OIG Report Identifies Integrity Problems With DMEPOS Suppliers

The Office of Inspector General released a report in December 2011,
detailing program integrity problems with nearly one in four enrolled suppliers
of durable medical equipment, prosthetics, orthotics, and supplies.

OIG used a proprietary database of public records and evaluated a
nationally representative sample of 229
DMEPOS suppliers enrolled from October 2008 through December
2008 and identified program integrity problems during suppliers’ first
year in Medicare. The office also identified required information that was
omitted from suppliers’ enrollment applications, such as ownership,
management, criminal histories, or adverse legal actions.

Thomas V. DiBello, CO, LO, FAAOP, president of the American Orthotic and
Prosthetic Association, and owner and president of Dynamic Orthotics and
Prosthetics LP, said the implication of the report is that some newly enrolled
suppliers omitted important information from their applications.

“I wonder, if that is true, why the Centers for
Medicaid Services granted applicants a supplier number based
upon incomplete applications,” he told O&P Business News.
“It seems to me that this is a serious indictment of the enrollment

Problems pointed out

In the past, DMEPOS suppliers presented significant program integrity
problems for Medicare. According to the report, CMS requires its contractor
— the National Supplier Clearinghouse (NSC) — to review supplier
enrollment applications, conduct unannounced site visits before enrollment and
assign newly enrolled suppliers a risk rating based on an assessment of fraud
risk after enrollment.

DiBello said that the application process requires the applicant meet 30
standards; failure to meet one results in disqualification.

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“It would seem to me that when one in every four applications
granted should have been rejected, the NSC is failing to identify errors or
intentional misrepresentations in the application,” he said “These
reports bring waves of negative reporting down on the O&P industry when it
seems to me the culprits here are the folks at the NSF. They need to do a
better job.”

According to the report, during their first year of enrollment as
Medicare providers, 26% of high- and medium-risk DMEPOS suppliers and 2% of
low/limited-risk suppliers were the targets of CMS enforcement actions,
including having their billing privileges revoked or being placed on prepayment
claims review.

“Some suppliers in our sample received significant Medicare
reimbursement before CMS’s contractor conducted its first post-enrollment
site visits to the suppliers’ business locations and CMS took enforcement
action,” OIG wrote in a statement provided to O&P Business

“I am amazed that the onsite visits were not timely (5 to 10 months
after enrollment),” Mark A. Porth, CPO, FAAOP, clinical manager at
Satellite Services at Mary Free Bed Orthotics & Prosthetics, said of the
report. “This could have reduced some of the fraudulent claims. I am also
concerned that 21% of medium- to high-risk providers lost their billing
privileges. Hopefully these were all justified.”

Results also showed that 13% of high- and medium-risk suppliers and 4%
of low/limited-risk suppliers omitted ownership or management information from
their applications.

  Mark A. Porth
  Mark A. Porth

“Many suppliers in our sample that omitted this information
remained in Medicare through December 2010, suggesting that information omitted
from applications can remain undetected for more than a year despite NSC
oversight,” OIG wrote.

In addition, of high- and medium-risk suppliers, 4% omitted owner or
manager criminal histories or adverse legal actions taken against these
individuals from their applications.

Next steps

“Our review demonstrates that further scrutiny of the riskiest
applicants is needed to prevent dishonest individuals from receiving Medicare
payment,” OIG wrote.

Porth agreed that further scrutiny to prevent abuse is needed because
money being paid to “bad providers” is common and difficult to

“This is long overdue. There has been too much abuse in this
industry and too much paid out and not recouped. Attention to detail is
crucial, as well as not omitting the correct personal information,” he
told O&P Business News. “It would seem that based upon
the information in the report, if the NSC effectively back checked the
information submitted, many of the applications that were found to have
problems would have been stopped before payments were made,” DiBello said.

Based on the results of this report, OIG wrote that it recommends
“CMS conduct postenrollment site visits earlier for new suppliers that
receive the most money from Medicare, apply investigative techniques and tools
to identify any owners or managers of suppliers who are not reported on
supplier applications as required, and take appropriate action regarding
suppliers that omit information from applications.”

“I would hope CMS will perform prepayment reviews instead of taking
away their billing abilities,” Porth said. “If there are paperwork
issues, this will provide them the opportunity to correct the errors. If the
paperwork is not corrected or omissions are found, then a loss of billing
privileges seems appropriate.”

CMS concurred with OIG’s recommendations and stated that it is
using authorities granted under the Patient Protection and Affordable Care Act
to address potential vulnerabilities, OIG told O&P Business

Investigate earlier

Brian L. Gustin, CP, BA, vice president of clinical research and payer
relations at iWalk, Inc., said he applauds the efforts to reduce those who are
committing fraud within the healthcare system. However, the report does not
address the underlying problem.

“The investigators from the DOJ and OIG that I have worked with are
frustrated with the current pay and chase system,” he said. “Nothing
in this report will end that scenario, so instead of conducting site visits
earlier why not do a thorough investigation prior to issuing a provider number.

“This scrutiny should come before they are issued a provider
number, not after. It all could be stopped at the front door,” Gustin

When submitting claims, current providers need to do a better job of
documenting a patient encounter and the rationale for the treatment provided,
medical necessity, etc., and ensure they have followed proper procedures
relative to Medicare policies, according to Gustin.

“We may argue whether these policies make sense or not but that is
another discussion. The policies are what they are and you either comply with
them or risk reprimand for violation,” he said.

DiBello said it is important to note that this report is not directed
specifically at O&P: it covers DME suppliers and all of DMEPOS.

“This report focuses at least as much on deficiencies by the NSC in
approving applicants for new Medicare provider numbers as it does on provider
claims, but beware because very often OIG and CME does not understand
orthopedic and prosthetic care, so their efforts to stop fraud create huge
hassles for providers an patients, though failing to hit the mark in terms of
really combating fraud,” he said. “Meanwhile, they have ignored or
avoided the much more targeted features of H.R. 1958, which would help stop
fraud and abuse in the orthopedic and prosthetics arena.” — by
Tara Grassia

For more information:

  • Department of Health and Human Services, Office of the Inspector
    General. Program Integrity Problems With Newly Enrolled Medicare
    Equipment Suppliers
    . Available at:
    www.oig.hhs.gov/oei/reports/oei-06-09-00230.pdf. Accessed
    January 29, 2012.

Disclosure: Gustin and Porth had no
relevant financial disclosures. DiBello is president of the American Orthotic
and Prosthetic Association.

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