CMS Demonstration Project Hopes to Eliminate Fraudulent DMEPOS Activity

On July 2 of this year, the Centers for Medicare & Medicaid Services (CMS) announced that it will be conducting a two-year demonstration project involving the Medicare enrollment for southern California and southern Florida.  The goal of the project is to strengthen CMS’ ability to detect and prevent fraudulent activity and will focus specifically on DMEPOS in counties located in southern Florida and southern California, two areas where there has been an “inordinate amount of fraudulent activity,” according to CMS officials.

 CMS began conducting site visits in both areas due to the high number of Medicare beneficiaries located in both areas, the growth of providers nearly doubling in the last two years, and “disproportionately high” Medicare billing. As a result of those site visits, CMS and the Office of Inspector General (OIG) identified and documented a high level of fraudulent activity and decided to launch a two-year demonstration project in those areas.

Seth Johnson, VP of government affairs for Pride Mobility Products, says, “When you have a big spike, such as the number of providers doubling in two  years, CMS digs in and tries to find out what is going on. Is it because a lot of people are retiring to those areas and there’s a market that hasn’t been met, or is there fraud going on?”

 Johnson says this is different from Operation Wheeler-Dealer in that CMS is basing this investigation off of site visits and in the case of Operation Wheeler-Dealer CMS was looking into specific claims. “The similarity is that they are both trying to address fraud in the industry, but both are starting from a different point.”

CMS will be investigating providers in the counties of Riverside, San Bernardino and Orange in the Los Angeles area, and the counties of Miami-Dade, Broward and Palm Beach in southern Florida.

In December of 2006, federal officials contracted with the National Supplier Clearinghouse (NSC) to conduct visits to 1,472 south Florida DMEPOS suppliers and through these investigations, 634 supplier billing numbers were revoked, saving Medicare a projected $317 million.

In January of 2006, the NSC conducted ad hoc visits of 480 providers in Miami-Dade and Broward counties within a one-week timeframe. At the conclusion of the project, 191 providers had their billing privileges revoked. The NSC spent a total of $3 million on all enrollment efforts in southern Florida, which resulted in a return on investment (ROI) of $100 savings for each dollar spent to conduct the project.

A similar investigation was conducted in the Los Angeles area last year, and out of 2,000 DMEPOS suppliers, 770 had their licenses revoked.

CMS looked at information from providers who billed in excess of $200,000 in any one month over a six-month period. Out of 18 DMEPOS suppliers, of which 15 were in the Miami-Dade area, 12 were revoked and two voluntarily deactivated their numbers.

Last year CMS examined recently enrolled providers in Miami-Dade county and of 35 providers reviewed, 28 had their billing privileges revoked as of April of this year. A separate project in the same area where 70 providers received site visits resulted in the discovery that 51 providers were not open for business, and their billing privileges were revoked.

Trends to Note, Southern Florida
Between 21 percent in 2002 and 78 percent in 2007 of all revocations nationwide occurred in southern Florida. Billing to Medicare increased by 200 percent between 2002 and 2007.

Trends to Note, Southern California

From all of the charts and of nearly 2,000 DMEPOS suppliers who were the subjects of these initiatives, approximately 770 or 37 percent had their billing privileges revoked, according to HHS. The HHS fact sheet, which includes the charts of both areas, concluded that Los Angeles and South Florida are “hotbeds for fraudulent activity” and that CMS should do everything in its power to prevent such suppliers from entering into the market in the first place to “preserve the investigative resources of the Office of Inspector General (OIG) and the prosecutorial resources of the Department of Justice.”

 The types of fraud include billing for services not rendered involving claims for power wheelchairs, scooters, nutritional products, orthotics, prostheses, hospital beds, and billing for services not medically necessary. Additionally, many Medicare beneficiaries living in southern Florida and California are receiving products they did not require based on their medical history or are receiving explanations of benefits for items that are not necessary, never ordered by their physicians, or never received by the beneficiary. Physicians in those areas are telling CMS that they never saw certain patients or never ordered the DME products in question.

CMS has also indicated that several products are being billed at higher than normal rates. Those products include motorized wheelchairs, nebulizers and aerosol medications, artificial limbs and wound therapy treatments.

In a statement released by CMS, former acting administrator Leslie Norwalk said, “Enhancing our review of these suppliers will go a long way to ferret out those who do not meet the needs of beneficiaries and the promises of Medicare. CMS hopes to expand this nationwide effort.”

The Project Ahead
There are three major components to the demonstration project:

 1. Submission of the CMS-855S application: Each DMEPOS supplier in the demonstration locales will be required to submit a CMS 855S Medicare enrollment application to the NSC within 30 days after the NSC requests the data.

2. Revocation of billing privileges: Under this demonstration, a DMEPOS supplier’s Medicare billing privileges will be revoked in certain circumstances such as:
•    failure to submit a CMS-855S application within the 30-day timeframe.
•    failure to report a change in ownership or address at least 30 days prior to the effective date of the change.
•    failure to obtain accreditation from an approved DMEPOS accrediting organization within 90 days of notification from the NSC to do so.
•    having an owner or manager with a felony conviction within the last 10 years.
•    the supplier no longer meets each and every requirement necessary for enrollment as a DMEPOS supplier.

 3. Enhanced review of remaining DMEPOS suppliers: NSC may conduct an enhanced review of providers who do not have their billing privileges revoked based on the information from the 855S application. The NSC will use a fraud level indicator for each DMEPOS supplier.

A fraud level indicator will be based on factors such as:
•    experience as a DMEPOS supplier with other payors.
•    prior Medicare experience.
•    specific supplier location.
•    fraud potential of products and services listed.
•    site visit results.
•    inventory observed and contracted.
•    accreditation of the supplier.

 In a CMS Open Door Forum held the last week of August, CMS recommended that providers in those areas abide by everything in the letters they receive from their contractor, send it back by the announced deadline, have supporting documentation, fill out the application accurately, and make sure the contractor knows how to contact the provider.

CMS’ 855S form is a comprehensive and lengthy application process that DME providers have to fill out in order to bill Medicare, add a new business location, reenroll or change their existing Medicare information. But for providers located in the aforementioned counties, CMS will be requesting that providers resubmit their 855S Form.

 If you’re an ethical provider who has to resubmit your 855S form, Johnson suggests you watch for the form, ensure that you complete it thoroughly and reapply after making sure your company is compliant with all supplier standards.

The 855S Form includes identifying information including supplier type and products or services provided; a listing of adverse legal actions or convictions; current business location; ownership and or managing control information; billing agency information; and a listing of authorized and delegated officials.

 Supporting documentation that providers will need includes copies of all federal, state and local professional and business licenses, certifications and registrations; copies of all liability insurance policies; written confirmation from the IRS confirming a tax identification number and the legal business name; a completed CMS-588 form authorizing electronic funds transfer; and a copy of the national provider identifier notification received from the National Plan and Provider Enumeration System (NPPES).

Depending on the provider, other supporting documentation may include a copy of all adverse legal action documentation; copy of all state pharmacy licenses; a statement in writing from the bank when the provider has a lending relationship with the bank; copy of delegated official’s W-2; copy of the bill of sale if you purchased an existing DMEPOS business with an active Medicare supplier billing number; and a completed form CMS-460, a Medicare participating physician or supplier agreement.

 Two pages of the 855 form list the penalties providers face for falsifying information in the enrollment application, and one page of the form lists the specific adverse legal actions that must be reported.

An additional component to the demonstration project includes unannounced site visits and criminal background checks.

 CMS will use this project to determine if other areas in the United States should be reviewed to deter fraudulent behavior, according to Walter Gutowski, public affairs specialist for CMS.

Asked whether this will further tarnish the image of DME providers in an industry that’s fighting so hard to show legislators in Washington the benefits DME providers bring to beneficiaries, Johnson said, “I think anytime there is this type of investigation, it gives the whole industry a black eye. Our industry needs to point out the fact that the Medicare program has had the authority since the Medicare Modernization Act in 2003 to go forward with accreditation, and the surety bond has been on the books since 1997 … 10 years now, but CMS is just now getting around to it. The industry supports mandatory accreditation for providers, but CMS is still not ready to implement it across the board. CMS has steps in place to ensure that providers are qualified.” 

This article originally appeared in the October 2007 issue of Mobility Management.

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