Medicare: CMS's Program Safeguards Did Not Deter Growth in Spending for Power Wheelchairs
Published: 2004-11-17T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: 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.
section_title: What GAO Found
paragraphs: 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.

section_title: Letter
paragraphs: 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). According to the Centers for  Medicare & Medicaid Services (CMS), 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.
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  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. 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.
subsections: section_title: Background
paragraphs: 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. (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  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.
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  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.
section_title: Steps Taken by CMS and Its Contractors Did Not Deter Improper Payments for Power Wheelchairs
paragraphs: 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.
subsections: section_title: CMS Did Not Act on Contractors’ Early Warnings about Escalating Power Wheelchair Payments
paragraphs: 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.
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,” 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. 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  conditions Medicare will cover—and help pay for—a power wheelchair for  a beneficiary.
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.
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. 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  whom Medicare claims for power wheelchairs were submitted in 2001.  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. 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.
section_title: Funding for Claims Review Declined as Power Wheelchair Spending Rose
paragraphs: 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. 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. 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  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.  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.
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, 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.
section_title: Palmetto Conducted Fraud Investigations in Texas to Address Improper Payments
paragraphs: 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  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. 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.
section_title: Fraud Investigations and Supplier Inspections Highlighted Weaknesses in Verifying the Legitimacy of Suppliers
paragraphs: 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, 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.
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’ co- payments 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 co- payments. 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. Furthermore, the Medicare statute generally prohibits  suppliers from canvassing beneficiaries by telephone to solicit their  business. 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 co- payments 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.
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. 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.
The experience in Harris County, Texas, suggests that conducting out-of- cycle 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  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-of- cycle site inspections and had found more than 300 suppliers out of  compliance with supplier standards.
section_title: Recent Actions May Help Control Improper Power Wheelchair Payments
paragraphs: 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). 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.
section_title: Conclusions
paragraphs: 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.
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.
section_title: Recommendations for Executive Action
paragraphs: 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.
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.
section_title: Agency Comments
paragraphs: 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). 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.
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.
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.
section_title: Appendix I: Scope and Methodology
paragraphs: 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.
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.
section_title: Appendix II: DME Regional Carriers’ Jurisdiction
paragraphs: Region A (HealthNow New York, Inc.)
Region B (AdminaStar Federal)
Region C (Palmetto Government Benefits Administrators)
Region D (CIGNA HealthCare Medicare Administration)
section_title: Appendix III: Internet Advertisement for Power Wheelchairs
subsections: section_title: We can even waive the remaining 20% of the cost for those who only have Medicare coverage.