Program Integrity Problems With Newly Enrolled Medicare Equipment Suppliers

During their first year of enrollment in Medicare, 26 percent of high- and medium-risk suppliers of durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) and 2 percent of low/limited-risk suppliers required CMS enforcement actions-i.e., CMS revoked their billing privileges or placed them on prepayment claims review. Some suppliers in our sample received significant Medicare reimbursement before CMS's contractor conducted its first postenrollment site visits to the suppliers' business locations and CMS took enforcement action.

Historically, DMEPOS suppliers have presented significant program integrity problems for Medicare. CMS requires its contractor, the National Supplier Clearinghouse (NSC), to review supplier enrollment applications, conduct unannounced site visits before and after enrollment, and assign newly enrolled suppliers a risk rating based on an assessment of fraud risk. We identified program integrity problems during suppliers' first year in Medicare for a nationally representative sample of 229 suppliers enrolled during October-December 2008. We also identified suppliers that omitted from their enrollment applications required information regarding ownership, management, criminal histories, or adverse legal actions.

Thirteen percent of high- and medium-risk suppliers and 4 percent of low/limited-risk suppliers omitted ownership or management information from their applications. 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. Also, 4 percent of high- and medium-risk suppliers omitted from their applications information regarding owner or manager criminal histories or adverse legal actions taken against these individuals.

Although the Patient Protection and Affordable Care Act (ACA) strengthens enrollment screening of DMEPOS supplier applicants, our review demonstrates that further scrutiny of the riskiest applicants is needed to prevent dishonest individuals from receiving Medicare payment. We recommended that 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.

CMS concurred with our recommendations and stated that it is using authorities granted under the ACA to address potential vulnerabilities.