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Report Faults Medicare Audits
Agency Missed Many Payment Errors, HHS Review Finds

By Christopher Lee
Washington Post Staff Writer
Tuesday, August 26, 2008

The rate of improper payments, including fraud, in Medicare's purchases of wheelchairs and other home medical equipment is significantly higher than the government has estimated, according to a federal audit released yesterday.

The report by Inspector General Daniel R. Levinson at the Department of Health and Human Services found an "error rate" of almost 29 percent in a sample of claims paid in 2006 under Medicare's multibillion-dollar durable medical equipment program. The Centers for Medicare and Medicaid Services had estimated a rate of 7.5 percent, or about $700 million in improper payments.

Investigators reviewed a sample of 363 claims to determine whether the Medicare contractor that routinely checks such claims had found all of the improper payments. Such payments include not only fraudulent claims, but also those without sufficient documentation and those for goods deemed not medically necessary. The new review found 20 payment errors that the contractor identified and 73 that it had not.

"We attributed these review discrepancies to the . . . contractor's reliance on clinical inference rather than additional medical records available from health care providers, CMS's inconsistent policies regarding proof-of-delivery documentation, physicians' lack of understanding of documentation requirements and CMS's lack of procedures for obtaining information on high risk DME [durable medical equipment] items from beneficiaries," Levinson wrote in a cover letter for the report.

Levinson recommended that Medicare auditors check a broader range of records underlying the claims, including physicians' records and other medical documents showing the necessity of the equipment. He also recommended requiring the contractor to contact beneficiaries who allegedly got power scooters and other devices, which are considered at high risk for improper payments, to confirm that they were received and to determine whether they were medically necessary.

Timothy B. Hill, CMS chief financial officer, said reviewing claims is one way the agency detects fraud. He said the agency implemented changes last year to help reduce the error rate, including a requirement of more documentation from doctors who prescribe wheelchairs for patients.

The inspector general's report "did point out some gaps in the program, some of which had already been addressed," Hill said.

Hundreds of millions of dollars are at stake in reducing payment errors. The durable medical equipment program, which costs more than $8 billion annually and pays for power wheelchairs, hospital beds, oxygen supplies and other equipment for home use, has long been considered vulnerable to waste, fraud and abuse.

A July report by the Government Accountability Office, for instance, found that Medicare has paid as much as $92 million since 2000 to suppliers who billed the government for equipment purportedly prescribed by doctors who were dead.

Michael Reinemer, a spokesman for the American Association for Homecare, a trade group for suppliers, said: "The association believes that any amount of fraud is unacceptable and that better controls at the front end of the process are needed to keep criminals out of the Medicare program in the first place."

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