MIAMI--A U.S. district judge rebuked a Medicare contractor last week for paying out $122 million for prosthetic limbs over a four-month period in South Florida.

Palmetto GBA, which handles Region C claims, paid for 21,000 artificial legs and arms in the Miami-Dade County area last year, a number that shouldn't have escaped Palmetto's notice, according to U.S. District Judge Cecilia M. Altonaga. "Common sense dictates this is an impossibility," she wrote in a May 10 decision, the Miami Herald reported.

Federal prosecutors have yet to file criminal charges, but have filed a civil suit against 48 suppliers and a billing agency for allegedly submitting false Medicare claims. Columbia, S.C.-based Palmetto GBA was not included in the lawsuit, but Altonaga had sharp words for the DMERC: "It is unclear why Palmetto GBA is not a subject of the government's investigation into criminal wrongdoing."

According to the Herald, billings for artificial limbs rose from $2,000 to more than $200,000 a month, and critics say the sharp increase should have raised red flags.

But spokeswoman Elizabeth Hammond said that catching the behavior at four months was early. "In addition to identifying this issue and actively supporting law enforcement investigation of this case, Palmetto GBA's scrutiny of orthotics and prosthetic billing in South Florida has resulted in hundreds of millions in program savings," she told HomeCare Monday.

Another problem is that the government does not fund or require Medicare contractors to perform pre-certification like private insurance does, Hammond said. Instead, Medicare relies on post-payment data analysis to spot payment trends. "Palmetto GBA does not have the authority to suspend payments without CMS permission," she said. "To obtain that permission, Palmetto has to gather data based on billings records for claims that are already paid."

Jeffrey Baird, a health attorney with Brown & Fortunato, Amarillo, Texas, also noted that it takes time for Medicare contractors to notice unusual billing patterns. "Any time you have a group of individuals or a company intent on gaming the system or intent on committing fraud, there's going to be some lag time before the DMERC catches on," he said.

"In a perfect world, Palmetto should have caught the fraud instantaneously, but if it took four to five months to catch on to the act, that's pretty quick," said Baird, who added that it typically takes a year to detect Medicare scams.

Funding is also an issue, according to Hammond--Palmetto GBA is only funded to review records on about 0.6 percent of claims that the company handles. Furthermore, she said the claims processor receives about one percent of benefit payments, much less than private insurance companies. Palmetto handles about 40 percent of all Medicare claims for DME in the country, according to Hammond, handling 28.1 million Medicare claims in the Southeast in 2004.

While better payment from CMS could help Palmetto put more people out in the field to investigate and uncover wrongdoing more quickly, Baird said, "it's still not going to allow Palmetto to discover fraud instantly."