Inspector General says DMERCs’ anti-fraud efforts still in question

By MATTHEW HAY

HHBR Washington Correspondent

WASHINGTON – The four durable medical equipment regional carriers (DMERC) are meeting most of the objectives the Health Care Financing Administration (HCFA; Baltimore) established for the specialized carriers in October 1993, the Department of Health and Human Services’ (Washington) Office of Inspector General (OIG) concluded in a report released last week. But the OIG questioned the effectiveness of the DMERC fraud units.

While the DMERCs have successfully targeted fraud in many specific cases, a lack of complete information made an assessment of their overall effectiveness in this area impossible, the OIG said. "While we obtained some workload data that quantifies their fraud efforts, the DMERCs did not provide needed data that documented the quality and result of their efforts."

To better measure those efforts, the OIG urged HCFA to require the DMERCs to maintain data in their automated fraud information systems that includes complete and accurate documentation on the sources of opened cases and detailed financial information on fraud cases in overpayment status. The OIG said these data would facilitate an analysis of both the quantity and quality of the work performed by the DMERC fraud units

HCFA Administrator Nancy Ann DeParle concurred with the OIG’s recommendation and reported that the agency is currently developing a Program Integrity Management Reporting system that will require Medicare contractors to report on fraud and abuse overpayments. She said the new system is scheduled for implementation in FY00.

HCFA started using the four DMERCs to process claims for Medicare durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) six years ago in place of the 34 carriers that used to process all Part B claims, including DMEPOS. The agency believed the plethora of carriers lacked expertise in DMEPOS and exposed this area to rampant fraud and abuse, including carrier shopping by suppliers looking for the highest reimbursement rates among carriers. The agency was also concerned about ineffective education and outreach efforts.

HCFA charged the DMERCs with establishing medical review (MR) policies for the 100 items that had the highest allowed charges, developing aggressive education and fraud prevention programs, and reducing claims processing costs.

On the whole, the OIG reported, those goals have been met. According to the OIG, claims processing costs for DMEPOS claims have declined by 15% since the DMERCs were established, from $1.17 per claim in 1995 to $1 per claim in 1998. That translates into a savings of $37 million per year compared to the old system, said the OIG. Most of those savings were realized through standardized claims forms, increased use of electronic claims submission, and DMERC medical expertise, according to the OIG.

The DMERCs established MR policies for all but one item and have implemented a series of educational seminars directed at suppliers, physicians, and beneficiaries, as well as focused efforts to educate suppliers with a history of billing problems, according to the OIG.

The OIG also reported that the DMERCs have worked cooperatively with HCFA, the OIG, and the statistical analysis durable medical equipment regional carrier, which analyzes billing patterns across all four DMERCs, to improve Medicare claims processing and reduce fraud. Subsequent policy revisions have led to financial savings in several areas, including wound care supplies, lymphedema pumps, incontinence supplies, and orthotics, the OIG added.