Suppliers that do not meet the accreditation deadline will likewise lose their supplier numbers.

Finally, the remaining suppliers will be subjected to greater oversight by CMS. It is not clear what this means, but a fact sheet published by CMS suggests that the NSC will develop a profile of the supplier based on several factors, which would determine the level of additional oversight the supplier receives. The burden of the demonstration will be felt mostly by smaller suppliers in south Florida and Los Angeles, but CMS is prepared to implement similar polices in other areas if it believes fraudulent activity is prevalent.

This article originally appeared in the Respiratory Management Jan/Feb 2008 issue of HME Business.