    [Senate Hearing 112-665]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 112-665

                    ELIMINATING WASTE AND FRAUD IN MEDICARE:
     AN EXAMINATION OF PRIOR AUTHORIZATION REQUIREMENTS FOR POWER MOBILITY
                                    DEVICES

    =======================================================================

                                    HEARING

                                   BEFORE THE

                           SPECIAL COMMITTEE ON AGING

                              UNITED STATES SENATE

                          ONE HUNDRED TWELFTH CONGRESS

                                 SECOND SESSION

                                   __________

                                 WASHINGTON, DC

                                   __________

                               SEPTEMBER 19, 2012

                                   __________

                               Serial No. 112-23

             Printed for the use of the Special Committee on Aging

             Available via the World Wide Web: http://www.fdsys.gov

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                           SPECIAL COMMITTEE ON AGING

                         HERB KOHL, Wisconsin, Chairman

    RON WYDEN, Oregon                    BOB CORKER, Tennessee
    BILL NELSON, Florida                 SUSAN COLLINS, Maine
    BOB CASEY, Pennsylvania              ORRIN HATCH, Utah
    CLAIRE McCASKILL, Missouri           MARK KIRK III, Illinois
    SHELDON WHITEHOUSE, Rhode Island     DEAN HELLER, Nevada
    MARK UDALL, Colorado                 JERRY MORAN, Kansas
    MICHAEL BENNET, Colorado             RONALD H. JOHNSON, Wisconsin
    KIRSTEN GILLIBRAND, New York         RICHARD SHELBY, Alabama
    JOE MANCHIN III, West Virginia       LINDSEY GRAHAM, South Carolina
    RICHARD BLUMENTHAL, Connecticut      SAXBY CHAMBLISS, Georgia
                                  ----------
                     Chad Metzler, Majority Staff Director
                 Michael Bassett, Ranking Member Staff Director

                                    CONTENTS

                                  ----------

                                                                       Page

    Opening Statement of Senator Bob Corker..........................     1

                               PANEL OF WITNESSES

    Deborah Taylor, Chief Financial Officer and Director, Office of
      Financial Management, Centers For Medicare & Medicaid Services,
      Baltimore, MD..................................................     2
    Paul Hughes, MD, Medical Director, National Heritage Insurance
      Company, Durable Medical Equipment Medicare Administrative
      Contractor, Jurisdiction A, Lexington, SC......................    11
    Stephen Peake, D.Ph., MD, Medical Director, Senior Care Division,
      Blue Cross Blue Shield of Tennessee, Chattanooga, TN...........    14
    Michael Clark, JD, Chief Administrative Officer and General
      Counsel, The Scooter Store, New Braunfels, TX..................    15
    Jerome Epplin, MD, FAAFM, Family Practitioner, Litchfield Family
      Practice Center, Litchfield, IL................................    17

                                    APPENDIX
                       Witness Statements for the Record

    Deborah Taylor, Chief Financial Officer and the Director of the
      Office of Financial Management, Centers for Medicare & Medicaid
      Services, Baltimore, MD........................................    34
    Paul J. Hughes, M.D., Medical Director, National Heritage
      Insurance Company, Durable Medical Equipment Medicare
      Administrative Contractor, Jurisdiction A, Lexington, SC.......    44
    Stephen T. Peake, D.Ph., M.D., Medical Director, Senior Care
      Division, Blue Cross Blue Shield of Tennessee, Chattanooga, TN.    48
    Michael Clark, J.D., Chief Administrative Officer and General
      Counsel, The SCOOTER Store, New Braunfels, TX..................    52
    Jerome J. Epplin, M.D., FAAFM, Family Practitioner, Litchfield
      Family Practice Center, Litchfield, IL.........................    62

                 Additional Statement Submitted for the Record

    Victor A. Hirth, MD, MHA, FACP, AGSF, Columbia, SC...............    70

                          ELIMINATING WASTE AND FRAUD
                      IN MEDICARE: AN EXAMINATION OF PRIOR
             AUTHORIZATION REQUIREMENTS FOR POWER MOBILITY DEVICES

                                  ----------

                         WEDNESDAY, SEPTEMBER 19, 2012

                                           U.S. Senate,
                                    Special Committee on Aging,
                                                        Washington, DC.
        The Committee met, pursuant to notice, at 2:38 p.m. in Room
    SD-562, Dirksen Senate Office Building, Hon. Bob Corker,
    presiding.
        Present: Senators Corker [presiding] and Blumenthal.

                OPENING STATEMENT OF SENATOR BOB CORKER

        Senator Corker. I think we'll go ahead and get started, and
    thank you very much for being here, and all of you who have
    come to this hearing.
        Instead of reading my opening statement, I'll start by
    saying that some time ago, I don't watch a great deal of
    television, but I would see ads on television regarding all
    kinds of mobility devices where people could, it appeared, just
    call up and the companies would figure out some way for this
    person to own these mobility devices with little or no money
    down. It almost gave the impression that they would ensure that
    you paid nothing.
        Obviously that's taxpayer money, and it looked to me to be
    very flagrantly in the face of anything that would have value
    for the American taxpayer, and it also seemed to me that people
    were taking advantage of this and probably jeopardizing people
    who really do need these mobility devices down the road.
        And so our staff began looking into it. We have learned
    that CMS has an 80 percent fault rate on these. In other words,
    80 percent of the people who apply for these mobility devices
    get turned down, initially anyway. So there's a huge problem
    here. I think most Americans have seen these advertisements on
    TV and probably question what the Federal Government is doing.
    I certainly do. It's actually--well, I'll just leave it at
    that.
        I know that we have a new program now that, through CMS, is
    going to look at this and try to get that fault rate down from,
    again, 80 percent to some normal level. So we have a program
    that is being advertised to the American people. People are
    applying for it. Lots of people are receiving these mobility
    devices, but we have an 80 percent case of these devices not
    meeting standards.
        So now we've hired contractors, I understand, to deal with
    this. These, by the way, are the same contractors we've been
    working with in the past on this same program.
        So the purpose of this hearing is to look into that and to
    ensure that we as a government are going to do those things
    that are responsible as it relates to these mobility devices.
    So I thank you all for being here.
        I might add, by the way, this is the same entity that's
    going to be dealing with all kinds of other responsibilities,
    especially as we move forward with the new health care bill.
        So I think this is something very timely for us to look at.
    I thank you all for participating. I'm going to go ahead and
    mention who all the participants are.
        Deborah Taylor, obviously, is the Chief Financial Officer
    and Director of the Office of Financial Management for CMS. We
    thank you so much for being here.
        Later on Panel 2, we'll have Paul J. Hughes, who is a
    physician and the Medical Director for the National Heritage
    Insurance Company, Durable Medical Equipment Medicare
    Administrative Contractor, responsible for Jurisdiction A,
    which is comprised of the northeastern states from Maine to
    Washington, D.C.
        We also have Stephen T. Peake, Ph.D., who is the Medical
    Director, and M.D. I might add, Medical Director for the Senior
    Care Division at Blue Cross Blue Shield of Tennessee.
        We have Michael Clark, J.D., the Chief Administrative
    Officer and General Counsel of the Scooter Store. I think this
    might have been the entity that I continued to see these
    advertisements with.
        And then Jerome Epplin, M.D., who is a family practitioner
    at the Litchfield Family Practice Center in Litchfield,
    Illinois, and also trains students at Southern Illinois
    University. In 2010 he received the American Geriatric Society
    Clinician of the Year Award.
        Now that I filibustered by introducing everybody on the
    front end, hoping that some of my colleagues would be here, if
    you would go ahead and start I would appreciate it, and
    certainly the meeting is now in order.

       STATEMENT OF DEBORAH TAYLOR, CHIEF FINANCIAL OFFICER AND
    DIRECTOR, OFFICE OF FINANCIAL MANAGEMENT, CENTERS FOR MEDICARE
                   & MEDICAID SERVICES, BALTIMORE, MD

        Ms. Taylor. Sure. Good afternoon, Ranking Member Corker,
    and thank you very much for the opportunity to discuss the
    Centers for Medicare & Medicaid Services' efforts to reduce
    fraud and improper payments for power mobility devices and to
    update you on the prior authorization demonstration, which CMS
    began earlier this month.
        Power mobility devices, or PMDs, have historically had high
    incidents of fraud and improper payments, and the suppliers of
    PMDs continue to be subject to significant law enforcement
    activities. Joint investigations by the Department of Justice
    and the HHS Office of Inspector General and CMS have resulted
    in numerous suppliers being charged with and convicted of
    defrauding the Medicare program. Recently, a Louisiana supplier
    was sentenced to 180 months in prison for participating in a
    scheme that defrauded Medicare of more than $21 million for
    billing for power wheelchairs and other medical equipment that
    was never provided to beneficiaries.
        In addition, the OIG--and you mentioned this--and our
    comprehensive error rate results have reported that more than
    80 percent of claims for motorized wheelchairs did not meet
    Medicare coverage requirements. Although CMS recognizes that
    many improper payments are not the result of willful fraud,
    this error rate is extremely high.
        In an effort to prevent dollars from being wasted and
    protect the Medicare Trust Funds from fraud, CMS began this
    PMD, Prior Authorization Demo, for orders written on or after
    September 1, 2012, for Medicare beneficiaries who reside in
    seven states. This demonstration will employ prior
    authorization, a commonly-used private sector tool to protect
    the Medicare Trust Funds. Prior authorization, sometimes known
    as prior approval or pre-certification, is currently used by
    other health care programs such as TRICARE, some state Medicaid
    programs, and private insurance plans for many services,
    including PMDs.
        With prior authorization, CMS will review the medical
    records before the supplier delivers the PMD. This allows
    suppliers to know before an item is delivered to a beneficiary
    whether Medicare will pay for the PMD. The demonstration does
    not create any new documentation requirements but simply
    requires the medical information be provided before submitting
    the bill for payment.
        The demonstration can also help us develop improved methods
    for the investigation and prosecution of fraud that could
    ultimately protect the Medicare Trust Funds from fraudulent
    activities. This prior authorization demo will also help ensure
    that a beneficiary's medical condition warrants the PMD under
    existing coverage guidelines.
        CMS did seek input from many provider and supplier groups
    on this demonstration when we originally announced it on
    November 15th, 2011. We received significant feedback from the
    industry. In response to that feedback, we did delay the
    demonstration by nine months from the original January 1, 2012,
    start date.
        CMS also made several other changes, such as reducing the
    resubmission review time from 30 business days to 20 business
    days, and allowing suppliers to submit the prior authorization
    request on behalf of the physician.
        In addition, CMS conducted and will continue to conduct
    education and outreach activities, including Webinars, open-
    door forums, and in-state meetings. CMS will closely monitor
    the demonstration and will continue to work to ensure that
    suppliers, physicians and beneficiaries have up-to-date
    information about the demonstration.
        Prior authorization can be an important tool to help CMS
    reduce fraud and improper payments for PMDs, while continuing
    to ensure that beneficiaries have access to needed equipment.
    We believe this demonstration will help protect the Medicare
    Trust Funds by utilizing many of the same methods already used
    by private insurance plans to ensure payment accuracy.
        I'm happy to answer any questions you have.
        Senator Corker. Thank you. What was the impetus to create
    this new pilot program that you're now putting in place?
        Ms. Taylor. Part of the impetus was the fact that we
    continue to do education and outreach for providers and
    suppliers of these PMDs. We have conducted lots of pre-payment
    review to ensure that they understand the policies. However, we
    continue to still see high error rates, over 80 percent, with
    this benefit; and as I mentioned, we continue to have fraud
    committed against the benefit by suppliers throughout the
    country.
        So we felt that this was the next step, that we really
    wanted to look at something the private sector uses currently
    to ensure that we're paying for wheelchairs that are really
    needed.
        Senator Corker. And I know many of the questions that
    whoever is here will ask will be of the second panel of people
    who are very directly involved, and I know you're not. I know
    you're trying to solve the problem. But 80 percent is a huge
    number. As a matter of fact, how much do we spend on PMDs
    annually? Do you know what is your estimate? We have one
    ourselves.
        Ms. Taylor. Yes. In 2011, we spent a little over $700
    million on power wheelchairs.
        Senator Corker. And 80 percent of the claims for those, as
    it turned out, were inappropriate as it relates to CMS
    standards?
        Ms. Taylor. Correct. On our review, documentation or
    additional information or the fact that the beneficiary did not
    need the PMD was what we found when we reviewed those claims.
        Senator Corker. I mean, it seems like any American that
    would see one of these commercials on television, they would
    realize that something probably really bad is happening here,
    and you guys have evidence that 80 percent of the claims
    shouldn't be there in the first place. So what is it that it
    takes to create huge alarm bells when we have this kind of
    money being wasted, being utilized in ways that it's not
    supposed to be utilized?
        Ms. Taylor. Conversations we've had with beneficiary groups
    as we've started to roll out this demonstration. We've
    continued to emphasize to providers, as well as to
    beneficiaries, that the Medicare program under statute and by
    law pays for power wheelchairs for use in the home, for
    beneficiaries who need a wheelchair to get around their home to
    perform an activity, one or more activities of daily living,
    such as going to get food, going to the bathroom. And when we
    explain that to beneficiaries, I would say many of them are
    surprised that it is for use in the home, and that is by law.
    It's under statute that that's the use for a PMD.
        And so I do think some of the commercials may be confusing
    for beneficiaries when they see the primary use for a
    wheelchair outside the home. That's not the primary benefit
    that we cover under Medicare.
        Senator Corker. And it is my understanding we're using the
    same contractors that we have used in the past where we've had
    this 80 percent error rate. We're using the same contractors on
    this pilot program. Is that correct?
        Ms. Taylor. Correct. We are using our durable medical
    equipment Medicare contractors to do these reviews.
        Senator Corker. Have you talked with any of the contractors
    themselves just on a one-on-one basis and asked them how in the
    world they could have an 80 percent fault rate in what they
    were doing?
        Ms. Taylor. Yes. We actually talk to our contractors
    probably quarterly to talk about what they're seeing, and more
    often if needed. I know that we have one of those contractors
    on the next panel.
        But most of it does come down to documentation. We require
    a seven-element form to be filled out by the physician, as well
    as a face-to-face examination. Oftentimes, one or two of those
    items is missing from the medical record. So it's really almost
    impossible to know what did the physician see or what did they
    observe when they saw that patient. So when documentation is
    missing, it's very difficult to determine what was going on in
    that examination.
        Senator Corker. But isn't an 80 percent rate almost beyond
    belief, even for the Federal Government?
        Ms. Taylor. It's extremely high, yes.
        Senator Corker. Have you--have there been any--I mean, that
    high rate would almost make one consider whether much of this
    is being done on purpose and whether there are actually other
    kinds of activities that are malicious in nature, and maybe
    there ought to be proceedings in other ways. I mean, have you
    all considered looking into that?
        Ms. Taylor. From our standpoint, we believe the prior
    authorization demonstration will be a great tool for us to look
    at it. Right now, on an annual basis, the products that are
    covered under this demonstration last year, or in 2010, we had
    about 200,000 claims billed for these products, and we looked
    at very few of those claims. We don't have the budget or the
    resources to review a lot. This will be the first time we will
    have, in fact, the records and the documentation up-front for
    about 40 percent of those.
        So we think the prior auth demonstration will, in fact,
    provide us with a lot of information to get exactly what you're
    saying, what are the things we should be looking for, is there
    patterns of fraud here that we should be looking for.
        Senator Corker. So, if I understand you correctly, CMS,
    which spends billions of dollars each year on durable medical
    equipment, doesn't have the staff or the resources actually to
    look at these authorizations in advance in most cases. So when
    people--I mean, sometimes you think you're hearing folks
    rhetorically talk about the waste and fraud and abuse that
    takes place in Medicare. What you would say is that just in
    this one case, 80 percent of the claims are off, and you think
    it's over $700 million. This is just one minor case of spending
    within the Medicare allotment, and you're saying that CMS
    really doesn't have the resources to know whether that's being
    carried out throughout the system. Is that correct?
        Ms. Taylor. Correct on some level. I mean, we do look at
    it. We do look for patterns where a provider or a supplier may
    look aberrant. So we do focus in on that. But in the grand
    scheme of the entire Medicare program, we have to focus our
    efforts on the highest dollar errors first. So that is where we
    tend to focus our resources. We have enough money to look at
    less than 1 percent of the claims that are submitted to
    Medicare each year, and so we really do have to use those
    resources sparingly, and we really think that this prior auth
    demonstration will give us the opportunity to really look at
    this benefit a little closer than we have been able to do in
    the past.
        Senator Corker. So we look at 1 percent of the claims, and
    a vast amount of money. So when people talk about hundreds of
    billions of dollars in waste, fraud and abuse existing in
    Medicare, just this one example would lead people to believe
    that that really might well be the case. Is that correct? The
    number has to be huge if we're finding in this one little $700
    million program that 80 percent of the claims are invalid.
        Ms. Taylor. Well, we do an error rate each year. We do a
    measurement, a comprehensive error rate measurement on the
    entire program, and last year it was less than 10 percent. It
    was 9-something. So on the entire program, we do do a
    measurement. We cannot determine how much of that is fraud, but
    we do know that we do have an error rate in the Medicare
    program of around 10 percent.
        Senator Corker. What would you expect would be an
    appropriate rate? When you get through doing this program, do
    you think there's going to be tremendous improvements? Again,
    we're using the same contractors in the past that have
    generated an 80 percent fault rate. So we're using the same
    people. We're just using a little different process. I would
    have thought some of them, doing so much business with the
    Federal Government, would have volunteered that this is a
    problem, and I look forward to asking some of those questions
    later.
        But what is the rate that you expect? That 80 percent rate
    will be what rate, in your estimation? What do you think would
    be a good job, if you will, by these contractors after this
    pilot is in place?
        Ms. Taylor. We're in the process right now of acquiring an
    evaluation contractor for this demonstration. We certainly are
    going to look at the quality of determinations, the quality of
    information sent in to us by providers. I don't think we have
    set a threshold of what is an acceptable error rate. Obviously,
    we would want an error rate to be zero. That's probably very
    aggressive given where we are now.
        But right now, we sort of need to start the program and
    evaluate it along the way to see what steps or actions we might
    need to take to tweak it. But we expect to have quarterly
    meetings with our contractors on what they are seeing inside
    the prior authorization demo, and we will have an evaluation
    contractor looking at the entire program to give us information
    and feedback on it.
        Senator Corker. So we've set up a program to deal with an
    80 percent error rate, one that any American with any kind of
    ability to comprehend can watch on television and understand
    that there's probably a tremendous amount of abuse taking place
    in this program. So we have this program that has an 80 percent
    error rate, and we put in place a prior authorization pilot,
    but we haven't yet figured out what our goals are as it relates
    to an error rate, and we're going to hire another contractor
    who is an evaluation contractor to help us figure out what that
    ought to be.
        Ms. Taylor. We are going to need some resources to help us
    analyze the data. So the prior authorization is one part of
    this. When you look at fraud, fraud moves. If someone believes
    we're looking at them, they are likely to move. So the entire
    benefit will have to be evaluated under this, and at this point
    I think it's too early for me to predict or to say what our
    hope is the error rate would be. We certainly will evaluate
    that, and that would be certainly one metric of the success of
    this program.
        Senator Corker. Well, first of all, I thank you. It sounds
    like to me that you understand there's a problem, and it sounds
    like you may be under-resourced, and I look forward to digging
    into that a little bit more. I really appreciate you being here
    today.
        But I think by just outside observers watching this, it
    would be almost beyond belief to realize that this has been
    occurring this long and that we really don't, in advance, have
    some standards.
        How would you feel about us, after we know more about this
    and dig into it a little bit more and have this hearing, how
    would you feel about us putting into law--I think the American
    people would fully stand behind this--but putting into law that
    if a contractor has an error rate above X, they are no longer a
    part of our program? Would you feel like that would be helpful
    to help reinforce what it is that you're doing?
        Ms. Taylor. We currently do have some metrics in our
    contractors' awards and the contracts that we sign with them
    that they must have efforts to reduce the error rates. We
    typically look at it as a whole, but it's certainly something
    we'd consider and would be happy to talk to the committee
    about.
        Senator Corker. So with the contractors who are getting
    ready to testify with us--and you know who is on the panel, you
    deal with them--who have an 80 percent error rate, they have in
    their contracts provisions that say that they need to help you
    figure out ways of lowering the error rate.
        Ms. Taylor. Correct.
        Senator Corker. And yet we continue to re-up with them even
    though they have an 80 percent error rate.
        Ms. Taylor. It is extremely difficult to be able to look at
    every benefit under a contractor's purview. We do work very
    closely with our contractors to make sure they have, you know,
    actions to deal with these and to mitigate them. So we do work
    very closely with them to make sure that they are on top of it
    and are taking actions to correct it.
        Senator Corker. Can you understand why I'd be semi-
    astonished at where we are today?
        Ms. Taylor. Yes, I can.
        Senator Corker. I think if most Americans realized that we
    had agencies of government that continued year after year after
    year to deal with people that had an 80 percent error rate, and
    we had in their contract solely that they were supposed to help
    us figure out ways of mitigating that, of lowering that, and
    that still hadn't happened, and then we were putting in a prior
    authorization program now that's a pilot using those same
    contractors and that we didn't have yet a standard by which we
    felt like they should live to or not be a part of the program,
    I think people would be just incredibly astonished, and I just
    want to make sure--I know that I am now--that I'm not missing
    something here, that maybe there is something else that you
    would like to say.
        Ms. Taylor. I think for the contracts, there are many
    things that our contractors do. Error rate is one piece of the
    contract. We do expect them to do education and outreach.
    Unfortunately, that education and outreach is not having the
    impact we hoped it would. Prior authorization is a tool that we
    think can help significantly lower the error rate and also
    identify and help us identify fraud that could be occurring
    inside the benefit, and help us figure out additional things
    that we may need to do to prevent it.
        Senator Corker. One of our panelists later on is part of
    Blue Cross of Tennessee, and they have a managed care plan, a
    Medicare Advantage plan that has a negligible improper payment
    rate, negligible. I guess I don't understand how they could
    have one that's negligible--I mean, almost zero--and CMS could
    have an 80 percent error rate, and we're only checking 1
    percent of the claims, and again we're using the same people
    that are creating this problem to try to fix it. I'm just
    wondering if you could share with me some of the differences
    that might exist there.
        Ms. Taylor. I really can't speak to the Tennessee model.
    But when we look at what other private insurers do to measure
    error rate, they typically measure it based on the claim as
    paid. When we do that same analysis, we pay appropriately based
    on the information that's on the claim, 99 percent of the time
    correctly. It's when you require or ask the physician or
    supplier to send in the underlying medical record that we find
    the error rate shoot up to the 80 percent that we've been
    talking about.
        So when the claim is submitted and the claim is paid based
    on the face of the claim--we cannot look at the underlying
    medical records for every claim--we do in fact pay very
    comparably, if not better than most private insurers. It's
    really when we pull the claim and request the medical record
    and look at the underlying record against our policies and our
    coverage requirements that there is information missing that
    would cause us to deny that claim for payment. So that's
    usually where we differ from private insurers.
        Senator Corker. That's a very good explanation, and I thank
    you for your temperament. Now that Senator Blumenthal is here,
    I'm going to turn it over to him. Again, thank you for being
    here.
        Senator Blumenthal. Thank you, Senator Corker, and my
    thanks to you for holding this hearing today and focusing on an
    issue that I think has not only financial and fiscal
    implications, but also potential dangers for consumers and the
    integrity of the entire program, and the public confidence and
    trust in its integrity. And I want to thank Senator Kohl, as
    well, for his leadership on this issue.
        Without belaboring some of these numbers, the OIG report in
    2011 finding that 80 percent of the claims for power mobility
    devices did not meet Medicare coverage requirements certainly
    raises urgent concerns, not just strong but also urgent
    concerns, and this error rate represents close to half a
    billion dollars in improper payments at a time when we're
    trying desperately to cut or reduce the increasing costs of
    health care.
        So I appreciate your being here today. I am really
    interested in what you can do and what you plan to do to
    address some of the direct-to-consumer ads. As Attorney
    General, I'm very familiar with the potential for deceptive and
    misleading ads to consumers, and especially where you have such
    strong financial leverage and interest, my view is that you
    have an opportunity and an obligation to do more to restrict
    some of those potentially deceptive and misleading ads.
        Could you tell us a little bit more what you can do to
    exercise some leverage and authority?
        Ms. Taylor. CMS does not have authority to really oversee
    or to regulate commercial direct-to-consumer advertising by
    suppliers for power wheelchairs or really for any health care
    delivery. What we do is we encourage that they not mislead or
    put anything in their advertisements that is not correct.
        We certainly have heard, as we've been out talking to
    beneficiary groups, that there is confusion on the part of
    beneficiaries as to what Medicare does pay for under the power
    mobility benefit, and by statute, by law, we can only pay for
    power wheelchairs when it is needed for the beneficiary for in
    their home to perform one or two activities of daily living.
        So when advertisements do show the power wheelchair for the
    primary use of outside the home, it does create confusion for
    beneficiaries. But we cannot regulate the advertisements that
    these suppliers put out there.
        Senator Blumenthal. When you say you can't regulate them, I
    know you can't order them off the air. You can't restrain them
    from making those ads, but you can refuse to pay for power
    mobility devices that are produced by those companies if they
    result in inappropriate use or if the purchases result from
    inappropriate ads.
        Ms. Taylor. I'm not sure we can do that. If a provider or a
    physician sees a patient and orders the wheelchair, and it is
    necessary for the beneficiary even though there is an ad that's
    not appropriate, I will and need to pay for the wheelchair that
    a physician signed an order for.
        Senator Blumenthal. So in effect, you're saying you don't
    have the authority that exists under the FDA Act that applies
    to a pharmaceutical drug manufacturer. If they advertise to a
    consumer an unapproved use of a drug, they would be held
    accountable. You can't do that.
        Ms. Taylor. I don't believe I can, no.
        Senator Blumenthal. Well, would you like that authority?
        Ms. Taylor. I really can't speak to whether I'd like that
    authority or not.
        Senator Blumenthal. Why not?
        Ms. Taylor. That's really not my place to kind of say that.
    We'd be happy to work with the committee, but I can't advocate
    for that.
        Senator Blumenthal. Well, I understand your point, and I
    understand that you can't speak for the agency. Let me put the
    question a different way. Wouldn't that authority enable you to
    safeguard the use of taxpayer funds?
        Ms. Taylor. It certainly would help not confuse
    beneficiaries about what the benefit is under the Medicare
    statute.
        Senator Blumenthal. Because I think a lot of taxpayers
    would be perplexed, to say the least, by payments made by the
    Federal Government for wheelchair devices that result from
    purchases induced by misleading ads when the government knows
    they're misleading or deceptive and does nothing, and therefore
    is in the position of paying for those devices. I know there's
    a demonstration project, and I know that you're doing
    everything that you can, or at least apparently so, to deal
    with this really very alarming problem.
        But I would like you to think about what we can do to
    enhance your power, your oversight, and your ability to
    intervene. I don't think it's so much a matter of regulation as
    simply oversight and stopping deceptive and misleading
    practices that result in waste and fraud.
        Thank you.
        Senator Corker. Thank you, Senator.
        Again, I want to thank you for coming up here. I do want to
    say that, again, I thank you for your temperament. I know
    you're the person that's been sent up to deal with this.
        I think it's this, again, 80 percent error rate. In any
    other realm of society, heads would be rolling everywhere. I
    mean, no contractors would be involved that had an 80 percent
    error rate, people involved within the institution. And I think
    it's this lack of alarm, lack of concern, lack of people
    hitting the roof over an 80 percent error rate that probably
    drives the American people crazy and causes them to lose trust
    in the U.S. Government, and I would say rightly so.
        So this is of great concern to me, to look at this one
    thing that's so evident to everybody in America who watches
    even one commercial that these people put out, that abuses are
    in place, and yet nothing really happens in a very rapid way.
        I do want to correct the record, or at least have you
    respond later. When I asked you about the error rate at Blue
    Cross Blue Shield and Medicare Advantage, and your response,
    it's my understanding they obviously are listening, and other
    people are. I was just handed a note that apparently the
    standards that are used by both Medicare Advantage and you are
    the same. So the 80 percent error rate and theirs being almost
    none, they are equivalent in their mind. So if you would just
    for the record respond as to what you were saying, because it
    appears to me there's a misunderstanding as to how we equate
    those things.
        Again, I want to thank you for coming in. But I think it
    just points to sort of a morass, if you will, when I know
    you've got to look at the big numbers. I mean, I know that's
    where you go is after the big problems. But this one jumps out
    at you so explicitly on a daily basis. When we see the kind of
    things that people see on television, and yet people see these
    things going undone, it just causes people again to lose
    tremendous faith in our government, as they should when they
    see this, and I do hope that you will all be absolutely on this
    pilot program, and I hope that you will terminate anybody in
    this program that has an unreasonable error rate, and I hope
    Senator Blumenthal and myself and others will figure out a way
    to pass some legislation that says that if we have contractors
    who, year after year after year, have claims that are coming in
    to you that have an 80 percent error rate, they will be banned
    from doing business with the Federal Government.
        Thank you for coming in.
        Ms. Taylor. Thank you.
        Senator Blumenthal. And I would, if I may, Senator, just
    add my thanks to you for being here. I know it's a difficult--I
    don't know what you did to draw the short straw, but you've
    done very well, and we appreciate you being here.
        Ms. Taylor. Thank you.
        Senator Corker. Thank you very much.
        Ms. Taylor. Thanks.
        Senator Corker. So I think the next panel is coming up. Is
    that right?
        Let me just--I'll tell you what. Why don't each of you just
    introduce yourselves again? I introduced on the front end,
    filibustering a little bit for time, but why don't each of you
    before your testimony just state who you are with and what you
    do. And we thank each of you for coming up here on this issue.
    Thank you very much and welcome to the U.S. Senate.
        Yes, sir. Paul.

       STATEMENT OF PAUL HUGHES, MD, MEDICAL DIRECTOR, NATIONAL
    HERITAGE INSURANCE COMPANY, DURABLE MEDICAL EQUIPMENT MEDICARE
        ADMINISTRATIVE CONTRACTOR, JURISDICTION A, LEXINGTON, SC

        Dr. Hughes. I am Doctor Paul Hughes, the Medical Director
    for the Durable Medical Equipment Medicare Administrative
    Contractor, commonly called a DME MAC, and my geographic area
    of responsibility is Jurisdiction A. Jurisdiction A is one of
    the four DME MACs and encompasses the northeastern states from
    Maine to Washington, D.C. I have been the Medical Director for
    this region since 1995. I work for NHIC, which contracts with
    the Centers for Medicare and Medicaid Services, to administer
    this jurisdiction since 2006. New York is the demonstration
    state in our region.
        My primary responsibilities revolve around the development
    and implementation of Medicare coverage policy. This role
    requires that I be involved in many aspects of NHIC's
    operations, including routine claim processing, appeals,
    medical review and provider education.
        I have been asked to speak briefly about the preparations
    NHIC has made to implement the Prior Authorization for Power
    Mobility Devices demonstration project. For convenience, I
    would like to separate the discussion into two parts, payment
    policy and operations.
        First, payment policy. Reimbursement for power mobility
    devices is set out in several sources. There are statutory
    requirements arising out of the Medicare Modernization Act
    implemented by CMS' Final Rule in 2006. These provisions
    require an in-person visit and a medical exam in addition to
    specific requirements for the creation of the prescription, and
    the provision of these documents to the DME supplier.
        CMS' National Coverage Policy creates the foundation for
    the medical coverage rules. It allows for the coverage of
    mobility assistive equipment for beneficiaries with mobility
    deficits that impair their ability to accomplish activities of
    daily living within the home. This policy guides coverage for
    all mobility equipment, from canes and crutches to walkers to
    manual wheelchairs, all the way up to power wheelchairs. To
    make a decision about which device is appropriate, CMS'
    national coverage policy requires a systematic evaluation of
    the beneficiary by their treating physician in order to
    determine which item optimally meets the beneficiary's mobility
    needs.
        In addition to this CMS national policy, the DME MACs also
    have a local coverage policy for Power Mobility Devices. This
    local policy pulls together both the statutory and national
    policy requirements, organizes the nearly 60 individual power
    mobility codes into five groups of similar products, sets out
    the criteria for each group and explains the documentation
    requirements and coding guidelines. In other words, the local
    policy takes coverage and payment information from various
    sources, adds additional necessary details for proper claim
    submission and incorporates those into one document.
        The major concern I hear raised by suppliers is whether the
    DME MACs will be able to review the anticipated request volume
    in a timely manner. Our staff is knowledgeable and experienced
    in looking at claims for power mobility. These requirements
    have been in place, unchanged, since 2006 when CMS' regulation
    took effect. All DME contractors have performed numerous
    reviews on power mobility devices since that time to identify
    problems.
        In addition to standard power wheelchairs, we have all
    reviewed many complex rehabilitation power wheelchair requests
    under the Advanced Determination of Medical Coverage, usually
    referred to as ADMC. In Jurisdiction A, we review an average of
    240 requests per month under this program.
        These complex products must meet the same basic coverage
    criteria as the products covered by the demonstration project
    in addition to the requirements necessary to determine coverage
    for the options and accessories needed to address the needs of
    these patients. This demonstration project does not change any
    of the applicable coverage rules. Thus, we do not anticipate
    any issues in this area.
        In fact, the project's focus only on coverage criteria for
    the wheelchair base simplifies the review for our staff. We do
    not anticipate that our review staff will have any difficulty
    in reviewing power wheelchairs of any type, including the
    numerous options and accessories used with them.
        Another issue I hear mentioned is that some suppliers and
    physicians may not be familiar with all of the policy
    requirements. The contractors have produced numerous
    educational resources about this policy, ranging from ``Dear
    Physician'' letters discussing the coverage criteria and the
    need for quality documentations, to Question and Answer
    documents and articles, webinars and in-person seminars, and
    CERT and medical review error analyses. In addition to the
    materials provided by the contractors, CMS' Medicare Learning
    Network has also published a variety of materials addressing
    power mobility coverage.
        Next, I would like to discuss operations. I know that some
    in the DME supplier community are concerned that the volume of
    claims may be too large to review in the allotted time of 10
    business days. Based upon historical claim volume in
    Jurisdiction A, we initially expect 25 to 30 new requests per
    day for the types of power wheelchairs included in the
    demonstration project. In anticipation of this project, we have
    increased our nursing staff and assigned our more experienced
    personnel to handle the anticipated volumes.
        Based upon historical power wheelchair audit data, we
    anticipate that approximately 50 percent of the initial
    submissions will not be approved. Likewise, based upon appeals
    data, we expect that about 50 percent of the resubmitted
    requests will not be approved.
        Once the demonstration project is operational and in full
    swing, we anticipate a total volume of 50 to 60 new and
    resubmitted requests per day from this project. We have
    sufficient additional staff to allow flexibility to deal with
    variations in volume.
        In the non-review areas, resources have been adjusted to
    allow for additional workload in written and telephone
    inquiries and in the production and mailing of response
    letters.
        Finally, I would like to discuss errors. Regardless the
    source of the audit, the types of errors are consistent. For
    example, our most recent Jurisdiction A report, published in
    July 2012, showed a charge denial rate of 54 percent. The
    common denial issues were: 33 percent had insufficient
    documentation. This includes both a failure to meet the
    statutory requirements to perform the face-to-face exam, as
    well as incomplete or poorly documented exams. Twenty-three
    percent had problems with the 7-element order. This is the
    statutorily required prescription. Problems include missing
    elements, illegibility, and that the prescription was created
    before the face-to-face exam was completed. Nineteen percent
    had problems with the specialty exam and were missing a
    financial relationship attestation. Fourteen percent had
    problems with the Detailed Product Description. This is a
    document produced by the supplier for the physician's
    signature. It serves as the prescription for all of the
    separately billable items. Problems included no detailed
    product description submitted and the items billed did not
    match the items ordered. Nine percent had problems with the
    home assessment. Either none was submitted or was not signed
    and dated. Four percent had problems with proof of delivery.
    Either none was submitted or the delivery ticket did not match
    the claim.
        Many discussions of errors focus upon issues related to the
    quality of the physician documentation and the DME supplier's
    inability to get the physician to improve. While physician
    documentation is an important factor in audit findings, it is
    not the only one. Many other errors occur. Often these others
    are more within the supplier's direct control either because
    they create the documentation or because there is an
    opportunity to screen for mistakes and have them corrected
    before submission. In this most recent review, most errors fell
    into this latter category.
        This pattern of errors is not unique to this particular
    report. Our review experience demonstrates that errors would
    drop significantly if attention were directed to some of these
    non-medical record issues.
        In summary, I believe that NHIC is well prepared to perform
    the work necessary to meet the requirements of this
    demonstration project. Thank you for the opportunity to share
    this information.
        Senator Corker. Thank you, sir.
        Mr. Peake. Dr. Peake.

    STATEMENT OF STEPHEN PEAKE, D.PH., MD, MEDICAL DIRECTOR, SENIOR
          CARE DIVISION, BLUE CROSS BLUE SHIELD OF TENNESSEE,
                            CHATTANOOGA, TN

        Dr. Peake. Ranking Member Corker, I appreciate the
    opportunity to appear before this Special Committee on Aging.
    My name is Dr. Stephen Peake, and I am the Medical Director of
    the Senior Care Division of Blue Cross Blue Shield of
    Tennessee. Currently, our Blue Advantage Product has
    approximately 30,000 enrollees, with an average age of 71, and
    we have been offering this product in Tennessee since 2006.
        We were established by Congress in January of 2006, and we
    must conform to guidelines which are outlined in the CMS
    Manual, Publication 100.16, which allows for increased
    flexibility in administering beneficiary benefits as long as
    they do not result in the beneficiary receiving less than
    traditional Medicare benefits.
        One aspect of this is the flexibility to perform
    utilization management, which allows us as an MA plan to
    require prior authorization of services.
        We feel strongly that properly applied utilization
    management protects, first and foremost, the beneficiary from
    unnecessary risks, but also helps to protect the system from
    fraud, waste and abuse.
        CMS has previously mentioned, has commented extensively,
    both directly and through the Medicare Administrative
    Contractors, on the documentation requirements for Power
    Mobility Devices. Yet CMS continues, as previously has been
    mentioned, to point out that the majority of claims for PMDs do
    not meet the documentation requirements for coverage.
        At Blue Cross Blue Shield of Tennessee, we in the Blue
    Advantage program require strict adherence to the documentation
    requirements as outlined in the CMS literature.
        For example, coverage is allowed only if the beneficiary
    has a mobility limitation that limits their ability to perform
    mobility-related activities of daily living in the home, such
    as toileting, feeding, dressing, grooming and bathing in
    customary locations in the home, not elsewhere. The
    documentation must indicate that the beneficiary's mobility
    limitation cannot be overcome with an optimally fitted cane,
    walker, or wheelchair. In other words, do they require a power
    mobility device?
        Also, it is required that the physician perform a face-to-
    face examination and ``shall'' document the examination in a
    detailed narrative note in their chart in the format they use
    for other entries. This is a requirement that is far too often
    not met.
        In addition, many suppliers have created forms which have
    not been approved by CMS. The one we most commonly see is the
    Texas Academy of Family Practice Mobility Evaluation. CMS even
    commented that this form was not adequate in the excellent
    September 2010 Provider Update. However, we continue to see
    suppliers completing this form and having the physicians sign
    it and physicians utilizing this form as the face-to-face
    mobility examination described above. In fact, if you go to
    their website, it clearly indicates it's not a CMS-approved
    form.
        In addition, the supplier must supply a detailed 7-part
    prescription but is prohibited in the LCD from completing any
    portion which must be completed by the prescribing physician.
    Yet again, we see what appear to be disparities in the
    handwriting on the form and the prescriber's handwriting.
        Lastly, an in-home assessment, which is often omitted, must
    be completed to make sure there is room for effective
    maneuverability, as the primary intent in obtaining a power
    mobility device is to alleviate barriers to the performance of
    mobility-related activities of daily living in the home, not
    elsewhere.
        In a one-year interval, Blue Cross Blue Shield of Tennessee
    Blue Advantage received 397 requests, the majority of which
    were for the more expensive power wheelchairs. Per CMS
    regulations, if the initial request is denied, the supplier can
    request a reopening with additional information. Both the
    prescribing physician and the beneficiary can appeal, and the
    prescribing physician can request a peer-to-peer discussion. By
    incorporating utilization management and requiring prior
    authorization of power mobility devices, 24 percent of the
    requests were still found not to be medically necessary. In
    2010, and now with the updated information of 2011, which is
    that approximately $700 million was spent, based on our
    experience, that would be about $168 million in savings if 24
    percent. We believe the savings could be significant.
        In conclusion, I personally applaud CMS for initiating this
    demonstration project and would welcome it in the great State
    of Tennessee. I appreciate the time you have allowed me to
    share on how we at Blue Cross Blue Shield of Tennessee's Blue
    Advantage Plan approach our prior authorizations of power
    mobility devices, and I welcome any questions you may have.

     STATEMENT OF MICHAEL CLARK, JD, CHIEF ADMINISTRATIVE OFFICER
       AND GENERAL COUNSEL, THE SCOOTER STORE, NEW BRAUNFELS, TX

        Mr. Clark. Good afternoon, Senator Corker and Senator
    Blumenthal, members and staff. My name is Mike Clark. I'm the
    Chief Administrative Officer of the Scooter Store, a nationwide
    supplier of durable medical equipment, including power mobility
    products and services.
        I have submitted extensive comments for the record and
    would like to take this opportunity to summarize those comments
    for the committee.
        PMDs allow people to retain their independence in their
    home and complete their activities of daily living safely so
    that they may age with grace and dignity inside their home.
    PMDs thus not only improve the lives of fellow citizens, but
    they also save significant health care dollars by preventing
    other serious injuries such as falls.
        In 2003, Congress decided that payment may not be made for
    a power wheelchair unless a doctor conducted a face-to-face
    examination of the individual and wrote a prescription for that
    item. The face-to-face examination properly places the doctor
    in charge of the patient's care. The Scooter Store fully
    supports this requirement and applauds Congress for emphasizing
    the role of the medical professional when assessing power
    mobility needs.
        Congress' good intentions, however, have been stymied by a
    review process that places arbitrary constraints upon what
    constitutes the patient's medical record. For example, Medicare
    will not consider attestations or letters of medical necessity
    provided by physicians who saw the patients face to face,
    explaining why they prescribed the item. The bottom line is
    there appears to be more of an interest in denying claims for
    technical documentation deficiencies rather than determining
    whether the patient actually needs the item.
        Private payers handle the process quite differently. For
    example, under the prior authorization process utilized by Blue
    Cross Blue Shield of Tennessee, a managed care program, 85
    percent of the Scooter Store claims receive approval upon
    initial submission, with an additional 10 percent approved
    after reconsideration or appeal, for a total approval rate of
    95 percent. In contrast, the Medicare prior authorization
    program to date has denied virtually all the claims submitted
    by the Scooter Store, although the TSS believes that prior
    authorization done right can be useful, we have several
    concerns about the program as currently structured.
        First, we believe that any prior authorization
    demonstration must be significantly smaller. Simply put, this
    is a bet the benefit proposal. By placing roughly 50 percent of
    the nation's Medicare PMD utilization into prior authorization
    with no defined phase-in, no calibration between the physician
    who prescribes one to three a year for the most part.
    Calibration between the physician, supplier and CMS is exactly
    what's needed. For example, we've had claims denied because the
    fact statements where the fax machine says the time and date,
    that there has to be a date and time, that's not being read
    properly by the reviewers, and claims are being denied for
    that. It's that type of calibration that will delay the process
    of people getting equipment for technical reasons, and at 50
    percent of the market, could lead to a disaster.
        Under the current CMS claims processing system, a
    beneficiary is provided his or her PMD after a physician
    performs a face-to-face examination. Medicare contractors then,
    upon review, deny 80 to 90 percent of those claims upon review.
    The patient has the equipment in their house. What's not being
    discussed right here, right now, is that there's a difference
    between the error rate and then the final denial rate. Upon
    appeal, those denials are overturned through the waterfall of
    the appeals process 80 to 85 percent of the time. So the error
    rate that is being reported is not the ultimate denial rate.
    It's just the error rate.
        Under prior authorization demonstration project, the 80 to
    90 percent is now going to move to the front end of the
    process, not the back end where the people already have the
    equipment. It now moves to the front end where they don't get
    the equipment. This involves problems in that there's no
    legitimate appeal right in this prior authorization project.
    You can just continue to resubmit these to the same reviewer.
        The doctor's medical judgment is essential to ensure our
    nation's elderly and disabled receive appropriate medical care.
    Towards that end, a face-to-face examination and clinical
    template should be available and sufficient for a determination
    of medical necessity. The doctor should be given the
    presumption that he was correct since he's the only one to have
    seen the patient.
        The use of a clinical template is absolutely consistent
    with documentation practices of our nation's health care
    providers. CMS has rejected this concept. They haven't approved
    any type of form to date.
        A face-to-face examination template designed to determine
    and establish medical necessity is necessary to establish
    objectivity, clarity and consistency in the claims processing
    system for all doctors, suppliers and reviewers, and to ensure
    access to quality health care for our nation's elderly.
    Everybody needs to work off the same playbook.
        I'd like to give you a real-life example of the difficulty
    beneficiaries are facing with this demonstration. We have a
    female patient who suffered a significant decline in her
    resting O2 saturation rates. Over a 7-month period of time, 3
    liters of oxygen, her O2 sat rates went from 97 percent down to
    83 percent at rest during the face-to-face exam. Her PMD claim
    was recently denied in prior auth because the doctor did not
    conduct an O2 saturation test on exertion. An exertion test
    rate at 83 percent O2 on 3 liters would have significantly put
    her health at risk.
        These types of denials, coupled with the restraints on the
    medical record, clearly placed the reviewer between the doctor
    and the patient, detracting from the primary task of simply
    determining whether the patient needs the equipment.
        Again, I thank the committee for allowing the Scooter Store
    this opportunity, and I welcome any questions you may have.
    Thank you.
        Senator Corker. Thank you, sir.
        Dr. Epplin.

      STATEMENT OF JEROME EPPLIN, MD, FAAFM, FAMILY PRACTITIONER,
           LITCHFIELD FAMILY PRACTICE CENTER, LITCHFIELD, IL

        Dr. Epplin. Good afternoon, Senator Corker and Senator
    Blumenthal. I would like to express my sincere appreciation on
    behalf of the American Geriatric Society for the opportunity to
    provide testimony on the issues surrounding the use of power
    mobility devices, or PMDs.
        I am Dr. Jerome Epplin, a board-certified family physician
    and geriatrician in Litchfield, Illinois, a small rural town of
    7,000. I am also an active member and fellow of the American
    Geriatrics Society, a non-profit organization of 6,000
    geriatrics healthcare professionals dedicated to improving the
    health, independence, and quality of life of all older
    Americans.
        Today I will briefly provide the perspective of a busy
    family physician and geriatrician with regard to patient
    evaluation for these devices. Many of the requests that I
    receive from my patients for power mobility devices are easy to
    evaluate. Some people obviously need them, and it is quite a
    pleasure to help provide them for them. Some patients, however,
    assume that these devices can be used merely as a convenience
    and not as a necessity. It is obvious to me that they do not
    need a PMD and would not qualify under the current Medicare
    guidelines. In most cases, the health of these patients may be
    compromised if they use an electronic vehicle rather than
    remaining ambulatory as their physical activity would be
    decreased. Preserving function and mobility is one of the
    hallmarks of geriatric care.
        In cases when it is less clear, I often use our physical
    therapist to help me decide if the patient qualifies for a PMD.
    They have told me that often a representative from a company
    that sells PMDs will accompany patients for the evaluation. A
    representative often wants to help fill out the forms or
    instructs the therapist in how to fill out the forms to better
    ensure that the patient will obtain the PMD. Understandably,
    the therapists feel pressured in such instances.
        Often, a letter instructing how to favorably fill out the
    application for a PMD will accompany the application. I see
    this as an inappropriate attempt to circumvent or influence my
    objectivity and clinical judgment when evaluating the patient.
        A physician with whom I trade calls recently told me of a
    patient who was denied by him a request for a power operated
    vehicle. Soon thereafter he received a call from a
    representative of the company telling him that if he changed
    some of his responses, the patient could get such a vehicle.
    The physician refused.
        In Illinois, each nursing home is required to fill out a
    form on each resident every three months as to why the resident
    should not have a power operated vehicle. In most cases, the
    residents do not have the mental capabilities to operate such a
    vehicle safely. Even if the resident has the cognitive ability
    to operate the vehicle, the other residents walking in the
    facility may not have the ability to get out of the way safely,
    thus putting the other ambulatory nursing home residents in
    harm's way. This could also be a liability issue for the
    nursing home.
        Unquestionably, the patients have been unduly influenced by
    the ads seen on television or received in the mail. They are
    told that all the doctor needs to do is sign the form and they
    will receive the vehicle. When the patient comes to my office,
    they already have false hope that they will qualify for a
    vehicle. If they are denied, many become very upset. I have had
    patients leave my practice because I denied their request for a
    vehicle.
        A more responsible approach would be for the ads to
    emphasize that many people who think they qualify for a vehicle
    may not. The ads could list some of the features that will
    cause a patient to be disqualified from obtaining such a
    vehicle and to highlight some of the side effects of the
    vehicles, such as worsening muscle weakness and the potential
    for pressure ulcers.
        As you know, Illinois is one of the seven states where CMS
    has implemented a prior authorization process for scooters and
    power wheelchairs for people with fee-for-service Medicare. The
    purpose of the demonstration is to ensure that a beneficiary's
    medical condition warrants the medical equipment under existing
    coverage guidelines.
        I am hopeful that the demonstration project will better
    match patients who need the power operated vehicle versus those
    who would be better served by other means. However, the
    information which I have received from CMS about the
    demonstration project is lengthy and not very clear. The thick
    packet of materials received by my office was not well marked
    as to its contents. This increased the chances that many were
    discarded before being read or even being opened.
        I did review the materials and, in my view, the
    demonstration needs to be better explained to clinicians in a
    more concise fashion. It would be helpful for clinicians if the
    application form could somehow be streamlined, as it takes at
    least 30 minutes to fill out after a lengthy examination.
    Perhaps a narrative could be accepted as an opinion. As you
    know, there is already a dire shortage of geriatrics healthcare
    providers, and the time spent filling out paperwork could be
    better spent providing care to patients.
        For most experienced clinicians, it is not difficult to
    quickly determine whether or not a patient qualifies for a
    powered vehicle under Medicare. But when further assessment is
    needed, clinicians may give additional weight to the history
    given to us by the patient, and there is a possibility that the
    patient was coached by a vendor or influenced by the ads as to
    what to say in order to qualify for a powered vehicle.
        Again, it would be helpful if the expectations of patients
    were not unduly elevated by outside sources, advertisements for
    one, when seen for their initial examination. This is an
    important issue as many older patients, often with complex and
    chronic conditions, benefit greatly from the use of powered
    vehicles. The challenge for all of us is to seamlessly get
    those vehicles to the appropriate patient. From a fiscal
    standpoint, it is also important that Medicare not needlessly
    pay for vehicles for patients who would be better served by
    more beneficial and less expensive modalities.
        Again, thank you for inviting me to today's important
    hearing, and I look forward to answering any questions you may
    have.
        Senator Corker. Thank you, and thank you all for your
    testimony.
        Senator, I'll go ahead and defer to you and let you start,
    and thank you very much for being here.
        Senator Blumenthal. Thank you very much, Senator Corker.
        Let me begin, if I may, with you, Mr. Clark. Just so the
    record is clear, no one has yet mentioned the 2007 settlement.
    My understanding is that there was a settlement of allegations
    with respect to over-payment, and there was an agreement that
    involved a payback schedule. Has that repayment been completed?
        Mr. Clark. The 2007 settlement was the result of lawsuits
    between the Scooter Store and the government. That resulted in
    a corporate integrity agreement. I think you may be referring
    to an agreement with CMS recently, this year, in 2012.
        Senator Blumenthal. There are two separate agreements; is
    that correct?
        Mr. Clark. Well, no. There was a settlement in 2007 after a
    long----
        Senator Blumenthal. Could you provide us with the--I'm
    sorry.
        Mr. Clark. After a long, protracted, many years of
    litigation, there was a settlement in 2007 that resulted in a
    payment, a payment of $4 million, and then there was a
    corporate integrity agreement that lasted for five years. The
    corporate integrity agreement just ended in 2012, in May 2012,
    entered into with the OIG. There is a separate discussion and
    agreement that was reached in connection with a voluntary over-
    payment with CMS, a voluntary refund of an over-payment with
    CMS earlier this year in 2012.
        Senator Blumenthal. And that was an amount between $32
    million and $63 million? Is that correct?
        Mr. Clark. No. The amount was--the total voluntary
    repayment amount was $19.5 million, which represents--the
    number is big, but it represents 4 percent of our Medicare
    billings for that two-year period of time. It was over a two-
    year period of time.
        Senator Blumenthal. I'm sorry. The initial figure reached
    by the reviewer was between $32 and $63 million, but the
    agreement was to repay $19.5 million.
        Mr. Clark. So there was an independent review organization.
    Pursuant to the corporate integrity agreement, the Scooter
    Store had an independent review organization that was hired and
    overseen by the Office of the Inspector General. The IRO, if
    you will, the independent review organization does a review of
    at least 250 claims a year, and if the error rate is at or
    above 5 percent, they may analyze additional cases to come
    within a certain statistical certainty of an over-payment. In
    the third year of our CIA, the IRO came out with a 14 percent
    over-payment pursuant to their audit, much different than the
    80 or 90 percent over-payment that's cited by the government in
    their audits of the claim.
        In year 4, the error rate, if you will, the percentage of
    over-payment was slightly over 7 percent.
        And so based upon those two over-payments, the OIG sent the
    Scooter Store a letter saying that they thought we were in
    violation of the corporate integrity agreement, which we
    weren't. We disagreed with the OIG's interpretation of their
    ability underneath the CIA, and we felt that their only
    recourse was to have CMS and the Scooter Store review those
    claims, come to a decision on what was an over-payment or not.
        So that's how that event finally happened, CMS and the
    Scooter Store came together, reviewed those claims. The Scooter
    Store then voluntarily repaid back $19.5 million, which
    represented 4 percent of our overall billings, and that was a
    payment to be perfect in an extrapolated scenario.
        Senator Blumenthal. Has that $19.5 million been repaid?
        Mr. Clark. It was--$5 million was paid up front, and the
    rest is in a payment schedule.
        Senator Blumenthal. So the answer is no.
        Mr. Clark. In total, no.
        Senator Blumenthal. How much remains outstanding?
        Mr. Clark. Well, $19.5 minus $5 million, and then we made
    some payments, I think somewhere around $13. And then we have
    some credits for some appeals. I don't know exactly what
    remains outstanding.
        Senator Blumenthal. Could you--I don't want to consume a
    lot more time on this issue.
        Mr. Clark. Right.
        Senator Blumenthal. But could you commit to provide the
    internal documentation relating to the corporate integrity
    agreement, the repayment agreement with respect to $19.5
    million, how much has been repaid and what amount remains
    outstanding?
        Mr. Clark. So I make it clear, you want a copy of the
    corporate integrity agreement?
        Senator Blumenthal. Well, I want to know, on the repayment,
    how much has been repaid and the documentation that underlies
    that.
        Mr. Clark. Yes, I can provide that to you.
        Senator Blumenthal. Thank you.
        Mr. Chairman, if I may, I'd like to ask that--I understand
    we have some ads that we can play at this time.
        Senator Corker. I understand that, yes, you all asked
    permission to do that, and that's fine.
        Senator Blumenthal. That's great.
        [Video presentation.]
        Let me ask you, Mr. Clark, the second of those ads is from
    your company, is it not?
        Mr. Clark. Yes, it is.
        Senator Blumenthal. And how recently was that ad aired?
        Mr. Clark. I don't think that one has been aired recently.
    I'm not completely sure on that.
        Senator Blumenthal. Do you have any reservations or qualms
    about that ad?
        Mr. Clark. No.
        Senator Blumenthal. You stand by everything in it?
        Mr. Clark. Yes.
        Senator Blumenthal. And how about the first ad? Do you have
    any problem with that ad?
        Mr. Clark. No, I don't like Hoveround's ads.
        Senator Blumenthal. Well, just as a matter of either their
    accuracy or----
        Mr. Clark. From the content of their ad, I don't see a
    problem with it.
        Senator Blumenthal. Dr. Epplin, could you give us your
    opinion of those ads?
        Dr. Epplin. Well, this morning I saw an ad on TV for a drug
    where at least half of the ad listed the side effects, and I'm
    not sure I'd even take that drug, nor prescribe it.
        There is nothing in these ads to suggest that actually
    immobility is not a good thing, that walking around is better,
    and it puts pressure--I feel like it puts pressure on me
    because people come in saying I can get this for free, why
    don't you give it to me? I mean, I hear that almost verbatim
    from people. It puts a lot of pressure on me. It makes me be
    the bad guy. Unquestionably, there are some people who need
    them, and I have no qualms with writing for them to get them.
    But I don't think these ads tell the whole story, that
    everybody shouldn't necessarily have one if they're able to get
    around. Many of them want them as a convenience and not as a
    necessity.
        Senator Blumenthal. So if I can put what you just stated
    perhaps in slightly different terms, the requirement is that
    the power mobility device is necessary for mobility. In many
    cases, there may be mobility through the use of other devices
    that may, in fact, be better for the patient.
        Dr. Epplin. Very simply, for some of these people, just a
    regular standard wheelchair will suffice. If they have good
    strength in their arms, reasonable strength in their arms, they
    can get by very well with a wheelchair or a walker.
        Senator Blumenthal. What about the use of these devices
    outdoors as opposed to inside?
        Dr. Epplin. That's sometimes a little bit more difficult,
    especially if the person wants to go a quarter mile or a half
    mile. They wouldn't be able to do that if they were walking.
    Many of them couldn't. The question is, is that a necessity
    that they do it, and could they be better served by a standard
    wheelchair? Not everybody can, of course.
        Senator Blumenthal. And these types of ads result in what
    you referred earlier to--I think you said elevated, unduly
    elevated expectations.
        Dr. Epplin. Yes.
        Senator Blumenthal. Do you know about instances of supplier
    representatives accompanying patients to their evaluation
    appointment?
        Dr. Epplin. Yes.
        Senator Blumenthal. And does that happen?
        Dr. Epplin. Yes.
        Senator Blumenthal. Has it happened to you?
        Dr. Epplin. Yes, and to our physical therapist. I have
    pretty much stopped filling these forms out myself. I send them
    to physical therapy because they take--it's an onerous form to
    fill out. It takes a while to do that.
        Senator Blumenthal. We've heard today also about the danger
    of falls. In your medical opinion, are there situations where a
    power mobility device may increase the risk of falling?
        Dr. Epplin. They can in that the potential that the person
    will not ambulate and thus get weaker can actually increase
    their risk of falls, or if they don't learn to properly use,
    for example, a walker and depend on these power mobility
    devices, it could increase the risk of falls. There are other
    people where the risk of falls is very high and these PMDs can
    help. But other times, if you allow yourself, your muscles to
    atrophy, you're going to increase your risk of falls.
        Senator Blumenthal. You referred earlier in your answers
    here to ads that you saw for pharmaceutical drugs where side
    effects were advertised because they had to be under the law.
        Dr. Epplin. Correct.
        Senator Blumenthal. The risk of falls for people who become
    overly dependent on these mobility devices may be a side
    effect, if I can characterize it as such, that perhaps should
    be told to consumers before they go ahead and get one of these
    devices.
        Dr. Epplin. Correct, and if they sit in them a lot, some
    people increase their risk of pressure ulcers as well.
        Senator Blumenthal. I have other questions, Mr. Chairman,
    but I know I'm way over my time.
        Senator Corker. Do you want to keep going for a minute?
        Senator Blumenthal. If I may continue?
        Senator Corker. That's fine.
        Senator Blumenthal. Let me turn to you, Mr. Hughes, if I
    may. Do you see any issues or problems with these ads?
        Dr. Hughes. Well, I agree. I think they create an
    expectation that everybody is entitled to the wheelchair and
    really, at least from a Medicare point of view, doesn't speak
    to how really very limiting the actual Medicare coverage
    criteria is. All of the ads always show folks very active,
    almost universally outside for the majority of the activities.
    So I think that it creates demand. I mean, that's what ads are
    supposed to do. So I suppose from the company's point of view,
    they're doing what they're supposed to do. But they create
    tremendous demand and put physicians in practice in a difficult
    situation.
        Senator Blumenthal. You referred in your testimony, and I'm
    going to quote, ``Our review experience demonstrates that
    errors would drop significantly if attention were directed to
    some of these non-medical record issues.'' Are these the kinds
    of issues that perhaps attention should be devoted to?
        Dr. Hughes. Well, what I was referring to there is often in
    discussions of errors, particularly discussions led by
    suppliers, the attention is given to how hard it is to get a
    physician to write a complete and thorough and detailed
    examination. You heard in Mr. Clark's testimony he is
    advocating for various forms and documents to streamline that
    process.
        Medicare's view when we're looking at medical records is
    that physicians need to document the way we're taught to
    document in medical school, the way nurses are taught to
    document, completely, thoroughly, enough so that an independent
    person can come along and read that record and know what's
    going on with the patient. That's a high standard, and many,
    probably most physicians don't consistently document to that
    level.
        The point I was trying to make is in addition to that
    problem, which in our most recent report was about a third of
    the errors, there are a whole variety of other errors not
    related to the physician's records. Some of the records, some
    of the documents suppliers create, and yet when they are
    charged with direct responsibility for creating the records,
    they fail to dot all the I's and cross all the T's and so on.
        With respect to the ads, the errors I'm talking about don't
    have anything to do with the ads, but it points to there are
    problems at a lot of levels and it's not entirely laid at the
    feet of the treating physician and the quality of their record-
    keeping.
        Senator Blumenthal. The treating physician in effect may
    agree to go along with prescribing or directing the use of
    these power mobility devices because of the demand generated by
    these ads.
        Dr. Hughes. Oh, yes, or so I've heard from my colleagues
    who are still in practice.
        Senator Blumenthal. Do you agree, Mr. Peake?
        Dr. Peake. Yes, I do. As a physician----
        Senator Blumenthal. I'm sorry, Dr. Peake.
        Dr. Peake. That's all right. I've been called worse. I'd
    make the supposition that most of us went into this profession
    because basically we like to be affirmed by others and we want
    to help people, and we like that affirmation that comes in. And
    tremendous pressure is put on the daily practicing physician in
    my experience to sometimes acquiesce to these demands, and I
    think these ads do add to that pressure, as the doctor so
    eloquently stated from Illinois.
        Senator Blumenthal. Thank you very much.
        I'd like to thank you all for being here today, and I'm
    very hopeful that your testimony, with the excellent leadership
    of Senator Corker, may lead us to take some measures that will
    address some of the concerns that you have very compellingly
    raised.
        Thank you, Senator Corker.
        Senator Corker. Thank you, Senator, for being here and
    participating.
        I appreciate the testimony. I think it gives really four
    different views of what's happening here, not that they're
    necessarily all inconsistent. But I'd like to understand just
    the identity of interest here. You, Dr. Hughes, you are a
    contractor that is hired by CMS to make sure that claims are
    valid. Is that correct?
        Dr. Hughes. The Medicare administrative contractor is
    basically hired to process claims. That's the vast majority of
    the responsibility. Our Region A is the smallest. We process a
    million claims a month. So that's the main task. We also handle
    appeals, provider education, customer inquiries, and we have a
    medical review department and a medical director. The medical
    review department is the place where audits are done.
        Senator Corker. So you process claims that are generated to
    you through the standard CMS process, and are you paid more or
    less whether they have high error rates or low error rates?
        Dr. Hughes. I'm sorry, Senator. That's sort of above my pay
    grade. My understanding is that the contracts are bid based on
    the projected claim volume. The payment rates and such don't
    affect that, but I defer that to my bosses.
        Senator Corker. So you have a contract to process the
    claims, but in essence the outcomes of the claims, based on
    your understanding, have no effect on what your company is
    paid.
        Dr. Hughes. That's my understanding.
        Senator Corker. So then, Dr. Peake, you all manage--it's a
    managed plan, and therefore claims that are inappropriate, if
    they are processed and people have asked for PMDs
    unnecessarily, then in essence your company loses money
    unnecessarily on the patients that you serve on a capitated
    basis or at a set price. Is that correct?
        Dr. Peake. That is correct.
        Senator Corker. So your incentive is to serve your clients
    and to maintain them on your rolls, but you also don't want to
    pay unnecessarily. So that might speak to the huge differences
    that exist between what Blue Cross is doing in this case and
    what a contractor--no offense, but really the outcome doesn't
    affect them in any way. The outcomes you might imagine would be
    very different. Is that correct?
        Dr. Peake. Yes. Our first priority, obviously, is the
    beneficiary. But then we also have a fiduciary responsibility
    to properly manage the premium dollar so we can make sure our
    beneficiaries get the greatest benefits they can get for that
    premium dollar.
        Senator Corker. But at the end of the day, you've got to
    provide those services at that premium dollar. Otherwise you
    can't provide services down the road.
        Dr. Peake. That is correct.
        Senator Corker. Whereas in a standard fee-for-service
    program, and certainly with contractors that have no financial
    incentive, when you have an 80 percent error rate, it really
    doesn't raise alarms. Is that correct?
        Dr. Peake. From what I've heard today, that would seem to
    be correct. Correct.
        Senator Corker. So then, Mr. Clark, obviously your goal is
    to sell as many scooters as you can, and you all obviously are
    doing a very good job, and it sounds like you've been overly
    aggressive in some cases and have had to deal with some
    payments back to the Federal Government and obviously are here
    today testifying because of the aggressive nature, at least
    from our perspective, that your company is taking.
        For me, as I listened to the testimony today, there is
    either a--I want to use this word not in a definitive term, but
    there's almost a fraud that's being put on the American people
    because of the way the system is set up. There really aren't
    checks and balances because, again, people aren't paid to care
    what this costs in the standard fee-for-service program. In a
    program where it does matter, they have different criteria and
    obviously don't have the error rate that exists.
        I know you've made the distinction between denial and
    errors, but it does appear to just a person who doesn't know
    much about scooters that there's a problem here, and I just
    want to ask you. I mean, would you not, based on what we've
    witnessed today and watched, and just the evidence of the error
    rate and the settlements that you've had with the Federal
    Government, would you want to dispel me of the notion that
    maybe the companies that are dealing with these PMDs are being
    a little bit overly aggressive?
        Mr. Clark. Yes, I'd certainly like to dispel you of that
    perception. First of all, of the people that call us for power
    mobility devices, only 13 percent of those end up in a power
    mobility chair paid for by Medicare. So between us and the
    doctors, we screen out 87 percent of those people that call.
        The idea that we want to sell as many of these as we can is
    just not correct. We want everyone who needs one to have one.
    The ads, in my opinion, let people know that this benefit
    exists. It doesn't say that you get to have one. In fact,
    Congress set up that the gatekeeper to that is the physician. I
    don't sell anything to anyone that a doctor doesn't prescribe,
    and to have the thought that a doctor would prescribe something
    he doesn't think a patient needs because of an advertisement,
    or because the patient walks in and says he or she wants one,
    is troubling from my seat as to what the physician community is
    doing.
        Senator Corker. Do you have people who go in with, as Dr.
    Epplin testified to and we've heard in many cases--as a matter
    of fact, what we hear a lot in the field is that the
    handwriting appears to be the same on massive numbers of these.
    In other words, somebody at the Scooter Store or some other
    entity is filling out many of these forms. There may be one
    little section that maybe has different handwriting. But do you
    have people who----
        Mr. Clark. Senator, I can assure you the Scooter Store is
    not pre-filling any paperwork. We don't fill out any paperwork
    because there is not an objective, standard system that's been
    created for this complex benefit--as testified by the good
    doctor from Illinois, this is a complicated exam with
    complicated criteria. Most of these doctors do this one to
    three times a year. If there was a process set up by CMS or the
    carriers that allowed everyone to work off the same playbook, I
    think it would be easier for the doctors to do these exams and
    provide the information that they need.
        So what happens is a lot of paperwork comes back, and when
    we look at it, it's not that the patient doesn't need it, it's
    that the doctor didn't document it appropriately. That's what's
    being said through the whole panel. That's what Ms. Taylor
    testified for. So we go back to the doctor and say, look, you
    didn't document this enough; go back and explain it. But we're
    not filling out the paperwork. We're not writing what the
    doctor says. If his nurse writes something and he signs it, it
    doesn't have to be in his handwriting. If he signs and dates it
    himself, then he's attesting to that.
        But again, we screen 87 percent of the people that call us.
    There's a gatekeeper. We sell the patient nothing. The doctor
    prescribes everything. We don't fill out paperwork. We don't
    sit in the doctor's office, Senator.
        Senator Corker. You don't have any people with your company
    that ever, in order to meet sales quotas or whatever, ever
    accompany a patient to the physician's office?
        Mr. Clark. I am unaware of where any representative from
    the Scooter Store goes and sits in an examination with the
    patient and their doctor. We have doctors--we have hundreds and
    hundreds of doctors that refer their patients to us to begin
    the paperwork process for them to get power mobility devices.
    We have people in the field that have relationships with
    doctors. I don't--I'm not personally aware of if one of my
    representatives, because a patient asked them to say would you
    go to the doctor's office and sit in the lobby. But there's not
    one of my people sitting in an exam with a patient and their
    physician. That's between them and their physician.
        There is an enormous difference, Senator, between an error
    rate and a denial rate.
        Senator Corker. I understand that.
        Mr. Clark. We have a very, very low denial rate. Our ads--I
    mean, when you talk about an over-payment that was voluntarily
    paid on a 4 percent denial rate so that we could be at
    perfection----
        Senator Corker. So what would be your denial rate overall
    with the PMDs for CMS?
        Mr. Clark. So as I go through the waterfall, they deny--
    just like all the audits, they deny----
        Senator Corker. I understand. But the net net net----
        Mr. Clark. So the net net net to me, through the
    governmental appeal process, is anywhere between--around 15
    percent is what I end up losing because then I decided not to
    go to Federal court, where I think I would win more at a
    Federal court----
        Senator Corker. And then you give them a PMD for free? Is
    that what you're saying?
        Mr. Clark. Right. We're not going to go pick them up at
    anyone's house.
        Senator Corker. So they've already been placed in their
    home by the time this all occurs.
        Mr. Clark. Right. So then I go through 18 months of appeal
    to get 85 percent of them overturned. I spend an enormous
    amount of money doing that. Now you're moving to a prior auth
    standard with, mind you, Senator, no changes to the system, so
    the error rate stays the same. Again, we're seeing almost a 100
    percent error rate right now coming back from prior
    authorization. The individual with the O2 sat rates is a bad
    case, and being denied because the reviewer can't understand
    the medical record or doesn't know how to look at a fax stamp
    to find out the date that's there.
        But, you know, because the over-payments were brought up,
    again, the IRO--we've had the OIG sitting over the top of us
    under the corporate integrity agreement for five years. They've
    never said anything about our ads. They didn't come after us
    and allege any fraud, any misuse, any abuse, any changes to our
    very robust compliance program. CMS, who I've dealt with for
    years, has not done any of that. We've talked to CMS about our
    ads. Again, we filter a lot in our ads.
        Senator Corker. Do you think that speaks to the--and I need
    to move on in just a second. But do you think--and I appreciate
    everything you've said. Do you think that speaks to the
    culture, though, at CMS, that they haven't responded? I mean,
    would you think, just if you were sitting on our side of the
    dais and we had a Medicare program that was going to be totally
    insolvent in the year 2022----
        Mr. Clark. Exactly.
        Senator Corker [continuing]. And we're all trying to figure
    out a way to stave off a fiscal crisis in this nation, the
    world is looking to us, we see these advertisements on
    television that--on our side of the dais, I mean, would you not
    understand why that would create a little bit of concern that
    we have companies like yours that are so aggressively trying to
    put these PMDs into people's hands and, in some cases according
    to testimony, in ways that actually hurt the patient? I mean,
    can you see why we would have a degree of concern over the
    testimony today, plus the marketing that's taking place around
    these PMDs?
        Mr. Clark. I could understand with not having an awareness
    of the screening process, that only 13 percent get that, with
    not having an awareness of the fact that the vast majority of
    error rates are overturned and don't become denial rates. I
    could understand that one would say, wow, these ads generate a
    lot of utilization.
        These ads have been going on for quite some time. Everyone
    knows utilization has dropped 30 percent in the last two years.
    We don't have the 2012 utilization, but it will be
    significantly less than 2011. Utilization is going down.
        Ads don't commit fraud; people do. Forms don't commit
    fraud; people do. Criminals aren't advertising. There are
    criminals in the system. There are criminals across every
    benefit by Medicare.
        I think the best thing that we could look to is the
    independent review organizations and their models. When they
    look at our claims Senator, they go through 190 questions on
    each claim over 42 areas of the file. They found an error rate
    between 3 percent and 8 percent.
        The managed care plans that are businesses, they don't have
    these high error rates. Nobody is judging the overturn rate and
    saying what's wrong with the process up front on the audits?
    Why isn't the right answer being decided up front? Because
    you're looking to deny the claim at all costs. You're not
    looking to see does the patient just need the equipment.
        Senator Corker. What we understood as far as the settlement
    that took place is it wasn't done voluntarily, that CMS
    threatened to cancel your ability to deal with them and this
    product, and therefore you made this settlement. So you're
    shading it a little differently than we've been told as to what
    happened. So which happened? I mean, were they threatening?
        Mr. Clark. So the OIG, the OIG threatened us under the CIA.
    The OIG had, in my opinion, in counsel's opinion--we wrote the
    OIG back--they had no authority to do that. They had no
    authority to do that. We sat down with CMS----
        Senator Corker. But you didn't just come forward with a
    settlement. You were----
        Mr. Clark. CMS never threatened to pull my supplier number
    or exclude me from the program.
        Senator Corker. The OIG did.
        Mr. Clark. That was OIG underneath their contract. CMS and
    I sat down, went over the IRO studies, and again that was an
    error rate. We went over them. We went over a bunch of files.
    We talked, and the company, if you look at the documents that
    came out of that back from CMS, they couch it as a voluntary
    repayment. We didn't have to pay that. We wanted to work with
    CMS. We wanted to stay in good graces with them, if you will.
        Senator Corker. I would imagine.
        Mr. Clark. We wanted to be a good partner.
        Senator Corker. What percentage of your business----
        Mr. Clark. We wanted to be a good partner, and it was 4
    percent of our business.
        Senator Corker. No, but the percent--CMS is 4 percent of
    your business?
        Mr. Clark. No, no. The overpayment was 4 percent.
        Senator Corker. And what is CMS as a percentage of your
    business, since you brought it up?
        Mr. Clark. Roughly 75 percent of our business.
        Senator Corker. Yes. Well, I would think the OIG
    threatening to end a 75 percent relationship would cause you to
    want to ``voluntarily'' settle this.
        But let me move on. And we----
        Mr. Clark. They just didn't have authority to do that.
        Senator Corker. For what it's worth, I am so glad they did.
        Doctor, just to get identities of interest, you sound like
    an outstanding physician, and you sound like you care greatly
    about your patients, and I'm sure that you do. When a physician
    fills out the forms for one of these PMDs, is there any
    incentive for them to do that financially, or is that----
        Dr. Epplin. You can charge Medicare for a higher level of
    service. It's not a significant--for the amount of time that it
    takes, the answer is no. There's no financial--you do it just
    because you have to do it.
        Senator Corker. You do it because you have a patient that
    is coming to see you to do it. Most physicians, according to
    the testimony, do it two or three times a year. The form is
    long, and there's really no financial incentive, you say, for
    physicians to really want to prescribe these.
        Dr. Epplin. There's no big financial incentive to do that.
    I think you would have to look at the specialty of the
    physician. I would think that people who are geriatricians or
    see a high percentage of their patients being elderly would
    have more than 1 to 3 per year. So if someone is seeing the
    broad spectrum of either internal medicine or family medicine,
    that may be true. But if you're seeing a lot of geriatric
    patients, I would guess it's probably more than that, and I do
    get requests frequently, and it's probably only, as Mr. Clark
    says, I can probably can screen out 80 to 90 percent of the
    people just by telling them you don't qualify. So the number
    that he gives is about what I see in my practice as well.
        Senator Corker. I know this was really to be about the
    demonstration program. I want to spend just a minute on that. I
    know we got a little astray based on the testimony, which we
    greatly appreciate.
        But, Dr. Hughes, what, in your opinion--and I know it
    sounds like some of the forms need to be reworked, and it
    sounds like it's very difficult.
        Dr. Epplin. They're very difficult.
        Senator Corker. And I hear all this, and certainly we'll be
    corresponding with CMS over the testimony that's come. And I
    know the error rate is different than the denial rate. But what
    is the appropriate error rate for this program once it gets
    refined?
        Dr. Hughes. Well, I hesitate to pick a number. Our numbers,
    as far as recent audits, are down to 50 percent from the OIG
    study from a couple of years ago. I don't think it will ever be
    zero, but I certainly would like to see it down to the single
    digits.
        Senator Corker. And is that based on your experience? I
    know what you'd like to see. Based on your experience, is
    getting the error rate down to single digits something that you
    think is achievable if we put the right processes in place?
        Dr. Hughes. Yes, I do, partly because of what I had in my
    testimony. A substantial percentage of the errors are technical
    things, as Mr. Clark points out. But I believe many of those
    technical errors are able to be remedied by the supplier, and
    that will then leave a nub of 20 to 30 percent of errors that
    have to do with the quality of the medical record. That gets to
    be subjective, but that's a different set of tools that would
    need to be worked on that, and maybe a form. I don't know what
    would be best for that.
        Senator Corker. And, Mr. Clark, I know you have concerns
    about what's happening, a 100 percent error rate now. Is it
    your view the pilot program is starting too large and should
    start in a smaller way to be more effective in figuring out the
    end processes that ought to exist?
        Mr. Clark. Without a doubt. I think the calibration that
    needs to happen between the reviewer, the contractor, CMS; the
    physicians who only do these once, many of them will only do
    them one to three times a year, it's complicated; the supplier,
    most of the time the supplier helps educate the physician.
    There's a great deal of calibration that has to happen in order
    to get the error rate down, and to do it on a 45 percent
    demonstration project just sets up an environment where you're
    betting the benefit if you have 80 to 90 percent denial rates
    up front, where businesses then have to carry that working
    capital, if you will.
        And particularly in this benefit that's gone from heavy
    allowable reductions in 2007, 27.5 percent price cut, then
    another 10 percent in 2008, competitive bidding, conversion to
    a 13-month rental program in 2012, now having a very high error
    rate for technical reasons or whatever, that's going to take 60
    days because it's 43 business days really, if you look at the
    10 business days CMS has, the mail, then the 20 business days,
    if they get that, that type of working capital would drive a
    lot of companies out of business while the claims then
    ultimately get paid.
        So our suggestion was to roll this thing out in one city in
    each state, something similar to what was done with the
    competitive bid program in DME, where they did it in two areas,
    worked out all the kinks, and then began to grow it, like
    they're doing now, that would be, in my opinion, the most
    effective way to do prior authorization. As well, it allows all
    parties to understand what's expected of one another without
    the threat of 50 percent of your revenue, or 100 percent of
    anyone sitting alone in Illinois or Florida, their business
    being subjected to that.
        Senator Corker. So I know Dr. Peake mentioned that they use
    the same coverage determination requirements as DME MACs for
    their prior authorization protocol. So why is it different for
    you to do prior authorization at a DME MAC than it is for you
    at Blue Cross?
        Mr. Clark. Blue Cross, most of the Blue Crosses have a
    prior authorization template. They have a face-to-face
    examination guide that the physician uses. So we can--we don't
    do--if we're doing with a managed care, whether it's Blue Cross
    Blue Shield or a MAP plan, and the volume is smaller, we can
    take their face-to-face exam, what they're wanting to see the
    doctor do, and we can calibrate with them. We can educate the
    doctor on what Blue Cross Blue Shield of Tennessee requires as
    far as the format they want to see and how they want to see it.
    And then that leads to a better face-to-face exam, and then the
    error rates are lower.
        It's just been my experience, Senator, that upon review,
    most of the managed care plans are more so not trying to just
    deny the claim. They're really trying to see does the patient
    need it or not, and the error rates are significantly lower
    than in Medicare.
        Senator Corker. So I think what you're saying is that CMS
    in this pilot could learn a lot from what's happening with some
    of the managed care plans that actually have themselves an
    incentive not just to provide very good care for the people
    they serve but also to make sure they do it in a way that's
    appropriate to keeping the company going.
        Mr. Clark. Absolutely. I think they would agree with me
    that the managed care plan loses a lot of money through an
    extended appeals process as well, and because they do have a
    business model and income they've got to deal with, they don't
    want to go through a lengthy appeal process. So it's best for
    everyone in every scenario to know exactly what's expected from
    them, calibrate to what that is, and then you can effectively
    move forward.
        Senator Corker. Dr. Epplin, have you--thank you. Dr.
    Epplin, do you deal with both managed care plans like Blue
    Cross and also--obviously, you deal with CMS. Is there a
    difference for you in filling out the forms and doing the
    things that are necessary to get someone enrolled?
        Dr. Epplin. Honestly, Senator Corker, in our rural area, we
    have very few, if any, managed care plans. So I don't deal with
    them in terms of filling that out.
        Senator Corker. And, Dr. Peake, would you say that
    testimony from Mr. Clark is on target?
        Dr. Peake. We don't have any forms, per se, and we have
    excellent physicians in Tennessee, like Dr. Epplin alluded to,
    that do this, that do very good face-to-face examinations. But
    I do support the documentation requirements from CMS in the
    fact that each patient is individual and I don't think that you
    can put them into a template. I think you can give them
    guidelines, and I think the guides are pretty clearly stated.
        But as an MA plan, when I deny something, we clearly
    articulate why we denied it, and if you read our denials and
    you figure it out and the patient truly does meet it, you'll
    know what you need to do so that beneficiary can get what they
    need. I talk to a lot of physicians about this subject, and I
    would agree with Mr. Clark. After a lot of our discussions,
    they don't understand that you can't get a power mobility
    device so mom can go to the park with the family.
        Senator Corker. But you'd have that impression if you saw
    the marketing materials; is that correct?
        Dr. Peake. I would have that impression. Unfortunately, and
    perhaps you have too, I've driven all over the state of
    Tennessee, and I see many power mobility devices sitting in the
    front yard, sitting in the backyard, sitting out on the porch
    because they can't get through the door, and I question how did
    those get there? I don't know that answer.
        Senator Corker. So the documentation issues that were being
    addressed earlier, you actually think the forms that Mr. Hughes
    is using and that CMS is requiring, you think that they're
    appropriate as they're laid out, or do you think there is
    some----
        Dr. Peake. No, I don't think the forms are. The forms can
    give guidance, but as has been mentioned by my physician
    colleagues, I personally feel that each patient is an
    individual and it needs to be documented, as CMS says, in the
    same format as the rest of the chart. The face-to-face
    examination does take time, but it's a fairly complex
    examination, but it's a good physical examination. That's all
    they're asking to be done.
        You're right, you could probably bill it at an 05 or a 15
    level. There is a G code that goes with that to give additional
    compensation. But they're just asking you to paint a picture of
    a patient that needs a power mobility device, nothing more,
    nothing less, not trying to put you in the same box with me, me
    in the same box with him. It's to look at that patient and say
    do you need this or do you not? I really compliment the doctor
    from Illinois for bringing up the fact that inactivity can lead
    to increased obesity, a worsening of diabetes, comorbid
    conditions. If they need a power mobility device, Blue Cross
    Blue Shield of Tennessee certainly supports providing that
    device. But there needs to be a clear picture that that patient
    needs it because I firmly believe as a physician that if they
    don't, we're not doing them a favor.
        Senator Corker. Well, I think taxpayers all across our
    country have seen abuse probably of these, and at the same time
    I think they realize that they may have a loved one at some
    point in time that really does need one, and I'm sure many
    people in the country that are using them really do need them.
    But it jeopardizes everyone who does have a medical necessity
    for one of these, and I appreciate all of you being here.
        We're closing, and I'm the only one here, and I appreciate
    all of you coming to testify.
        I wonder if any of you would like to take just a moment, a
    brief moment, sharing with me some misperception or
    misconception that we might have after hearing the testimony
    today. Is there anything you'd like to clear up before we
    leave? I've got a feeling Mr. Clark might, and you're welcome
    to do that. But do any of you have anything you'd like to say
    as we leave that might help us as we move ahead looking at this
    pilot? Dr. Hughes? Dr. Peake? Mr. Clark?
        Mr. Clark. I would say that we are obviously working well
    together with Blue Cross Blue Shield of Tennessee since we have
    a 95 percent payment rate with them. So again, I think most of
    the misperceptions we've talked about. I will not take up any
    more of your time, Senator.
        Senator Corker. Thank you.
        Dr. Epplin.
        Dr. Epplin. No, thank you.
        Senator Corker. Well, thank each of you for coming and
    testifying. I thank you again, all of you, also for your
    temperament, and I hope the pilot goes well and hope we get
    down in the single digits, as you mentioned, Dr. Hughes.
        Thank you all, again. I appreciate it.
        [Whereupon, at 4:29 p.m., the hearing was adjourned.]

                                    APPENDIX

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