Article - August 4, 2008 - San Francisco Chronicle

Skimpy oversight endangers millions of Medicare dollars
Fictitious suppliers OKd for payment, investigation finds

By Hope Yen, Associated Press

(08-04) 04:00 PDT Washington -- The government is putting millions of Medicare dollars at risk by authorizing fictitious sellers of wheelchairs, prosthetics and other medical supplies to submit reimbursement claims with only limited review, congressional investigators say.

The study by the Government Accountability Office, obtained by the Associated Press, sought to follow up on oversight gaps that have plagued the Centers for Medicare and Medicaid Services since at least 2005. Roughly $1 billion of the $10 billion in annual Medicare payments the government makes for medical equipment is later deemed improper.

The investigation found that the centers approved two companies in the past year for Medicare billing privileges that the GAO had set up as sham businesses. The companies did not have clients or medical inventory to supply prospective Medicare patients.

These fictitious suppliers, based in Maryland and Virginia, won privileges even though GAO investigators deliberately provided the government with sketchy information and false documents that offered little assurances the companies were legitimate.

"This sting operation proves that there are gaps in the system and that scam artists can exploit - and are exploiting - those gaps," said Minnesota Sen. Norm Coleman, the top Republican on the Senate Homeland Security and Governmental Affairs subcommittee that requested the report.

In response to the findings, the centers agreed there were problems with enrollment procedures. The agency said it recently put in place new standards that require medical suppliers to be certified. The goal is to help ensure that medical suppliers meet quality standards before they receive Medicare billing privileges.

Among other changes are:

• Requiring that suppliers keep supporting paperwork from doctors.

• Limiting use of cell phones and pagers as a supplier's primary business number.

• Setting up a new competitive bidding process for medical equipment.

But investigators noted that the centers have made promises since at least 2005 to fix problems in its supply program and achieved only limited success. They said the government's approval of their two sham companies was alarming because once a supplier attains Medicare billing privileges, it easily can get a doctor's ID code fraudulently and begin submitting claims.

"If real fraudsters had been in charge of the fictitious companies, they would have been clear to bill Medicare from the Virginia office for potentially millions of dollars worth of nonexistent supplies," the GAO report said.

The new oversight procedures "will only be successful if those tasked with ensuring compliance exercise due diligence when conducting screenings and inspections," investigators wrote.

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