Q&A: U.S. Attorney establishes special unit to tackle DME fraud

Thursday, March 31, 2005

LOS ANGELES — In its “opening salvo” to step up prosecution of healthcare fraud in southern California, the U.S. attorney’s office here has accused Pacific Care Medical Supply of bilking Medicare out of $2.4 million over the past five years, much of it in phony power chair claims. Since the new unit formed in February, it has grown to four full-time attorneys. The unit’s head, Assistant U.S. Attorney Consuelo Woodhead, said she hopes to eventually have six attorneys working full time, targeting health care cases in problem areas like DME and fraudulent diagnostic testing facilities. In March, HME News talked with Woodhead about the area’s health care fraud epidemic and what she hopes the unit and the industry can do to curb the abuse.
HME News: Why did your district decide there was a need for this unit?
Woodhead: I think because health care fraud is such a significant problem in the district. It is so widespread, and it was felt there was a need to have a core of experienced assistant U.S. attorneys (AUSAs) to manage and direct the prosecutions.
HME: Have you seen a significant increase in health care fraud over the past few years? If so, in what areas?
Woodhead: I think it is growing problem. I think there are a very significant number of wholly fraudulent enterprises out there — durable medical equipment companies that operate like bust out schemes. They obtain patients' names and numbers, they bill Medicare for three months, and by the time all the bells and whistles go off on that kind of exploitation they have closed up shop and moved somewhere else. Right now, DME fraud is very attractive in this area, because it takes essentially no capital, no medical knowledge and no expertise to open a business and get a number. Other problem areas are independent diagnostic testing facilities and home health. We also have a problem with people recruiting beneficiaries and paying them to basically accept all of these things, sometimes a panoply of services. Those areas where you can enter the Medicare or Medi-Cal payment system without a large investment in education, training or money become the easiest to exploit.
HME: The industry feels a few bad apples give all DMEs a bad name. Is that a legitimate concern?
Woodhead:I think that is a real concern for legitimate DME companies. Anything that the legitimate side of the industry can do to help us identify and put out of business the fraudulent companies would be greatly appreciated. I also think that legitimate manufactures have to keep in mind that there are true scam artists out there. When legitimate companies are lobbying, for example, they do need to keep that in mind.
HME: Can the DME industry itself do anything to reduce fraud?
Woodhead: That’s a question you should ask me six months from now. I think my ideas on that will get refined the more I see. I would certainly be happy to have a dialogue with legitimate members of the community as to what they can do. One thing that strikes me is that it appears to take nothing to get into this business. I wonder if there isn’t more that can be done in terms if licensing, survey and certification. I see the process working in a way that people who have no intention of ever conducting a legitimate business are getting into the business.
HME: With all this fraud, does it mean that Medicare doesn’t have the necessary safeguards in place?
Woodhead: I certainly think that areas should be examined very closely — how the safeguard can be improved because you could double or triple the number of AUSAs that I have and there would still be a problem. I have not looked at the supplier number process, but it certainly appears to me that is very easy to get one of those numbers. In one case, the guy had a corporate number and an independent number at the same address. Now why would someone be operating two companies at the same location?
HME: On average, how much money do these companies get away with billing fraudulently before they are discovered?
Woodehad: Just in my anecdotal observation — easily $500,000. I just saw one recently that billed $300,000 in six weeks. I do know that we identified a pair of problem DME companies recently and a lawyer called in and asked, in effect, how did you get them so fast. These companies are used to having a good six months before anyone figures out what’s happening because of delays in the billing cycle. It takes a while for the claims to go in and get paid and it’s only when the claims are paid that Medicare summary notices go out to the beneficiary and it takes some time for them to respond.
HME: Is fraud common in both Medicare and Medi-Cal or is one more problematic than the other?
Woodehad: They seem to love Medicare. We have actually gotten intelligence that suggests that they prefer Medicare. Medi-Cal has been much more aggressive at least over the last couple of years in quickly suspending payment and revoking licenses. That’s one of the things I have suggested that regulators look at — why is it that Medi-Cal is able to yank these licenses more quickly?
HME: Has all the publicity surrounding DME fraud and high profile cases resulted in more fraud or has it caused to reduce it?
Woodhead: I would certainly hate to think it is causing more, but on the other hand, from my little corner of the world, I don’t see any great sign of it going down either. I do think to have a deterrent impact we may need do a group of cases. Just getting some unfortunately is not enough. It’s still too easy to fly under the radar.