The Truth about Fraud

Our industry gets a bad rap these days. Government officials rage over allegedly rampant malfeasance within the DMEPOS industry. Reimbursements are subject to cuts and more cuts, in part because there is allegedly so much waste that we not only can handle the cuts but deserve them.

Competitive bidding is characterized in part as an anti-fraud initiative, even though legislative history shows that it is nothing of the sort. Whenever CMS wants to get some positive ink in the Federal Register, it just tightens the screws on providers in Florida or one of its other go-to states.

Is this fair? Is this true? I think not, at least as a matter of degree. But it is a reality. There are valuable lessons to learn when we explore the real truth about DME fraud and malfeasance.

CMS' Office of the Actuary released a report recently that confirms what most of us have said for years: DME is the smallest segment of health care spending. These figures, from 2007, show that our national expenditure for health care services was $2.24 trillion. Of this, DME spending was $24.5 billion, about half that of its nearest neighbor.

DME for Medicare beneficiaries constitutes $7.5 billion, or about 3 percent of our total spending on DME from all payer sources. When you factor in another $2.3 billion from public spending on non-durable medical products, the total public spending to DME suppliers for 2007 becomes $9.8 billion. This is about 14 percent of the total payments to suppliers of durable and non-durable medical products. This is also about 2 percent of the total Medicare budget.

Now let's look at the fraud number reflected in the report. CMS set total Medicare waste, fraud and abuse at about $70 billion, with DME's portion at about $700 million — less than 1 percent of the total. The report shows that the DME industry contributes a lesser percentage to Medicare waste, fraud and abuse than do the other health care sectors on average.

Let's look at this another way. Medicare expenditures for 2007 were approximately $453 billion. Total waste, fraud and abuse in Medicare was about $70 billion, or about 15.4 percent of total Medicare expenditures. DME spending for Medicare was about $9.8 billion, of which about $700 million was attributed to waste, fraud and abuse, or approximately 7 percent of total Medicare spending for DME.

I draw several insights from this analysis.