Medicare Waste on Infusion Drugs

medicare infusion drugsTaxpayers are losing money because of Medicare waste on infusion drugs.

Because Congress locked some drug costs at 2003 prices, Medicare has wasted $334 million dollars over the last six years by failing to buy medication at the best possible discount, according to a new investigation that reinforces just how prevalent waste and abuse are inside the government’s main health program for senior citizens.

Investigators at the Health and Human Services Department Office of Inspector General said that Medicare waste on Plan B by purchasing drugs at an outdated average wholesale price, or AWP,  as opposed to the manufacturing price the government is supposed to receive.

“Our findings—like those of OIG’s previous studies in this area—demonstrate that AWPs are unrelated to the prices of drugs in the marketplace and that the reliance on an AWP-based payment methodology has led to Medicare waste that cost the program hundreds of millions of dollars,” the inspector general said.

The culprit is infusion drugs in durable medical equipment – basically drugs meant to be used in home medical equipment like IV’s, catheters or infusion pumps.  But the drugs haven’t been purchased at the optimal sales price, investigators said.  Instead, Medicare officials have been following 2003 pricing guidelines set by Congress.

“Basing payments for DME infusion drugs on AWPs set almost a decade ago raises concerns about whether Medicare payment levels are appropriate,” the IG said.

For creating a scenario that kept taxpayers from getting the best prices — and failing to fix it for years — the Centers for Medicare and Medicaid Services, or CMS, and Congress jointly win this week’s Golden Hammer, a distinction awarded by the Washington Guardian to an egregious example of waste, fraud and abuse in government.

Through an update to the Social Security Act, lawmakers said that “in the case of infusion drugs furnished through an item of durable medical equipment,” prices “on or after January 1, 2004,” will be set at “95 percent of the average wholesale price for such drug in effect on October 1, 2003,” the law reads.

The inspector general said CMS needs to petition for a change in the law that would set prices to current levels, or to include infusion drugs in an already successful competitive bidding process.  Marilyn Tavenner, CMS acting administrator, agreed and said the agency is looking at both options.

Medicare has come under fire before for the exact same issue.  In fact, in January the Washington Guardian reported on Medicare’s overpayments with prescription medication.

For the six years covered by the latest review, investigators estimated the government had been paying between 54 percent and 122 percent more for the drugs than was necessary.  By using the wholesale price, investigators said CMS failed to get “any price concessions, such as volume discounts, ‘prompt pay’ discounts, cash discounts, free goods contingent on purchase requirements, chargebacks and rebates other than those obtained through the Medicaid drug rebate program.”

The IG also said that because medicine was being purchased at 2003 prices, the government might have been getting some drugs cheaper than current costs.  But investigators said it was a small amount, and is already calculated in the $334 million estimation.

And investigators were able to identify the largest single Medicare waste problem: a drug called milrinone lactate, which is used to treat heart failure.  Medicare Plan B was paying a price for the drugs more than 18 times greater than the actual cost, the inspector general said.

Of the $125 million Medicare spent in 2011 for 21 different infusion drugs, that particular drug accounted for 62 percent of the costs, according to the IG’s report.

Washington Guardian

Medicare Fraud – Ambulance Company Fined $800,000

BARNWELL, S.C. — Williston Rescue Squad Inc. has agreed to pay the U.S. $800,000 to resolve allegations it committed Medicare fraud and violated the federal False Claims Act in ambulance transports, the Justice Department announced this week.

Medicare reimburses providers only for nonemergency ambulance transports if the patient is bed-confined or has a medical condition that requires an ambulance. The settlement resolves allegations that the rescue squad billed Medicare for routine, nonemergency ambulance transports that were not medically necessary and created false documents to make the transports appear to meet the Medicare requirements.

Barnwell County Councilman Lowell Jowers said the settlement should not have any impact on Barnwell County doing business with the rescue squad.

Jowers said the squad’s “top three” management people had been replaced since the incidents occurred in 2008 to 2011.

Barnwell County contracts with Williston for nearly $1 million per year for emergency medical transports throughout the county. The contract is set to renew in June.

“Back in 2011, the government identified various billing concerns at the Williston Rescue Squad, which arose from claims submitted from the WRS Transport division from 2008 to 2011. These claims related primarily to the transport of dialysis patients,” rescue squad director Phil Clarke said in an e-mailed statement.

The settlement resolves a lawsuit filed by Sandra McKee under whistleblower provisions of the False Claims Act. McKee is a clinical social worker at a facility that regularly received patients transported by Williston’s ambulances. Under the False Claims Act, citizens can bring suit on behalf of the U.S. and share in any recovery. McKee will receive $160,000 as her share of the government’s recovery.

“Williston fully cooperated with the government, which resulted in a Medicare fraud settlement agreement in which there was no admission of liability by Williston,” Clarke said. “However, to resolve the government’s concerns and to bring closure to the process, Williston agreed to make certain payments to the government.”

Medicare fraud is stealing, and it is crippling America’s health care system, said Stuart F. Delery, the principal deputy assistant attorney general for the Civil Division, in a Monday news release.

Augusta Chronicle


For more information on ambulance charges, review this post at Georgia Insurance. Find out how non-emergency Ambulance charges can soak your wallet.

Obamacare Medicare Advantage Cuts

Medicare Advantage cutsUS federal ( Obamacare ) rules requiring health insurers to spend 80%-85% of their revenues on clinical services and other benefits are to be extended to Medicare Advantage and prescription drug plans, which will be required to spend “at least” 85% of their revenues on clinical services including prescription drugs.

The change, to be introduced next January, is included in a proposed rule which extends the 2010 Affordable Care Act (ACA)’s medical loss ratio (MLR) requirements, which limit how much insurance plans can spend on marketing, overheads and profit, to Medicare Advantage and Medicare Prescription Drug plans.

Similar MLR requirements are already benefitting consumers in the private health insurance market, says the Centers for Medicare and Medicaid Services (CMS), which has sent the proposed rule to the White House Office of Information and Regulatory Affairs (OIRA).

“We are working to ensure that people with Medicare have affordable access to health and drug plans, while making certain that plans are providing value to Medicare and taxpayers,” said Jonathan Blum, acting principal deputy administrator at the CMS and director of the agency’s Center for Medicare.

The MLR rules note that many insurance companies spend “a substantial portion of consumers’ premium dollars on administrative costs and profits, including executive salaries, overhead and marketing.” The ACA requires health insurers to submit data on the proportion of premium revenues spent on clinical services and quality improvement (which constitute MLR), and to issue rebates to enrolees if their spending on these benefits does not meet the minimum percentages.

The proposed new rule will require Medicare Advantage and Medicare Prescription Drug plans to meet a minimum MLR from the start of next year. “Plans must spend at least 85% of revenue on clinical services, prescription drugs, quality improvements, and or/direct benefits to beneficiaries in the form of reduced Medicare premiums. Enrolled seniors and individuals with disabilities will get more value and better benefits as plans spend more on health care,” says CMS.

Failure to meet these percentage requirements for five consecutive years would lead to a plan’s removal from Medicare Advantage, reports Washington newspaper The Hill, which points to the proposal’s significant financial importance, as it is estimated to carry an economic impact of more than $100 million. However, it is not yet clear what will be defined as “quality care” and what will fall into “expenses and overhead,” and this is very important, it says, quoting healthcare lawyer Bobby Guy, who suggests that how the prescription drug plans deal with the new caps could serve as a model for the rest of the health insurance industry.

– The initial MLR rule, first introduced in 2011, was a factor in the compression seen in health insurers’ margins last year, according to a new report from ratings agency A M Best. The majority of health insurers have positioned themselves to implement strategies that will allow them to adapt to the new operating environment created by the ACA and to maintain profitability, says the firm, although it “has concerns” about the profitability of smaller, more specialised companies, particularly over the near to medium term, given the Obamacare  minimum MLR requirements.


Scooter Store Medicare Fraud

scooter storeLast week’s raid by 150 agents on The Scooter Store’s corporate headquarters in New Braunfels — presumably as part of an investigation into Medicare and Medicaid fraud — capped a tumultuous couple of months for the provider of power-mobility devices.

But trouble has been part of the company’s legacy.

Its most recent bout began in December when two U.S. senators sent a letter to the Centers for Medicare & Medicaid Services (CMS) wanting to know why The Scooter Store had received as much as $87.7 million in Medicare overpayments from 2009 to 2011 but only had to pay back $19.5 million.

Then, in January, a CBS News report questioned whether power wheelchair companies were “ripping off the government.” One ex-Scooter Store employee told the network the company’s goal is to “bulldoze” doctors into writing prescriptions for power wheelchairs.

A few weeks later, CMS announced cuts in Medicare reimbursements for equipment starting July 1, drawing howls from suppliers. Providers of power wheelchairs, scooters and accessories will see payments slashed by more than one-third on average.

The Scooter Store, known for its ubiquitous television ads, responded by axing 150 workers, the second mass layoff in a matter of months. It let go 220 employees in September.

In a 2010 interview, well in advance of the current turmoil, the privately held company pegged annual revenue in the $350 million-to-$400 million range.

Last week’s raid involved agents from the FBI, the U.S Department of Health and Human Services’ Office of Inspector General and Texas attorney general’s office. It marked the second such raid at the company in just under 10 years.

All of this has many locals wondering what the future holds for one of Comal County’s largest employers. The company employs about 1,200 people at its headquarters and 1,800 overall.

“It’s certainly not comforting,” New Braunfels City Manager Michael E. Morrison said.

The city earlier this month demanded The Scooter Store return nearly $1.4 million of $3.5 million in economic incentives it was awarded in 2009 for promising to create 500 jobs in New Braunfels. The company hasn’t lived up to its end of the bargain; so the city is exercising a “claw-back provision” in the contract.

“What I’m most concerned about are the folks who are employed,” Morrison said. “These folks have families, they have obligations. I’m pretty sure it’s safe to say they don’t know what their future is. I think any of us in the same position would be incredibly worried.”

Scooter Store CEO Martin “Marty” Landon declined to comment when reached by phone Thursday. The company promised to send a statement via email, but the San Antonio Express-News never received it.

History of fraud probes

The power-mobility industry long has been a target of federal probes into Medicare fraud. Authorities want to determine whether unscrupulous firms have billed for providing power wheelchairs to elderly people who don’t have a legitimate medical need for the devices.

A 2011 report by the U.S. Department of Health and Human Services’ Office of Inspector General (OIG) found 80 percent of claims for power wheelchairs did not meet Medicare coverage requirements and should not have been paid for by Medicare.

It’s easy to understand why the industry is ripe for fraud.

“The reimbursement is so great,” said Jeffrey B. Hammond, who teaches health care law at Faulkner University in Montgomery, Ala., but calls New Braunfels home.

“Think about fee-for-service medicine this way: You would have to pile up an enormous amount of $70 office visits to make up for a $9,000 wheelchair,” he said. “The margins are just great.”

In 2003, the FBI visited with a couple of dozen Scooter Store employees in their homes. Authorities were investigating whether the company had defrauded Medicare, the Express-News reported.

A current employee who declined to be identified recalled federal agents also raided the company’s offices on a Saturday in 2003, though that appears to have escaped notice.

Scooter Store officials always have denied wrongdoing and staunchly defended their business practices.

Over its 22-year history, the company said in a statement this month, The Scooter Store has provided “freedom and independence to more people with limited mobility than any company in the nation.” It has served more than 500,000 customers.

The Scooter Store was founded by petroleum engineer Doug Harrison and his wife, Susanna, in 1991.

When a cousin broke his back in a car accident in the late 1980s and was confined to a wheelchair, the couple began thinking about ways to help the disabled. With the advent of the federal Americans with Disabilities Act, the Harrisons realized that buildings, sidewalks and other places would become handicapped-accessible.

The Harrisons sold their house and left high-paying jobs to start The Scooter Store. Their gamble paid off.

Annual sales topped $200 million by about the end of its first decade. Doug Harrison told the Express-News in 2001 that he wanted to see annual sales reach $800 million, though it’s not clear if the company ever achieved that mark.

Harrison resigned from The Scooter Store last year to “pursue other interests,” a little more than a year after Florida-based private-equity firm Sun Capital Partners acquired a minority ownership stake for an undisclosed sum. He would remain one of its largest shareholders, the company said at the time.

While The Scooter Store specialized in the senior market, it expanded into the more lucrative market of “complex” power wheelchairs for the severely disabled in 2007 by launching Alliance Seating & Mobility.

The feds sue

The Scooter Store maintained extensive records to stay in compliance with Medicare regulations, company officials told the Express-News in 2001.

Nevertheless, in 2005 the U.S Justice Department sued The Scooter Store for allegedly making false Medicare claims and defrauding the government.

The government accused the company of engaging in a mass-marketing campaign to “entice” Medicare beneficiaries to obtain power wheelchairs paid for by Medicare, Medicaid and other insurers.

“Instead of the ‘zippy’ power scooters that were advertised, The Scooter Store sold the beneficiaries expensive power wheelchairs that they did not want, need and/or could not use,” the Justice Department said in a 2007 statement.

A Scooter Store ad on its website in 2005 had the following guarantee: “If we pre-qualify you for a new scooter or power chair and Medicare denies your claim, The Scooter Store allows you to keep your scooter or power chair at no cost.”

The Scooter Store settled the case in 2007 by agreeing to pay the government $4 million and forgo $13 million in Medicare payments.

As part of the settlement, The Scooter Store entered into a five-year “corporate integrity agreement” that required the company to report any Medicare overpayments within 30 days of identification.

That became an issue last year when an independent auditor discovered The Scooter Store was overpaid between $46.8 million and $87.7 million combined in the third and fourth years of the agreement.

The Scooter Store never refunded any of the overpayments, the OIG said a year ago when it gave notice of its intent to exclude the company from participating in Medicare.

Following the notice, The Scooter Store, while disputing it breached the corporate integrity agreement, agreed to repay $19.5 million under a five-year payment plan.

That led two U.S. senators to write CMS in December asking why it agreed to accept an amount “significantly less” than what it overpaid The Scooter Store.

In the agency’s reply last month, CMS said it accepted the amount based on The Scooter Store’s analysis of the auditor’s report. CMS said the agreement doesn’t absolve The Scooter Store from further liability related to the billed claims.

One of the senators, Connecticut Democrat Richard Blumenthal, issued a statement following last week’s raid on The Scooter Store.

“This raid is a welcome step toward cracking down on waste and fraud in Medicare payments for motorized wheelchairs involving The Scooter Store,” he said. “I have urged action to stop abusive overpayments for such devices — costing taxpayers hundreds of million of dollars and preying on seniors with deceptive sales pitches.”

The corporate integrity agreement expired last May. However, the OIG still is evaluating The Scooter Store’s compliance for the last year of the agreement.

In the spotlight

The Scooter Store attracted unwanted attention in January when CBS News interviewed former employees who said the company’s main goal is not to help patients but to “bulldoze doctors into writing prescriptions” so it can boost profits.

Once a doctor has written a prescription, CBS News reported, Medicare rarely checks whether the chairs actually are necessary. The company had a program specifically to get chairs for people that doctors already deemed ineligible, according to three former employees interviewed by CBS News.

Scooter Store officials declined an on-camera interview with CBS News, but said its screening process eliminates 88 percent of those seeking reimbursements through Medicare or private insurance.

CMS, meanwhile, has been implementing programs designed to rein in fraud and cut costs.

Last summer, the agency started a three-year demonstration program that requires providers get “prior authorization” from Medicare before patients living in seven states receive a power wheelchair or scooter.

The states, which include Texas, have “high populations of fraud- and error-prone providers,” CMS said in a statement at the time. The program eventually could be rolled out in all states.

The American Association of Homecare, which represents durable medical equipment suppliers but not The Scooter Store, contends the rules could delay deliveries for some or that others never receive approval.

After the latest round of layoffs this month, The Scooter Store announced it was “better aligning its resources to accelerate its new vision of helping seniors age gracefully at home.”

The company plans to offer additional products and services to aid its customers, but it didn’t give any details.

“They’re going to have to try to find … other lines of business because what was high (profit) margin is now becoming much lower margin,” said Hammond, the Faulkner University law professor.

Whether The Scooter Store’s efforts to expand its offering are at risk of being derailed in the aftermath of last week’s raid remain to be seen.

For their part, authorities are keeping a lid on precisely what they were looking for.