Coleman Expresses Alarm Over CMS Inaccurate Auditing of Medicare Medical Equipment Payments

Washington, D.C. – Senator Norm Coleman, Ranking Member of the Permanent Subcommittee on Investigations (PSI), recently sent a letter to Mr. Kerry N. Weems, Acting Administrator of the Centers for Medicare & Medicaid Services (CMS), expressing his alarm and serious concerns over purported inaccurate auditing of Medicare medical equipment payments. Coleman, who initiated an investigation into fraud and abuse in Medicare two years ago as Subcommittee Chairman and continued to lead the investigation as the Subcommittee’s Ranking Member, demanded CMS’s explanation for auditing irregularities and raised numerous questions about a recent contract awarded to a Medicare service provider.

In his letter, Coleman made clear that the irregularities identified in a recent report from the Department of Health & Human Services Office of Inspector General (IG) regarding the auditing of Durable Medical Equipment (DME) payments raised serious questions about the legitimacy of CMS’s reported error rates and must be addressed immediately. Coleman expressed concern that CMS officials have on numerous occasions – including sworn testimony by senior CMS administrators at Subcommittee hearings cited low error rate as evidence of CMS’s success in battling fraud and waste in the DME benefit. A recently issued IG report, however, reveals that the volume of improper payments on DME payments in 2006 is likely substantially larger than CMS had previously stated. Coleman, who is concerned that CMS may have altered its auditing practices in order to artificially improve the appearance of its performance, directed CMS to answer the following questions immediately:

• Provide the Acting Administrator’s assurance that CMS’s previous statements and testimony were in fact accurate;

• Provide clear verification of the accuracy of previous error rates as reported;

• Provide an explanation regarding the problems found in the recent IG report, and address the issue of previous error rates; and

• Provide a detailed briefing from CMS for Subcommittee staff regarding the Comprehensive Error Rate Testing (CERT) Program as well as the findings in the IG report that CMS changed the manner in which such reviews were conducted.

“If auditing practices were altered to create false impressions of satisfactory performance, CMS will have to provide immediate explanations,” said Coleman. “We must preserve the integrity of Medicare – a vital service to the nation’s elderly and disabled – which is why it is disturbing to hear allegations that CMS may have altered its auditing practices in order to inflate their performance results. It is imperative for CMS to produce reliable and accurate error reports. In light of these findings, my insistence that Acting Administrator Weems provide a detailed briefing with my Subcommittee staff to review the accuracy of CMS testimony regarding error rates, as well as the estimated error rates for previous years, is something that I expect will happen without delay.”

Coleman’s investigation into fraud, waste and abuse in Medicare found that from 2000 through 2007, Medicare payments for medical equipment claims containing the identification numbers of dead doctors ranged from an estimated $60.3 million to $92.8 million. Notably, this estimate included only claims that occurred at least one year after the doctors' deaths; if claims within 12 months of the physicians' deaths were included, the estimate of claims paid over that timeframe would likely reach over $100 million. Coleman’s investigation uncovered that Medicare claims contained the identification numbers of an estimated 16,500 to 18,200 deceased physicians and involved approximately 385,000 to 572,000 claims for medical equipment.

Coleman also raised concerns over CMS’s renewal of Palmetto GBA’s contract to serve as the National Supplier Clearinghouse (NSC) for DME suppliers after a GAO report requested by PSI revealed that GAO investigators were able to set up two fictitious medical equipment suppliers and received Medicare billing numbers from CMS and Palmetto GBA. According to Palmetto GBA’s press release, this contract has the potential to last up to five years and be worth $76 million. In his letter, Coleman inquired whether the renewed contract contained any provisions, terms or penalties relating to poor performance. In addition, he asked the Administrator whether bidders were required during the bidding process to submit documentation on how they plan to address fraud and abuse.

“In light of the serious concerns raised at the Subcommittee’s hearing in July and the vulnerabilities uncovered by the Subcommittee’s recent GAO sting operation, it is critical for CMS to do its due diligence and take the time to properly assess current and potential suppliers,” said Coleman. “Considering the time it takes to thoroughly evaluate contractors, I was surprised to learn that one of the most important Medicare contractors was awarded a new contract merely two weeks after the Subcommittee’s hearing. I look forward to a prompt response from the Administrator to ensure that Medicare is able to accomplish its noble goals, while still protecting Americans’ hard-earned tax dollars. As long as any of these concerns remain unanswered, my confidence in CMS on this matter is not complete.”

Media Contact

Leroy Coleman, 202/224-5641