AMARILLO, TX – Health care is big business, and it involves a lot of money. There are 330 million Americans, approximately half of whom have at least one chronic disease. The life expectancy of Americans is much higher than earlier generations. This means that millions of Americans, who are no longer in the work force, will need health care.

Someone – or something – needs to pay for the health care of these aging Americans. That “something” is the Medicare program…and to a lesser extent, state Medicaid programs. This means that taxpayers are paying for the health care for aging Americans.

And so billions of dollars are flowing along the figurative “atmospheric highway.” It is human nature to want to reach up and grab some of the money flowing along the highway. Sadly, but predictably, it is also human nature of some to resort to fraud to accomplish this goal.

Expenditures by Medicare for DME constitute a very small percentage of Medicare’s total health care expenditures. And yet, the DME industry receives a disproportionate amount of bad publicity involving health care fraud. The most recent example of this pertains to urinary catheters.

Catheters, like continuous glucose monitors, fall into the category of “flavor of the month.” Over the decades, we have witnessed many “flavors of the month” come and go. Examples include (i) seat lifts, (ii) gel mattress pads, (iii) respiratory drugs (to go with nebulizers), (iv) diabetic testing supplies, (v) power wheelchairs (think “Operation Wheeler Dealer”), (vi) back and knee braces (think “Operation Brace Yourself”), and now (vii) catheters and CGMs.

There is a cottage industry of individuals who scrutinize their ability to bill Medicare (or to facilitate the billing by others to Medicare) for products…regardless of whether or not the products are needed by patients. These individuals jump into the fray, game the system for as long as possible, and then try to get out before being caught.

The latest example of this pertains to urinary catheters. Think about it. Many catheter patients will need disposable catheters for the remainder of their lives. Each such patient is like an “annuity.” Once the patient is signed up, then he/she (or more accurately, Medicare) will generate payments for catheters for the lifetime of the patient. This is a target rich environment for fraudsters. And this has caught the attention of the government and journalists alike. The most recent example of public awareness of fraud in the urinary catheter space is a July 2, 2024 Washington Post article entitled “Medicare Pushes New Payment Rule After Alleged $3 Billion Fraud Scheme.” This article states, in part:

Federal officials are seeking to overhaul how Medicare pays health-care providers after an alleged $3 billion scheme to defraud the program, which would be one of the largest such schemes in its history.

For more than a year, officials said, about a dozen companies submitted bills to the Centers for Medicare and Medicaid Services for tens of millions of urinary catheters, using the personal information of Medicare beneficiaries and physicians — some of whom still have questions about how the companies obtained their private details and used them to bill the federal health program for catheters that they never wanted nor received.

Experts said the alleged catheter fraud ring is just the latest reminder that Medicare is a tempting target for scammers. The roughly $1 trillion agency has long struggled to combat a stream of fraudulent claims for durable medical equipment, and CMS leaders have urged Congress to provide them with additional resources to crack down on would-be thieves.

Health-care providers also urged the government to clamp down on the companies, saying the alleged scheme threatened to distort Medicare payments by making it appear that doctors were ordering massive amounts of unnecessary catheters and skewing the government’s formula for reimbursing providers.

“We’ve never seen anything like this” in size and scope, said Clif Gaus, CEO of the National Association of Accountable Care Organizations, which helped uncover and spotlight the alleged fraud earlier this year.

The Washington Post in February first reported that the FBI and other agencies had opened a probe of the alleged fraud ring, sparking anger from lawmakers who asked why potentially fraudulent claims had been allowed to continue for months.

Federal officials this week refused to confirm whether they were investigating the allegations, saying they did not want to compromise the process. Officials also have repeatedly declined to specify whether criminal charges have been filed or share details about how the alleged fraudsters obtained patient and provider data.

But in a proposed rule issued Friday, CMS said an investigation was “ongoing, and we have taken initial actions in response.”

“We have made referrals to law enforcement, recouped improper Medicare payments, and terminated certain suppliers from the Medicare program,” the agency added in its proposed rule. CMS also said it would change its payment formula for accountable care organizations, citing the surge of “significant, anomalous and highly suspect” bills linked to urinary catheters. The change effectively protects the organizations from the spike in catheter bills.

Medicare officials this week separately confirmed that 11 companies were collectively responsible for $3.16 billion in questionable bills for urinary catheters between January 2023 and March 2024, saying the agency had successfully blocked payments to the companies.

The ACOs said they identified 12 companies engaged in the alleged fraud, which they say stretches back into late 2022 or even earlier.

Gaus, a 50-year veteran of the health-care industry, said he was not aware of Medicare ever before overhauling its payment rules in response to alleged fraud — a conclusion shared by several current Medicare officials who spoke with The Post. He warned that similar schemes are likely on the horizon.

“These fraudsters can get patient IDs, provider IDs, and maybe use AI to glean through these massive files of patient data that they collect from everywhere,” Gaus said.

Patients drawn into the alleged fraud said they remain confused and nervous about the implications of fraudsters knowing their personal information.

Many industries – health care and non-health care alike – have self-policing mechanisms. Perhaps the DME industry needs to install a self-policing mechanism. For example, the industry may want to set up its own fraud hotline in which DME suppliers can phone in tips/information about possible fraud the callers are witnessing in the industry. The organization in charge of the hotline can reach back out to the caller to obtain additional information. The organization can provide the information to an industry stakeholder that will forward the information to the appropriate government official.

• Such a DME industry-manned fraud alert will be more effective than the 1-800 fraud hotline that goes to the OIG. Too often, calls to the 1-800 hotline simply disappear into the stratosphere and no enforcement action occurs.
• An industry stakeholder can take the information and present it to the appropriate enforcement official…who may be (i) an Assistant U.S. Attorney in, e.g., Des Moines or Phoenix, (ii) with the Department of Justice (“DOJ”) in Washington, D.C., (iii) with a regional OIG office, (iv) with the OIG in Washington, D.C., or (v) with CMS. Taking such a step will increase the chances of a more timely enforcement action.

Above, I have focused on a telephone hotline. In lieu of a hotline, or in addition thereto, the DME industry may want to set up an interactive website that people can access in order to report suspected fraud. The manager of the website can collect information from the informant. And then an industry stakeholder can reach out to an enforcement official.

I recognize that what I am suggesting may be “pie in the sky” because of several factors. First, who will take responsibility for overseeing the telephone hotline/interactive website? Second, the hotline/website will cost money. Who will pay for it? Third, which industry stakeholders will take responsibility for presenting evidence of suspected fraud to enforcement officials?

And yet, it gets tiring for such a small industry to receive disproportionate bad publicity. Adopting a self-policing mechanism will (i) catch a number of fraudulent programs before they become too large and (ii) show Congress, government enforcement agencies and the general public that the DME industry is serious about “policing its own.”

Jeffrey S. Baird, JD, is chairman of the Health Care Group at Brown & Fortunato, a law firm with a national health care practice based in Texas. He represents pharmacies, infusion companies, HME companies, manufacturers, and other health care providers throughout the United States. Mr. Baird is Board Certified in Health Law by the Texas Board of Legal Specialization and can be reached at (806) 345-6320 or [email protected].

AAHOMECARE’S EDUCATIONAL WEBINAR

Employee Retention Tax Credit: Benefits and Pitfalls 

Presented by: Jeffrey S. Baird, Esq., Brown & Fortunato & Kianna L. Sitarski, Esq., Brown & Fortunato

Thursday, July 11, 2024

1:30-2:30 p.m. CENTRAL TIME
The COVID pandemic was unprecedented … and traumatic … for all of us. In response, the federal government passed laws – and issued regulations – designed to (i) provide “safety nets” to businesses, (ii) expand the provision of health care in the home, and (iii) assist families financially. A key provision is the Employee Retention Tax Credit that is designed to encourage employers, that are adversely affected by the pandemic, to keep employees on their payroll. Since its inception in 2020, the Employee Retention Credit has been modified by federal statute and IRS regulations to relieve financial struggles faced by employers. This webinar will discuss the history of the Employee Retention Credit, including eligibility and value of tax credits available for wages paid between March 2020 and December 31, 2021. The webinar will also discuss how to retroactively claim the Employee Retention credits and common pitfalls to avoid when the DME supplier is amending its tax filing. Lastly, the webinar will discuss how the DME supplier can avoid the scams that have arisen in conjunction with the Employee Retention Tax Credit.

Register for Employee Retention Tax Credit: Benefits and Pitfalls on Thursday, July 11, 2024, 1:30-2:30 p.m. CT, with Jeffrey S. Baird, Esq., and Kianna L. Sitarski, Esq., of  Brown & Fortunato.

Members:  $99
Non-Members:  $129