GAO Fraud Sting Points Finger at CMS

WASHINGTON

With Medicare fraud and abuse a hot topic on Capitol Hill and CMS pushing tougher supplier standards and accreditation as a catchall fix in the DMEPOS sector, just how easy is it to bilk the system by pulling the wool over CMS' eyes?

Well, according to a recent Government Accountability Office report, it's not hard.

In an undercover sting operation, the GAO set up two fictitious DME companies to test the rigors of CMS' oversight in policing Medicare enrollment. The result? Both phony companies, one in Virginia and one in Maryland, were approved to bill Medicare, despite the fact that neither had clients or inventory.

“Health and Human Services (HHS) has acknowledged Centers for Medicare and Medicaid Services' (CMS) oversight of suppliers of durable medical equipment … is inadequate to prevent fraud and abuse,” the GAO report, released last month, states. “Specifically, weaknesses in the DMEPOS enrollment and inspection process have allowed sham companies to fraudulently bill Medicare for unnecessary or nonexistent supplies.”

CMS' contractor (the National Supplier Clearinghouse, responsible for verifying that potential suppliers meet Medicare enrollment standards) conducted a “limited verification” of the phony companies and sham contracts, the report said. Despite onsite visits and an initial denial of the applications, the contractor ultimately did not detect that the companies were phony.

“We believe that, had our operation continued successfully, we could have fraudulently billed Medicare for substantial sums — potentially reaching millions of dollars,” the GAO said in its report.

CMS recently awarded Palmetto GBA a continuing contract to act as the NSC for one more year with four additional one-year options. Palmetto has held the NSC contract since 1993.

Following is a description of the sting that was used to test CMS' DMEPOS enrollment oversight — and how undercover agents got past the requirements — in the GAO's own words:

• “Prior to submitting applications to CMS to become approved DMEPOS suppliers, investigators easily set up two fictitious durable medical equipment companies during April and May 2007 using undercover names and bank accounts. Although we did not actually obtain any inventory, we decided that both companies would be generic medical supply companies …