THE HEALTH CARE industry is no stranger to fraud and abuse. In fact, the costs resulting from fraudulent activities in this industry are overwhelming — often attracting national media coverage on programs such as 60 Minutes and the NBC Nightly News' popular segment, “The Fleecing of America.” Industry estimates of the actual dollar amounts lost to health care fraud vary, according to Bill Mahon, executive director of the Washington-based National Health Care Anti-fraud Association.

“The Federal Bureau of Investigation and members of Congress both are quoted as saying that fraud accounts for 10 percent of every health care dollar we spend each year, but nobody knows whether or not that is true,” Mahon says. “It is all speculative, based on empirical evidence and known quantities of fraud, but the prevailing range of estimates tends to be [from] 3 to 5 percent of annual expenditures.”

Even the lowest estimates translate into staggering costs. The Centers for Medicare and Medicaid Services in Baltimore estimates that Americans spend $1.3 trillion per year on health care. “Three percent of $1.3 trillion is $39 billion, minimum, and maybe more like $50 billion to $60 billion if you accept the 5 percent estimate,” Mahon says. “[But] thirty-nine billion should be a big enough wakeup call for all concerned.”

A Tarnished Image?

Unfortunately for home medical equipment providers, the negative attention that health fraud garners often is focused on the HME industry — and recent schemes are not helping to rebuild the industry's reputation.

“I think [HME] is a very different industry than it was 15 or 20 years ago,” says Asela Cuervo, vice president and general counsel for the American Association for Homecare, based in Alexandria, Va. “But unfortunately we still have the image that we are just vendors who are trying to manipulate Medicare beneficiaries to buy things and get medical equipment they don't need.

“Historically, there were a few items that were abused,” Cuervo continues, “and Congress reacted to that abuse by putting in place some [compliance] mechanisms that I think have been working quite well during the past several years.”

However, the HME industry's image remains tainted, Mahon says. “There are some areas in which I have concluded there is a disproportionate incidence of fraud,” he explains, “and for better or worse, I think durable medical equipment has suffered from [being perceived as one of those areas].”

Miriam Lieber, president of Lieber Consulting in Sherman Oaks, Calif., says the HME industry still is perceived as one with widespread fraud and abuse. “It is assumed that there is considerable fraud,” she says. “For that reason, more and more government resources are allocated to chasing down the abusers.”

Recent reports substantiate Lieber's theory. According to the U.S. Department of Health and Human Services Office of Inspector General's Semiannual Report to Congress, April-September 2001, “the durable medical equipment industry suffers from waves of fraudulent schemes in which federal health care programs are billed for equipment never delivered, higher-cost equipment than that actually delivered, unnecessary equipment or supplies, or equipment delivered in a state different from that billed in order to obtain higher reimbursement.”

Additionally, “the OIG is committed to protecting the integrity of the federal health care programs,” said Lewis Morris, HHS' inspector general for legal affairs, while explaining Medicare's enforcement actions to the U.S. Senate's Special Committee on Aging in July 2001. “Our enforcement efforts will continue to focus on those providers who have engaged in fraudulent conduct.”

HME Product Category	HHS/OIG Fiscal Year 2002 Work Plan Products Under Review	2001 Red Book Savings Estimate in Millions(if recommendation is implemented)
Blood glucose test strips	✓	$79
Diabetic supplies	✓	N/A
Enteral nutrition	✓	$28
Home oxygen therapy		$263
Hospital beds		$40
Manual weelchairs	✓	N/A
Parenteral nutrition	✓	$65
Support surfaces	✓	$12
Therapeutic footwear		$7
Source: HHS/OIG Fiscal Year 2002 Work Plan and the 2001 Red Book/www.oig.hhs.gov

One reason for the focus on fraud and abuse in HME could be the growing number of Medicare beneficiaries, says Jane Bunch, chief executive officer of Jane's Billing & Consultation Services in Marietta, Ga. “Medicare has no choice but to crack down on the reimbursement issues of health care, including DME, hospitals and physicians' offices,” she explains.

What are the reimbursement issues that draw so much attention? According to CMS, the most common forms of Medicare abuse include:

• Billing for services not furnished
• Misrepresenting the diagnosis to justify payment
• Soliciting, offering or receiving a kickback
• Unbundling charges
• Falsifying certificates of medical necessity
• Billing for services not provided

Contributing Factors

Many believe the HME industry is susceptible to fraud because of a lack of licensure or registration. One OIG official told HomeCare that the HME industry is vulnerable to fraud because obtaining a provider number and entering the industry is easy.

“One solution [to the lack of stringent requirements] could be mandatory licenses, mandatory accreditation, or conditions of participation that have strength behind them — as do the conditions of participation for other kinds of providers under federal health care programs like home health agencies and nursing homes,” says Corrine Parver, a partner with the Washington-based law firm Dickstein Shapiro Morin & Oshinsky. “This is not to say that licensing and accreditation are 100 percent effective, because they aren't. Human nature says there always will be unscrupulous people looking for an easy way to make a dollar.”

Perhaps the system itself encourages fraud and abuse, Cuervo muses. “Certainly Congress has a responsibility for how convoluted things have become,” she says. “There are some rules that help providers, but it is a struggle to try to get CMS to apply them in the way they were intended to be applied.”

For example, Cuervo says, the Paperwork Reduction Act states that providers must rely solely on the certificate of medical necessity to justify need, yet the durable medical equipment regional carriers ask for additional documentation that goes beyond what the CMN requires.

Additionally, continual changes make operating an HME business difficult, Parver says. CMS constantly issues new letters, memoranda and bulletins with changes that are “sometimes modest, but other times fairly extensive — changes to the way in which the payers will be looking at claims and how the payers are going to adjust their policies and payments,” she says. However, she emphasizes, change is the nature of the business, and HME providers are responsible for staying up-to-date.

“Once you sign on to be a player in the game by becoming a provider under the Medicare program, you sign on to adhering to all [the game's] rules and regulations,” she says. “[Compliance] becomes your responsibility, and this highlights the importance of becoming educated — either through national or state associations, or through conferences.”

Protecting Your Company

Knowledge of new requirements and regulations is essential for Medicare providers, but a compliance program will enhance a company's long-term success significantly.

Putting a compliance program in place requires providers to identify the rules, make sure that employees understand the rules and create a procedure that ensures employees will follow the rules, says Neil Caesar, president of the Health Law Center in Greenville, S.C.

But the work is worth it, says Parver. “Having an effective compliance program provides the insurance and protection you need to feel secure that your systems and that your staff are fully aware of what should be done correctly,” she says.

An effective compliance program can provide both internal and external benefits if it is designed correctly and reviewed regularly, the experts agree. Although many companies fear they cannot afford to invest in a compliance program, most experts say implementing such a program is an essential expense.

A Proper Defense

Another impetus for implementing a compliance program is the fact that the government looks favorably on these programs, Bunch says. “If you have a living, breathing, working compliance plan that you are using daily, [the OIG allows] a 50 percent reduction of the fines you may incur during an audit,” she says.

The government has indicated “quite publicly” that adopting and maintaining an effective compliance program will benefit a company during an investigation, Mahon agrees.

While that benefit alone is a good reason to implement a compliance program, other benefits include reduced penalties under sentencing guidelines, identification of potential exposure to improper conduct, greater internal sensitivity to fraud and abuse issues, and early detection of problems, Parver says.

In a sluggish economy, many companies weigh their risk of investigation against the cost of creating and maintaining a compliance program. Yet, the risk of not having a compliance program when federal agents knock on your door can be a “corporate death penalty,” Parver continues.

“If a company can prove [it has conducted] ongoing education and training, as well as ongoing internal auditing that has revealed errors for which money has been repaid — those efforts toward adhering to program requirements go a long way,” she explains. “[A compliance program] removes the element of intent that is necessary for proving fraud.” Additionally, a compliance program lessens the possibility that agents will find abuse, Parver says.

Another risk involves an HME company's relationships with partners and referral sources, Caesar says. Often, fraud investigations start elsewhere. If, for example, you are a partner in a joint venture being investigated, you will become part of that investigation. “It is not likely you are going to get caught, accused of criminal or civil violations, go to court, lose and go to jail,” he explains. “But you can have your business turned upside down, spend dozens or hundreds of hours working on this problem, and have your reputation bullied substantially.”

How can HME providers avoid such a scenario? Be clean, Caesar tells providers, and use a compliance program to stay clean.

Building a Better Business

Many consultants advise clients to consider a compliance program as more than a safeguard against civil and criminal investigations. An effective plan can enhance a company's internal processes by reinforcing internal communication, bolstering daily operations and strengthening the company's relationship with referral sources and potential business partners.

“A system that was perhaps created for regulatory compliance can be used for anything — it is a system of communication, a system of capturing information, a system of responding to questions, and a system of finding and implementing solutions,” Caesar says. “A compliance program will help you with any business activity you want to pursue because you can demonstrate to potential partners, lenders and managed care companies that you have your act together and you have a system in place that can help you respond to [questionable] situations.”

Caesar also emphasizes the benefits a compliance program can provide for employees. “It forces you to have your act together, which demonstrates to your employees that you care,” he says. “People want to work in a place that [is] committed to ethical behavior. That is one of the key elements of job satisfaction.” Satisfied employees are better, more loyal workers, he adds.

Providers should not underestimate the power of setting a corporate tone that emphasizes ethical behavior, Parver says. “It demonstrates an overall theme [of corporate culture] to every employee from the president down to the customer service reps and delivery technicians.”

Creating the Program

The OIG issued compliance guidelines for the HME industry in 1999 (see sidebar on page 30) that outline what the industry should include in compliance programs. Nonetheless, creating a program that fits a company's specific needs and characteristics — such as size, organizational skills and operations — still is a formidable task.

The first question to consider is if a compliance plan can be created internally or if outside experts must be retained. The answer is not always clear.

Clients who have created their own compliance program often tell Caesar they would rather pay the money to have an outside expert develop the program, because they underestimated the time commitment.

In addition to considering time requirements, companies must consider whether they can look at their own business objectively. The fact that claims are being paid does not guarantee that the claims are being filed correctly, Caesar says. “A lot of the problems [found during an assessment] tend not to be based on ignorance but on systemic dysfunctional aspects of your operation,” he explains.

An outside consultant's assessment often can catch inaccuracies and offer recommendations to improve operational processes, but this advice can be expensive. A large portion of the costs depend on the number of claims, the number of locations and the number of product lines.

“It is very hard to figure out how the assessment, creation and launching of a compliance program — and the follow-up support — can be done for less than $20,000 to $60,000, and more for large companies,” Caesar says.

Experts suggest a combination of internal efforts and outside assistance. Industry attorneys and consultants can create compliance programs for your company or they can work as advisors to review documents and perform outside billing audit. “You can do a draft on your own and then work with someone from the outside to review the program,” Parver says. But “you need somebody to come into your company who understands the requirements of the program and can find inaccuracies. If you have always billed a certain way and [that way] is incorrect — and you have only internal [auditors] who may have misunderstood a lecture or misunderstood a rule — you never will correct your problem.”

Implementation: A Must

Once a compliance program is created, it is important to remember that the program is a “living and breathing” document that requires corrective action when inaccuracies are discovered. “Part of what it means to have an effective program is you have to monitor and tweak the thing all the time,” Caesar says. “The rules change, the attitude changes, your people change, some of your weaknesses become strengths, and some of the things you didn't have to worry about, now, suddenly, you do. This is an ongoing process.”

The role of the compliance officer and compliance committee cannot be underestimated in this task. Internal audits must be conducted regularly, and the corporate climate must encourage open discussion of problems, Lieber says. The worst mistake a company can make is ignoring a plan that is in place.

Although compliance programs are not mandatory, placing a program on the shelf can bring severe consequences. “One thing is clear: If you take steps to demonstrate you know what you are supposed to be doing, then you can't claim you were ignorant,” Caesar says. “If there is proof you knew [how to proceed] and didn't do it anyway, then you are in big trouble.”

Parver urges those in management roles to see the value of a compliance program and to encourage all employeesto take a proactive approach. Again, having a compliance program without implementation is too risky.

“Having a paperwork compliance program [and placing] the beautiful program manual on the shelf is worse than useless,” she says, because it proves you knew what steps to take but didn't take them. “It is worse than having nothing at all.”

The Next Step

There is no question compliance programs are the industry's best defense against fraudulent activities and their consequences, according to the experts. However, decreasing the amount of fraud and reversing the negative reputation the HME industry will require the efforts of providers, payers and legislative decision-makers.

“Health care fraud hurts not only tax payers, insurance buyers and patients, it also hurts honest health care providers,” Mahon says. “The question becomes, what are those disciplines or professions doing to address it internally?”

Education might be the best solution. HME providers must work aggressively toward understanding and implementing new regulations, and they must also educate the physicians, payers and federal investigators. “Many times, agents don't understand how this industry works, particularly when they are investigating sophisticated customized seating and mobility systems, for example,” Parver says. “It becomes the company's responsibility to then educate the agent.”

The bottom line is that this is the providers' business and compliance is providers' responsibility, the experts say. Although the game may not be fair, it is the game that providers decided to play, so providers should play fairly and achieve success through ethical, well-planned business operations.

“If you are prudent, responsible and proactive, the environment is not scary,” Parver says. “You can't prevent someone from suing you, but you can mount a [strong] defense by becoming educated and being on the proactive end of prevention. You can feel protected because you have done the best for yourself, your company and your patients.”

The Hit List

MANY GOVERNMENT PUBLICATIONS, including the HHS/OIG Fiscal Year 2002 Work Plan and the 2001 Red Book, detail the categories of home medical equipment that are under scrutiny.

The HHS/OIG Fiscal Year 2002 Work Plan lists product categories that the government currently is investigating. When conducting investigations, the U.S. Department of Health and Human Services' Office of Inspector General tries to determine if the documentation supported the claims, if the items were medically necessary and if the beneficiary actually received the items. In the 2001 Red Book, OIG explains the cost-saving estimates for the agency's various recommendations.

Compliance Program Guidelines

The Essential Elements that Make the Program Work

THE U.S. DEPARTMENT of Health and Human Services' Office of Inspector General has provided the home medical equipment industry with a blueprint for remaining compliant and preventing health care fraud. In June 1999, the OIG issued its compliance program guidelines for providers of medical equipment and services.

Although the guidelines are voluntary, inclusion of the following seven elements in a company's compliance program can demonstrate to the government that the company is dedicated to remaining compliant with the Medicare program's rules and regulations:

• Implementation of written policies, procedures and standards of conduct
• Designation of a compliance officer and committee
• Development of training and education program
• Creation of a hotline or other measures for receiving complaints and protecting callers from retaliation
• Performance of internal audits to monitor compliance
• Enforcement of standards through well-publicized disciplinary directives
• Prompt response to detected offenses through corrective action
  — D.H.M.

The Benefits of Remaining Compliant

COMPLIANCE PLANS ARE COSTLY — both financially and in terms of time and effort. Yet, the benefits these plans bring are overwhelming and far reaching, experts say. Some of the benefits include a plan's ability to:

• Reduce potential for fraud
• Reduce federal penalties if violations occur
• Improve internal communication
• Encourage effective personnel feedback
• Reduce likelihood of “whistleblowing”
• Enable prompt response to new regulations
• Create efficient means for disseminating information
• Identify corporate culture
• Heighten awareness of general ethical issues
• Improve personnel skills
• Provide reassurance to third parties
• Prove valuable in acquisition and merger situations
• Demonstrate proper business practices to government investigators
• Permit speedy response to problems

Adapted from the Home Care Compliance Answer Book, by Neil Caesar

Riding the Fraud Wave

MONITORING THE DURABLE medical equipment industry is a top priority for federal law enforcement agencies, according to the U.S. Department of Health and Human Services Office of Inspector General's Semiannual Report to the Congress, April-September 2001.

“The durable medical equipment industry suffers from waves of fraudulent schemes in which federal health care programs are billed for equipment never delivered, higher-cost equipment than that actually delivered, unnecessary equipment or supplies, or equipment delivered in a state different from that in which it was billed in order to obtain higher reimbursement,” the report says.

Additionally, the report cites the following examples of fraud in the industry:

• In Puerto Rico, nine of 12 defendants involved in a kickback-related HME fraud scheme were sentenced. In February 2000, a 134-count indictment was handed down, charging all defendants with illegal kickback activity, conspiracy, mail fraud and money laundering. The alleged scheme centered on the illegal exchange of kickbacks for patient referrals by a DME company owner.
• A Missouri DME company agreed to pay the government $324,392 to resolve its liability for point-of-sale violations. The company allegedly submitted claims for wound care supplies to a Pennsylvania carrier — not a carrier in the state where the sales occurred — in order to receive a higher rate of reimbursement from Medicare.
• In New York, the chief executive officer and the chief operating officer of an HME company were sentenced to three years probation and were ordered to pay fines of $20,000 and $15,000, respectively, for violating the anti-kickback statute. The two offered and paid kickbacks to an individual in exchange for the right to supply HME to his Medicare patients.
• In August 2000, an 83-count indictment charged 23 defendants, including two owners of a medical equipment company in Florida, for their roles in a fraud and kickback scheme that allegedly involved recruiting Medicare beneficiaries to use their Medicare numbers to bill for equipment not provided. The scheme resulted in the billing of more than $14 million in fraudulent Medicare claims.

These examples seem extreme, yet both fraud and abuse within the HME industry remain important issues for the federal government and its investigators. In fact, prior to the events of Sept. 11, 2001, health care fraud was the Federal Bureau of Investigation's top priority, says Corrine Parver, a partner with the Washington-based law firm Dickstein Shapiro Morin & Oshinsky. “While the landscape has shifted slightly as far as some reassignment of FBI agents, the OIG's agents are working around the clock to protect the Medicare program from abusive and fraudulent health care suppliers, providers and manufacturers.”
— D.H.M.

Compliance: A Company-wide Responsibility

COMPLIANCE IS MORE than a billing issue, according to Kim Brummett, director of reimbursement for Advanced Home Care in Greensboro, N.C. “It is about providing service, so it affects a lot of people,” she says. Looking at compliance as an operational rather than a billing function allows everybody in the company to take ownership, she adds.

At Advanced Home Care, the compliance committee meets regularly to discuss new regulations, internal audits and staff training. But this is only one of the many factors that make Advanced Home Care's compliance program effective.

Knowing the latest regulations is a crucial part of remaining compliant, according to Brummett. “What is most challenging from our perspective is that the regulations are ever-changing,” she says. “We have to get everybody on the same page and make sure they understand what they need to do to qualify patients.”

Self-monitoring, in the form of internal audits, also is an important compliance component — and one that companies should not be afraid to use, Brummett says. “It is easy to say, ‘I don't have time for it or I can't afford it,’” she says. Yet, not knowing your weaknesses is more risky and costly if your company is investigated.

Taking a proactive approach is the best defense, Brummett says. It will serve the company best in the long run.

Advanced Home Care is a full-service, alternate site health care facility with branch locations in Greensboro, High Point, Winston-Salem, Charlotte, Asheville, Sylva and Greenville, N.C. In addition to home medical equipment, Advanced Home Care offers home health services, respiratory care and infusion therapy.
— D.H.M.

A Focused Approach

THERE ARE MANY benefits to having an effective compliance program, including the ability to keep a company focused, says Jim Frederick, the compliance officer for Young Medical in Toledo, Ohio.

“A compliance plan keeps you focused on what training and education you need to provide for your staff on an ongoing basis,” he explains. “It also keeps it in the forefront of your staff's minds that you are trying to prevent fraudulent activity.”

Unfortunately, a lot of what catches the suspicious eye of the government is not fraud but unintentional mistakes. An effective compliance program can identify these types of mistakes to an ethically run business before the mistakes become a problem. Additionally, “a compliance program keeps you on-track for performing internal audits that can catch unintentional mistakes,” Frederick says. “Often, people are trying to do a good job but, through a lack of understanding, end up making mistakes.”

However, a company can avoid these mistakes when its staff is fully aware of the latest policy changes. Frederick says Young Medical's compliance committee reviews policy changes and then decides what internal changes need to be made to remain compliant. The committee is comprised of individuals from many departments. “Anyone who can impact the company's ability to bill Medicare in a more appropriate manner should be on the compliance committee,” Frederick advises.

Young Medical offers a full line of home medical equipment products and services, including respiratory care, rehabilitation and infusion services.
— D.H.M.