Medicare fraud risk created by billing loophole

A temporary rule allows equipment claims to be processed without NPIs from referring physicians. Suppliers say this facilitates payments. OIG says it needs to stop.

By Chris Silva — Posted May 10, 2010

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Medicare paid a total of $87 million over 16 months for medical equipment and supply claims in which suppliers listed their own national provider identifiers in place of the NPIs of referring physicians, according to a report from the Dept. of Health and Human Services Office of Inspector General.

Although these payments were allowed under a temporary provision, they represent a potential risk, because Medicare claims-processing systems did not verify if the equipment actually was ordered by eligible physicians, OIG reported. The oversight agency recommended that the Centers for Medicare & Medicaid Services end the practice "at the earliest date possible while maintaining beneficiary access to services."

In May 2008, CMS began requiring suppliers to include NPIs for both the supplier and the referring physician on every Medicare claim. But the agency has been allowing suppliers to use their own IDs in the claims field designated for the referring physician if the supplier is unable to obtain the information from the doctor.

CMS plans to end the temporary provision on Jan. 3, 2011, when it will make several changes to its claims processing system. OIG noted, however, that this implementation date already has been postponed twice.

"Provider identifiers are valuable program integrity safeguards," OIG stated in the April 8 report. "Medicare relies on physicians and other health care providers to ensure that beneficiaries receive medically necessary medical equipment and/or supplies."

But suppliers of durable medical equipment maintain that it's sometimes difficult to track down a referring physician's NPI. The ability to list the supplier's ID twice ensures that everybody gets paid for their services, they said.

Walter Gorski, vice president of government affairs for the American Assn. for Homecare, which represents suppliers, said the temporary provision is needed to ensure a smooth transition for whatever claims-processing changes CMS makes.

"It is an access-to-care issue to facilitate a seamless continuity of care," Gorski said. He said any type of actual fraudulent activity would be picked up in an audit, because a physician prescription must be provided before a patient can receive equipment or supplies.

"Frankly, this shows that doctors need to get their NPIs so the [suppliers] don't have to use their NPIs twice on the claim," Gorski said.

Possible trouble spots

Payments for claims featuring identical NPIs in the supplier and physician fields were concentrated on a few particular pieces of equipment and geographic locations.

Only 10 codes out of roughly 1,200 accounted for half of the $87 million in payments identified by OIG in its report. The equipment billed included oxygen concentrators, shoe inserts for diabetics, eyeglasses and power wheelchairs. Past federal reports have identified significant fraud activity involving claims for power wheelchairs and scooters.

OIG found that nearly 20% of the payments identified originated in 10 counties, including the cities of Los Angeles, Houston and Detroit. These three metropolitan areas are among seven the Health Care Fraud Prevention and Enforcement Action Team has identified as hotbeds of Medicare fraud. HEAT is a joint effort by HHS and the Justice Dept. that was formed in May 2009. The other identified metro areas are Baton Rouge, La.; Brooklyn, N.Y.; Miami and Tampa, Fla.

In addition, more than a quarter of the suppliers that received payments from identical NPI claims were paid for these types of claims almost exclusively, OIG reported. Those suppliers accounted for nearly half of all the payments identified.

One supplier received $1.6 million for claims with identical NPIs, and nine suppliers received more than a half million dollars, though the average was $6,358. OIG said none of the suppliers receiving large amounts appeared to be large, chain-based businesses.

For its report, OIG looked at medical equipment and supply claims that CMS received from May 23, 2008, through Sept. 30, 2009. The agency did not seek to determine if any of the claims were fraudulent, but it noted in its report that it was forwarding information on the suppliers who used identical NPIs to CMS.

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Potential for fraud?

Medicare paid about $87 million over 16 months for medical equipment that suppliers billed listing their own IDs in place of the referring physicians' -- meaning that some of the claims might be fraudulent, says the HHS Office of Inspector General. Roughly half of the amount billed using the same NPI in both fields could be associated with just 10 categories of equipment:

Device Amount
Oxygen concentrator $8,853,321
Shoe insert for diabetic (custom preparation) $8,010,672
Shoe insert for diabetic (prefabricated) $5,980,864
Shoe insert for diabetic (custom fabricated) $4,923,674
Eyeglass frame $3,727,351
Standard power wheelchair with captain's chair $3,427,307
Spherocylinder bifocals $2,954,644
Pneumatic, prefabricated walking boot $2,115,382
Sphere bifocals $1,597,861
Breast prosthesis, silicone or equal $1,498,309

Source: "Medicare Payments for Claims with Identical Referring Physician and Supplier National Provider Identifiers," HHS Office of Inspector General, April 8 (link)

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