[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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