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Spotlight On... Diabetes Test Strips

A man living with diabetes, striving to manage his disease with the right combination of medication and maintaining an all-around healthy lifestyle, receives a phone call offering him a free cookbook full of delicious recipes designed specifically for people with diabetes. All he needs to do is provide some basic information—his name, address, and Medicare number—and the cookbook will arrive at his doorstep in just a few days. Sounds like a pretty good deal, right?

Maybe for the telemarketer, but certainly not for the Medicare program. Schemes like this are too often used to obtain Medicare and Medicaid patient identification numbers, which are then used to fraudulently bill the programs for diabetes supplies that aren't medically necessary or are never delivered. Fraud associated with the illegal billing of diabetes supplies became so prevalent that OIG issued Special Fraud Alerts—aimed at  suppliers and telemarketers as well as consumers—and a podcast to target the fraud from all angles.

In addition to focusing on prevention, OIG uses a wide arsenal of enforcement actions to fight fraud associated with diabetes supplies, such as pursuing criminal actions, excluding—or banning—Medicare and Medicaid providers from participating in any Federal health care program, working with our State partners who are authorized to revoke health care licenses, and entering into settlement agreements that can recover fraudulently obtained money.

For example, in 2013, OIG entered into settlement agreements recovering nearly a half million dollars from Four Leaf Clover (FLC), Inc., Team Tech Solutions (TTS), and owners from both companies. The companies and their executives allegedly made unsolicited calls to diabetes patients resulting in false Medicare claims and exchanged kickbacks for each patient referred for diabetes supplies. In addition to monetary recoveries, the settlement agreements resulted in permanent exclusions of FLC and its owners and 10-year exclusions of TTS and its owner.

Individual cases of fraud are just the tip of the iceberg regarding waste associated with diabetes supplies. Improper payments are a significant problem and warrant greater attention and oversight. For example, OIG reviewed 400 claims across four Medicare contractors and found that 303—over 75 percent—had 1 or more deficiency; for example, the quantity of supplies exceeded Medicare guidelines without any documentation to support the additional supplies, or physicians orders were missing or incomplete. These deficient claims represented an estimated total of $209 million in improper payments in 1 year. In a report titled Inappropriate and Questionable Medicare Billing for Diabetes Test Strips, OIG found that in 2011, Medicare improperly paid $6 million for diabetes test strips (DTS) claims billed for beneficiaries that were missing a documented diabetes diagnosis code or that inappropriately overlapped with patients' hospital or skilled nursing facility stays. In both reports, OIG made recommendations to CMS to address these improper payments.

In addition to improper payments, another red flag is the prevalence of questionable billing. The same report—Inappropriate and Questionable Medicare Billing for Diabetes Test Strips—identified nearly 5,000 suppliers that had unusually high billing for at least one questionable billing measure, such as multiple DTS claims submitted for the same patient by the same supplier in overlapping time periods. In total, Medicare paid $425 million for questionable billings from these suppliers.

Digging deeper, the report found that Medicare paid $55 million for non-mail-order DTS claims for patients living an unusually long distance from their suppliers. These suppliers may have billed mail order DTS as non-mail-order because prior to 2013, non-mail-order DTS were reimbursed a higher rate than mail-order DTS.* Several other OIG reports explored the possible effects of this price difference. A review of Medicare claims data in Supplier Billing for Diabetes Test Strips and Inappropriate Supplier Activities in Competitive Bidding Areas revealed that claims for the more expensive, non-mail-order DTS increased from 2010 to 2011 while claims for the less expensive, mail-order DTS decreased during the same period. Further, for one-fifth of the patients in the review, suppliers billed Medicare for non-mail-order DTS but provided the less expensive, mail-order DTS. A report entitled Results of Reviews at Three Suppliers of Diabetic Testing Supplies found that suppliers may have been taking advantage of a loophole by delivering DTS in company-owned vehicles in order for the DTS to qualify as non-mail-order and receive a higher reimbursement rate, costing Medicare millions. Though legislation passed in 2013 eliminated the reimbursement rate difference, the prevalence of questionable billing for this and other measures indicates that DTS should continue to be closely monitored.

A third area of concern is the pricing of DTS. OIG compiled results from audit conducted in five States to determine whether State Medicaid programs could achieve savings on DTS. Two of the five State Medicaid agencies (New York and Indiana) saw $17.9 million in savings through the use of rebates, and four of the five State Medicaid agencies (Illinois, New Jersey, New York, and Ohio) could save an additional $29.7 million through implementing rebates or a competitive bidding program** for the purchase of DTS. OIG recommended that CMS work with State Medicaid agencies to evaluate these and other DTS savings opportunities.

According to the Centers for Disease Control and Prevention, 8.3 percent of the U.S. population is living with diabetes. For those eligible for Medicare—those aged 65 and above—that number jumps to 26.9 percent. Therefore, it's clear that the demand for diabetes supplies is not going away. However, OIG will continue to fight the fraud, waste, and abuse associated with this important health care benefit.

* For more information about payment disparities in Medicare and Medicaid, check out our "Spotlight on...Bad Bargains for Federal Health Care Programs."

** The OIG reports entitled Inappropriate and Questionable Medicare Billing for Diabetes Test Strips and Supplier Billing for Diabetes Test Strips and Supplier Billing for Diabetes Test Strips and Inappropriate Supplier Activities in Competitive Bidding Areas both suggest that while the Competitive Bidding Program appeared to reduce potential fraud and abuse, it did not appear to limit patients' access to the DTS. OIG continues to do work on competitive bidding for DTS and will issue additional reports on the topic in the future.

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Office of Inspector General, U.S. Department of Health and Human Services | 330 Independence Avenue, SW, Washington, DC 20201