Steps Taken by CMS and Its Contractors Did Not Deter Improper Payments for 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. 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. However, CMS did not begin to lead efforts to  address the underlying problems contributing to potentially improper  payments for power wheelchairs until September 2003. CMS Did Not Act on Contractors’ Early Warnings about Escalating Power Wheelchair Payments

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. 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. Funding for Claims Review Declined as Power Wheelchair Spending Rose

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. 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. CMS requires NSC to  conduct a site visit to assess compliance with the 21 supplier standards  before authorizing a new supplier to bill Medicare. Other than constraining suppliers’  communications with beneficiaries by telephone, the 21 supplier standards  do not provide guidance on appropriate marketing practices. Recommendations for Executive Action

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. Appendix I: Scope and Methodology

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.
Why GAO Did This Study

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.

What GAO Found

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.