Los Angeles and Florida Pilot Program Targets Medicare Fraud

Fraudulent Medicare billings submitted by medical equipment suppliers in the Los Angeles area and south Florida are the target of a pilot program developed by the Centers for Medicare and Medicaid Services (CMS). California Health Advocates’ Senior Medicare Patrol (SMP) project is highly involved in this program in Southern California, and has been instrumental in the indictment of many individuals, doctors, and medical equipment suppliers, including 9 individuals charged for attempts of defrauding Medicare of $12 million last spring. This two-year program is concentrating on fake bills and overcharges sent by suppliers of prosthetic limbs, orthotics, diabetic supplies and durable medical equipment, which includes such items as wheelchairs and nebulizers. Medicare estimates that the amount of public funds lost to fraud could reach several billion dollars a year. Therefore, if the pilot program is successful in reducing fraud in the two regions, it probably will be rolled out nationwide.

Federal authorities have long raised concerns about the level of Medicare fraud in Southern California. With over 4,800 durable medical equipment (DME) suppliers in the L.A. area and with such a high number of beneficiaries, the opportunity for this kind of fraud is high. In addition, the number of DME suppliers has steadily increased along with a surge in the amount of money that they have billed Medicare.

At the start of the current fiscal year, 5,097 suppliers operated in Los Angeles, Orange, Riverside and San Bernardino counties — up from 4,417 at the start of the 2002 fiscal year. Meanwhile, the amount billed to Medicare by local suppliers rose from $614 million in the 2002 fiscal year to $945 million in 2006.

The U.S. attorney’s office in Los Angeles has a special unit of four prosecutors devoted to filing criminal cases. The office also uses civil lawsuits to seek reimbursements for improper billing. Most of the Los Angeles cases involve defendants accused of overcharging the federal health insurance program or billing for unnecessary or undelivered services.

For example, in February, a federal grand jury in Santa Ana indicted 18 people, including nine doctors reported to CMS’ integrity unit by CHA’s SMP project, on charges that involved an alleged scheme to defraud Medicare of more than $12 million. Prosecutors allege that the doctors worked with board-and-care administrators to bill the federal government for respiratory treatment for elderly, sick and mentally ill patients that was unnecessary or not provided.

Investigations of suppliers have frequently turned up problems as well. Last year, the agency responsible for vetting companies that bill Medicare for supplies started visiting hundreds of sites in Los Angeles. The effort resulted in 95 suppliers losing their billing privileges.

People acting as Medicare suppliers were setting up fake companies by passing through a series of requirements to get a Medicare billing number, which is the key to sending Medicare claims, and closing up shop after submitting several claims. Others companies committed fraud by offering money to low-income Medicare recipients for their program numbers and billing the government for services the patients didn’t need or were never prescribed. Still others did provide the prescribed equipment, but billed Medicare for upgrades or more expensive equipment the patient never received.

Through a series of investigations in the Los Angeles area, 108 companies had their Medicare privileges revoked between January and April 2007 because they were not active businesses, but shell companies that were charging for fictional services. Most of these cases came from poring over billing information and interviewing physicians or Medicare patients who found that something didn’t seem right on a bill.

The new pilot program will more effectively weed out nonexistent shell companies through a few key strategies. First, the government will strengthen the requirements for new dealers to obtain Medicare billing numbers, including stringent background checks for company owners and managers. Second, companies already enrolled in the program will be required to reapply for billing privileges annually instead of every three to five years. And third, area equipment providers can also expect to see a lot more of the Medicare staff.

Former Acting CMS Administrator, Leslie Norwalk said that the primary purpose of the pilot program is to “put some feet on the street,” with investigators visiting the equipment companies to make sure that they are actual businesses. Norwalk added, “The point is to keep fraud providers out of the program before they can rip us off. With re-enrollment and multiple surprise visits, we think we can stop the fraud.” (see California Healthline article)

If companies or individuals are found to be committing billing fraud, their Medicare billing privileges are suspended and their billing number could eventually be revoked.

From there, the Department of Justice can file criminal charges or help patients and doctors file civil charges against the companies.

For more information, see the U.S. Department of Health and Human Services press release and fact sheet on this topic. Also, a recent news article, ”Scammers target seniors in effort to con money out of Medicare system” details this problem in California and provides a good review of common red flags to watch for with sales agents. If advocates and/or beneficiaries have a case of suspected fraud to report, contact your local Health Insurance Counseling & Advocacy Program (HICAP) at 1-800-434-0222 or CHA’s SMP office in Orange County at 714-560-0309.

This article was edited in part from the Los Angeles Times article, “Program to Target Medicare Fraud,” July 2, 2007.