Report to the Chairman, Committee on 

Finance, U.S. Senate 

United States Government Accountability Office

GAO 

November 2004 MEDICARE

CMS’s Program 

Safeguards Did Not 

Deter Growth in 

Spending for Power 

Wheelchairs 

GAO-05-43 
www.gao.gov/cgi-bin/getrpt?GAO-05-43.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Leslie G. 

Aronovitz at (312) 220-7600. 

Highlights of GAO-05-43, a report to the 

Chairman, Committee on Finance, U.S. 

Senate 

November 2004

MEDICARE

CMS’s Program Safeguards Did Not Deter 

Growth in Spending for Power 

Wheelchairs 

Starting in 1997 and over the next 6 years, CMS’s contractors repeatedly 

communicated with CMS officials about escalating spending for power 

wheelchairs, and the contractors took steps to respond to improper 

payments for this Medicare benefit. In 1997, one contractor warned the 

agency about rapid increases in power wheelchair spending. In 1998 and in 

2000, medical directors at the four contractors that pay DME claims 

suggested steps that could be taken and sought CMS’s help in curbing power 

wheelchair spending growth. However, while contractors continued to 

conduct in-depth medical reviews of claims for power wheelchairs and to 

investigate cases of suspected fraud, CMS did not begin to assume an active 

role in addressing the identified problems until September 2003. Problems 

included Medicare supplier standards that did not provide adequate 

guidance on appropriate marketing practices and the predictability of visits 

to screen suppliers, which made it relatively easy for illegitimate suppliers to 

prepare for, and pass, site inspections. 

Since September 2003, CMS has taken steps to prevent fraudulent suppliers 

from entering the Medicare program, clarify coverage policy, ensure 

appropriate pricing for power wheelchairs, provide education on coverage 

rules, conduct detailed claims reviews where power wheelchair fraud was 

prevalent, and coordinate with law enforcement agencies. Although CMS 

has made progress, it has not implemented a revised form to collect better 

information for power wheelchair claims review, clarified guidance for 

suppliers on appropriate marketing, or required its contractor to routinely 

conduct less predictably timed site visits. Further, CMS’s response to power 

wheelchair spending highlighted the lack of a process within the agency to 

rapidly address indications of potentially improper DME payments. 

National Medicare Power Wheelchair Spending 

Source: CMS.

Dollars in millions

0

200

400

600

800

1,000

1,200

1997 1998 1999 2000 2001 2002 2003

Years

Note: Medicare spending includes federal payments and beneficiary cost sharing. 

Medicare spending for power 

wheelchairs—one of the program’s 

most expensive items of durable 

medical equipment (DME)—rose 

more than fourfold from 1999 

through 2003, while overall 

Medicare spending rose by about 

11 percent for the same period, 

according to the Centers for 

Medicare & Medicaid Services 

(CMS). This spending growth has 

raised concerns that some of the 

payments may have been improper. 

In May 2003, the Department of 

Justice indicted several power 

wheelchair suppliers in Texas 

alleged to have fraudulently billed 

Medicare. GAO was asked to 

examine the early and more recent 

steps taken by CMS and its 

contractors to respond to improper 

payments for power wheelchairs. 

GAO recommends that CMS 

develop a process to analyze trends 

in Medicare spending and develop 

and implement strategies to 

address possible improper DME 

payments, implement revisions to 

provide clearer information for 

power wheelchair claims 

adjudication, strengthen the 

standards that suppliers must meet 

to obtain or retain their Medicare 

billing privileges, and direct its 

contractor to routinely conduct site 

visits to suppliers that are not 

predictable in their timing. CMS 

agreed with the recommendations 

and noted that it has undertaken 

several efforts to curb the abuse of 

the power wheelchair benefit in the 

last year. 
Page i GAO-05-43 Medicare Power Wheelchairs 

Letter 1

Results in Brief 2 

Background 4 

Steps Taken by CMS and Its Contractors Did Not Deter Improper 

Payments for Power Wheelchairs 7 

Recent Actions May Help Control Improper Power Wheelchair 

Payments 18 

Conclusions 21 

Recommendations for Executive Action 22 

Agency Comments 23 

Appendix I Scope and Methodology 26 

Appendix II DME Regional Carriers’ Jurisdiction 28 

Appendix III Internet Advertisement for Power Wheelchairs 29 

Appendix IV Comments from the Centers for Medicare & Medicaid 

Services 30 

Tables 

Table 1: Contractors’ Key Safeguard Activities for DME Payments 5 

Table 2: Clinical Information Questions on the CMN, Power 

Wheelchair Coverage Criteria, and CMN Limitations 10 

Table 3: CMS’s Actions to Address Improper Payments for Power 

Wheelchairs and Other DME Items 19 

Figures 

Figure 1: National Medicare Power Wheelchair Spending 6 

Figure 2: Medical Review Funding for Each $100 in Submitted 

Claims for Palmetto and the Other Three DME Regional 

Carriers 13 

Figure 3: Regional Medicare Power Wheelchair Spending 14 

Contents 
Page ii GAO-05-43 Medicare Power Wheelchairs 

Abbreviations 

CMN certificate of medical necessity 

CMS Centers for Medicare & Medicaid Services 

DME durable medical equipment 

HHS Department of Health and Human Services 

MMA Medicare Prescription Drug, Improvement, and 

 Modernization Act of 2003 

NSC National Supplier Clearinghouse 

OIG Office of Inspector General 

SADMERC statistical analysis durable medical equipment regional 

 carrier 

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reproduce this material separately. 
Page 1 GAO-05-43 Medicare Power Wheelchairs 

November 17, 2004 

The Honorable Charles E. Grassley 

Chairman 

Committee on Finance 

United States Senate 

Dear Mr. Chairman: 

In 2003, Medicare and its beneficiaries spent more than $1 billion for 

power wheelchairs, one of the program’s most expensive individual items 

of durable medical equipment (DME).1

 According to the Centers for 

Medicare & Medicaid Services (CMS),2

 the agency responsible for 

managing the Medicare program, spending for power wheelchairs rose 

more than fourfold from 1999 through 2003. In contrast, CMS’s records 

show that overall Medicare spending increased by about 11 percent during 

the same period. Concerns have been raised that the millions of dollars in 

increased spending for power wheelchairs was fueled by improper 

payments to suppliers that submitted fraudulent claims to Medicare. 

Improper power wheelchair payments can be due to mistakes on the part 

of suppliers, beneficiaries, or beneficiaries’ physicians, fraud—intentional 

misrepresentation, and abuse. For example, improper payments can occur 

when suppliers submit claims on behalf of beneficiaries who do not meet 

the Medicare coverage criteria. Such improper payments have been a 

problem for other DME items paid by Medicare.3

Medicare pays about $5,000 for each power wheelchair—not including 

accessories—making them an attractive target for those who would 

defraud the program and its beneficiaries. In May 2003, the Department of 

 1

Medicare defines DME as equipment that may be prescribed by a physician for a patient’s 

use for an extended period. This equipment serves a medical purpose, can withstand 

repeated use, is generally not useful in the absence of an illness or injury, and is 

appropriate for use in the home. 42 U.S.C. § 1395x(n) (2000). 

2

Until July 1, 2001, CMS was called the Health Care Financing Administration. We use the 

name CMS throughout this report. 

3

For example, see Janet Rehnquist, Inspector General, Department of Health and Human 

Services, Medicare Reimbursement for Medical Equipment and Supplies, testimony 

before the Senate Committee on Appropriations, Subcommittee on Labor, Health and 

Human Services, and Education, 107th Cong., 2nd sess., Washington, D.C., June 12, 2002. 

United States Government Accountability Office

Washington, DC 20548 
Page 2 GAO-05-43 Medicare Power Wheelchairs 

Justice began indicting some physicians and wheelchair suppliers in Texas 

that were alleged to have billed Medicare for power wheelchairs that 

beneficiaries never received. 

Prompted by concerns about fraud and abuse in Medicare’s power 

wheelchair benefit, your committee held a hearing on this issue in April 

2004. We testified before your committee on how CMS and its contractors 

that administer Medicare DME fee-for-service claims addressed problems 

with power wheelchair payments.4

 After the hearing, you requested that 

we report in more detail on early and more recent steps taken by CMS and 

its contractors to respond to improper payments for power wheelchairs. 

In preparing this report, we reviewed DME claims payment data from 1997 

through 2003; DME claims payment data analysis reports from CMS’s 

statistical contractor; written policies and procedures from CMS and its 

contractors, including the four DME regional carriers that process power 

wheelchair claims; budget and expense data for contractor activities; 

Medicare coverage policies, which explain the criteria for covering power 

wheelchairs; and CMS’s recent actions, including its September 2003 

action plan and its April 2004 initiatives, for responding to payment 

problems with Medicare’s power wheelchair benefit. We also interviewed 

CMS and contractor officials, suppliers, industry representatives, 

manufacturers, and representatives from beneficiary advocacy groups. For 

DME claims payment data covering 1997 to 2003, we reviewed CMS and 

contractor internal control procedures to help determine whether these 

data were accurate, timely, and complete. We determined that these data 

were sufficiently reliable for addressing the issues in this report. 

Contractor budget and expense data are self-reported by CMS or the 

contractors, and we did not validate these data. Appendix I includes a 

more detailed discussion of our scope and methodology. We conducted 

our work from February through November 2004 in accordance with 

generally accepted government auditing standards. 

Over a 6-year period beginning in 1997, CMS’s contractors repeatedly 

communicated with CMS about escalating spending for power wheelchairs 

and conducted program safeguard activities to respond to improper 

payments for this benefit, but CMS did not lead a coordinated effort to 

 4

GAO, Medicare: CMS Did Not Control Rising Power Wheelchair Spending, GAO-04-716T

(Washington, D.C.: Apr. 28, 2004).

Results in Brief 
Page 3 GAO-05-43 Medicare Power Wheelchairs 

address the underlying problems. For example, in 1997, a CMS contractor 

tasked with analyzing Medicare data warned the agency about rapid 

increases in power wheelchair spending. Further, in 1998, and again in 

2000, reacting to the continuing rise in power wheelchair spending, 

medical directors at the four DME regional carriers sent joint 

memorandums to CMS officials outlining steps that could be taken and 

sought CMS’s support. For example, the medical directors expressed 

concerns about the certificate of medical necessity (CMN)—a document 

completed by physicians to provide information with which contractors 

make payment decisions. They noted that the CMN for power wheelchairs 

does not provide sufficient information for determining if claims for power 

wheelchairs should be paid, but CMS did not respond by revising the CMN 

at that time. During this period, contractors also took other actions, 

including conducting medical reviews of claims and investigating 

suspected instances of power wheelchair fraud. However, the amount of 

funding CMS allotted to them for medical review declined in relation to 

the rise in Medicare payments. Additional problems related to the power 

wheelchair benefit surfaced during this period. For example, inspectors 

had difficulty enforcing two of the broad standards used to screen 

suppliers before they obtain or renew their Medicare billing privileges. 

Because supplier standards do not adequately describe what constitutes 

an acceptable physical location and sufficient inventory, CMS’s contractor 

had difficulty interpreting and enforcing these two standards. In addition, 

Medicare standards for suppliers do not address certain misleading or 

abusive marketing practices that were a factor in increased utilization of 

power wheelchairs in Texas. Finally, CMS officials did not address 

weaknesses in the site visits that are used to assess suppliers’ compliance 

with Medicare standards. For example, the predictability of visits made it 

relatively easy for illegitimate suppliers to prepare for, and pass, site 

inspections. 

Since September 2003, CMS has led an effort to improve the processes for 

responding to improper payments for power wheelchairs. The agency’s 

actions are in different stages of completion and focus on preventing 

fraudulent suppliers from entering the Medicare program; clarifying the 

coverage policy; ensuring appropriate pricing for power wheelchairs; 

educating physicians and beneficiaries on coverage rules; conducting 

detailed claims reviews in Texas, where power wheelchair fraud was 

prevalent; and coordinating with law enforcement agencies. Although CMS 

has made progress, it has not completed a revision to the CMN, clarified 

guidance on appropriate marketing to beneficiaries, or directed its 

contractor to conduct less predictably timed site visits to suppliers on a 

routine basis. Further, CMS’s response to power wheelchair spending 
Page 4 GAO-05-43 Medicare Power Wheelchairs 

highlighted the lack of a process within the agency to rapidly respond to 

indications of potentially improper DME payments. 

To help ensure that improper payments are identified and addressed in a 

timely manner and that Medicare pays properly for power wheelchairs and 

other items of DME, we recommend that the Administrator of CMS take 

four actions. We are recommending that CMS (1) establish a process to 

more quickly respond to indications of potentially improper DME 

spending, (2) finalize revisions to the CMN to make it a more effective tool 

for claims adjudication, (3) develop a more prescriptive supplier standard 

on appropriate marketing practices, and (4) amend the supplier inspection 

process to require that out-of-cycle inspections be routinely conducted. 

CMS agreed with our recommendations and stated that it has undertaken 

several efforts to curb the abuse of the power wheelchair benefit in the 

last year. 

Most Medicare beneficiaries purchase part B insurance, which helps pay 

for certain physician, outpatient hospital, laboratory, and other services; 

medical supplies and DME (such as oxygen, wheelchairs, hospital beds, 

and walkers); and certain outpatient drugs. Medicare covers a wide variety 

of DME items—including power wheelchairs. Medicare covers power 

wheelchairs when they are medically necessary, the beneficiary would be 

bed- or chair-confined without one, and the beneficiary can operate a 

power wheelchair, but not a manual wheelchair. Medicare part B pays for 

most medical equipment and supplies based on a series of state-specific 

fee schedules. Medicare pays 80 percent, and the beneficiary pays the 

balance, of either the actual charge submitted by the supplier or the fee 

schedule amount, whichever is less. If a beneficiary has supplemental 

insurance, the insurance may cover the 20 percent co-payment. 

CMS contracts with four insurance companies, referred to as DME 

regional carriers, which review and pay claims submitted by outpatient 

providers and suppliers on behalf of beneficiaries residing in specific parts 

of the country.5

 (See app. II for the states under each DME regional 

carrier’s jurisdiction.) For example, Palmetto Government Benefits 

Administrators is responsible for processing claims for beneficiaries 

 5

The four DME regional carriers are HealthNow New York, Inc. (region A), AdminaStar 

Federal (region B), Palmetto Government Benefits Administrators (region C), and CIGNA 

HealthCare Medicare Administration (region D). In this report, “states” refers to the 50 

states, the District of Columbia, U.S. territories, and the Commonwealth of Puerto Rico. 

Background 
Page 5 GAO-05-43 Medicare Power Wheelchairs 

permanently residing in region C, which encompasses 14 states, Puerto 

Rico, and the Virgin Islands. In 2002, Palmetto made about two-thirds of 

Medicare’s payments for power wheelchairs. In addition, the DME regional 

carriers and other CMS contractors conduct program safeguard activities 

to identify and respond to improper payments for DME claims (see table 

1). CMS oversees contractors’ activities through various means, such as 

performing yearly on-site evaluations, reviewing planned activities, 

monitoring data and periodic reports, and conducting regular conference 

calls with the contractors. 

Table 1: Contractors’ Key Safeguard Activities for DME Payments 

Responsibility Contractor Safeguard activities 

Analyze billing and report 

trends 

Statistical analysis DME 

regional carrier (SADMERC) 

The SADMERC conducts ongoing data analysis and reporting for the DME 

regional carriers and CMS. Its reports are used to identify trends in 

payment and potential fraud by item, geographic region, supplier, and 

physician. 

 TriCenturion, LLCa and DME 

regional carriers for regions B, 

C, and D 

TriCenturion and the DME regional carriers for regions B, C, and D 

analyze claims payment data to identify improper payments and to 

investigate and develop fraud cases. 

Review claims against 

coverage criteria 

TriCenturion and DME 

regional carriers for regions B, 

C, and D 

These contractors are responsible for conducting medical reviews of 

submitted claims either before or after payment to determine if the claims 

should be, or should have been, paid. Claims are reviewed to see if the 

beneficiaries’ conditions meet the Medicare coverage criteria. If medical 

review identifies claims that should not have been paid, the DME regional 

carrier that paid the claim is responsible for collecting overpayments and 

educating the supplier about appropriate billing. 

Investigate potential 

fraud 

TriCenturion and DME 

regional carriers for regions B, 

C, and D 

These contractors investigate cases of suspected fraud, which can involve 

conducting a more detailed analysis of claims and other investigative 

steps. Once a case has been developed, it is referred to the Department of 

Health and Human Services’ (HHS) Office of Inspector General (OIG) or to 

law enforcement for prosecution. 

Enroll suppliers National Supplier 

Clearinghouse (NSC) 

CMS contracts with NSC to screen and enroll suppliers and assign 

Medicare supplier numbers. NSC is responsible for verifying information 

on supplier applications to ensure that suppliers meet 21 supplier 

standards and that only valid suppliers bill Medicare. NSC also maintains a 

central database of information on DME suppliers, reenrolls active 

suppliers every 3 years, and assists with fraud and abuse investigations. 

Source: GAO. 

a

TriCenturion, LLC is a specialized program safeguard contractor responsible for reviewing claims 

and investigating and developing fraud cases for claims processed by region A. 

These key safeguard activities help ensure that the more than 10 million 

claims the DME regional carriers process each year for power wheelchairs 

and other items are properly paid. For example, medical reviews can alert 

the DME regional carriers to potential cases of fraudulent billing, which 
Page 6 GAO-05-43 Medicare Power Wheelchairs 

they may refer to their respective fraud investigation units. The DME 

regional carriers use both automated medical reviews and complex 

medical reviews to make decisions to pay or deny claims based on 

coverage criteria. Automated medical reviews are computerized checks of 

claims using available electronic information. Complex medical reviews 

are conducted by clinical staff, such as a nurse or doctor, who examine 

additional documentation provided by the supplier or the beneficiary’s 

physician. 

A key responsibility of CMS and its contractors is constraining improper 

program spending, while ensuring that beneficiaries who qualify for items 

and services have access to them. In the case of power wheelchairs, 

spending for claims processed by the DME regional carriers rose markedly 

from 1997 through 2003, as shown in figure 1. A number of factors other 

than improper payments may have contributed to it, including increased 

demand due to technological improvements or a growing number of 

beneficiaries who may meet the Medicare coverage criteria. 

Figure 1: National Medicare Power Wheelchair Spending 

Note: Medicare spending includes federal payments and beneficiary cost sharing. 

Source: CMS.

Dollars in millions

0

200

400

600

800

1,000

1,200

1997 1998 1999 2000 2001 2002 2003

Year
Page 7 GAO-05-43 Medicare Power Wheelchairs 

Beginning in 1997 and continuing over the next 6 years, CMS’s contractors 

repeatedly communicated their concerns to the agency about rapid 

increases in Medicare spending for power wheelchairs. One area of 

concern focused on the CMN, which did not provide sufficient information 

to adjudicate claims, according to medical directors. During this period, 

the contractors, however, took a variety of steps, including conducting 

medical reviews of claims and investigating suspected instances of power 

wheelchair fraud. Other issues related to improper payments for power 

wheelchairs surfaced concerning the process for verifying the legitimacy 

of Medicare suppliers. However, CMS did not begin to lead efforts to 

address the underlying problems contributing to potentially improper 

payments for power wheelchairs until September 2003. 

In 1997, CMS’s SADMERC—its data analysis contractor—alerted CMS and 

the DME regional carriers about rapid increases in the spending for, and 

utilization of, power wheelchairs in the Medicare program. As part of its 

data monitoring efforts, the SADMERC noted that Medicare spending for 

power wheelchairs had grown from almost $8 million in October 1995 to 

about $24 million in March 1997. For the next several years, the 

SADMERC’s quarterly reports continued to highlight rapid growth in 

power wheelchair spending and utilization, identifying the states and the 

suppliers for which claims volume was particularly high. Although the 

SADMERC’s reports were sent to agency officials responsible for ensuring 

that program funds are safeguarded, CMS staff told us that they did not 

take action because the DME regional carriers have primary responsibility 

for responding to data indicating rapid increases in utilization. CMS 

officials acknowledged that the agency was not proactively identifying 

trends in data related to Medicare spending, developing strategies to 

address concerns about possible improper payments tied to spending 

increases, and implementing actions to address these concerns. 

After reviewing the SADMERC data in 1997, the four DME regional 

carriers’ medical directors found cause for concern and identified possible 

approaches to address what they described as “tremendous growth” in 

Medicare power wheelchair spending. In a joint April 1998 memorandum 

sent to CMS officials, the medical directors requested CMS’s assistance in 

addressing power wheelchair spending growth and proposed 

implementing changes in the coverage policy for power wheelchairs. 

However, because of competing demands, the DME regional carrier 

medical directors never completed the policy revision, nor did CMS direct 

them to do so. 

Steps Taken by CMS 

and Its Contractors 

Did Not Deter 

Improper Payments 

for Power 

Wheelchairs 

CMS Did Not Act on 

Contractors’ Early 

Warnings about Escalating 

Power Wheelchair 

Payments 
Page 8 GAO-05-43 Medicare Power Wheelchairs 

Power wheelchair fraud had already surfaced as a serious problem in 

Florida and in other southeastern states. In 1996, Palmetto began a major 

investigation of power wheelchair suppliers, during which it uncovered 

fraudulent activities such as billing for services not provided or not 

medically necessary, or delivering a less expensive power-operated 

vehicle—commonly called a “scooter,”6 while charging Medicare for a 

more expensive power wheelchair. Palmetto developed a fraud alert for 

other contractors and investigative agencies, which explained the schemes 

that suppliers were using to obtain inappropriate payments for power 

wheelchairs. CMS issued the fraud alert in June 1998.7

 Fraud alerts are 

intended to increase external awareness of potential vulnerabilities and 

help the agency direct its efforts to address potential fraud. However, the 

June 1998 fraud alert did not prompt CMS to require the DME regional 

carriers to specifically scrutinize power wheelchair claims or to undertake 

any other efforts to identify fraudulent billing for this item. 

In June 2000, the DME regional carriers’ medical directors sent a second 

jointly signed memorandum to CMS officials. The medical directors 

identified several problems tied to the provision of power wheelchairs and 

again asked for CMS’s assistance in addressing them. Despite this second 

warning from the medical directors, CMS officials did not begin to lead a 

coordinated effort to address escalating spending for power wheelchairs 

until September 2003. 

One problem cited in the June 2000 memorandum concerned the CMN, a 

document that the physician is required to complete and sign to order a 

power wheelchair for a beneficiary. DME regional carriers do not routinely 

obtain beneficiaries’ medical records when deciding whether to pay 

wheelchair claims. Instead, DME regional carriers rely on information 

contained on the CMN. However, the medical directors of the four DME 

regional carriers noted that the CMN for power wheelchairs does not ask 

about the beneficiary’s functional abilities and limitations in sufficient 

detail for them to be able to determine if the Medicare coverage criteria 

are met. These criteria provide guidance on whether and under what 

 6

Scooters are used by patients who are unable to walk and are unable to operate a manual 

wheelchair. A scooter has three or four wheels, is powered by an electric motor, steered by 

means of a tiller, and appropriate for indoor use. Scooters are more expensive than manual 

wheelchairs, but less expensive than power wheelchairs. 

7

Centers for Medicare & Medicaid Services, Unrestricted National Medicare Fraud Alert, 

UMFA 9802 (Baltimore, Md.: June 9, 1998, revised Oct. 6, 1998). 
Page 9 GAO-05-43 Medicare Power Wheelchairs 

conditions Medicare will cover—and help pay for—a power wheelchair for 

a beneficiary.8

Our comparison of the CMN and the Medicare coverage criteria 

highlighted limitations in this document. (See table 2, which provides 

information on the clinical questions on the power wheelchair CMN, the 

Medicare coverage criteria, and limitations of the CMN.) For example, the 

CMN does not include a question about the beneficiary’s capability to 

safely operate the controls of a power wheelchair, although having that 

capability is required by the Medicare coverage criteria. CMS did not 

change its CMN in response to the medical directors’ 2000 memorandum 

that outlined their concerns with the CMN. In written comments on a draft 

of this report, CMS stated that it has a revised CMN under development, 

which it anticipates having in use in 2005.9

 8

Items or services that are not reasonable and necessary for diagnosis, treatment, or 

improvement of a bodily function, or are otherwise excluded by statute, are not covered by 

Medicare. 42 U.S.C. § 1395y(a) (2000). 

9

A CMS official told us that the revised CMN would incorporate information collected 

previously on three separate CMNs for manual wheelchairs, scooters, and power 

wheelchairs. He stated that the revised CMN would be structured to encourage the 

physician to consider the least costly, medically acceptable wheelchair or scooter for the 

beneficiary. 
Page 10 GAO-05-43 Medicare Power Wheelchairs 

Table 2: Clinical Information Questions on the CMN, Power Wheelchair Coverage Criteria, and CMN Limitations 

Information solicited by the CMN 

concerning medical necessity 

The Medicare coverage criteria for 

power wheelchairsa Limitations of the CMN 

What is the estimated length of need for a 

power wheelchair? 

What is the diagnosis code for patient’s 

condition? 

The patient’s condition is such that a 

wheelchair is medically necessary. 

The CMN asks for the patient’s diagnosis, 

but it does not ask for information on the 

extent or severity of the patient’s clinical 

condition, to indicate that a power 

wheelchair is medically necessary. 

Does the patient require and use a 

wheelchair to move around in his or her 

residence? 

The patient’s condition is such that 

without the use of a wheelchair, the 

patient would otherwise be bed- or chairconfined. 

The CMN is more open to interpretation as 

to when a patient would require a power 

wheelchair than the coverage criteria. 

The CMN does not solicit information about a 

patient’s capability to safely operate the 

controls of a power wheelchair. 

The patient is capable of safely operating 

the controls for the power wheelchair. 

The CMN does not ask if the patient is 

capable of safely operating the controls for 

the power wheelchair. 

Is the patient unable to operate any type of 

manual wheelchair? 

Does the patient have severe weakness of 

the upper extremities due to a neurologic, 

muscular, or cardiopulmonary 

disease/condition? 

The patient is unable to operate a manual 

wheelchair. 

There are no limitations because the CMN 

elicits information that can be used to 

determine that the Medicare coverage 

criteria concerning the patient’s ability to 

operate a power wheelchair are met. 

Source: GAO analysis. 

Note: Information from Coverage Issues Manual, rev. 36, Section 60-9, 

www.cms.gov/manuals/06_cim/ci60.asp, accessed July 29, 2004; DME regional carrier coverage 

guidance; and Department of Health and Human Services, Centers for Medicare & Medicaid 

Services, Certificate of Medical Necessity, Motorized Wheelchairs, DMERC Form 02.03A. 

a

A power wheelchair is covered when all the Medicare coverage criteria are met. 

The HHS OIG recently testified that the CMN for power wheelchairs, 

which does not list coverage guidelines and is not completely consistent 

with coverage policy, is one of the reasons that DME regional carriers 

have paid claims for power wheelchairs for beneficiaries who did not 

qualify for them under Medicare coverage rules.10 In a related report, the 

OIG discussed the findings of an independent medical review contractor, 

which the OIG retained to review 230 medical records for beneficiaries for 

 10Department of Health and Human Services, Office of Inspector General, Medicare: 

Reimbursement for Power Wheelchairs and Scooters, Testimony of Dara Corrigan, Acting 

Principal Deputy Inspector General, before the U.S. Senate Committee on Finance, April 

28, 2004. 
Page 11 GAO-05-43 Medicare Power Wheelchairs 

whom Medicare claims for power wheelchairs were submitted in 2001.11

The independent reviewer found that only 13 percent of the claims met the 

Medicare coverage criteria for a power wheelchair. The reviewer also 

found that 31 percent of the claims did not meet the Medicare coverage 

criteria for any type of power wheelchair or scooter, while an additional 45 

percent did not meet the criteria for a power wheelchair, but may have 

met the criteria for another type of wheelchair or scooter.12 The HHS OIG 

recommended that CMS educate physicians and beneficiaries about the 

Medicare coverage criteria for power wheelchairs and develop coverage 

policy to include specific information about the medical conditions for 

which Medicare will cover different types of power mobility equipment. 

Because annual funding for the DME regional carriers to conduct medical 

reviews declined, while power wheelchair spending rose, the DME 

regional carriers’ capacity to conduct medical review was affected. CMS 

decreased the total funding for the medical review of claims submitted to 

the four DME regional carriers by about 22 percent, comparing fiscal year 

1999 and fiscal year 2003.13 Consistent with the decrease in funding, the 

number of claims for all items undergoing complex medical review in 

regions B, C, and D fell by about 39 percent from fiscal year 2001 through 

fiscal year 2003.14 These funding decreases can weaken program safeguard 

efforts. For example, three of the four DME regional carriers told us that 

conducting medical review on a larger number of claims would allow them 

to better address improper Medicare billing. Furthermore, Palmetto 

officials said that the funding they received for medical review did not 

equip them to handle the level and type of fraudulent power wheelchair 

billing that was discovered in Texas in 2002. In addition, they told us that 

 11Department of Health and Human Services, Office of Inspector General, Medicare 

Payments for Power Wheelchairs, OEI-03-02-00600 (Washington, D.C.: April 2004). 

12For 11 percent of the claims, due to insufficient documentation, the reviewer could not 

determine whether the beneficiaries’ conditions met coverage criteria. 

13Our data include funding for medical review activities performed by the four DME 

regional carriers and, starting in fiscal year 2001, the program safeguard contractor for 

region A. From fiscal year 1999 through fiscal year 2001, total funding for the medical 

review of claims submitted to these carriers increased from $10,806,376 to $12,388,461. 

However, total funding for the medical review of claims decreased from $9,472,076 in fiscal 

year 2002 to $8,432,894 in fiscal year 2003. 

14Regions B, C, and D conducted complex medical reviews on about 297,600 claims for all 

items in fiscal year 2001 and on about 180,600 claims in fiscal year 2003. This information 

was not available for region A. 

Funding for Claims Review 

Declined as Power 

Wheelchair Spending Rose 
Page 12 GAO-05-43 Medicare Power Wheelchairs 

they were also addressing fraudulent billing related to other items for 

which they had made payments. 

The decline in funding for medical review is even more dramatic when 

weighed against claims submitted to the DME regional carriers. Overall, 

the amount of medical review funding from CMS per $100 in total 

submitted claims dropped over 50 percent from fiscal year 1999 through 

2003 for total claims submitted to the four DME regional carriers. 

Palmetto’s funding dropped from about 8 cents per $100 in submitted 

claims in 1999 to less than 4 cents per $100 in submitted claims in 2003.15

Compared to the other three DME regional carriers, Palmetto was 

allocated less medical review funding per $100 in total submitted claims 

each year from fiscal year 1999 through 2003, as figure 2 shows. 

 15In fiscal year 2003, Palmetto received $3.1 million for medical review activities—about 15 

percent less than it received in 1999. 
Page 13 GAO-05-43 Medicare Power Wheelchairs 

Figure 2: Medical Review Funding for Each $100 in Submitted Claims for Palmetto 

and the Other Three DME Regional Carriers 

Note: Based on CMS data on medical review funding and submitted claims. 

Despite the relatively low funding allotted by CMS to Palmetto for medical 

review, Palmetto more than tripled the number of power wheelchair 

claims on which it conducted complex medical review from fiscal years 

2000 to 2002. Nevertheless, Palmetto still reviewed less than 3 percent of 

its power wheelchair claims in 2002,16 while it paid about $550 million to 

suppliers for this item. 

The reduction in medical review funding for Palmetto is of particular 

interest because Palmetto had already found significant power wheelchair 

fraud in its region in the late 1990s. Further, from 1997 through 2003, 

spending growth for power wheelchairs in Palmetto’s region surpassed 

that of the three other regions combined, as shown in figure 3. 

 16Palmetto reviewed about 4,400 of the approximately 158,000 claims submitted for power 

wheelchairs in 2002. 

0

2

4

6

8

10

12

14

1999 2000 2001 2002 2003

Fiscal year

Palmetto

All others

Source: GAO analysis.

In cents
Page 14 GAO-05-43 Medicare Power Wheelchairs 

Figure 3: Regional Medicare Power Wheelchair Spending 

Note: Medicare spending includes federal payments and beneficiary cost sharing. 

In early 2002, Palmetto officials became concerned that some power 

wheelchair suppliers in Harris County, Texas, and other parts of the state 

had submitted—and Palmetto had paid—fraudulent power wheelchair 

claims. Specifically, a Palmetto fraud analyst had identified highly aberrant 

billing behavior for one supplier, which he began to monitor. Palmetto 

analysts also discovered that some suppliers were billing for a power 

wheelchair or for power wheelchair accessories multiple times on behalf 

of a single beneficiary. 

Also in 2002, legitimate power wheelchair suppliers in Harris County, 

Texas, became increasingly suspicious about the activities of some 

suppliers in their area. For example, representatives of two suppliers with 

whom we spoke learned that Medicare had paid other suppliers for power 

wheelchairs that beneficiaries had never received. Suppliers told us that 

they, other suppliers, and beneficiaries reported their suspicions to the 

Palmetto fraud unit, the Medicare fraud hotline, the Federal Bureau of 

Palmetto Conducted Fraud 

Investigations in Texas to 

Address Improper 

Payments 

Dollars in millions

Region A (HealthNow New York, Inc.)

Region B (AdminaStar Federal)

Region C (Palmetto Government Benefits Administrators)

Region D (CIGNA HealthCare Medicare Administration)

Source: CMS.

0

100

200

300

400

500

600

700

800

1997 1998 1999 2000 2001 2002 2003

Year
Page 15 GAO-05-43 Medicare Power Wheelchairs 

Investigation, and the HHS OIG. The suppliers’ suspicions were supported 

by data indicating that in 2002, 14 percent of Medicare’s power wheelchair 

spending was for beneficiaries in Harris County, although only 1 percent 

of Medicare beneficiaries lived in that area in 2001. During January 2003, 

Palmetto referred 22 Harris County area suppliers suspected of fraud in 

their billing for power wheelchairs to the Dallas office of the HHS OIG for 

potential prosecution.17 Palmetto officials estimated that at least 200 

individuals in region C were involved in fraudulent power wheelchair 

schemes and that Medicare had improperly paid at least $20 million in its 

region for fraudulent claims from fiscal year 2000 through fiscal year 2003. 

NSC, which is the CMS contractor responsible for DME supplier 

enrollment, noted in 2002 that Texas had an unusually high number of 

suppliers compared to the number of beneficiaries residing in the state. At 

CMS’s request, NSC stationed one of its inspectors in the Harris County 

area to conduct supplier site visits. During these site visits, which began in 

September 2002, NSC’s inspector found instances where suppliers lacked 

appropriate places of business or had moved their businesses without 

giving NSC the required forwarding addresses. Based on these findings, 

NSC’s inspector subsequently led site visits of every active supplier that 

had not been inspected since January 2003 in the Harris County, Texas, 

area. These out-of-cycle site visits of about 1,300 suppliers were conducted 

from August 2003 through January 2004, and identified instances where 

suppliers did not meet required Medicare standards,18 including lacking 

appropriate inventory and insurance. Due to problems identified during 

regular and out-of-cycle site visits, NSC revoked 367 supplier billing 

numbers for power wheelchair suppliers in the Harris County, Texas, area, 

from September 2002 through March 2004. 

Many suppliers, whose billing numbers were later revoked, gained entry 

into the Medicare program because of three weaknesses in the enrollment 

process. First, NSC did not always verify submitted documents. NSC 

officials told us that they had routinely accepted copies of key documents, 

such as liability insurance forms, at face value without verifying them. 

 17Palmetto conducted additional investigations and made referrals throughout 2003, and, as 

of August 18, 2004, investigations were continuing. 

18Suppliers must meet 21 standards. 42 C.F.R. § 424.57(c)(1) – (21) (2003) (in effect since 

December 11, 2000). Suppliers must be in compliance with these standards in order to 

obtain and maintain their Medicare billing privileges. 

Fraud Investigations and 

Supplier Inspections 

Highlighted Weaknesses in 

Verifying the Legitimacy of 

Suppliers 
Page 16 GAO-05-43 Medicare Power Wheelchairs 

Failure to verify the accuracy of these documents had enabled supplier 

applicants to submit falsified papers and still become enrolled as Medicare 

suppliers. NSC officials indicated that they began verifying suppliers’ 

liability insurance forms in September 2003. 

Second, the 21 standards that NSC uses to evaluate suppliers lack the 

specificity needed to screen out illegitimate suppliers and do not provide 

guidance on appropriate marketing practices. For example, the supplier 

standards are not specific about the characteristics of a physical location 

or the amount or type of inventory that would be expected, given the items 

the supplier intends to provide to Medicare beneficiaries. According to 

NSC staff, the broad language used in these standards is difficult to 

interpret and enforce. CMS and NSC are in the process of developing 

additional guidance concerning supplier standards, including prescribing 

how existing standards on physical location and inventory should be 

interpreted. 

In addition, the 21 standards do not address certain misleading or abusive 

marketing practices, including offers to routinely waive beneficiaries’ copayments and certain types of personal solicitations. Individuals with 

whom we spoke contended that misleading and abusive marketing 

practices have escalated nationwide utilization of power wheelchairs and 

were a factor in increased utilization of power wheelchairs in Texas. For 

example, CMS officials told us of instances of suppliers promising free 

power wheelchairs to beneficiaries in Texas. We also found supplier 

advertisements on the Internet, in print, and on television, that used the 

words “free” or “no cost to you” in connection with beneficiaries receiving 

power wheelchairs. Appendix III shows an example of an Internet 

advertisement that appears to illegally offer to waive Medicare copayments.19 CMS officials also reported suppliers canvassed beneficiaries 

door-to-door in Texas to solicit their business. By statute, Medicare 

suppliers are not permitted to offer free wheelchairs by waiving 

beneficiary co-payments routinely or as part of an advertisement or 

solicitation.20 Furthermore, the Medicare statute generally prohibits 

suppliers from canvassing beneficiaries by telephone to solicit their 

 19The supplier has since withdrawn this advertisement from its Web site. 

2042 U.S.C. § 1320a-7a(a)(5) and (i)(6)(A) (2000). As a result, suppliers soliciting Medicare 

business by advertising that they can provide a beneficiary with a free wheelchair may be 

subject to penalties if they actually provide the beneficiary with a wheelchair at no cost. 
Page 17 GAO-05-43 Medicare Power Wheelchairs 

business.21 While the 21 supplier standards reflect the statutory restriction 

on telephone solicitations, they do not prohibit door-to-door solicitation. 

Furthermore, the standards do not reflect the prohibition on waiving copayments routinely or as part of an advertisement or solicitation. CMS has 

statutory authority to specify additional supplier requirements, but has not 

used this authority to modify the 21 standards to ensure that suppliers’ 

marketing practices are not misleading or abusive.22

A third weakness in the enrollment process concerns the predictability of 

NSC’s initial and subsequent site visits to suppliers. CMS requires NSC to 

conduct a site visit to assess compliance with the 21 supplier standards 

before authorizing a new supplier to bill Medicare. NSC is also required to 

conduct a site visit to assess the supplier’s continued compliance with the 

standards every 3 years, when suppliers must reenroll in order to retain 

their Medicare billing privileges.23 Because the timing of such visits is 

predictable, a supplier that is intent on committing fraud can anticipate a 

site visit and present an illusion of legitimacy for the purpose of passing 

the initial inspection, fully understanding that an inspector is not likely to 

return for 3 years, even if beneficiaries complain of potential fraud. For 

example, the person convicted of Medicare fraud who testified before your 

committee on April 28, 2004, stated that although a fraud analyst contacted 

her after a beneficiary complained about nondelivery of a power 

wheelchair billed to Medicare, no inspector visited the facility. According 

to this individual, she was able to bill Medicare $50,000 for power 

wheelchairs in the next month without any further scrutiny, though her 

operation rarely delivered the power wheelchairs billed.24

The experience in Harris County, Texas, suggests that conducting out-ofcycle site visits was valuable to uncover fraud and suppliers that were not 

complying with required standards. Nevertheless, CMS does not require 

NSC to routinely conduct out-of-cycle site visits, maintain data on the 

 2142 U.S.C. § 1395m(a)(17) (2000). 

2242 U.S.C. § 1395m(j)(1)(B)(ii)(IV) (2000). 

23CMS does not require NSC to conduct a site visit to every supplier. Suppliers that are 

Medicare-enrolled entities (hospitals, skilled nursing facilities, home health agencies, 

physicians, and ambulatory surgical centers) and existing supplier chains with 25 or more 

locations are excluded from site visits. 

24This individual reported that prior to submitting additional power wheelchair claims, she 

did mail a refund check to Medicare for the power wheelchair that the beneficiary 

complained about not receiving. 
Page 18 GAO-05-43 Medicare Power Wheelchairs 

number of out-of-cycle visits that NSC may choose to conduct, or report 

on the results of such visits. According to an NSC official, NSC may 

choose to conduct an out-of-cycle visit to a supplier when a complaint is 

lodged or when data analysis of the supplier’s claims indicate that there is 

a potential problem. In its written comments on a draft of this report, CMS 

reported that, in the summer of 2003, NSC had conducted over 600 out-ofcycle site inspections and had found more than 300 suppliers out of 

compliance with supplier standards. 

CMS has recently taken steps, including issuing an action plan in 

September 2003 and announcing additional initiatives in April 2004, that 

should strengthen the processes the agency and its contractors use to 

identify and respond to improper payments for power wheelchairs and 

other DME items. While some of these activities addressed fraud, abuse, 

and utilization issues in Harris County, Texas, others focused on clarifying 

the Medicare coverage criteria for adjudicating power wheelchair claims. 

Still others were in response to requirements in the Medicare Prescription 

Drug, Improvement, and Modernization Act of 2003 (MMA).25 As shown in 

table 3, CMS’s and its contractors’ actions to respond to rising spending 

for power wheelchairs are in different stages of completion and focus on 

supplier enrollment; coverage policy; pricing; provider and beneficiary 

education; actions to address concerns in Harris County, Texas; and law 

enforcement. 

 25Pub. L. No. 108-173, § 302, 117 Stat. 2066, 2223. 

Recent Actions May 

Help Control 

Improper Power 

Wheelchair Payments 
Page 19 GAO-05-43 Medicare Power Wheelchairs 

Table 3: CMS’s Actions to Address Improper Payments for Power Wheelchairs and Other DME Items 

Action Explanation Statusa 

Supplier enrollment 

Prevent fraudulent suppliers from 

enrolling in Medicare for the purpose of 

receiving inappropriate payments. 

CMS stated it would begin to aggressively 

scrutinize all new applications; NSC stopped 

issuing new supplier numbers in Harris 

County, Texas, in March 2003 and nationally 

in September 2003. NSC began issuing 

supplier numbers again in November 2003. 

Since October 2003, NSC had received 

over 5,800 new applications from 

potential Medicare suppliers and had 

approved over 4,000 of these 

applications. During the same period, 

over 8,000 supplier numbers were 

inactivated and 4,000 were reactivated. 

Identify and prevent inappropriate 

enrollment of suppliers by providing a 

more detailed screening process, allowing 

CMS the time needed to properly review 

applications, and providing sanctions 

against suppliers abusing the enrollment 

process. 

CMS stated its intent to publish regulations to 

enhance its ability to screen new supplier 

applications. 

MMA requires CMS to establish quality and 

consumer service standards for suppliers. 

MMA § 302(a)(1), 117 Stat. 2223 (to be 

codified at 42 U.S.C. § 1395m(a)(20)). 

CMS plans to establish quality and 

consumer service standards for suppliers 

by January 2005. 

Clarify existing supplier enrollment 

standards. 

CMS is currently working with NSC on 

clarifying the existing 21 supplier standards. 

CMS planned to implement the clarified 

21 supplier standards by October 2004. 

Implement an accreditation process to 

determine if suppliers meet quality 

standards, which MMA requires CMS to 

establish. 

This action is required by MMA. MMA § 

302(a)(1), 117 Stat. 2223 (to be codified at 42 

U.S.C. § 1395m(a)(20)). 

The agency has not developed a 

schedule for this action. 

Coverage policy for power wheelchairs 

Ensure national policy accurately defines 

the conditions under which Medicare will 

cover mobility products. 

CMS stated it would promulgate regulations 

revising coverage policy for power wheelchairs 

and scooters. The coverage policy will 

implement the MMA provision requiring 

medical providers to conduct face-to-face 

examinations of patients before prescribing 

wheelchairs. MMA § 302(a)(2), 117 Stat. 2224 

(to be codified at 42 U.S.C. § 

1395m(a)(1)(E)(iv)). 

CMS developed a proposed rule that 

would require medical providers to 

conduct face-to-face examinations of 

patients prior to prescribing wheelchairs 

and scooters. In July 2004, the proposed 

rule was under review; on August 5, 

2004, it was published. 

Accurately portray the clinical conditions 

for which mobility products are reasonable 

and necessary, and facilitate correct 

billing and payment for mobility devices. 

CMS stated that DME regional carriers would 

immediately adopt local medical review 

policies to educate suppliers and beneficiaries 

on the Medicare coverage criteria for 

wheelchairs. 

In December 2003, the DME regional 

carriers published an educational bulletin 

to clarify coverage criteria. It explained 

how claims would be reviewed and 

should be coded and how the 

beneficiary’s medical need for the item 

should be documented. This information 

has since been removed from their Web 

sites, in response to concerns raised by 

suppliers, beneficiary representatives, 

and industry groups. As part of its April 

2004 initiatives, CMS convened an 

interagency work group to develop 

guidance on power wheelchair coverage 

policy. 
Page 20 GAO-05-43 Medicare Power Wheelchairs 

Action Explanation Statusa 

Coverage policy for power wheelchairs (cont’d) 

When national billing and utilization trends 

are identified, ensure that only claims that 

are reasonable and necessary are paid 

and resolve national billing problems 

consistently. 

CMS stated that the DME regional carriers 

would adopt a consistent approach to medical 

review. 

Each DME regional carrier has assured 

CMS that it is consistently using local and 

national policy guidance when reviewing 

claims. 

Establish an interagency work group, 

including clinicians from CMS, the 

National Institutes of Health, the 

Department of Veterans Affairs, and the 

National Institute on Disability and 

Rehabilitation Research. 

This group of clinicians will develop guidance 

on implementing power wheelchair coverage 

policy. 

CMS will provide for a public comment 

period, and then issue guidance by the 

end of 2004. 

Power wheelchair pricing 

Ensure that Medicare is paying 

appropriately for power wheelchairs. 

CMS stated it would develop guidelines to 

implement its payment rate adjustment 

process for most part B services (called 

inherent reasonableness) and apply this 

process first to power wheelchairs. 

CMS officials indicated that the agency 

would issue guidelines for implementing 

an inherent reasonableness process 

soon. Once the guidelines are issued, 

CMS can use them to determine whether 

payment amounts for power wheelchairs 

should be adjusted. 

Develop a new set of power wheelchair 

billing codes. The DME regional carriers 

use billing codes to identify power 

wheelchairs and other items billed by a 

supplier on a beneficiary’s behalf. 

These codes will provide more specificity in 

differentiating the various power wheelchairs 

on the market. 

CMS will consult with other experts and 

solicit public comments before finalizing 

its coding changes. When new codes are 

established, CMS will develop payment 

ceilings for each new code. 

Implement competitive bidding, and 

include power wheelchairs in this process. 

MMA requires CMS to begin a Medicare 

competitive bidding program for medical 

equipment and supplies in 2007. Under this 

program, suppliers will compete by offering 

bids or amounts they will accept to supply 

DME products to beneficiaries, and CMS will 

use the bid information to set payments and 

choose suppliers (MMA § 302(b), 117 Stat. 

2224). 

CMS may consider including power 

wheelchairs in its competitive bidding 

effort as early as 2007. 

Provider and beneficiary education 

Provide physicians and beneficiaries with 

the necessary information about Medicare 

coverage policies for power wheelchairs. 

CMS stated that it would work with physicians 

to clarify their prescribing responsibilities. It 

would also educate physicians, beneficiaries, 

and suppliers on the Medicare coverage 

criteria for power wheelchairs. 

The DME regional carriers provided an 

online tutorial to physicians and suppliers 

to better educate them about the power 

wheelchair benefit. The DME regional 

carriers have also provided one-on-one 

and group education to suppliers. 
Page 21 GAO-05-43 Medicare Power Wheelchairs 

Action Explanation Statusa 

Focus on Harris County, Texas 

Address what CMS called “rampant” fraud 

and abuse in the Harris County, Texas, 

area. 

CMS stated, effective with plan’s issuance, all 

payments for power wheelchairs in the Harris 

County, Texas, area would be individually 

approved by CMS staff in the Dallas regional 

office. 

CMS has continued to have medical 

professionals in its Dallas regional office 

review all claims for power wheelchairs 

from Harris County, Texas, that have 

been approved for payment, but 

anticipated phasing out this review. 

Ensure that all suppliers of manual 

wheelchairs, scooters, and power 

wheelchairs in Harris County, Texas, 

know and understand Medicare coverage 

rules. 

CMS stated that it would require all wheelchair 

suppliers in the Harris County, Texas, area to 

attend mandatory training on wheelchair 

coverage and medical review policies. 

Palmetto and the CMS Dallas regional 

office sponsored mandatory training for 

all Houston-based suppliers of manual 

wheelchairs, scooters, and power 

wheelchairs, which was completed in 

October 2003. Employees representing 

328 suppliers attended the training. CMS 

plans to take administrative action 

against, and has not paid claims from, 

any of the 53 suppliers that did not 

attend. 

Law enforcement 

Quickly identify and punish fraudulent 

suppliers and work collaboratively with 

law enforcement to process fraud cases. 

CMS, DME regional carriers, and law 

enforcement agencies will collaborate to 

process criminal prosecutions. CMS also 

indicated that it would use payment 

suspension against suppliers referred to law 

enforcement, as needed, to prevent loss of 

Medicare funds. 

Since September 2003, 179 fraud cases 

involving 296 suppliers had been referred 

to law enforcement officials. In addition, 

the DME regional carriers had 121 active 

investigations under way. 

Source: GAO analysis. 

Note: Based on CMS’s September 2003 action plan, April 2004 initiatives, and other status 

information provided by CMS. 

a

Information on status as of July 2004, unless otherwise noted. 

Fraud, abuse, and misapplication of Medicare rules in the program’s 

power wheelchair benefit highlight four areas of concern relating to how 

CMS and its contractors safeguard Medicare program dollars. First, while 

contractors repeatedly communicated concerns about potential problems 

to the agency, CMS was slow to react to rising spending. Some of this 

spending was on behalf of beneficiaries who met all of the Medicare 

coverage criteria, but millions of dollars were spent on power wheelchair 

claims submitted by suppliers intent on defrauding the Medicare program. 

CMS’s failure to take an early leadership role underlines the need for a 

more proactive response by the agency in the future when there appears 

to be disproportionate and suspicious spending for DME items provided to 

Medicare beneficiaries. 

Conclusions 
Page 22 GAO-05-43 Medicare Power Wheelchairs 

A second area of concern centers on the CMN. CMS is in the process of 

revising the CMN for power wheelchairs, but has not implemented a 

version that provides sufficient information to allow DME regional carriers 

to correctly adjudicate power wheelchair claims. Until it does so, its DME 

regional carriers will continue to be hampered in their efforts to properly 

pay power wheelchair claims. 

Third, fraud that occurred among suppliers in Harris County, Texas, 

highlights significant weaknesses in the supplier enrollment process—

especially standards covering suppliers’ physical locations, required 

inventory, and marketing. Other than constraining suppliers’ 

communications with beneficiaries by telephone, the 21 supplier standards 

do not provide guidance on appropriate marketing practices. For example, 

they do not include language reflecting the statutory provision that 

prohibits suppliers from waiving beneficiaries’ co-payments when offered 

as part of an advertisement or solicitation. While CMS is working on more 

specific guidance relating to a supplier’s physical location and inventory, it 

has not modified the 21 supplier standards to ensure that marketing 

practices are not misleading or abusive. Such marketing practices include 

offering to waive beneficiaries’ co-payments, using the words “free” or “no 

cost to you” in relation to provision of Medicare items to beneficiaries, and 

using door-to-door solicitations. 

Fourth, site visits, which can help ensure compliance with supplier 

standards, are less effective in screening potential suppliers because they 

are highly predictable. Despite evidence that out-of-cycle site visits proved 

useful in identifying fraudulent suppliers in Harris County, Texas, CMS 

does not require its contractor to conduct such site visits on a routine 

basis across the country. 

To help ensure that improper payments are identified and addressed in a 

timely manner and that Medicare pays properly for power wheelchairs and 

other items of DME, we recommend that the Administrator of CMS take 

four actions: 

• Develop a process within CMS to focus on trends in Medicare spending 

and disproportionate or suspicious Medicare payments; develop strategies 

to address the trends that may indicate possible improper payments for 

DME; and take timely action, when warranted. 

• Implement a revised CMN that incorporates key elements of power 

wheelchair coverage criteria to help DME regional carriers properly 

adjudicate claims. 

Recommendations for 

Executive Action 
Page 23 GAO-05-43 Medicare Power Wheelchairs 

• Strengthen the standards for Medicare DME suppliers to include 

prohibiting certain misleading or abusive marketing practices. 

• In addition to conducting the currently required initial and reenrollment 

site visits, direct NSC to routinely conduct out-of-cycle site visits to 

suppliers that are suspected of billing improperly and to maintain data on 

these visits and their results. 

In its written comments on a draft of this report, CMS agreed with our 

recommendations and stated that it had undertaken several efforts to curb 

the abuse of the power wheelchair benefit in the Medicare program within 

the last year. CMS mentioned its September 2003 power wheelchair 

initiative, which focused on aggressive claims review, enforcement, and 

supplier training, and its April 2004 initiative, which targeted coverage, 

payment, and the quality of suppliers of power wheelchairs. 

In response to the draft report’s discussion on the decline in annual 

funding for the DME regional carriers to conduct medical reviews, CMS 

indicated that it agreed that funding had decreased when fiscal year 1999 

is compared to fiscal year 2003. However, CMS noted that funding had 

increased steadily before it began to decrease. In response to CMS’s 

comment, we revised the report to provide additional information on 

funding changes from fiscal year 1999 to fiscal year 2003. CMS also stated 

that it continues to request additional funding for Medicare Integrity 

Program efforts and that legislative caps on that funding had affected 

medical review spending. CMS was referring to funding for the Medicare 

Integrity Program, which was provided by the Health Insurance Portability 

and Accountability Act of 1996 (HIPAA).26 Medicare Integrity Program 

activities include medical review of claims, investigation of potential fraud 

cases, and provider education and training to combat Medicare fraud, 

waste, and abuse. Beginning in fiscal year 1997, HIPAA appropriated an 

increasing level of funding through fiscal year 2003 and permanent funding 

at the 2003 level thereafter. 

 26Pub. L. No. 104-191, sec. 201(b), § 1817(k)(4), 110 Stat. 1936, 1995. 

Agency Comments 
Page 24 GAO-05-43 Medicare Power Wheelchairs 

CMS agreed with our recommendation that it develop a process to focus 

on trends in Medicare spending and disproportionate or suspicious 

Medicare payments; develop strategies to address the trends that may 

indicate possible improper payments for DME; and take timely action, 

when warranted. CMS indicated that it is building on its current program 

integrity efforts to implement a new data-driven approach to detect 

improper payments and potential areas of fraud and abuse in the Medicare 

program. In response to our recommendation that CMS implement a 

revised CMN for power wheelchairs, CMS stated that it anticipates having 

a revised CMN in use in 2005, which it said should provide useful 

information for more accurate and timely claims reviews. CMS agreed 

with our recommendation on strengthening the standards for DME 

suppliers by prohibiting certain misleading or abusive marketing practices. 

The agency noted that it is examining whether its current authorities allow 

it to address direct-to-consumer marketing beyond telephone solicitations 

or if it needs to seek a legislative remedy to amend the supplier standards 

to do so. However, CMS indicated that it intended to further delineate 

appropriate marketing practices by DME suppliers to beneficiaries. 

Finally, CMS agreed with our recommendation to direct NSC to routinely 

conduct out-of-cycle site visits to selected suppliers. CMS noted that NSC 

had conducted out-of-cycle site inspections in 2003 and 2004, and the 

agency said that it has directed NSC to continue these reviews in fiscal 

year 2005. 

We have reprinted CMS’s letter in appendix IV. CMS also provided us with 

a technical comment, which we incorporated. 

As agreed with your office, unless you publicly announce its contents 

earlier, we plan no further distribution of this report until 30 days after its 

date. We are sending copies of this report to the Administrator of CMS, 

appropriate congressional committees, and other interested parties. We 

will also make copies available to others upon request. This report is also 

available at no charge on GAO’s Web site at http://www.gao.gov. 
Page 25 GAO-05-43 Medicare Power Wheelchairs 

If you or your staff have any questions about this report, please call me at 

(312) 220-7600 or Sheila K. Avruch at (202) 512-7277. Other key 

contributors to this report are Sandra D. Gove, Joy L. Kraybill, Lisa S. 

Rogers, and Craig Winslow. 

Sincerely yours, 

Leslie G. Aronovitz 

Director, Health Care—Program 

 Administration and Integrity Issues 
Appendix I: Scope and Methodology 

Page 26 GAO-05-43 Medicare Power Wheelchairs 

We assessed the early and more recent steps taken by the Centers for 

Medicare & Medicaid Services (CMS) and its contractors to respond to 

improper payments for power wheelchairs. First, we obtained reports on 

national and regional annual Medicare claims payment data for power 

wheelchairs from 1997 through 2003 from the statistical analysis durable 

medical equipment regional carrier (SADMERC). These annual reports 

included the paid claims data for power wheelchairs with dates of service 

during a calendar year. They included all paid claims data received by the 

SADMERC during that calendar year through March 31 of the next 

calendar year. We reviewed CMS and contractor internal control 

procedures to help ensure that these data were accurate, timely, and 

complete. We determined that these data were sufficiently reliable for 

addressing the issues in this report. 

We reviewed actions taken by the SADMERC in identifying claims 

payment trends and possible improper payments and informing the other 

durable medical equipment (DME) regional carriers and CMS. To do so, 

we reviewed SADMERC reports from 1997 to 2003 sent to DME regional 

carrier and CMS staff that contained information on power wheelchair 

billing and interviewed SADMERC, DME regional carrier, TriCenturion, 

and CMS staff about SADMERC activities. 

We reviewed actions taken by DME regional carriers in responding to 

possible improper payments and informing CMS about potential issues. 

We reviewed DME regional carrier and CMS documents, including 

memorandums, a fraud alert, reports related to power wheelchair fraud 

activities, the certificate of medical necessity for power wheelchairs, the 

Medicare coverage criteria, and CMS budget documents for fiscal year 

1999 through fiscal year 2003. From the budget documents provided by 

CMS and submitted claims information provided by the SADMERC, we 

analyzed funding for claims review activities. Contractor budget and 

expense data are self-reported by CMS and the contractors, and we did not 

validate these data. We also interviewed DME regional carriers and 

TriCenturion staff, including their medical directors, and CMS 

headquarters and regional staff with responsibility for overseeing, or 

budgeting for, DME regional carrier and TriCenturion activities. 

To review steps taken by the National Supplier Clearinghouse (NSC), we 

reviewed CMS and NSC documents, such as the 21 supplier standards and 

correspondence from NSC highlighting problems with the supplier 

standards. We also interviewed CMS and NSC staff about power 

wheelchair supplier issues; on-site review activities, particularly in Harris 

County, Texas; and potential weaknesses in supplier verification activities. 

Appendix I: Scope and Methodology 
Appendix I: Scope and Methodology 

Page 27 GAO-05-43 Medicare Power Wheelchairs 

We assessed the steps taken by CMS to respond to improper payments for 

power wheelchairs by reviewing CMS’s action plan to combat improper 

payments for power wheelchairs; relevant sections of the Medicare 

Prescription Drug, Improvement, and Modernization Act of 2003 and the 

Social Security Act; and other documents mentioned above. We 

interviewed CMS officials with responsibility for safeguarding DME 

payments and overseeing SADMERC, DME regional carrier, TriCenturion, 

and NSC activities. We also interviewed SADMERC, DME regional carrier, 

TriCenturion, and NSC staff; supplier representatives; beneficiary 

advocates; and industry representatives. The beneficiary advocates whom 

we interviewed included members of the Independence Through 

Enhancement of Medicare and Medicaid Coalition. In addition, we 

interviewed clinicians from the University of Pittsburgh. We also 

interviewed representatives of manufacturers, suppliers, and a trade 

association, including representatives from Hoveround, Invacare, Pride 

Mobility Products Corporation, the Power Mobility Coalition, and two 

suppliers in Harris County, Texas. We also participated in three “listening 

sessions” on February 24, March 31, and June 14, 2004, that were 

organized by CMS staff so that they could hear the viewpoints of suppliers, 

beneficiary advocates, and industry representatives on the actions taken 

by CMS and its contractors to address power wheelchair issues. We 

performed our work from February through November 2004 in accordance 

with generally accepted government auditing standards. 
Appendix II: DME Regional Carriers’ 

Jurisdiction 

Page 28 GAO-05-43 Medicare Power Wheelchairs 

Appendix II: DME Regional Carriers’ 

Jurisdiction 

AL

AZ

AR

CA

CO

CT

DE

FL

GA

ID

IL IN

IA

KS

KY

LA

ME

MD

MI

MN

MS

MO

MT

NE NV

NH

NJ

NM

NC

ND

OH

OK

OR

PA

RI

SC

SD

TN

TX

UT

VT

VA

WA

WV

WI

WY

AK

HI

NY

MA

Region A (HealthNow New York, Inc.)

Region B (AdminaStar Federal)

Region C (Palmetto Government Benefits Administrators)

Region D (CIGNA HealthCare Medicare Administration)

PR

VI

Source: CMS.

AS NMI

DC

GU
Appendix III: Internet Advertisement for 

Power Wheelchairs 

Page 29 GAO-05-43 Medicare Power Wheelchairs 

Note: This advertisement was downloaded from a supplier’s Web site on April 24, 2004. The supplier 

has since withdrawn this advertisement from its Web site. 

Appendix III: Internet Advertisement for 

Power Wheelchairs 

Source: Internet Web site.

 We can even waive the remaining 20% of the cost for

 those who only have Medicare coverage.

XXXX
Appendix IV: Comments from the Centers for 

Medicare & Medicaid Services 

Page 30 GAO-05-43 Medicare Power Wheelchairs 

Appendix IV: Comments from the Centers for 

Medicare & Medicaid Services 
Appendix IV: Comments from the Centers for 

Medicare & Medicaid Services 

Page 31 GAO-05-43 Medicare Power Wheelchairs 
Appendix IV: Comments from the Centers for 

Medicare & Medicaid Services 

Page 32 GAO-05-43 Medicare Power Wheelchairs 
Appendix IV: Comments from the Centers for 

Medicare & Medicaid Services 

Page 33 GAO-05-43 Medicare Power Wheelchairs (290390) 
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