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95–476—PDF 2004

S. HRG. 108–601

TAKING TAXPAYERS FOR A RIDE: FRAUD AND

ABUSE IN THE POWER WHEELCHAIR PROGRAM

HEARING

BEFORE THE

COMMITTEE ON FINANCE

UNITED STATES SENATE

ONE HUNDRED EIGHTH CONGRESS

SECOND SESSION

APRIL 28, 2004

(

Printed for the use of the Committee on Finance
COMMITTEE ON FINANCE

CHARLES E. GRASSLEY, Iowa, Chairman

ORRIN G. HATCH, Utah

DON NICKLES, Oklahoma

TRENT LOTT, Mississippi

OLYMPIA J. SNOWE, Maine

JON KYL, Arizona

CRAIG THOMAS, Wyoming

RICK SANTORUM, Pennsylvania

BILL FRIST, Tennessee

GORDON SMITH, Oregon

JIM BUNNING, Kentucky

MAX BAUCUS, Montana

JOHN D. ROCKEFELLER IV, West Virginia

TOM DASCHLE, South Dakota

JOHN BREAUX, Louisiana

KENT CONRAD, North Dakota

BOB GRAHAM, Florida

JAMES M. JEFFORDS (I), Vermont

JEFF BINGAMAN, New Mexico

JOHN F. KERRY, Massachusetts

BLANCHE L. LINCOLN, Arkansas

KOLAN DAVIS, Staff Director and Chief Counsel

RUSSELL SULLIVAN, Democratic Staff Director

(II)
(III)

C O N T E N T S

OPENING STATEMENTS

Page

Grassley, Hon. Charles E., a U.S. Senator from Iowa, chairman, Committee

on Finance ............................................................................................................ 1

Graham, Hon. Bob, a U.S. Senator from Florida .................................................. 22

AGENCY WITNESSES

Corrigan, Dara, Acting Principal Deputy Inspector General, Office of the

Inspector General, Department of Health and Human Services, Washington, DC ............................................................................................................. 9

Aronovitz, Leslie G., Director, Health Care—Program Administration and

Integrity Issues, U.S. General Accounting Office, Washington, DC ................ 12

Kuhn, Herbert, Director, Center for Medicare Management, Centers for Medicare & Medical Services, Department of Health and Human Services,

Washington, DC ................................................................................................... 14

PUBLIC WITNESSES

Lewandowski, Rebecca, a witness/defendant who plead guilty to DME fraud ... 4

Cohen, Laura, physical therapist and assistive technology practitioner, Consultant to Triwest Region of Tricare, Tucson, Arizona ..................................... 30

Claypool, Henry, co-founder of advancing independence, Washington, DC ........ 32

Cox, Kay, president and CEO, American Association for Homecare, Alexandria, Virginia ........................................................................................................ 34

ALPHABETICAL LISTING AND APPENDIX MATERIAL

Aronovitz, Hon. Leslie G.:

Testimony .......................................................................................................... 12

Prepared statement .......................................................................................... 39

Claypool, Henry:

Testimony .......................................................................................................... 32

Prepared statement .......................................................................................... 62

Cohen, Laura:

Testimony .......................................................................................................... 30

Prepared statement w/attachment .................................................................. 66

Corrigan, Dara:

Testimony .......................................................................................................... 9

Prepared statement .......................................................................................... 92

Cox, Kay:

Testimony .......................................................................................................... 34

Prepared statement .......................................................................................... 103

Graham, Hon. Bob:

Opening statement ........................................................................................... 22

Letter from Doris J. Giles, Program Manager, Health Care Fraud, U.S.

Department of Justice .................................................................................. 108

Grassley, Hon. Charles E.:

Opening statement ........................................................................................... 1

Prepared statement .......................................................................................... 109

Kuhn, Hon. Herbert:

Testimony .......................................................................................................... 14

Prepared statement w/attachment .................................................................. 112

Response to a question from Senator Graham ............................................... 126
Page

IV

Lewandowski, Rebecca:

Testimony .......................................................................................................... 4

Prepared statement .......................................................................................... 127

COMMUNICATIONS

American Association for Homecare (AAHomecare) ............................................. 137

American Physical Therapy Association (APTA) .................................................. 140

Amigo Mobility International, Inc. ......................................................................... 144

Independence Through Enhancement of Medicare and Medicaid Coalition

(ITEM) ................................................................................................................... 159

Medicare Rights Center .......................................................................................... 168

National Coalition for Assistive and Rehab .......................................................... 172

Pride Mobility Products Corp. ................................................................................ 186

Restore Access to Mobility Partnership (RAMP) .................................................. 191

United Spinal Association ....................................................................................... 200
(1)

TAKING TAXPAYERS FOR A RIDE: FRAUD AND

ABUSE IN THE POWER WHEELCHAIR PROGRAM

WEDNESDAY, APRIL 28, 2004

U.S. SENATE,

COMMITTEE ON FINANCE,

Washington, DC.

The hearing was convened, pursuant to notice, at 10:08 a.m., in

room SD–215, Dirksen Senate Office Building, Hon. Charles E.

Grassley (chairman of the committee) presiding.

Also present: Senator Graham.

OPENING STATEMENT OF HON. CHARLES E. GRASSLEY, A U.S.

SENATOR FROM IOWA, CHAIRMAN, COMMITTEE ON FINANCE

The CHAIRMAN. Good morning, everybody. I would call the hearing to order.

I give a special thanks to all the witnesses for participating

today, but a special thank you to Rebecca Lewandowski, our first

witness.

The purpose of today’s hearing is to examine a number of fraudulent schemes and costly and abusive practices that are taking place

in the sale of motorized wheelchairs, and that would generally be

to Medicare and Medicaid recipients.

However, merely identifying problems is not enough. I want today’s hearing to be involved with a first step toward fixing those

problems. Accordingly, I am asking each witness today if they

would offer solutions based on their own experiences.

Therefore, I would like to ask Mr. Kuhn, who is here today representing the Centers for Medicare and Medicaid Services, to remain at the hearing and listen to each of the witnesses’ testimony

and recommendations.

I want to make it clear from the start that Medicare and Medicaid fulfill vital responsibilities for our seniors and many others.

It is part of the fabric of American society.

It is critical, then, that the Centers for Medicaid Services meet

the interests and needs of all these individuals in an effective, efficient, economical, and competent manner. However, at the same

time, it is imperative that the interests and expectations of the taxpayers be met as well.

Since the inception of the Medicare and Medicaid programs, the

government has reimbursed qualified beneficiaries and recipients

for the medical equipment they need to function in Society. Overall,
2

however, it is fair to say that the system has experienced some serious problems with fraud and abuse over the years.

Now, today we are here once again attempting to address yet another serious problem area for the Centers for Medicare and Medicaid Services: fraud, waste, and abuse involving its reimbursement

for power wheelchairs.

We have several power wheelchairs in the room here. One type,

the K11, these two here on the right and the second from the right,

are the main type of chair purchased by Medicare. We will hear

that term come up a lot today, so remember the term K11.

Because of the immense size and cost of Medicare and Medicaid

programs, it seems that no fraud in these programs is ever small.

Rather, it tends to total in the hundreds of millions of dollars, even

billions of dollars.

Today, the General Accounting Office and the Office of Inspector

General at the Department of Health and Human Services are here

to report on many serious problems they have documented. In fact,

the Office of Inspector General is releasing two reports during this

hearing.

One of these reports looked at those who are receiving the most

commonly provided power wheelchair, again, the K11. For this report, the Office of Inspector General examined a statistically valid

sample of those who had received the K11, and found that almost

one-third did not meet the requirements to have any type of wheelchair. In fact, the Office of Inspector General found that only 13

percent of those it surveyed actually met the coverage requirements for the K11.

That, I submit, is not a very good batting average, and that

would be in any league. The Office of Inspector General also conservatively calculated that, just for calendar year 2001 alone, the

over-payments for K11 power wheelchairs totaled an estimated

$178 million, and this was when the expenditures for power wheelchairs were less than half what they are today.

Another Office of Inspector General report released today looks

at the prices that Medicare pays for the K11 versus the prices that

others pay. The conclusion? Despite Medicare’s huge size and buying power, it actually pays more for the K11s than do other buyers.

So would you please take a look at the chart over here, at the

prices that we have? I think you would see that there is really a

problem. Going from bottom to top there, you would see a real difference in price.

So, imagine if the Medicare reimbursement amount was set at

prices available to consumers and suppliers, then Medicare and its

beneficiaries could have saved over $224 million in 1 year.

If Medicare based its reimbursement amount on the median price

offered by wholesalers or the median price that suppliers negotiated with manufacturers and distributors, the program could

have saved between $459 million and $586 million. That is just in

the year 2002.

None of this makes a whole lot of sense to this Senator, and I

do not think that it would make a whole lot of sense to the taxpayers to my State of Iowa, or the other 49 States who have just

finished sending much of their hard-earned dollars to Washington

during this tax season.
3

Coupling the Office of Inspector General’s findings on price and

eligibility, and unfortunately to say, there are a lot of schemes out

there that are ripping of Medicare when it comes to power wheelchairs.

Let me turn your attention to a one-minute DVD that we have

now that we want to play for you. So, if you would turn down the

lights so everybody can see this, I would like to have you pay some

attention to it. It is very short, so do not miss anything.

[Whereupon, a DVD was shown.]

The CHAIRMAN. All right. What you see there, is you saw a group

of people who were defrauding the Medicare program. The Office

of Inspector General, as a part of a sting operation, set up a pole

camera—that is why you were looking up above—and called what

was a sham storefront, ‘‘Durable Medical Equipment Supplier,’’ and

told them that the Centers for Medicare and Medicaid Services was

going to conduct an on-site visit.

Because it was a sham operation, they needed to bring in supplies like desks, chairs, and DME supplies to pass an on-site review. That is what you just saw there, those trucks pulling up and

people quickly filling the storefront so it looked like it was a real

business.

Today, we have one witness who has agreed to testify and provide us with a real insider’s account of how power wheelchair

frauds work. The DVD that you saw is one of the sham DMEs in

which she was involved. She has agreed to talk to us candidly

about her personal experience in a scam that billed Medicare for

$25 million.

Now, I would be remiss if I did not say that most suppliers and

most manufacturers are putting in an honest day’s work and submitting accurate bills to the Federal Government for payment.

They are playing by the rules, and we welcome their assistance in

combatting fraud.

The General Accounting Office, as well, has some startling findings to report today. Although CMS has noted that there was a 4-

year growth rate of about 450 percent in the expenditures for

power wheelchairs, only recently has the CMS finally gotten

around to asking why there was that big increase, and then begin

to attempt to stop it.

I find it very troubling, especially since GAO reports that CMS

was advised about the problem some 6 or 7 years ago, that nothing

was done about it until just recently.

Fortunately, the Centers for Medicare and Medicaid Services recently initiated ‘‘Operation Wheeler Dealer’’ in an effort to attack

the problem of wheelchair fraud. For that, I am grateful. But rest

assured, we will not be waiting another 6 or 7 years for the results

of that initiative.

The General Accounting Office also has examined CMS’s 10-point

initiative unveiled last September to address power wheelchair

fraud. I am anxious to hear what the General Accounting Office

has to say about that proposal, and I am interested in CMS’s response to the findings that were presented by both the General Accounting Office and the Office of Inspector General.
4

Finally, we will have some thoughtful comments from some

skilled professionals and representatives of the disability community and the durable medical equipment industry.

Well, with that opening comment, I want to introduce Mrs.

Lewandowski. She is with us today to testify about her extensive

inside knowledge of the organization and operation of more than a

score of bogus durable medical equipment companies.

She will explain to us how, as a 22-year-old office assistant, she

first became involved in the durable medical equipment business,

and how she helped set up about 20 sham durable medical equipment companies with no training and little experience.

I thank you for her willingness to share your first-hand insights

with us, and I thank you very much for your testimony. We will

go immediately to you, Ms. Lewandowski.

STATEMENT OF REBECCA LEWANDOWSKI, A WITNESS/

DEFENDANT WHO PLEAD GUILTY TO DME FRAUD

Ms. LEWANDOWSKI. Good morning, Senator. My name is Rebecca

Lewandowski. What brings me before you today is my involvement

in a massive California-based Medicare fraud ring. Several co-defendants and I are currently waiting sentencing on multiple Federal charges in Phoenix, Arizona.

Please allow me to give you some history of how I became involved with my co-conspirators and their company. My younger

brother befriended two young men who already had two durable

medical equipment companies established in California and Nevada.

As their friendship grew, so did their desire to expand by recruiting new people to assist in opening additional DME companies in

partnership with the two brothers. With promises of wealth and a

better life, my brother was enticed into applying for a DME provider number and ultimately billed Medicare for over $2 million.

During the spring of 1998, I was introduced to the Edem brothers, who were looking for clerical assistance in their Long Beach,

California office. At that time I was unemployed and was thrilled

with the opportunity to work for them.

My duties for the Edem brothers began with completing certificates of medical necessity, delivery tickets, and various insurancerelated documents. They said physicians gave them power of attorney to sign on behalf of the doctors, and my responsibilities then

escalated to forging physicians’ and patients’ signatures on thousands of documents for several DME companies, all of which were

maintained from our Long Beach office.

I was given the title of office manager and was made the direct

contact for our two billers. Through my association with the billers

and with the assistance of Medicare-provided manuals and booklets, I was eventually coordinating billing for approximately 20

companies.

The Edems instructed me to bill a specific amount each month,

and I achieved the goal. In total, our operation defrauded the Medicare program for $25 million. Within 6 months of my first day of

employment, at 24 years old, with no medical experience and totally ignorant of how to operate a legitimate DME operation, I was
5

the sole proprietor of Mercury Medical Supply located in Klamath

Falls, Oregon.

The process by which I obtained a DME provider number was

fairly simple. I referred to my brother’s already approved application as a guide and simply copied the information onto my own application. The Edems provided me with $3,000 to rent an office space and

to finance other related expenses. In order to approve an application, CMS requires a site surveyor to conduct a surprise inspection

of each business location. The site surveyor asks several test questions relating to the DME company.

On the day of inspection for my storefront, the surveyor telephoned me for an appointment. That call gave me ample opportunity to prepare for my surprise visit.

After completing the test questions, the surveyor gave me a copy

of the list of questions. That mistake set a precedent for every

other site inspection that followed. During a 2-year period, my storefront billed Medicare $1.158 million. Eighty-four percent of that money was paid to the Edems, 6

percent to the biller, and 10 percent was given to me.

The process of creating sham storefronts was repeated, with new

people posing as DME suppliers and obtaining new Medicare provider numbers. The Long Beach operation was responsible for over

20 new companies in California, Oregon, Nevada, Arizona, Utah,

and Missouri.

In December of 2001, Federal agents raided the Long Beach office and several homes and discovered six supplier applications for

new DME companies in the State of Washington.

Key individuals within our organization that made the operation

function properly included marketing persons, billers, physicians,

nurses, office support staff, delivery drivers, and Medicare beneficiaries. The goal of each role was to benefit all of our DME companies, working as a single unit.

The marketing persons were from a specific ethnic background,

and most were related by blood or through marriage. Their mission

was to visit similar ethnic communities to solicit information from

Medicare beneficiaries. Often, modestly-priced supplies, such as

Ensure or walkers, and less often, cash, were offered in exchange

for beneficiary information and for their silence.

Marketing persons exploited the language barrier to manipulate

and to deceive non-English speaking beneficiaries into giving them

identification cards and Medicare numbers, and were paid between

$800 and $1,500 for each name and Medicare number they supplied us with.

We provided each beneficiary a toll-free number for any questions or complaints regarding a Medicare statement. All incoming

calls from beneficiaries from every location rang directly to our

Long Beach office. Our goal was to satisfy the beneficiary and avoid

any complaints of fraudulent activity reaching Medicare.

Some of the mistakes and poor decisions that were made within

our organization were of such significance, that we should have

been exposed much sooner than we were.

All of our ‘‘patients’’ were of similar ethnic background and resided in the State of California. The same doctors were used re-
6

peatedly for every company. All paperwork for every company was

completed by the same staff and had striking similarities. Less

than 5 percent of our patients ever visited a doctor or clinic.

At the height of our operation, we billed Medicare for approximately 100 power wheelchairs each month, but delivered only a

tiny fraction of that number.

I received a letter from a fraud analyst representing Medicare

that stated that a patient complained about not having received

the power wheelchair for which we billed Medicare. Offering no explanation, I mailed a refund check to Medicare and billed another

$50,000 the following month.

In many instances, a simple telephone call to either a doctor or

a patient could have prevented some of this fraudulent activity.

My experience with the whole process of how these sham storefronts operated has given me several ideas how to improve the system that we easily manipulated. Screening new provider applicants

for previous violations and/or convictions could eliminate repeat offenders. More thorough investigations should be performed when a

beneficiary complains of having been the victim of fraud.

The site surveyor inspections should always be a surprise and

should occur more often. Random calls to doctors and patients will

help to identify illegitimate claims.

New DME companies should be restricted to submitting paper

claims only, as opposed to electronic submissions. This allows

Medicare a closer inspection of a patient’s file, which could alert

them to suspicious paperwork. Lastly, literature written in several

languages could assist and educate minorities about fraud and

abuse.

If telling my story sheds more light on this rampant problem and

assists you in plugging some of these holes in the Medicare system,

my time here has been well spent today, and I thank you.

[The prepared statement of Ms. Lewandowski appears in the appendix.]

The CHAIRMAN. Well, I appreciate, very much, your testimony. I

have a few questions I would like to ask you.

Just how difficult would you say it is to set up, run, and get a

passing grade from CMS on bogus DME companies, or to set up a

bogus DME company?

Ms. LEWANDOWSKI. Well, again, referring to my statement, I was

22 years old. I knew absolutely nothing about the durable medical

equipment business. I was completely ignorant to all the workings

and how to operate a legitimate company.

Yet, I was able to pass the site inspection easily, and I had my

provider number within 2 weeks of that inspection. It was only one

time that I ever spoke to anybody, any representative from Medicare, and that was it. It was that simple.

The CHAIRMAN. Based on your own experiences of having gone

through one or two CMS on-site reviews, what do you think are the

best two or three ways to stop fraud?

Ms. LEWANDOWSKI. Well, again, I will refer back to my statement. I think, first and foremost, there should be a much stricter

screening process of anyone who applies for a DME provider number.
7

I have a very specific example for you that I did not include in

my statement, which is a question, very thorough and lengthy, on

the Medicare provider application. It was, do you have any relatives, family, or friends that are involved in the Medicare program? For me, the answer obviously have been yes, but the answer

on my application was ‘‘no.’’

I find it hard to believe that, in this day in age, this computer

era, that a simple reference, typing a last name into a system,

could not have alerted anyone to the fact that my brother had just

received his provider number not even a year before I applied for

my own.

The CHAIRMAN. All right. You referred to an 800 number that

was set up.

Ms. LEWANDOWSKI. Yes.

The CHAIRMAN. Why was the 800 number set up?

Ms. LEWANDOWSKI. It was set up in order to field any complaints

or calls from a beneficiary. It was listed on top of our delivery ticket or authorization form, which is an insurance-related document,

so we could have a chance to appease or make happy these beneficiaries that were complaining of not having received a supply, or

we were late, or whatever the reason was so they would not directly call Medicare.

So, oftentimes when we received calls like that, we just solved

the problem right then and there by offering more supplies, or

money, or whatever it is the patient wanted.

The CHAIRMAN. How much fraud would you say there is in DME,

based on what you saw in California? I know it is probably your

opinion of how much there is, but any sort of quantification you

could give to that would be helpful to us.

Ms. LEWANDOWSKI. Well, Senator, let me begin by saying, after

my surrender in California to face these multiple Federal charges

that I had against me, I had to leave the State of California. I left

immediately. The contacts that I made and the people I knew in

that business were a tremendous amount, and I just wanted to be

away from that. I did not want to be exposed.

I did not want telephone calls, visits to my home begging for my

help, asking for assistance, things of that nature. And I think once

you are exposed to those people, which are a lot, it really is hard

to disconnect yourself from that group.

So for me, I had to leave the State. I moved away from the area.

I made myself inaccessible and unavailable to those people. It is a

rampant problem. There are clinics and hospitals, and so many

things and different aspects involved in this, and it just comes full

circle.

The CHAIRMAN. Do you think that there would be fraud in other

States like there is in California?

Ms. LEWANDOWSKI. I can speak for our companies. I know that

we had fraudulent DME companies established in several other

States other than California, which I think I mentioned in my

statement to you.

The CHAIRMAN. One person that we spoke to who owned a DME

company told us that he was approached by a nurse in a doctor’s

office with whom he had an established business relationship, and

she demanded $10,000 to continue using his company for DME
8

supplies for patients. Would that be a surprise to you to hear that

sort of thing?

Ms. LEWANDOWSKI. Not at all. Not at all. I do not know if you

are aware, but we had a certified, registered nurse working in our

location in Long Beach completing doctor’s progress notes, different

forms of a progress note, using different pens and different handwriting. So, reaching the professionals is not unheard of.

I think that their cooperation is, more often than not, necessary,

not only to start doing something like this, but to maintain and to

continue doing. Their cooperation is something that you have to

have. It is something that we had, and it is something that we

needed in order to continue doing what we were doing.

The CHAIRMAN. Well, I thank you for your testimony. Those are

all the questions I have.

Now, let me make an announcement before you go, for other witnesses as well. Since other Senators are busy with other things

today, they may not come here for questions. You may get questions in writing. I would like to have the staff inform members that

may have questions submitted within 5 days, and then we will get

them out to whomever to respond to them as quickly as we can.

If we can get those back 2 weeks after you receive them, I would

appreciate it.

In your case, since you may not have gone through a process like

this, my staff would be able to help you with the process of responding to those questions in writing. So, I would want to be helpful to you. I think other witnesses probably would know how to do

that.

Thank you very much, Ms. Lewandowski.

Ms. LEWANDOWSKI. I thank you.

The CHAIRMAN. I am going to call the second panel. We start

with Hon. Dara Corrigan. She is the Acting Principal Deputy Inspector General at the Department of Health and Human Services,

the department that oversees the Medicare and Medicaid programs, among others. She will be describing two reports that are

being released today, as well as the results of many criminal investigations her office has been conducting.

Also appearing before us today on this panel is the Honorable

Leslie Aronovitz, the Director of Health Care, Program Administration and Integrity Issues at the General Accounting Office.

Leslie’s staff has been conducting a series of examinations about

the steps taken by CMS and its contractors to identify and respond

to improper payments for power wheelchairs, and how the recently

passed Medicare prescription drug bill of 2003 may affect CMS’s

ability to set payment rates for DMEs.

Our third witness is Hon. Herbert Kuhn, Director of the Center

of Medicare Management for the Centers for Medicare and Medicaid Services. Mr. Kuhn will discuss the policies, procedures and

operations that CMS uses to manage, oversee, and control the approval and oversight of DME companies and the claims processing

and payment performed by its contractors.

I will have you go in the way that you were introduced, starting

with you, Dara. Thanks to all of you for coming.
9

STATEMENT OF DARA CORRIGAN, ACTING PRINCIPAL DEPUTY

INSPECTOR GENERAL, OFFICE OF THE INSPECTOR GENERAL, DEPARTMENT OF HEALTH AND HUMAN SERVICES,

WASHINGTON, DC

Ms. CORRIGAN. Thank you, and good morning, Mr. Chairman.

The facts are certainly startling. If you look at the amount of

money spent on power wheelchairs in 2003, the amount exceeds

$1.2 billion. But I think we have to also keep in the back of our

minds today that power wheelchairs do have the power to transform the lives of our beneficiaries, so it is important for me and for

everyone who works in my office to make sure that the right people

are getting wheelchairs, that no one is abusing the system, and

that we are getting a fair price for the wheelchairs.

Now, I wish I could say there has not been fraud and abuse, but

we have been investigating allegations of fraud in the power wheelchair industry since 1994, and it certainly has not stopped. With

a benefit as important as power wheelchairs, we have an obligation

to make sure that we stop those who take advantage of the system.

So, today I will describe for you the type of scheme that we have

been looking at in the power wheelchair industry. I also want to

talk to you about the two inspection reports that we will issue

today. You did a very good job of describing the reports, but I will

go through them in a little bit more detail and I will describe our

work on coverage for power wheelchairs, and pricing for power

wheelchairs.

But, first, I would like to talk about the work that our investigators have been doing in the power wheelchair area. As you know,

the Medicare program has paid significant amounts of money for

power wheelchairs, increasing from $259 million in 1999 to over an

estimated $1.2 billion in 2003.

Now, I think it is perhaps simplistic, but I also think it is true,

that the greater the amount of money in a particular area, the

more people will be inspired to commit fraud and to abuse the system. It is certainly true in the DME area, in general, and it is certainly true in the power wheelchair area, in particular.

We have found fraud occurring in all sorts of ways, from the

most blatant where people file claims and never deliver a wheelchair to more creative schemes where people will up-code and bill

for power wheelchairs, but give the beneficiary a scooter or a manual wheelchair.

The Medicare program, as you mentioned already, pays for medical equipment for beneficiaries who do not need it at all, and we

found an almost sad amount of kick-backs to physicians and nurses

who are willing to participate in these schemes by signing certificates of medical necessity like the one you have up there, and other

types of documentation.

To show you how blatant these schemes are, I would like to describe one particular investigation that our office conducted. In this

case, we were looking at two co-owners of two separate DME suppliers. What they did, was they would go around to beneficiaries.

They would almost round them up.

They would round up people and they would bring them to central locations like community centers, particular parts of housing

areas, and they would tell them to bring their Medicare numbers
10

with them. And what they did, was they promised them money for

their numbers. A lot of people participated. For amounts as low as

$200, they would turn over their Medicare numbers.

In addition, they would take turns posing in wheelchairs. It was

fairly creative. The co-owners would put the wheelchairs in different parts of the community center or different parts of the housing development so that Medicare would not be able to tell that it

was some type of a scam.

In addition, they would solicit either doctors or nurses to sign the

certificates of medical necessity or they would forge them themselves. Now, over a nine-month period they billed Medicare for $5

million and they received $2.3 million out of the $5 million that

they billed.

Now, this is a successful case because there was a prosecution

and they were sentenced to 87 month, and 54 months, in prison for

their roles in submitting fraudulent claims for power wheelchairs.

But I think the ability of these criminals to be creative, to lie blatantly to the government, to set up schemes to use and abuse our

beneficiaries is, unfortunately, not one example. We have many examples of that happening.

In our office, we felt it was necessary to also look beyond those

types of criminal investigations to see what else was happening in

the power wheelchair industry. We wanted to do a study on it to

see how many claims actually met the criteria set by Medicare in

order to qualify for a power wheelchair.

In one of the reports that I am releasing today, as you have already mentioned, our findings show that a lot, the majority, a lot

more than the majority, did not meet the coverage criteria for K11

wheelchairs.

For our review, we randomly sampled, as you said, wheelchairs,

and we collected documentation in support of those claims. We

hired an independent medical reviewer to look at those claims because we do not want to second-guess the doctors, but we are more

than willing to have doctors second-guess doctors. They looked at

these claims and they determined that only 13 percent met the coverage criteria for K11 power wheelchairs. Thirteen percent.

Thirty-one percent of the claims reviewed did not meet the coverage criteria for any mobility advice at all. So, as you said, a third

of them did not qualify for any type of mobility device. Forty-five

percent of the claims did not meet the coverage criteria for the

power wheelchair, but they would have met criteria for a less expensive type of wheelchair or scooter.

Clearly, there are problems with the coverage criteria that need

to be resolved. Our job in the Office of Inspector General is not to

say what should be covered. But what we are saying is that what

Medicare has said should be covered is not being covered, by a long

shot.

The second report I am releasing today compares Medicare reimbursement amounts for K11 power wheelchairs to purchase prices

available to consumers and suppliers. I remember one of my employees coming into my office one day, and he was furious. He said,

I have been looking around the Internet. It is easy—it is easy—to

get a wheelchair cheaper than Medicare pays. He was outraged. It

is outrageous.
11

When you look at the numbers that you have up here, Medicare

is paying excessive prices for these wheelchairs. We found that,

even if you look at the most generous of prices, the prices available

to consumers, retail prices, Medicare is overpaying. The number

that you had up there was about $3,800 for consumers. It is about

$5,200 under the Medicare program.

Now, suppliers have better negotiating power and the prices for

suppliers are less. But as you have already highlighted, should

Medicare’s purchasing power not be better than suppliers’? The

amounts of money we could save are significant: $224 million, approximately, in 2002 if we even used the supplier Web site number.

I know I am out of time.

The CHAIRMAN. Proceed. I think without more members being

here, we have got some more time to take testimony.

Ms. CORRIGAN. I will try to keep it short.

The CHAIRMAN. Proceed.

Ms. CORRIGAN. But this is perhaps the most important point of

me being here today, is to say that we know what the problem is.

We have seen the problems with coverage, with pricing, with fraud

and abuse, and we have to figure out a way to stop it.

It is much better to stop fraud from occurring in the first place

than to go after it on the investigative side, and I think it is very

important that we all work together, and in particular our office to

work closely with CMS, to try and figure out how to reign in and

stop this problem.

My written statement has a number of suggestions, but I would

like to highlight just a few that I think are the most important. In

some way, coverage policy has to be revised. Our suggestion would

be to have more specific information, like medical conditions, that

would justify coverage for a power wheelchair.

We also think it is important to both educate physicians, nurses,

and beneficiaries about coverage criteria, which I know CMS is always trying to do. But somehow I think we have to take that away

from anyone who can say that they do not understand the criteria.

As the first witness testified, it is not that hard to defraud the program. We want to be able to find the people who are lying and

stealing.

I think we can create a new coding system for K11 power wheelchairs to account for the variety in models, and perhaps save some

money. But, most importantly, on the pricing side I think we have

to get prices in line with reality, because if they are not in line

with reality, there is so much more incentive to exploit the system.

We would support any efforts to reduce prices, and we will help

anyone who wants to use our data.

On the other hand, we have to be vigilant in the Office of Inspector General, and we will continue to be vigilant in investigating

and prosecuting violators. I think, as the first witness highlighted,

there is also a tremendous need to look at the way that DME suppliers get into the system in the first place. If we can make those

controls stronger, we will prevent a lot of fraud from occurring at

all.

I do believe that in this area that is sometimes fraught with a

lot of emotion, and for good reason, that we can make positive

changes without depriving disabled individuals of the power wheel-
12

chairs that they need. It is certainly the goal of the Office of the

Inspector General, and I am sure everyone here shares that goal.

We should be working together to find a solution to this problem.

Thank you very much. I would be happy to answer questions.

[The prepared statement of Ms. Corrigan appears in the appendix.]

The CHAIRMAN. We will go through the entire panel before we

have questions.

Ms. Aronovitz?

STATEMENT OF HON. LESLIE ARONOVITZ, DIRECTOR, HEALTH

CARE—PROGRAM ADMINISTRATION AND INTEGRITY

ISSUES, U.S. GENERAL ACCOUNTING OFFICE, WASHINGTON,

DC

Ms. ARONOVITZ. Thank you, Mr. Chairman. I am pleased to be

here today as you discuss issues regarding Medicare payments for

power wheelchairs.

While the Inspector General’s information is stunning, we found

that this situation has been developing for a long time. As far back

as 1997, spending has been rising at a disturbing rate.

As you can see on our chart, power wheelchair spending went

from $140 million in 1997 to more than $800 million in 2002, and

is expected to top $1.2 billion, when all the numbers are in, for

2003.

These alarming statistics prompt two questions: why did Medicare let power wheelchair claims escalate for so long without ensuring that beneficiaries actually qualified for, and received, the benefit? Why are Medicare’s payments for these items so out of line

with both wholesale and retail prices?

For 6 years, CMS was warned repeatedly about excessive claims

for power wheelchairs. Only in 2003 did it coordinate action to stop

the losses and prevent further abuse.

In 1997, its statistical contractor alerted CMS that utilization

had tripled in the last year and a half. CMS failed to act, even

after the regional carriers twice put their concerns about dramatic

payment growth in writing. CMS did issue a fraud alert in 1998

after one of its DME regional carriers launched a major investigation of suppliers in the southeast.

While a fraud alert raises awareness of potential vulnerabilities,

it should also help the agency direct its own efforts to address the

problem. But in this case, CMS did not act on its own alert by focusing DME regional carriers’ attention and resources to this problem.

Meanwhile, funding for Medicare claims review declined relative

to the tremendous surge in claims, leaving contractors no choice

but to scale back their review efforts.

As a result, a minimal number of power wheelchair claims were

scrutinized. Also, CMS’s gatekeeping process for determining which

suppliers were authorized to bill Medicare did not keep out fraudulent suppliers.

When CMS’s enrollment contractor, the National Supplier Clearinghouse, got wind of the situation in 2002, it visited 1,300 suppliers in Harris County, Texas. The clearinghouse found that over
13

350 of them did not meet Medicare supplier standards and revoked

their Medicare billing numbers.

Fueling the unbridled utilization of power wheelchairs were aggressive marketing campaigns by certain suppliers. Suppliers have

saturated TV, radio, newspapers, magazines, and the Internet with

advertising directed at beneficiaries that portrayed wheelchairs as

desirable and easy to obtain. They were even advertised as ‘‘free,’’

with Medicare footing the bill.

As you can see on this flyer, beneficiaries are encouraged to act

quickly because ‘‘time is running out.’’ Also, I should add that advanced technology has made power wheelchairs increasingly useful

for beneficiaries, sleek and socially acceptable, which also drove

utilization.

Once CMS decided to take action in March, 2003, it was 6

months later that it issued its 10-point plan. The plan itself appears to be a reasonable approach for reducing improper payments.

I read today that CMS put out another press release where they

are going to do additional activities, which also seem very positive,

except the 10-point plan does not deal with the aggressive marketing issue. CMS has begun, and in some cases completed, actions

on all 10 items.

I would like to turn to my second point, briefly, why Medicare’s

payment rates for power wheelchairs are so irrational. Historically,

Medicare has not been successful in setting market-based payment

rates. Its inherent reasonableness authority was cumbersome and

slow, and used only once. The guidelines supporting a streamlined

version of this process are still under way, and CMS is planning

to test it first on power wheelchair payment rates.

The Medicaid Prescription Drug Improvement and Modernization

Act of 2003 offers hope that future payment rates will be more reasonable. The MMA requires CMS to use competitive bidding to set

payment rates for durable medical equipment. CMS has already

saved money with this method of payment setting in a demonstration in two areas of the country.

We believe that this hearing is not just about power wheelchair

payments. It is also about how CMS is organized to respond to any

inappropriate use of Medicare dollars and its ability to set reasonable payment rates for durable medical equipment.

In discussions about power wheelchair payments with the DME

regional carriers, they indicated that there is no shortage of items

they have identified as meriting immediate attention and possible

payment rate adjustments.

Mr. Chairman, this concludes my prepared remarks. I will be

happy to answer any questions you or Mr. Graham might have.

The CHAIRMAN. Thank you.

[The prepared statement of Ms. Aronovitz appears in the appendix.]

The CHAIRMAN. Mr. Kuhn?
14

STATEMENT OF HERBERT KUHN, DIRECTOR, CENTER FOR

MEDICARE MANAGEMENT, CENTERS FOR MEDICARE & MEDICAL SERVICES, DEPARTMENT OF HEALTH AND HUMAN

SERVICES, WASHINGTON, DC

Mr. KUHN. Mr. Chairman, Senator Graham, thank you for inviting me to discuss Medicare’s coverage and payment policies for

power-operated wheelchairs.

I also want to thank you, Chairman Grassley, for the great working partnership we have had with you to rid the Medicare program

of fraud.

Also, Chairman Grassley, I would say I heard your opening

statement when you asked me to stay for the entire hearing. You

can be assured that I will listen to all the witnesses.

The CHAIRMAN. Thank you.

Mr. KUHN. As you have heard today from other witnesses,

growth in total allowed charges for power wheelchairs has outpaced other Medicare economic indicators in recent years.

A number of factors contributed to this growth, including changing needs of the Medicare population, technical progress in power

mobility devices that have led to more options for beneficiaries,

overuse of the benefit, fee schedule payment levels, limited coding

options, increases in supplier enrollment, and the lack of beneficiary, provider, and supplier understanding of coverage.

Unfortunately, fraud and abuse presented a challenge as well.

Yet, some beneficiaries who really need these mobility devices were

not getting high-quality and timely assistance.

CMS utilized a variety of tools to combat these abuses, culminating with a major national effort last fall. Working with the

Health and Human Services office of the Inspector General, CMS

launched ‘‘Operation Wheeler Dealer’’ to crack down on fraud and

abuse in the wheelchair market.

These efforts succeeded in reigning in payments for improper

claims. As you can see from the chart I have displayed here, since

the task force to develop Operation Wheeler Dealer convened in

March, 2003, utilization and allowed charges for power wheelchairs

declined from a monthly high of over $113 million in April to about

$69 million in December, 2003.

In Harris County, Texas, CMS witnessed a major spike in Medicare claims. However, as my second chart indicates, the percentage

of claims submitted and allowed in Harris County compared to national claims has returned to 2000 levels.

This is down from a high of approximately 23 percent of national

claims submitted, and 17 percent of claims allowed in 2003. In the

first quarter of 2004, only about 4.5 percent of claims originated in

Harris County, and about one-tenth of 1 percent of the national

claims were paid to Harris County suppliers. These initiatives have

been successful and they continue today.

Now CMS is moving to the next stage in reshaping policies for

power mobility vehicles. CMS has a three-pronged approach to

focus on coverage, payment, and quality of suppliers of power

wheelchairs.

In the first prong of the plan, CMS is developing guidance on the

current coverage of power wheelchairs. Beginning next month,

CMS’s chief medical officer will bring together clinicians from
15

across HHS and other government agencies to develop draft guidance for determining whether a patient meets the definition of bedor chair-confined.

The goal is to focus on a set of clinical and functional characteristics that are evidence-based and will better predict who would benefit from a power wheelchair or scooter. The public also will be

given an opportunity to comment.

To further ensure that beneficiaries who get mobility devices receive a high-quality and timely evaluation, appropriate device

choice and clear guidance in using the device, CMS is also addressing certain requirements for ordering mobility equipment through

a proposed regulation which will, among other things, implement

the provisions of the Medicare Prescription Drug Improvement and

Modernization Act of 2003, also known as the MMA.

The second area in which CMS has taken action is in the billing

payment for power wheelchairs and scooters. The technology, range

of products, and market for power wheelchairs has changed substantially since the current codes for power wheelchairs were added

in late 1993.

CMS is working with a national coding panel to develop a new

set of codes that better describe the wheelchairs currently on the

market. CMS will develop individual payment ceilings for each of

the new codes.

CMS plans to implement competitive bidding for a number of

items of durable medical equipment, as authorized by last year’s

MMA. CMS expects to include power mobility devices in the competitive bidding program.

The third prong of the new initiative, is to ensure that there are

appropriate quality controls for suppliers. Building on existing

standards in the industry, CMS will revise the suppliers’ standards

for enrolling in Medicare to include quality measures, as required

by the MMA.

In addition, CMS will develop a proposal for an accreditation program as part of the implementation of competitive bidding to further ensure that power wheelchair suppliers meet industry and

community standards for power wheelchair utilization.

Lastly, through its contractor, the National Supplier Clearinghouse, CMS will continue its work to ensure a thorough review of

all applications for enrollment so that only qualified suppliers are

allowed to build the Medicare program.

In launching Operation Wheeler Dealer, CMS and the OIG had

to take dramatic action to stop Medicare fraud, and those actions

are having an impact. With CMS’s new initiative and with input

and feedback from suppliers, beneficiaries, and clinicians, we will

do even more to make sure that Medicare funds are spent on patients who need them, and that beneficiaries with disabilities are

getting the high-quality, modern services they deserve.

To be successful, CMS must ensure that suppliers are legitimate,

beneficiaries are eligible, physicians prescribe correctly, and equipment is priced reasonably. CMS’s agenda is consistent with recommendations set forth by the GAO and OIG. Specifically, our

forthcoming proposals and regulations will address several areas in

the coverage policy.
16

CMS is also developing changes for the HCPCS codes for power

wheelchairs, and, furthermore, we are rolling out educational campaigns for physicians and beneficiaries that, as you have heard this

morning, are so important. CMS is well on its way toward addressing these key areas to protect beneficiaries and taxpayers alike.

Mr. Chairman, thank you again for this opportunity to describe

CMS’s power wheelchair initiatives. I look forward to answering

your questions.

[The prepared statement of Mr. Kuhn appears in the appendix.]

The CHAIRMAN. Thank you very much to all you. Thank you for

your testimony. Particularly, each of you have given us some ideas

of what needs to be changed to get on top of this problem.

I am going to start with Ms. Corrigan. Why does CMS pay so

much more for power wheelchairs than others seem to pay, and are

taxpayers being well served with the current system?

Ms. CORRIGAN. I think it is because the law, as it currently is,

requires CMS to use a fee schedule that is based on historic prices

that are not in line with real-world prices. With power wheelchairs,

it is even worse because they do not really have a fee base.

They just started using retail prices, and those went up throughout the years. So, I think that CMS is constrained. I think they

have tried to use their inherent reasonableness authority, but that

has been very slow. There really needs to be some mechanism to

jump-start the process.

I am not talking about price controls, but just some fair way that

CMS and Medicare can compete in the real world, and perhaps the

MMA will be that solution. It will allow them to have competitive

projects and competitive bidding for wheelchairs. But I think historically, CMS has not been able to do that easily within the current structure.

The CHAIRMAN. All right. Also for you, Ms. Corrigan, you testified that only 13 percent of those who received K11 power wheelchairs were eligible for them. To what extent is that a result of

fraud or aggressive marketing, or just some sort of unclear eligibility requirements?

Ms. CORRIGAN. The way that our study was constructed, it did

not evaluate what caused the coverage problems. But my best assumption would be that there is a bit of everything in there, that

there is certainly fraud, because you are always going to have the

people who will just blatantly lie to the government. I am sure

there is some of that in there.

I mean, we heard it this morning. What she described is just blatant lying and forging documents. I am sure there is some of that

in there. I am sure there is also just abuse in there as well, and

there are probably errors in there, but there is no way to quantify

exactly what would compose that percentage.

The CHAIRMAN. You did put some emphasis, though, in your

statement on aggressive marketing, did you not?

Ms. CORRIGAN. That was more Ms. Aronovitz than me.

The CHAIRMAN. I am sorry. All right.

Ms. CORRIGAN. But we have certainly looked at that issue.

The CHAIRMAN. All right.

Also for you, Ms. Corrigan, is it legal for suppliers to offer to

waive the co-payment in an ad as an inducement in order for some-
17

body to get a power wheelchair? I think you have seen the TV advertisement that talks about waiving the co-payment.

Ms. CORRIGAN. I will respond to your question in this way. For

the most part, that is a kick-back and it is illegal. There are certain instances in which suppliers, or any provider, can waive a copayment if it is based specifically on a person’s financial circumstances. If somebody really cannot afford the co-payment, the

law permits any provider to waive that co-payment. But in the majority of situations, that is a kick-back and that is against the law.

The CHAIRMAN. All right.

Ms. ARONOVITZ. I could add there that another situation would

be—and Dara is the lawyer at the table, so she could make sure

I am saying this right—if a supplier tries to collect the co-payment

and fails after really trying very hard to collect that payment, they

could write that off as a bad debt.

But one thing that I think the law specifically prohibits is any

general solicitation in an ad of the words ‘‘waiving a co-payment’’

and then going ahead and waiving that co-payment. It has to be

based on a specific situation where there is due diligence.

The CHAIRMAN. So your judgment is, the statement of that in the

ad, that is an illegal act, making that statement.

Ms. ARONOVITZ. This is a little bit of a nuance. My understanding is that it would not be illegal to put it in an ad, but then

it would be illegal to act on it once it was in an ad.

The CHAIRMAN. All right.

Ms. ARONOVITZ. For instance, attached to our statement is another example of an ad that we saw posted in a nursing home, or

an assisted living facility, where they said that if you only have

Medicare, we can waive the 20 percent co-payment. If, in fact, that

entity, that supplier then went ahead and did waive the co-payment, it would be illegal.

The CHAIRMAN. All right.

I did have a follow-up question for you in regard to that, Ms.

Corrigan. Is there anything that you would suggest that should be

done about that waiving of the co-payment?

Ms. CORRIGAN. I think that we have to be aggressive in our investigations. I think that we have to educate people about what advertising can lead to problems. We have certainly started to do

that. This is a relatively new area where people are advertising a

lot.

It comes up with the uninsured as well. Can hospitals advertise

about programs for the uninsured? I mean, it is something that we

need to talk to people about and explain where the lines are in the

law. So, I think it is two things. I think we really have to watch

out for it and make sure we stop it when it happens. Two, we have

to really explain to people what their obligations are.

The CHAIRMAN. All right.

Then, also to you, MMA imposes a number of important reforms

on CMS for durable medical equipment. What institutional changes

must CMS implement now to ensure they can successfully execute

what the law says, and what are OIG’s plans to oversee, monitor,

and report back to us?

Ms. CORRIGAN. Well, I think that we would not tell CMS how to

run CMS. But I think with respect to the provisions that we are
18

talking about with wheelchairs, like the provisions that are in the

MMA about making sure that a physician sees a patient before

signing a certificate of medical necessity, for making sure that

there is competitive bidding with pricing and other obligations like

that, our obligation is to go out and make sure that CMS is doing

it. In many ways, although I certainly have an opinion, which does

not really matter, as long as CMS does it, we do not really care

how they do it.

To my mind, it is their program and they should manage it in

the best possible way. We have an obligation, on the other hand,

to make sure that they are fulfilling their obligation, and if they

do not, we will tell you.

The CHAIRMAN. All right.

Ms. Aronovitz, what do you suggest CMS do so that it is better

in a position to react to these types of out-of-control payment patterns?

Ms. ARONOVITZ. Actually, there is quite a lot that we could offer.

I think CMS has probably at this point, and Mr. Kuhn has probably heard most of this, but we feel very strongly that CMS needs

to take more of a leadership role when it finds situations that potentially could be dramatic, like this one, and develop a formal approach to coordinate a consistent focus on the problem with its

DME regional carriers.

We think that the gatekeeping process, in terms of giving people

supplier numbers, is key here. The out-of-cycle site visits were very

important. As the first witness stated, it was the lack of the surprise that really made it so easy for her to pass the site visit.

The way it works right now, is that a supplier receives a site

visit when they first enroll in the program, or they apply for a billing number, and then when they re-enroll every 3 years.

Right now, there are not funds in the system to permit out-ofcycle site visits. We think that if the National Supplier Clearinghouse did a risk assessment and then did at least some out-of-cycle

visits, it could be very lucrative for CMS in terms of keeping unscrupulous suppliers out of the program.

The third thing, would be to develop more specific standards for

suppliers. It became clear, in talking to inspectors when they did

their site visits, that there were certain parts of those 21 standards

that suppliers are supposed to follow that were ambiguous enough

where inspectors did not want to deny a billing number based on

an ambiguous standard.

For instance, one standard requires suppliers to have ‘‘adequate

inventory,’’ but there is no definition of what adequate inventory is.

Another one talks about having an ‘‘appropriate location.’’ It specifically says that you cannot have a post office box number, but

it does not say whether a cubicle in a high-rise would be an appropriate location or an adequate location. We need to clarify those

standards, or CMS should, to make it easier for inspectors to deny

billing numbers in cases where it is appropriate.

My last area is something that GAO has been saying for a long

time. That is, it would be very important for CMS to understand

better what it is paying for when it pays for a K11 power wheelchair. Right now, the value of the prices of power wheelchairs real-
19

ly ranges. It is a very, very wide category in terms of what could

be included in the K11.

Medicare pays, as you see, about $5,300 per wheelchair that is

in the K11 category. Even if a supplier legitimately supplied exactly what the beneficiary needed, it is possible that they only need

a wheelchair that is a low lower priced than that.

The philosophy behind this is, on average, Medicare will pay the

right amount. However, if you go into a grocery store and ask

Giant or Safeway, they know, with bar codes, every carton of yogurt—the size, the flavor, and the amount—what they are selling.

They understand where their inventory is. Right now, CMS, even on a $5,000 item, really has no idea of

whether the lower-priced wheelchair is getting delivered or a highpriced wheelchair is getting delivered. We think they really ought

to fix that, also.

The CHAIRMAN. Following up on that, before I ask you another

question, I would like to ask Mr. Kuhn then, along the lines of just

where she ended up, we understand that CMS does not confirm

with beneficiaries exactly what type of wheelchair they were provided. That is obviously a problem. What do you think you can do

about that?

Mr. KUHN. That is a good question, Senator.

The CHAIRMAN. First of all, do you think something needs to be

done about that?

Mr. KUHN. We absolutely do. What we have here, and I think

you have got a couple of examples sitting in front of us right here

of a couple of wheelchairs that are quite different, but they both

fit the K11 category.

We agree with GAO’s recommendation. We need to do a better

job of differentiating between the two. When this code was set back

in 1993, it pretty well captured the industry. But technology has

changed dramatically over the time and we have not kept up.

So, we have already begun the analytical work in order to begin

that process of breaking those down into different parts so that if

someone gets a power wheelchair that is, say, in a lower price category, that is what we are going to get and that is what we are

going to pay for, medium, high, or however we decide to set those

categories.

We think it is important to begin the process now, because,

again, you have given us this new authority in MMA for competitive bidding. It is a natural ramp-up into competitive bidding.

So if we can get some of this base work now in terms of getting

these segregated into the right categories, get the payment prices,

it makes it easier as we transition into competitive bidding.

The CHAIRMAN. Leslie, on your point about universal product

numbers, does CMS use the UPN number system, and if not,

should they?

Ms. ARONOVITZ. Absolutely. They do not right now. About 6 years

ago, we recommended that CMS embark on some activities along

these lines. We did not recommend that they do this for every piece

of durable medical equipment, but ones where there is a very high

margin or ones where they really feel that they are vulnerable.

Unfortunately, CMS felt that it would be a much more arduous

process to do this than we pretty much felt it would, and it never
20

really caught on. Then with HIPPA and the standardized transactions, it has gotten a little bit more complicated.

We think, though, at least for power wheelchairs, on some big

items, even if you then ask the supplier to submit the model number or some information about what was ultimately delivered, that

there are ways that you could collect data, at least to get a sense

of what is actually being delivered.

The CHAIRMAN. Leslie, even when Medicare pays about $5,000

for a power wheelchair, is it true that suppliers could legally give

the beneficiary a wheelchair of much less value?

Ms. ARONOVITZ. Yes. That is exactly right. That is exactly what

we are talking about.

The CHAIRMAN. Does that happen a lot?

Ms. ARONOVITZ. We do not know, and that is exactly the point.

I do not think CMS really understands what gets delivered. I think

most suppliers are incredibly careful to make sure that their beneficiaries get exactly what they need. But no one really knows what

that is and what that should be.

I think the industry has made recommendations in the past to

sit down with CMS to work out or to split the K11 code into different categories, and then to be able to look at functionality and

say, based on this definition of functionality, this is what the beneficiary needs. It sounds like you are now embarking on that.

The CHAIRMAN. Have you had a chance to look at the 10-point

program that CMS has announced, and is there anything missing

from it?

Ms. ARONOVITZ. Yes. We have not investigated in detail and we

have not looked at its implementation, but we did look at the plan

itself and it appears very reasonable, from our first look.

The one area that is missing is the area that I mentioned earlier

about regulating marketers. In talking to CMS about this, it said

that it does not have the authority to regulate marketers, except

to prohibit telephone solicitation.

The CHAIRMAN. If I asked you to this week, could you monitor

their use of that 10-point system?

Ms. ARONOVITZ. Absolutely. We would be happy to.

The CHAIRMAN. All right. Thank you.

Mr. Kuhn, why does CMS pay so much for power wheelchairs,

and why can CMS not use market clout to negotiate a more favorable rate for the taxpayers?

Mr. KUHN. I think, as you heard earlier from Dara, our current

authority to set the prices is cumbersome and difficult when we use

inherent reasonableness. So, in the past we have had difficulty in

kind of moving those prices where we think that they really ought

to be set in terms of the market price.

There is no question we announced it. We stated it when we

launched Wheeler Dealer last year, and we are stating it again

today, that the prices we pay for chairs is excessive. There is no

question about it.

But as you asked in that previous question, we are going to begin

embarking on that, because now we have this new authority with

competitive bidding, in a new way to try to set these prices by trying to break these chairs down into proper coding categories, setting the prices there, trying again to use inherent reasonableness,
21

and then ultimately getting ourselves to competitive bidding. We

think that is going to make a vast improvement, and I think in the

future we are going to get prices set where they need to be.

The CHAIRMAN. How would you characterize CMS’s Central Office’s role in helping to curb these types of billing problems that we

have discussed today, primarily the illegal activity that our first

witness testified about?

Mr. KUHN. Our history in this area goes back, as you heard from

GAO. We did send out a fraud alert in 1998 and began then working with some of the DMRCs, the regional carriers, to begin that

process. We have also worked pretty closely with law enforcement

in this area as well, to try to help them in that area.

There is no question that the results and what we have seen in

the spike show that we could do better in this area, but I think

some of the reforms that we are talking about now, not only the

10-point plan that was announced last year, but also the additional

areas that we are looking at now in terms of coverage, payment

and quality, are going to make a huge difference in this area.

The key here, and I think you heard from the other witnesses,

is that if we can make sure that these suppliers are certified and

good suppliers, if we are getting good information coming in, it is

going to make a big difference.

If we can really work with the physician community to better describe the conditions and describe the benefit more clearly, we can

get better prescriptions from physicians by getting better information coming into the system, by getting suppliers out there. We also

think that is a huge area where we can make great improvement

in this area.

The CHAIRMAN. CMS is now implementing the new drug bill.

Does HHS OIG have a seat at the table in those discussions, or do

you call them if you think they should be there? My point is, developing a new implementation strategy from the get-go that is fraudresistant is a good thing, and obviously OIG has some experience

in that area. Are they at the table?

Mr. KUHN. We do consult with OIG in terms of implementation

areas of the MMA. I think, as you know, last week we did an event

with you, and with Dr. Mark McClellan, our administrator, to talk

about possible fraud, at least with the new drug card. We appreciate the help and the leadership that you gave us in that area to

really get that information out.

So, we are using folks on Capitol Hill, we are using the IG, we

are using anybody we can in order to make sure that we can move

forward on that program as cleanly and as trouble-free as possible.

The CHAIRMAN. What took your agency so long to get on top of

the power wheelchair situation?

Mr. KUHN. I think there are a host of factors here, Senator, that

drove this. A lot of it had to do with beneficiaries’ misunderstanding of the benefit, and physicians’ misunderstanding of the

benefit. Obviously, there are a lot of people operating out there

that should not have been operating in terms of suppliers, payment

prices that were too high, just a lot of factors that were going on.

We had a pretty good process, we thought, in surveillance with

our durable medical equipment regional carriers. But what we

found when we really started looking at the data, is that we were
22

capturing the data at a State-wide level, not really at a county

level.

So as our surveillance effort went forward, and of course it takes

some time to process these bills, as the information came forward,

we were finding that sometimes we were a little bit later finding

out the real rise and spikes in terms of area.

Since that time, and through that process, we have made a number of important changes in the area, including one, as I said—a

very important one—down at the county level, so that if things

start happening in this area in a particular county, like Harris

County, Texas, we are going to detect it a lot earlier and be much

more aggressive in terms of getting after it.

The CHAIRMAN. Do you think CMS is in a better position overall

to address the fraud problem throughout the Medicare program?

Mr. KUHN. We do, Senator, I think, in a couple of areas. One, beginning, I think, in 1996, where we really started tracking how

well we did in terms of performance in dealing with claims processing. In our testimony, we have really reduced the number of errors by over 50 percent in that time. I think that is a good improvement.

Also, I think with the real good partnership we have with the IG

and the great recommendations that are coming forth with the

GAO, we are reaching out to others to help us identify problems

and suggest improvements. As I said in my statement, we are very

much adopting virtually all the recommendations that have been

made by these two groups.

On a go-forward basis, you also gave us some new tools in the

MMA which are going to be very helpful to us. So, I think we are

well positioned. I think we have got a pretty good plan here.

The key here in this plan, is that this is a wonderful benefit. It

is a wonderful benefit for those people who need power mobility in

their home. What we need to do is make sure that it goes to them,

and we think this plan also really drives that important fact home.

The CHAIRMAN. All right.

Senator Graham?

OPENING STATEMENT OF HON. BOB GRAHAM, A U.S. SENATOR

FROM FLORIDA

Senator GRAHAM. Thank you, Mr. Chairman. Thank you for holding this hearing on a very specific issue which raises a lot of broader concerns.

Mr. Chairman, I have got some questions, first, on the issue of

fraud, and then, second, on the process by which the Medicare program goes about acquiring these devices.

The CHAIRMAN. Proceed. Just proceed. I do have one more panel,

but I took a lot of time. Obviously, you are entitled to equal time.

Senator GRAHAM. On the issue of fraud, unfortunately, I know a

lot about this issue. Not too long ago, it was estimated that, of all

the fraud committed against the Medicare program in the country,

that 10 percent of it came from the State of Florida. We were embarrassed by that, distressed, and were looking for some way to

deal with it on a systemic basis.
23

One thing that I had had some considerable experience with,

which was another issue that Florida was particularly impacted

with, was the issue of illegal drug trafficking.

What occurred in the late 1980’s and early 1990’s, was the establishment of a series of what were referred to as joint task forces,

made up of federal, State, and local law enforcement agencies

which had a responsibility for dealing with drug-related issues. I

am not talking about prescription drugs, I am talking about the

other kind of drugs.

Those task forces recognized some fundamental principles. One,

was that if there was an issue of illegal drugs that affected, let us

say, the Drug Enforcement Agency at the Federal level, it probably

also affected the sheriff’s office at a county level or a police office

in a city, and each one of those entities brought something to the

table in terms of understanding the network that was contributing

to that.

The second, is these tend to be paper-intensive investigations,

boxes and boxes of materials that have to be pored over, analyzed,

and then determine which can be effective in an anti-drug prosecution.

I was struck that those two qualities also relate to medical fraud.

If you see medical fraud in Medicare, you can be pretty well assured that in 6 months to a year you are going to see it in Medicaid. Also, these are very paper-intensive investigations.

So, as a result of those observations, approximately 5 years ago,

under the leadership of the U.S. Attorney for the Southern District

of Florida, a medical fraud unit, which involved Federal agencies,

State, even private sector health insurance companies, was established, based in Miramar, Florida, in the southern part of Broward

County, with responsibility for doing the basic investigation on

medical fraud in South Florida.

Let me just give you some of the statistics. This is from a letter

that I received from Doris J. Giles, who is the program manager

for health care fraud for the U.S. Attorney in the Southern District

of Florida.

She says in this letter, ‘‘We have secured 180 criminal convictions, with over $139 million assessed in restitutions, fines, and

forfeitures for the trust fund. In addition, civil proceedings have resulted in restitutions in the amount of $120 million.’’

Mr. Chairman, I would like to ask that the full letter be entered

in the record.

The CHAIRMAN. It will be entered in the record, yes.

[The letter appears in the appendix.]

Senator GRAHAM. My concern is that this program has been so

successful in one of the highest regions of the country in terms of

medical fraud, why it has not been expanded to other areas of the

country, so we did not have to wait 5 or 10 years to find out that

we have got a problem.

It got so flagrant in South Florida, that the medical providers,

primarily DME providers, were setting up post office boxes. In fact,

one of them was so flagrant that they actually used an avenue and

street address upon which there was no building. It happened to

be the 18th green of the Doral Country Club, was the place they

selected to have as their office.
24

My concern is, with this program being so successful, why do we

not aggressively establish similar types of programs in other areas

of the country—I gather that Harris County, Texas may be a candidate—which have high incidence of medical fraud?

Mr. KUHN. Senator, actually, it is a good suggestion. It is a good

model, and we have actually been trying to use that model in different areas. We used it in Harris County, Texas. We established

our task force about a year ago this time to move forward in that

area, and some good recommendations and good efforts came out

of that.

For example, a 100 percent review of all claims in that county.

You talk about being labor-intensive in paper claims, but it worked.

The numbers we showed earlier showed real progress in that area.

It is a good model to work.

Also, much better coordination when you get something like this

between the agencies and law enforcement. We have got to have

that coordination if we are going to get at these folks.

The other part that it also gave us a real opportunity to do, was

100 percent education with the suppliers in this area. They all had

to come in and do education programs so they could understand the

benefit, we could see who they were, that process. Those that did

not show up, we knew who they were and we could go talk to them

further about it.

So, it is a great model. It worked there. I think we have also

used that model in California. It is something I think we need to

pursue even further and more aggressively where we find these

problems.

Ms. CORRIGAN. I think it is working well in certain areas, and

certainly in Texas. We are in the process of almost modeling what

is being done in Florida. Texas has one of the highest fraud rates,

next to Florida. I think it is a model that works really well. If you

do not have the agency working with law enforcement, you can

really run into trouble down the road.

I also think different models can work in different places. Like,

in Boston, you have a really aggressive U.S. Attorney’s office, and

they will take resources from anywhere to get their cases done,

their pharmaceutical cases, and I think they have been very successful. But I think, in general, having everybody working from the

beginning works really well, and we are trying to do it as we have

funds to do it, basically.

Senator GRAHAM. Any comment?

Ms. ARONOVITZ. No, sir.

Senator GRAHAM. Let me ask, first, a question, then make a request. In the Harris County example, was that a multi-level effort?

For instance, the State has responsibility for administering the

Medicaid program, which also is very vulnerable to fraud. Was that

involved? Were private health insurers involved in the Harris

County example?

Ms. CORRIGAN. I do not think any private insurers were involved,

but the medical societies and the State were. The benefit that we

were looking at, it would not have been as problematic on the private side so we stuck with the people that were going to be affected, which would be the State, the medical societies, CMS, the
25

U.S. Attorney’s office, probably in different parts of Texas, and the

Office of Inspector General, our agents down there.

Senator GRAHAM. I would also suggest, we found that the Department of Defense, through its TRICARE program, and the VA,

even, were targets of these malevolent defrauders of health care.

I would like to ask if you might submit to the committee a

memorandum of your thoughts about replicating the model that

maybe has been used in Harris County, Texas and the Southern

District of Florida in an aggressive way in other high medical fraud

areas of the country.

I agree with the statement that Ms. Corrigan made, that the

principal restraint has been resources, although the savings are so

enormous, over $100 million of restitution from this one area of the

country.

What I would like to do, frankly, is go before the appropriators

and urge them to provide funding to establish other similar medical fraud units in high intensity areas, and I would like a memo

as to your recommendations as to whether that is a good idea, and

if so, how you would recommend going about phasing it in more

broadly, and what would be its cost. Based on the Harris County/

South Florida example, what are its likely savings in the reduction

of, and deterrence of, medical fraud?

Mr. KUHN. We would be happy to do that for you, Senator.

Ms. CORRIGAN. We will work with them. We should be able to do

that.

Senator GRAHAM. Thank you.

I would like to ask if I could possibly have that within the next

20 days so that we do not get caught in the appropriation timetable

and miss the window of opportunity.

Now I would like to go to the first question, which is the means

by which we purchase DMEs. Again, I hate to be parochial, but you

mentioned there were two pilot sites. One of them was San Antonio, Texas, the other one was Lakeland, Florida. So, again, I have

had some personal experience with this.

I would like to talk, Mr. Chairman, about some of the provisions

in the 2003 Medicare Reform Act as they relate to this. Frankly,

Mr. Chairman, I know you are going to be tired of hearing me say

this.

But as I discuss the provisions on DME in this act, they again

cause me to ask that we have a hearing before the Memorial Day

recess on the general topic of the prescription drug Medicare Reform bill. We have known now for several months that there was

a very stark disagreement between the Congressional Budget Office upon which we rely for numbers and the auditors within the

Executive Branch as to what this program is going to cost.

The Congressional Budget Office said it was going to cost $395

billion over 10 years, and the auditors in the agency estimated it

was going to cost between $520 and $530 billion over 10 years. We

need to explore that.

A second thing that has happened, is we have gotten the trustees

of the Medicare program report, which indicates that the Part A of

Medicare, hospitalization part, is going to go broke 7 years earlier

than had originally, or even a year ago, had been estimated. That

is another serious financial issue.
26

An area that I would like us to look at which relates to the 2003

act, is the fact that, today, hospitals are spending about 5 to 6 percent of the total cost of patient care on prescription drugs.

In my judgment, there is no reason why hospitals cannot negotiate, under the supervision of the Medicare administration, to secure better prices for prescription drugs that are utilized in a hospital setting. They are a significant part of the overall cost. They,

therefore, are a significant reason that the Part A trust fund is

under the kind of financial pressure that it is.

I do not like to make policy by anecdote, but this weekend I happened to end up talking with a man who runs the pharmaceutical

unit for four hospitals in this region. I asked him, how do you go

about paying for the prescription drugs which you use, a substantial amount of which go to Medicare patients? He said, we use the

average wholesale price.

Well, frankly, anybody who knows it, knows that the average

wholesale sale price is neither an average nor wholesale price. It

is a totally fictitious number used for purposes unrelated to what

the real market value of these prescription drugs are.

If his statement is true, generally, there is a massive over-payment for the cost of prescription drugs by hospitals, which we are

paying for, we, the American taxpayers and those who pay into the

Part A trust fund.

We are not taking advantage, as the largest hospital system in

the nation is, the VA, of being able to negotiate for substantially

better prices. The VA pays less than half of the retail price for the

prescription drugs that are made available to American veterans.

So, that would be another issue that would be appropriate at such

a discussion of the 2003 bill.

Then, based on what we have heard today, there is yet a third

issue. We have talked a lot about the fact that the 2003 act sanctions the use of competitive bidding, but there are some big problems. The first, is that the program is being phased in in implementation.

The first wave of that phase-in does not start until 2007, 3 years

from now, and it can only apply to 10 of the largest metropolitan

statistical areas in the country, so it is late and limited. Then 80

percent of the largest metropolitan statistical areas can be included

as of 2009, 5 years from now. How long did it take in Lakeland and

San Antonio for those programs to be operational?

Ms. ARONOVITZ. They were very successful programs and they

did save a lot of money. I am not exactly sure how long it took.

I know there was quite a bit of start-up. I am guessing that it was

about six or 8 months, in terms of getting all the infrastructure in

place and educating suppliers and beneficiaries about what was

going to happen.

Senator GRAHAM. So it not only did not take the 3 years or the

5 years——

Ms. ARONOVITZ. I should say that that is just my recollection. I

am not sure that that is correct.

Senator GRAHAM. But it appears as if it was substantially less

than either the 3-year period or the 5-year period that we are contemplating, and we now have the experience of San Antonio and

Lakeland, so we are not starting from a dead start. We have got
27

some momentum based on the very purpose of a demonstration

project, which is to demonstrate how a different process can be

used. So, that is my first concern.

The second concern, is the definition of what can be covered

seems to be peppered with exceptions. I think we ought to explore

whether the restraints that we are about to impose on using competitive bids are justifiable in the context of the additional cost that

we are going to incur.

Then, finally, there is a general exception authority granted to

the Secretary for ‘‘items and services for which the application of

competitive acquisition is not likely to result in significant savings.’’

I think the presumption ought to be that we are going to competitively bid, and if there is going to be an exception it should be

in the reverse, not in whether we are going to start with competitive bids.

So, I think we have some very serious problems with this law,

Mr. Chairman, which need to be carefully reviewed, and as quickly

as possible. As we are learning here today, every month that we

go with this antiquated price list system, the taxpayers of America

pay an enormous cost.

So before turning to some more specific questions about this, I

would just urge, again, Mr. Chairman, that we have a hearing on

this 2003 act before the Memorial Day recess so that we can go

into detail in each of those issues, and I am certain other issues

that you and other members of the committee would want to explore.

Back to the issue of the process which we use. When was the

price list for power chairs established? You mentioned that it was

done based on retail prices.

Ms. CORRIGAN. 1994.

Senator GRAHAM. And for the last 10 years, we have been following the trend of the retail price?

Ms. CORRIGAN. Yes. Adjusted every year.

Senator GRAHAM. How much, for instance, does the VA pay for

these chairs?

Ms. CORRIGAN. We, at least in our most current study, have not

looked at what the VA paid.

Senator GRAHAM. Could you do that and see how it compares

with what Medicare is doing?

Ms. CORRIGAN. Yes.

Senator GRAHAM. Who, besides Medicare, pays the ‘‘retail price?’’

How is the retail price established?

Ms. CORRIGAN. You mean, back in 1994, or now?

Senator GRAHAM. Well, I assume if we have kept that as the

principle, that we will pay the retail price, as the retail price is adjusted, what Medicare pays is adjusted. Is that correct?

Ms. CORRIGAN. Yes. I would be what the manufacturers told

Medicare it was.

Senator GRAHAM. So if they said it cost $100,000, even though the VA could buy it for $1,500, we would say $100,000 is what the

retail price is?

Ms. CORRIGAN. That would surprise me.

Senator GRAHAM. That may be an extreme example.
28

Ms. CORRIGAN. Right. But I think that, at the time, that was the

law that CMS has to comply with. They had to have the current

prices of the time, and they accepted manufacturers’ prices. I

mean, manufacturers set retail prices, and that is what they had

in 1994.

Senator GRAHAM. And they continued to do that over the last 10

years.

Ms. CORRIGAN. Yes. Although I believe—and CMS can certainly

address this—there were attempts during the 1990’s to try and use

their inherent reasonableness authority to lower prices. I am not

sure if that was with power wheelchairs or with other DME.

Mr. KUHN. Other products, but power wheelchairs was an option

to deal with that. But, also, in the MMA, as you may recall, Senator, there is a 5-year freeze on prices of these products as well,

which we implemented this year. So there have been times when

we have really tried to move, based on direction from Congress, to

control these prices as well.

Senator GRAHAM. So we are paying egregiously more than we

should, but at least we will continue to pay the same egregiously

high rate for the next 5 years. Is that what we are doing?

Mr. KUHN. Well, I think, as we stated here in our statement,

that we are addressing the issue of payment. With the MMA and

with this era of going to competitive bidding, it is going to make

a difference. I hear your statement, that it has taken longer than

perhaps we would want to go.

But we are going to try again to use our inherent reasonableness

process and we are going to try to do better in terms of the coding

of this area so that, sooner than 3 years from now, we are going

to have better prices. We are going to have people get the chairs

who need to get the chairs, someone who needs a chair that is at

the lower end of the spectrum versus one that needs a higher, and

we are going to pay appropriately.

Senator GRAHAM. Is that freeze both a ceiling and a floor?

Mr. KUHN. There are a range of prices in here, and it just freezes

all those payments, period, where they are now.

Senator GRAHAM. So it is both a ceiling, you cannot go higher in

payments, but it is also a floor, you cannot go lower.

Mr. KUHN. Yes, sir. Yes, sir. Except we can invoke the IR authority, the inherent reasonableness, to try to drive those prices, because it is pretty obvious where they are now versus where they

are currently set, at least in the retail market. If you go on the

Internet, you can find that. That gives us the trigger mechanism

to go in and make those adjustments.

Senator GRAHAM. We always talk about running government like

a business. Why in the world would you put a restraint on yourself

that says you have to go in and approve that a product is excessively priced when it is so obvious that it is excessive? I would like

you to add the VA as one of the major purchasers of wheelchairs

and what they are paying.

Ms. CORRIGAN. Well, actually, I can add it for you. We have not

obtained those prices, but Senator Grassley’s staff has. If there is

no objection, I can share those for the record.

The prices that they obtained, that the VA negotiated for four separate power wheelchairs, ranged from about $1,300 to $2,200.
29

Senator GRAHAM. And that compares to what? I cannot see that.

Ms. CORRIGAN. It is lower than any of the prices that we found.

Senator GRAHAM. Well, it seems to me that is almost prima facia

evidence that what the Medicare program is paying is not reasonable.

Ms. ARONOVITZ. Yes. I should add one thing, though. In looking

at VA prices, VA is structured differently. I am not making excuses. I totally agree that CMS really needs to look at what it is

paying for power wheelchairs.

But there are additional elements that come into the servicing

aspect that Medicare suppliers must comply with that VA does not

in terms of delivering the product, assuring that it continues to be

maintained, and is working with the beneficiary to educate the

beneficiaries in how to use it.

So, there are other costs associated with that and there are some

nuances in how VA is able to get those prices. But, clearly, even

if you started with the VA price and then marked up from the VA

price to accommodate these other needs, it could be a way to proceed.

Senator GRAHAM. Well, Mr. Chairman, I want to thank you for

holding this hearing, because I think you have really put the spotlight not only on this specific issue, but on the broader issue of,

how do we deal with this enormous overrun of costs that we have

got in the 2003 Medicare Prescription Drug Improvement and Modernization Act in this area, not just power wheelchairs, but across

the DME front. It could be a significant way of beating down that

cost.

One of the issues that is sometimes raised, is we have got to use

the Congressional Budget Office number. We cannot look at any

other figures. Well, I think Charles Dickens once said, ‘‘If the law

says that, the law is an ass.’’ I would say we would be subject to

that same comment.

In this area, apparently, we have known for a long time that we

were egregiously over-paying, but we felt that we were constrained

and were forced to continue to do so.

For those of us who consider ourselves to be good, solid capitalists and concerned about the taxpayer money, Mr. Chairman, I

think that a hearing on this recent legislation would be a fertile

ground to apply some of those basic, good business principles.

The CHAIRMAN. Thank you, Senator Graham.

I am going to call our third panel, now. Dr. Laura Cohen, physical therapist, assistive technology practitioner who works as a consultant reviewing all power wheelchair claims by TriWest, a contractor that handles claim processing and payment for the Department of Defense TRICARE.

Dr. Cohen will detail the process she goes through to assess patients’ needs. She will explain to us what information she requires

in making those determinations.

Mr. Henry Claypool, co-founder of Advancing Independence, an

advocacy group for the disability community. Mr. Claypool brings

to this hearing a lengthy prior work experience with CMS and

first-hand knowledge of the issues involved.

Then our final witness is Kay Cox, president and CEO of the

American Association for Homecare, which represents about 3,000
30

members who provide all elements of home care, including home

medical equipment and rehabilitation technology.

We will start with you, Dr. Cohen, then Mr. Claypool, and then

Ms. Cox.

STATEMENT OF LAURA COHEN, PHYSICAL THERAPIST AND

ASSISTIVE TECHNOLOGY PRACTITIONER, CONSULTANT TO

TRIWEST REGION OF TRICARE, TUCSON, ARIZONA

Dr. COHEN. Chairman Grassley and Senator Graham, good morning. Thank you for the opportunity to be here today to discuss how

to ensure that individuals with disabilities receive appropriate and

necessary wheel mobility devices while guarding against waste and

abuse of Federal Medicare funding.

I plan to summarize my written statement now, but request that

the full written statement be added to the official record.

My name is Laura Cohen. I am a physical therapist, hold a Ph.D.

in rehabilitation science from the University of Pittsburgh, and an

assistive technology practitioner certification from the Rehabilitation, Engineering, and Assistive Technology Society of North America, RESNA.

My experience includes three distinct professional activities,

spanning a period of 17 years, including direct and supervisory

clinical service, policy development, and claims review.

As a service provider, I evaluated and recommended medically

necessary seating and mobility systems and prepared documentation required for equipment to be funded by Medicaid, Medicare,

and numerous insurers.

I worked to develop medical necessity guidelines for specialty,

manual, and power wheelchairs for the Pennsylvania Medicaid program, and participated in program development for assistive technology service delivery programs in Tucson, Arizona, and for an administrative region of the Department of Veteran’s Affairs.

For the past 6 years, I have served as a second-level reviewer of

durable medical equipment, DME, claims for the contractor that

administers the military medical TRICARE program in 16 States.

Within TRICARE, I review the medical necessity and appropriateness of requests for items of DME that exceed $1,500. These

equipment requests include items such as seating systems, manual

and power wheelchairs, scooters, and vehicle lifts.

It is my job to determine whether the clinical data submitted, in

support of the funding request, identifies a recipient’s current and

reasonably anticipated future medical needs, and whether the device requested represents the most cost-effective alternative to

meet those needs.

In TRICARE, the following written documentation is required for

prior authorization: a signed prescription from a physician; an

order that specifies and justifies the equipment; and a price quote

with HCPCS codes, which is the Health Care Common Procedure

Coding System.

When I perform a review of documentation submitted in support

of a request, I examine three critical components: the physical evaluation, the assessment of the individual’s environment, and the

specifications of the technology being requested for payment.
31

As both a clinician and claims reviewer, I find these three components must be present for the wheelchair funding documentation to

be complete and to adequately explain the basis for the device

being requested.

Based on the information provided, I make one of four recommendations: I approve the request; I suggest an alternative device; I recommend further assessment to collect needed missing information; or I deny the request. My recommendation then goes to

the regional medical director for final determination.

As I work daily with this DME process, I can point out what is

missing within the existing Medicare process, in common with

other insurers as well. Required documentation lacks assessment

information and rationale to justify a request.

Even for the most knowledgeable clinician with seating and

wheel mobility technologies, it is difficult to identify and not required as part of the determination of medical need.

There exists an outdated HCPC coding system that does not adequately differentiate mobility technologies, and there is only rare

clinical peer review of prior authorization or post-payment audits

to make clinical decisions of medical necessity, appropriateness, or

cost effectiveness.

Every one of these things can be readily corrected. Existing

Medicare coverage policies for lower limb prostheses and speech

generating devices are good examples of models that could be used

for wheel mobility technologies. It is important to recognize that,

historically, policy implemented by CMS is commonly used as a

model for other third party payors.

A system consisting of clear coverage guidance, incorporating assessment and documentation requirements sufficient for clinical decision-making, a revised coding scheme that recognizes differences

in technologies, focus on skilled decision makers and skilled reviewers as part of the data collection and review process, and a prior

authorization procedure is recommended.

Together, these elements have the potential to eliminate both

CMS and Congressional concern about waste and abuse regarding

Medicare manual and power wheelchair funding by facilitating procedural objectivity, predictability, and consistency.

In closing, I believe it is crucial in the development of policy

aimed at reducing waste and abuse that the patient is not left behind. It is imperative that access to the technology that allows for

independence and enhances the quality of life not be denied or reduced.

Every effort must be made to ensure access to technology and

maintain quality outcomes for the health care dollars spent. Ensuring that patients can perform basic activities of daily living in their

homes and in their community, as well as access to community

services, is paramount.

An advisory committee with the consumer, and representation

from the clinical, supplier, and industry communities to provide

guidance on these issues would be useful. I would like to offer my

assistance to Congress and CMS as you continue to address these

important issues.

Thank you for this opportunity. I will be glad to answer any

questions you may have.
32

The CHAIRMAN. Thank you.

[The prepared statement of Dr. Cohen appears in the appendix.]

The CHAIRMAN. Mr. Claypool?

STATEMENT OF HENRY CLAYPOOL, CO-FOUNDER OF

ADVANCING INDEPENDENCE, WASHINGTON, DC

Mr. CLAYPOOL. Good morning, Chairman Grassley and Senator

Graham. Thank you for inviting me to testify today.

I am Henry Claypool, the co-Director of Advancing Independence,

a policy forum that advances responsible reforms in Medicare and

Medicaid to increase the health, independence, and self-sufficiency

of Americans with disabilities of all ages.

I am also a former Medicare beneficiary who is acutely aware of

the strengths and severe limitations of the program coverage of

manual and power wheelchairs.

The focus of this hearing is on what can be done to curb fraud

and abuse in Medicare’s purchasing of power wheelchairs. Developing more effective ways to do so is something we all support.

But we believe it must be done without barring beneficiaries

from obtaining the medically necessary wheelchairs they need to

move about their homes and communities safely and independently.

Unfortunately, CMS is acting as if the only way it can combat

fraud is to severely limit the benefit in ways that undermine the

health, independence, and dignity of thousands of beneficiaries of

all ages. We believe this is wrong, and will prove extremely costly

to the trust funds.

Confusion regarding the wheelchair benefit arises from two key

factors. First, there is a complete lack of clear, up-to-date clinical

standards set by Medicare for determining who needs a manual or

power wheelchair. The second, is CMS is, instead, using an overly

restrictive interpretation of the statutory phrase ‘‘used in the patient’s home’’ to limit when Medicare will buy a wheelchair for

someone.

Congress used this phrase when it created the DME benefit to

make certain that Part B paid for such equipment only when the

person was living at home so as not to duplicate payments for persons that were in a hospital or skilled nursing facility when Part

A would cover it.

But CMS has a far more restrictive interpretation of what the

phrase means in regard to when Medicare will pay for a manual

or power wheelchair, and it is becoming far more restrictive with

each passing day.

Today, Medicare will only buy a wheelchair for a person who, (1)

is bed- or chair-bound; and (2) needs the specific wheelchair to

move about within the four walls of their home. At first glance, this

may seem like a reasonable coverage policy that meets the needs

of beneficiaries and helps promote the integrity of the program.

Let me highlight why this is not the case by sharing with you

snapshots of how this policy has impacted three former and current

beneficiaries, and countless more as well.

My personal experience with Medicare. I had Medicare coverage

from 1984 to 1994 after I sustained a spinal cord injury in college.

Back then, I was eligible for both Medicare and Medicaid. I was
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fortunate to have Medicaid, which filled some of the coverage gaps

in the Medicare benefit.

Medicare would only pay for a standard manual wheelchair that

was suitable for use in my home. Without Medicaid paying for a

sturdier, yet lightweight manual wheelchair that enabled me to

move about the hilly campus of the University of Colorado, I would

not have finished my education.

I eventually returned to work, left the Medicare and Medicaid

rolls, and several years later went to work for HCFA Administrator

Nancy Ann DeParle. It was when I was at HCFA that I obtained

my power wheelchair using my private coverage.

I did so because I needed it to go to work, and because my shoulders would soon wear out from over-exertion. Had I been on Medicare at the time, the claim would likely have been rejected because

I do not need a power wheelchair to move about within the four

walls of my home.

Mr. Chairman, you are one of the authors of the Ticket to Work

Act. I would respectfully ask that you reflect upon whether it was

your, or others’, intent to extend Medicare coverage as an incentive

to return to work, only to have the program deny the wheelchairs

they need to get out the door.

April. April is an elderly woman with chronic obstructive pulmonary disease. She has had a portion of her lung removed. She

requires continuous oxygen therapy, all day, every day, but lives

independently in her own home. She drives her own car, but has

difficulty walking distances necessary to complete the tasks that

allow her to live at home.

She has been unable to get to the grocery store and complete her

shopping for the past 4 months, and relies on others to purchase

the food she needs for meals.

When she drives to a doctor’s appointment, she waits in her car

until someone brings an office-owned manual wheelchair out to her

to push her into the office. Medicare will not buy April a wheelchair because she does not need one within the four walls of her

home.

Linda. Linda has multiple sclerosis. Her symptoms wax and

wane. Most days, Linda can walk from her bedroom, to her bathroom, to her kitchen the whole time using the walls and furniture

to steady herself as she moves from room to room in her modest,

750-square foot apartment. On other days, she is hardly able to

make it from her bedroom to her bathroom.

If Linda lived in a larger home, she might qualify for a wheelchair since she could not use the walls and furniture to steady herself to move about in a larger home. Then again, she might not.

CMS considers it an abuse for a beneficiary to use Medicare to

obtain an appropriate wheelchair, even when their physician certifies that it is medically necessary for them to use to move about

safely and independently, both in their home and community.

Mr. Chairman, the agency cannot possibly curb fraud and abuse

so long as it continues to assume that its major tool in doing so

is to enforce coverage policy that completely ignores the medical

and very practical needs of people who use wheelchairs.

We have four brief recommendations that I can share now, or

hopefully during the question and answer period.
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The CHAIRMAN. Go ahead.

Mr. CLAYPOOL. These are our recommendations basically on how

CMS can better curb fraud and abuse. CMS should immediately

initiate a process for working with people with disabilities, physicians, clinicians, industries, and others to develop fair and rationale coverage policy that ensures beneficiaries with legitimate medical needs have access to the wheelchairs for use in their homes

and community, and address the issue of combatting fraud.

On that point, I would note that CMS mentioned that they were

going to move ahead with developing coverage policy, but they were

going to use the physicians that were working for the agency and

throughout government.

I really did not hear that they were going to bring in outside experts. I think it unfortunate that they would end up coming up

with coverage policy that is close to what they have now, which not

many people quite understand.

Second, any new coverage policy should include objective medical

standards developed by clinicians that specialize in conducting

evaluations of people with functional limitations that arise from

disability or the aging process. These standards should be consistent with contemporary medical standards or practices.

If CMS believes it is not able to carry out the first two recommendations because it views the statute as not permitting such

action, it should report to this committee on what the basis of its

interpretation for that is.

Fourth, I am attaching to my written comments a legislative history of the Medicare DME submitted to CMS 3 years ago on behalf

of several organizations in follow-up to the President’s New Freedom Initiative. This history calls the agency’s interpretation into

sharp question. CMS said it would address these claims, but never

has. I respectfully request that this committee find out why not.

Thank you for this opportunity to raise these critical points. I

look forward to answering any questions you might have.

The CHAIRMAN. Thank you, Mr. Claypool.

[The prepared statement of Mr. Claypool appears in the appendix.]

The CHAIRMAN. Now, Ms. Cox?

STATEMENT OF KAY COX, PRESIDENT AND CEO, AMERICAN

ASSOCIATION FOR HOMECARE, ALEXANDRIA, VIRGINIA

Ms. COX. Thank you. Thank you, Chairman Grassley and Senator Graham, for the opportunity to assist the Finance Committee

on this important issue.

The American Association for Homecare is the only national association that represents every line of service within the home care

community. We have around 800 member companies, with thousands of associates across the Nation, including providers of durable medical equipment.

AA Homecare joins this committee in refusing to tolerate the

stealing of taxpayers’ hard-earned dollars set aside for Medicare

beneficiaries. We endorse zero tolerance for Medicare fraud and

abuse involving power wheelchairs. AA Homecare will continue to

assist CMS and Federal law enforcement agencies in an effort to

ensure the integrity of the Medicare program.
35

As the investigations in the power wheelchair area proceed, we

respectfully caution about drawing over-generalizations of our providers. The great majority of DME providers and manufacturers in

your States are run by hard-working Americans interested in providing products that treat and improve medical conditions for patients.

These honest DME providers understand the importance of the

long-term relationships with the Medicare program, not like the

fly-by-night operators. AA Homecare and its Rehabilitation and Assistive Technology Council have adopted a code of ethics and have

approved a guide of conduct for our membership.

We would like to present the following suggestions for addressing

the fraud and abuse. First, the guiding principle should be to provide each Medicare beneficiary with medical equipment that is both

medically necessary and appropriate, giving the patient a fuller

and healthier life.

Where a beneficiary has a genuine medical need for a power

wheelchair, as judged by the patient’s attending doctor, the right

wheelchair should be provided in accordance with that need. The

patient benefits from increased independence.

Second, coverage and coding policies must capture the evolving

and improving varieties of power wheelchair technologies and

medically necessary accessories. For example, power wheelchairs

with significantly different features and product costs should not be

lumped together in outdated medical equipment codes that reflect

older technology.

AA Homecare has worked with CMS and its Medicare contractors to improve coding for power wheelchair products. More definitive product coding will provide doctors with better information and

will also improve Medicare billing and payment policies.

Reimbursement should appropriately reflect Medicare equipment

and overhead costs, including the cost of patient assessment and

education, delivery and maintenance, and a reasonable return for

the provider.

Documentation. We previously submitted detailed recommendations to CMS to improve the use of medical necessity documentation in order to give providers clear guidelines on the criteria necessary to support a power wheelchair Medicare claim.

Quality standards. From the outset, AA Homecare’s DME providers embraced the new MMA Federal quality standards and accreditation requirements for DME. AA Homecare will work with

CMS to ensure that any new standards complement quality control

measures already voluntarily adopted by our industry.

Third, CMS and law enforcement agencies should bear in mind

the critical distinction between just billing errors or omissions, on

one hand, and the intentional or knowing submission of false

claims on the other.

I think we can all agree that the Medicare program is extremely

complex. Where errors have been made in billing, coding, or documentation for furnishing a particular power wheelchair, the appropriate over-payment, if any, should be collected, consistent with the

Medicare program’s legal authorities.

Well-intentioned providers work hard to comply with Medicare

requirements, while faithfully serving their patients’ needs. They
36

should neither be unfairly penalized, nor subject to over-generalizations based on the intentional misconduct of abusive operators.

On the other hand, we say, go get them. Where law enforcement

agencies obtain reliable evidence of the knowing submission of false

claims, AA Homecare and all honest providers in the industry do

not tolerate this type of conduct.

Mr. Chairman, AA Homecare and our members are on the front

lines of serving Medicare beneficiaries each and every day, in your

State and across the Nation. We vigorously advocate ethical and

honest conduct in these endeavors, as well as clear, updated, and

fair regulation. We continue to serve as an experienced and knowledgeable resource for you in this committee. Thank you.

The CHAIRMAN. Yes. Thank you very much.

[The prepared statement of Ms. Cox appears in the appendix.]

The CHAIRMAN. I am going to remind you that members who

were not here may have questions for answer in writing.

I am going to ask some questions orally, and then I am going to,

for sure, submit some to you for answer in writing.

I will start with Dr. Cohen. In your opinion, do certificates of

medical necessity and the physicians’ notes provide adequate information to make accurate determinations about patients’ needs?

Dr. COHEN. Well, in my experience, the certificates of medical necessity lack information and rationale that I find necessary to

make a clinical decision of medical necessity, appropriateness, or

cost effectiveness. It lacks information about the physical evaluation, environmental considerations, or mobility potential for the client that is being evaluated.

The CHAIRMAN. Mr. Claypool, in your judgment, is it possible to

have the proper balance that you request in your statement, or at

least I think it is implicit in your statement, that we take care of

the people that have needs for power wheelchairs, or any other

DME device, for that matter, and getting at the fraud and waste?

Can CMS, in your judgment, both from your experience with it, as

well as your being a client of it, do that?

Mr. CLAYPOOL. I really believe so. I think, referring back to my

recommendations, that establishing clear national coverage policy

that uses truly objective clinical standards—and it is not an easy

process, but we need to be about that work—can be done. That will

result in a much clearer or brighter line that would be drawn. People would know when to submit claims and when not.

The current situation really puts the supplier in the position of

making a medical determination on whether a claim is going to go

forward. A physician really is not very aware at all of what the coverage criteria are. They fill out a form and pass it along.

The supplier is in the position, and that is really unfortunate. We

should return this to the physicians, the clinicians, and the other

folks that know this work, and they should work with beneficiaries

and assess their need.

The CHAIRMAN. Ms. Cox, has AA Homecare developed and promulgated ethical standards that its members must comply with?

What happens if someone in your membership would not comply?

Ms. COX. Yes, Mr. Chairman, we do have a code of conduct within our membership, and ethics and standards. If someone did not

comply, they would no longer be a member of the association. As
37

you can imagine, those that are committing these crimes do not

want to be associated with those professionals that are on the front

lines of caring for patients.

The CHAIRMAN. If a DME company that is a member of AA

Homecare runs afoul of the law, what will your organization do? Is

your organization willing to actively monitor the industry, including conducting peer reviews of practices and operations?

Ms. COX. We would be involved with any other organizations

that would be looking at any criminal behavior. It is not our job,

of course, to do that, but we do have standards and we do have

councils within our organization that work with our members. But

we have not had that situation before.

The CHAIRMAN. All right.

Is that something that you would consider?

Ms. COX. Well, we are limited as an organization. We do not

have the authority to go into that area.

The CHAIRMAN. I know that. But I thought you were indicating,

as you finished your first statement, that that was a possibility, of

moving beyond just what you said you presently do, not to obviously enforcing law, but other things that you could do.

Ms. COX. Well, of course we have seminars on compliance, education, making sure that we work with the DMRCs, which are the

DME carriers, and we are involved in those activities with our

members.

The CHAIRMAN. Yes.

Well, I thank all of you very much, our witnesses in the second

panel, and Ms. Lewandowski, for helping us understand the depth

of this problem.

I would like to just speak a little bit about follow-up on the part

of this committee before we adjourn. We have really heard some incredible testimony today about power wheelchair fraud, waste and

abuse. It has kind of spread like a cancer and has been running

virtually rampant and unchecked for many years, it appears.

We also have heard compelling situations of those who truly need

power wheelchairs to function, as well as many caring and honest

DME companies who are trying to meet those needs every day. Obviously, we applaud those efforts.

While some may want to try to sweep under the run these power

wheelchair problems or attribute them to a host of other factors,

I think the witnesses we have had today tell us a very different

story.

There are real problems going on, and we should make no mistake about it. Our only option is to fix it. It seems to me we must

work together to fix it so that con artists and fraudsters cannot

continue to steal Medicare money, and fix it so that taxpayers are

not left having to pay too much for too little, or for nothing at all.

We also have heard each of our witnesses offer many thoughtful,

compelling, and in some cases, I think, easy-to-implement recommendations to improve the situation in which we find ourselves,

and we are obviously going to follow up on some of those recommendations.

I want, as Chairman of the committee, to make sure that CMS

takes immediate measures towards significant and sustained steps

to continue to fix those problems that we have heard about. But re-
38

member, there is no silver bullet available to anyone to put an end

to the problems that we explored here today.

To properly address the situation, we need everyone’s help: CMS,

GAO, Inspector General, Department of Justice, the DME community itself, and everyday Americans. As we found out, we can get

help from them.

Accordingly, I am asking that CMS continue to aggressively attack the problem, taking into consideration the recommendations

made here today. I ask that the General Accounting Office continue

to monitor CMS implementation of its efforts to reduce fraud and

waste in power wheelchairs.

In that regard, I ask the General Accounting Office to report

back to me regularly about its findings. As for the Office of Inspector General, please continue to develop the 65 open cases that you

are working on related to power wheelchair fraud.

I encourage GAO as well to provide your views and recommendations to CMS as it implements the drug bill that the President

signed last year. I also intend, because I am a member of the Judiciary Committee, to encourage the Department of Justice to make

this expensive form of Medicare fraud a priority and ask durable

medical equipment community suppliers and manufacturers alike

to become more aggressive in helping identify fraudsters, and letting the law enforcement community know who they are.

Last, but not least, it seems to me that it is legitimate to ask

across America for any American to report suspicious activity when

it is a medical supply store that never has anyone in it, or a solicitors asking for your Medicare number, to call the Inspector General

at 1–800–447–8477. Taxpayers just do not deserve to be taken for

a ride any longer, and I fully intend to put the brakes on that.

In closing, please note that the hearing record will remain open

for approximately 3 weeks for further comments and questions.

Thank you very much.

The hearing is adjourned.

[Whereupon, at 12:11 p.m., the hearing was concluded.]
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A P P E N D I X

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