Fraud and Abuse: Providers Target Medicare Patients in Nursing Facilities
(Letter Report, 01/24/96, GAO/HEHS-96-18).

Pursuant to a congressional request, GAO reviewed allegations of fraud
and abuse related to services and supplies provided to nursing facility
patients, focusing on: (1) the nature and extent of such fraud and abuse
exist; (2) why nursing facility patients are an attractive target for
miscreants; and (3) options for reducing fraudulent billing practices.

GAO found that: (1) fraudulent and abusive billing of Medicare is
widespread and frequent and a wide variety of providers have been
involved in Medicare fraud or abusive billing related to nursing
facility patients' care; (2) most fraud and abuse involves billing
Medicare for unnecessary or undelivered services and supplies or
misrepresenting services to obtain reimbursement; (3) Medicare patients
in nursing facilities are attractive fraud targets because of the high
volume and concentration of Medicare beneficiaries in nursing
facilities, easier access to patients' medical records, billing without
confirmation, the lack of sufficient and timely warning flags in
Medicare's automated claim processing systems, and inadequate recovery
of unwarranted payments; (4) to change its reimbursement method to
incorporate the nursing facilities' monitoring of the provision of
services and supplies Medicare will need long-term commitment,
structural changes, unified billing, and capped payments; and (5)
short-term steps to reduce fraud and abusive billing include instituting
federal penalties for unauthorized disclosure of patients' medical
records and incorporating various early warning controls into Medicare's
claim processing systems.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  HEHS-96-18
     TITLE:  Fraud and Abuse: Providers Target Medicare Patients in 
             Nursing Facilities
      DATE:  01/24/96
   SUBJECT:  Health care programs
             Fraud
             Program abuses
             Erroneous payments
             Claims processing
             Nursing homes
             Long-term care
             Health care cost control
             Medical expense claims
             Billing procedures
IDENTIFIER:  Medicare Program
             
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Cover
================================================================ COVER


Report to the Ranking Minority Member, Committee on Commerce, House
of Representatives

January 1996

FRAUD AND ABUSE - PROVIDERS TARGET
MEDICARE PATIENTS IN NURSING
FACILITIES

GAO/HEHS-96-18

Targeting of Nursing Facility Patients

(101291)


Abbreviations
=============================================================== ABBREV

  EKG - electrocardiogram
  HCFA - Health Care Financing Administration
  HHS - Department of Health and Human Services
  HMO - health maintenance organization
  OIG - Office of the Inspector General

Letter
=============================================================== LETTER


B-255730

January 24, 1996

The Honorable John D.  Dingell
Ranking Minority Member
Committee on Commerce
House of Representatives

Dear Mr.  Dingell: 

At recent congressional hearings on efforts to trim billions of
dollars from the rapidly growing Medicare program, we testified on
the program's vulnerabilities to waste, fraud, and abuse.\1 Among the
major weaknesses is the Health Care Financing Administration's (HCFA)
inadequate array of controls--both for detecting billing abuses and
for ensuring the legitimacy of providers billing the Medicare
program.\2

One of your concerns focused on the numerous allegations of fraud and
abuse related to services provided to Medicare patients in nursing
facilities.\3

In 1995, physicians, medical equipment companies, laboratories, and
other providers were reimbursed an estimated $5.5 billion for the
services and supplies they furnished Medicare patients in nursing
facilities.  Because some portion of this amount is likely to have
been paid unnecessarily, you asked us to review (1) the nature and
extent of fraud and abuse related to services and supplies provided
to nursing facility patients, (2) the conditions that make the
provision of services and supplies to nursing facility patients an
attractive opportunity for wrongdoers, and (3) options for removing
such opportunity. 

For this review, we interviewed officials at HCFA, Medicare claims
processors, HHS Office of Inspector General (OIG), and several
national organizations representing the nursing home industry and
providers of services and supplies.  We also analyzed documents for
ongoing and recently completed investigations by Medicare claims
processors and OIG, and interviewed investigators working on those
cases to identify factors leading to fraudulent and abusive billing
situations.  Our work was done between April 1994 and August 1995 in
accordance with generally accepted government auditing standards. 
Further details of our scope and methodology are provided in appendix
I. 


--------------------
\1 See Related GAO Products at the end of this report. 

\2 Within the U.S.  Department of Health and Human Services (HHS),
HCFA establishes regulations and policy guidance for the Medicare
program. 

\3 In this report, the term "nursing facility" is used to describe a
nursing home that could provide services ranging from skilled care
for patients with complex medical or rehabilitative needs to
custodial care for those patients needing assistance with activities
of daily living. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

Although most providers are honest and bill appropriately, a wide
array of provider types--including durable medical equipment
suppliers, laboratories, physicians, optometrists, and
psychiatrists--have been involved in the fraudulent or abusive
billing of Medicare for services and supplies furnished to nursing
facility patients.  The wrongdoing has generally focused on billing
Medicare for unnecessary or undelivered services, or misrepresenting
a service to obtain reimbursement.  The investigations we reviewed
probed activities in over 40 states, with many providers operating in
multiple states.  Although not quantifiable, the evidence suggests
that such fraud and abusive billing activities are frequent and
widespread. 

Several features make Medicare beneficiaries in nursing homes an
attractive target for fraudulent and abusive activity.  First,
because a nursing facility locates individual Medicare beneficiaries
under one roof, unscrupulous billers of services can operate their
schemes in volume.  Second, in some instances, nursing facilities
make patient records available to outside providers who are not
responsible for the direct care of the patient, contrary to federal
regulations which prohibit such inappropriate access.  In such cases,
nursing facilities--however inadvertently--enable exploitative
providers to obtain the information on Medicare beneficiaries that
they need to bill Medicare. 

Third, under HCFA's provisions for reimbursement, providers can bill
Medicare directly, without the nursing facility or attending
physician affirming whether the items were necessary or provided as
claimed.  Nor is the scrutiny at the claims processor level adequate. 
Medicare's automated systems do not accumulate data that would flag
timely indications of improbably high charges or levels of services. 
As a result, Medicare claims processors miss opportunities to avoid
paying out large sums unnecessarily and to track schemes exploiting
groups of vulnerable beneficiaries.  Finally, even when Medicare
detects abusive billings and seeks recovery of unwarranted payments,
it often receives little repayment from the wrongdoers who either go
out of business or deplete their resources so that they lack the
resources to repay the funds. 

Medicare needs to change the way it reimburses for services and
supplies provided to beneficiaries residing in nursing facilities. 
Because these facilities have a primary role in planning their
residents' care, they are in the best position to monitor the
provision of services and supplies.  Although options exist for such
involvement of nursing facilities, all require structural--and
therefore long-term--changes.  In the meantime, certain incremental
changes would make the nursing facility environment less hospitable
to fraudulent or abusive billing activities.  These changes include
instituting penalties at the federal level for the unauthorized
disclosure of patients' medical records and programming various early
warning controls in Medicare's claims processing systems to better
detect fraud and abusive billings before claims are paid. 


   BACKGROUND
------------------------------------------------------------ Letter :2

As the nation's largest health care payer, Medicare provides health
insurance coverage to over 36 million elderly and disabled Americans. 
Medicare part A covers inpatient care in a hospital or skilled
nursing facility and home health or hospice care.  The care in
skilled nursing facilities that part A covers--for which Medicare
paid an estimated $6.6 billion in 1995--is limited to relatively
short stays for patients who need daily skilled care following
hospitalization.  Most elderly people in nursing facilities do not
qualify for part A coverage. 

Medicare part B covers physician services, outpatient hospital
services, durable medical equipment, and various other health
services.  Although the vast majority of Medicare patients in nursing
facilities do not require skilled nursing care, they are entitled to
the full range of services and supplies covered by the Medicare part
B program when part A does not pay for the nursing facility services
themselves.\4 This care is usually billed directly to Medicare by the
providers who serve these patients.  In 1995, Medicare paid an
estimated $5.5 billion for services and supplies furnished to
patients in nursing facilities. 

HCFA contracts with insurers, such as Blue Cross and Blue Shield
plans, Aetna, and The Travelers Insurance Company, to process and pay
claims submitted by providers.  These contractors--referred to as
carriers under Medicare part B--are responsible for the monitoring
and analysis of claims both before and after payment to ensure that
Medicare dollars are used to pay only reasonable and necessary
claims.  Carriers' automated claims processing systems include
computerized controls, or screens, that screen claims for diagnosis
coding errors, billing abuses, and incorrect or incomplete
documentation.  Some controls deny or adjust claims payments
automatically without human intervention.  Others flag claims for
further review by carrier personnel if the claims do not conform to
payment criteria or are submitted by a provider under carrier
scrutiny. 

Nursing facility patients--many of whom are cognitively
impaired--rely on the facility to manage their care needs.  Under the
nursing home reform provisions established by the Omnibus Budget
Reconciliation Act of 1987, nursing facilities have a major role in
designing plans of care for each of their patients.  The act imposed
requirements that nursing facilities provide those services and
activities necessary to attain or maintain the highest practicable
physical, mental, and psychosocial well-being of each resident.  Upon
a patient's admission to a facility, a registered nurse must conduct
or coordinate a comprehensive assessment of medical, nursing, mental,
and psychosocial needs.  The facility must then develop a
comprehensive plan of care for the patient that includes measurable
objectives and timetables to meet the patient's needs identified in
the comprehensive assessment.  Each assessment must be reviewed at
least every 3 months; any revisions must be reflected in the
corresponding plan of care. 


--------------------
\4 Stays in nursing facilities are primarily paid by the individual
or Medicaid. 


   INSTANCES OF WRONGFUL BILLING
   SUGGEST WIDESPREAD ACTIVITY
------------------------------------------------------------ Letter :3

Fraudulent and abusive practices by some providers who furnish
services and supplies to nursing facility patients entail billing
Medicare for unnecessary or undelivered services and supplies or
misrepresenting a service or supply item to obtain Medicare
reimbursement as the following examples show: 

  A company billed Medicare for heart monitoring services provided to
     nursing facility patients.  The diagnoses entered on the
     Medicare claims forms by the laboratory were false and did not
     reflect the patients' condition at the time services were
     ordered and rendered.  Medicare overpaid this company an
     estimated $4.3 million.\5

  An optometrist filed Medicare claims for services either not
     medically necessary or not provided to nursing facility patients
     from 1991 through 1993.  Medicare paid this practitioner over
     $190,000 for these services. 

  A supplier billed Medicare for ostomy, enteral, and surgical
     dressing supplies that it had not delivered and forged the
     attending physicians' signatures on the certificates of medical
     necessity using samples of signed orders found in patients'
     files.  This case involved about 4,000 fraudulent claims
     totaling about $1.5 million. 

These fraudulent and abusive activities involve a wide array of
provider types, including ambulance service companies, dentists,
medical equipment suppliers, general practitioners, internists,
laboratories, optometrists, podiatrists, psychiatrists, and
psychologists.  The actual extent of the problem cannot be
quantified, but the evidence suggests that it is widespread.\6 Our
review of ongoing and completed investigations by Medicare carriers
and HHS OIG included cases encompassing at least 41 states, the
District of Columbia, and Puerto Rico.  Thirty of the providers in
these cases operated in multiple states as these examples illustrate: 

  A supplier currently under investigation for allegedly billing
     Medicare for surgical dressing kits and components that were not
     provided or medically necessary operates in at least 20 states. 

  Another supplier with offices in at least seven states billed
     Medicare for incontinence supplies that were inflated in price,
     not provided, or not medically necessary.\7

  Another company under investigation for inappropriately billing
     Medicare for heart monitoring services operates in at least 11
     states. 

Because data on fraud and abuse have not been accumulated based on
place of service, investigators cannot quantify the extent of
Medicare fraud and abuse involving the provision of services and
supplies to nursing facility patients.  Medicare carriers and OIG
officials believe, however, that fraud involving services provided in
nursing facilities is significant.  In 1994, the Senate Special
Committee on Aging reported a considerable number of cases involving
the targeting of nursing facility patients by industries that supply
products and services directly to them.\8 Also in 1994, OIG reported
on a completed investigation in which Medicare had paid over $7.4
million to a billing company (representing 70 nursing facilities in 7
states) that had billed for surgical dressings supplied to nursing
facility patients who had had no surgery.  And in February 1995
testimony before the House Committee on Ways and Means, Subcommittee
on Health, the Inspector General reported that about half of the $230
million Medicare approved in 1993 nationally for incontinence
supplies was questionable.  The Inspector General noted that "the
potential for great profit provides an incentive for fraudulent
marketing and billing schemes which target the entire nursing home
population of Medicare beneficiaries."\9


--------------------
\5 An additional $655,000 approved for payment was withheld by the
Medicare claims processing contractor once the contractor had
identified the problem. 

\6 See app.  II for examples of closed fraud investigations. 

\7 The controller of the parent company recently pled guilty to
submitting more than $4.4 million of false and fraudulent claims to
one Medicare carrier and similarly submitting millions of dollars of
bogus claims to other carriers. 

\8 Gaming the Health Care System, Billions of Dollars Lost to Fraud &
Abuse Each Year, Investigative Staff Report of Senator William S. 
Cohen, Ranking Minority Member, Senate Special Committee on Aging
(July 7, 1994). 

\9 Statement by Michael Mangano, Principal Deputy Inspector General,
Office of Inspector General, HHS, for Oversight Hearings Before the
House of Representatives, Committee on Ways and Means, Subcommittee
on Health (Feb.  6, 1995). 


   SERVICES PROVIDED AT NURSING
   FACILITIES SUSCEPTIBLE TO FRAUD
   AND ABUSE
------------------------------------------------------------ Letter :4

The nursing facility setting can be an inviting target of opportunity
for the unscrupulous provider of part B services and supplies. 
First, a vulnerable population grouped together at a single location
offers the opportunity for volume billing.  Second, HCFA's provisions
for reimbursing providers of these part B services and supplies
furnish little early warning of egregious overutilization or rapid
increases in billings. 


      NURSING FACILITIES DO NOT
      ALWAYS MONITOR SERVICES OR
      SUPPLIES FURNISHED BY
      OUTSIDE PROVIDERS
---------------------------------------------------------- Letter :4.1

Federal requirements call for nursing facilities to perform numerous
tasks to monitor and meet patient care needs, but there are no
similar requirements to monitor claims submitted directly to Medicare
for services or supplies provided to nursing facility patients. 
HCFA's reimbursement system for part B services and supplies allows
providers to bill Medicare without adequate confirmation that the
care or items were necessary or were delivered as claimed.  As a
result, the program is highly vulnerable to exploitation.  Also,
despite the emphasis on patient care, the cases we reviewed
demonstrate that nursing facilities often do not control provider
access to records closely enough and opportunists are permitted to
exploit Medicare. 

Nursing facilities generally do not have the in-house capability to
provide all the services and supplies that patients need. 
Accordingly, outside providers market their services and supplies to
nursing facilities to meet the needs of the facilities' patients. 
OIG has reported that provider representatives typically enter
nursing facilities and offer to handle the entire transaction--from
reviewing medical records to identify those patients their products
or services can help, to billing Medicare--with no involvement by
nursing facility staff.\10 Some facilities allow providers or their
representatives to review patient medical records despite federal
regulations that prohibit such unauthorized review.\11 These
representatives gain access to records not because they have any
responsibility for the direct care of those patients, but because
they want to market their services or supplies.  We found that
unscrupulous providers can obtain all the information necessary to
order, bill, and be reimbursed by Medicare for services and supplies
that are in many instances not necessary or even provided.  The
following are two examples of this practice: 

  A supplier obtained a list of Medicare patients at three nursing
     facilities together with their Medicare numbers from another
     supplier who had access to specific Medicare billing information
     for certain patients at these facilities.  The first supplier
     billed Medicare for large quantities of supplies that were never
     provided to these patients and then paid the second supplier
     half of the approximately $814,000 it received in reimbursement. 

  A group optometrical practice performed routine eye examinations on
     nursing home patients, a service not reimbursable by Medicare. 
     The optometrist was always preceded by a sales person who
     targeted the nursing facility's director of nursing or its
     social worker and claimed the group was offering eye
     examinations at no cost to the facility or the patient.  The
     nursing facility gave the sales person access to patients'
     records, and this person then obtained the information necessary
     to file claims.  Nursing staff would obtain physicians' orders
     for the "free" examinations, and an optometrist would later
     arrive to conduct the examinations.  The billings to Medicare,
     however, were for services other than eye examinations--services
     that were never furnished or were unnecessary. 

The OIG and HHS attorneys with whom we spoke agreed that granting
providers of services and supplies unauthorized access to medical
records contributes to fraud and billing abuse.\12 They stated that
except in specific cases in which a resident's safety is jeopardized
as a result, HHS lacks clear authority to impose monetary or other
penalties on nursing facilities solely for providing such access. 


--------------------
\10 See Marketing of Orthotic Body Jackets (OEI-04-92-01081, Mar. 
1994) and Marketing of Incontinence Supplies (OEI-03-94-00770, Dec. 
1994). 

\11 Based on 42 CFR 483.75(l)(4), all information contained in the
patients' records must be kept confidential except when release is
required by (1) transfer to another health care institution; (2) law;
(3) third party payment contract; or (4) the resident. 

\12 OIG refers to this practice in an August 1995 Special Fraud Alert
entitled, "Fraud and Abuse in the Provision of Medical Supplies to
Nursing Facilities."


      LITTLE CHANCE OF TIMELY
      DETECTION OF EXCESSIVE
      MEDICARE REIMBURSEMENTS
---------------------------------------------------------- Letter :4.2

Although carriers employ a number of effective automated controls to
prevent or remedy some inappropriate payments, such as suspending
claims for further review that do not meet certain conditions for
payment, our work shows that outlandish charges or very large
reimbursements routinely escape the controls and typically go
unquestioned.  The carriers we reviewed had not put any "triggers" in
place that would halt payments when cumulative claims exceed
reasonable thresholds. 

Our analysis showed that as a result, Medicare has reimbursed
providers, who were subsequently found guilty of fraud or billing
abuses, large sums of money over a short period without the carrier
becoming suspicious.  The following examples highlight the problem: 

  A supplier submitted claims to a Medicare carrier for surgical
     dressings furnished to nursing facility patients.  In the fourth
     quarter of 1992, the carrier paid the supplier $211,900 for
     surgical dressing claims.  For the same quarter a year later,
     the contractor paid this supplier more than $6 million without
     becoming suspicious despite a 2,800-percent increase in the
     amount paid. 

  A carrier's payments for a supplier's body jackets claims averaged
     about $2,300 per quarter for five consecutive quarters, then
     jumped to $32,000, $95,000, $235,000, and $889,000 over the next
     four quarters, with no questions raised by the carrier.\13

In other instances, we found that providers subsequently investigated
for wrongdoing billed and were paid for quantities of services or
supplies that could not possibly have been furnished or necessary as
these examples illustrate: 

  A carrier reimbursed a clinical psychology group practice for
     individual psychotherapy visits lasting 45 to 50 minutes when
     the top three billing psychologists in the group were allegedly
     seeing from 17 to 42 nursing facility patients per day.  On many
     days the leading biller of this group would have had to work
     more than 24 uninterrupted hours to provide the services he
     claimed. 

  A carrier paid a podiatrist $143,580 for performing surgical
     procedures on at least 4,400 nursing facility patients during a
     6-month period.  For these services to be legitimate, the
     podiatrist would have had to serve on average at least 34
     patients per day, 5 days per week. 

The Medicare carriers in these two cases did not become suspicious
until they received complaints from family members, beneficiaries, or
competing providers.  In other cases, the carriers initiated their
investigations because of their analysis of paid claims (a practice
referred to as postpayment medical review), which focuses on those
providers that appear to be billing more than their peers for
specific procedures.  One carrier, for instance, reimbursed a
laboratory $2.7 million in 1991 for heart monitoring services
allegedly provided to nursing facility patients and $8.2 million in
1992.  The carrier was first alerted in January 1993 through its
postpayment review efforts when it noted that this laboratory's
claims for monitoring services exceeded the norm for its peers. 

In all these cases, the large increases in reimbursements over a
short period or the improbable cumulative services claimed for a
single day should have alerted carriers to the possibility that
something unusual was happening and prompted an earlier review.  For
example, people do not usually work 20-hour days, and billings by a
provider for a single procedure do not typically jump 13-fold from
one quarter to the next or progressively double every quarter. 


--------------------
\13 A body jacket is a custom-fitted spinal brace made of a rigid
plastic material that conforms to the body and provides a high degree
of immobility. 


      LIMITED RECOVERY OF LOSSES
---------------------------------------------------------- Letter :4.3

Although Medicare carrier postpayment reviews do lead to fraud and
billing abuse investigations, from the perspective of curtailing
fraudulent or abusive billing activities, we found that these reviews
often happen too late.  In all the cases cited previously, the
carriers did investigate the providers, but by the time the
investigations began, Medicare had already made millions of dollars
in unwarranted payments.  The risk to the Medicare program, as
evidenced by the fraud cases we reviewed, is that relatively little
of the money inappropriately paid out is recovered as the following
examples show:\14

  The owners of a company that had received over $4.3 million from
     Medicare based on fraudulent claims for heart monitoring argued
     before the court that $250,000 was the most they could repay. 
     In the settlement agreement, they agreed to reimburse Medicare
     $250,000, plus interest, and be excluded from the Medicare
     program for 5 years. 

  The optometrist mentioned previously who billed for services never
     rendered and for undocumented consultations agreed, in a civil
     settlement, to refund $30,000 to Medicare over a 35-month period
     and to be excluded from the program for 3 years.  Although
     Medicare had reimbursed this provider over $450,000 on the basis
     of false or misleading claims, the case was settled for less
     because the provider had no assets from which the overpayments
     could be recovered. 

  Several companies under investigation since early 1993 for the
     submission of false claims for heart monitoring services have
     billed Medicare large sums over a 6- to 9-month period and then
     have gone out of business when Medicare began making billing
     inquiries.  For example, within a month of Medicare's contacting
     one company for medical records, the company--which had already
     been paid at least $1.4 million--closed its operations making it
     unlikely that Medicare can recover inappropriate payments. 


--------------------
\14 See also our testimony on this subject, Medicare:  Modern
Management Strategies Needed to Curb Program Exploitation
(GAO/T-HEHS-95-183, June 15, 1995). 


   OPTIONS FOR REIMBURSING PART B
   CLAIMS FOR SERVICES PROVIDED TO
   NURSING FACILITY PATIENTS
------------------------------------------------------------ Letter :5

Our analysis showed that a major contributing factor to fraudulent
and abusive billings for services and supplies provided nursing
facility patients is that no one is ensuring that what is billed for
is necessary or actually provided.  Because nursing facilities
already have a significant role in planning and providing patient
care, they are the likely entity to scrutinize providers'
reimbursement claims for services administered to the facilities'
patients. 

Several options for making nursing facilities accountable for costs
incurred on behalf of their patients were suggested during our
discussions with federal officials and such nursing facility industry
representatives as the American Health Care Association.  Each option
would require a basic change in the way Medicare reimburses part B
services and supplies provided to nursing facility patients: 

  Unified billing by the nursing facility:  Under this approach, the
     nursing facility would bill Medicare for all services it is
     authorized to furnish to patients, whether payment is sought
     from part A or B.  This would be the case whether the facility
     provided the care itself or contracted for the services or
     supplies to be provided by someone else.  Outside providers
     would be prohibited from billing Medicare directly and would, in
     effect, have to have agreements with nursing homes.  Absent an
     agreement, the nursing facility could not bill Medicare because
     it would not be financially liable or medically responsible for
     the care.  By contrast, under the current system, outside
     providers can bill Medicare directly, without scrutiny by anyone
     where the care is delivered.  Unified billing by the nursing
     facility would make it easier for Medicare to identify all the
     services furnished to residents, which in turn would make it
     easier to control payments for those services. 

  Capping payments:  An alternative to paying on a fee-for-service
     basis as Medicare now does is to pay a fixed amount per
     beneficiary.  This approach mirrors the payment method Medicare
     uses to reimburse most health maintenance organizations (HMO)
     serving Medicare beneficiaries.\15 As with HMOs, Medicare would
     pay the nursing facility a fixed amount per month for all part B
     services and supplies provided to each resident beneficiary.\16
     A variant, one that would apply only to skilled nursing
     facilities, would mirror the way Medicare pays hospitals for
     inpatient care.  As with hospitals, Medicare would pay nursing
     facilities a predetermined fixed amount per patient based on the
     type of case or diagnosis-related group into which the patient
     is classified.  Both variants of the capped payment approach
     would, by definition, limit Medicare outlays for these services,
     eliminating providers' incentive to provide too many services. 
     By the same token, the incentive for nursing facilities to
     profit from accepting fixed payments while providing fewer
     services than necessary would need to be addressed.  A further
     difficulty in these approaches is in establishing reasonable
     rates given the wide range of services provided individual
     nursing facility patients. 


--------------------
\15 HMOs were designed to offer health services less expensively and
to constrain the provision of extensive services, primarily through a
reimbursement method known as capitation.  Under capitation Medicare
pays HMOs a fixed amount per month for each beneficiary.  This method
typically places HMOs at risk for health costs, thereby giving them a
financial incentive to control the use of services and avoid
unnecessary care.  HMOs may use their own staff of physicians and
other providers to deliver care or may contract with individual
providers or medical groups to deliver services. 

\16 The current method for reimbursing risk contract HMOs is not
without its problems.  See Medicare Managed Care:  Program Growth
Highlights Need to Fix HMO Payment Problems (GAO/T-HEHS-95-174, May
24, 1995). 


   CONCLUSIONS
------------------------------------------------------------ Letter :6

Under Medicare neither the nursing facility nor the physician ensure
that the services and supplies outside providers claim to have
furnished to beneficiaries in nursing facilities are in fact
necessary and actually provided.  As a result, services provided to
Medicare beneficiaries in nursing facilities offer a target of
opportunity for the fraudulent schemes and billing abuses of the
dishonest provider.  To address the root cause of this accountability
issue, Medicare needs to change the way it reimburses for services
and supplies furnished patients in nursing facilities.  Options range
from those that can be implemented in the short term, such as
allowing only nursing facilities to bill for all services and
supplies provided to their patients, to the more difficult long-term
solutions, such as capitation or prospective payment systems.  All
these options address the accountability issue, but more study is
needed to assess the comparable costs and benefits of these options. 

Certain immediate actions would help stem losses.  First, carriers
could establish computerized payment controls that, before payment,
would detect and automatically suspend for further review claims that
exceeded established thresholds for charges and utilization.  The
thresholds need not be based on statistical averages, but they should
be based on an assumption about what is reasonable activity for
specific procedures, provider types, beneficiaries, and places of
service.  Such controls could provide timely warnings and trigger
investigations of potentially fraudulent and abusive billings before
large sums were paid out.  Second, nursing facilities should be held
accountable for the unauthorized disclosure of patient medical
records.  Giving providers or their representatives inappropriate
access to patient medical records was a major contributing cause to
the fraud and abuse cases we reviewed.  Although such disclosure is
contrary to program regulations, HCFA or HHS generally cannot levy
penalties, monetary or otherwise, against a nursing facility for that
unauthorized disclosure. 


   RECOMMENDATION TO THE CONGRESS
------------------------------------------------------------ Letter :7

To curtail the practice of giving providers unauthorized access to
beneficiary medical records, the Congress should authorize HHS OIG to
establish monetary penalties that could be assessed against nursing
facilities that disclose information from patients' medical records
not in accord with existing federal regulation. 


   RECOMMENDATIONS TO THE
   SECRETARY OF HHS
------------------------------------------------------------ Letter :8

We recommend that the Secretary of HHS direct the Administrator of
HCFA to

  establish, for procedure billing codes by provider or beneficiary,
     thresholds for unreasonable cumulative levels or rates of
     increase in services and charges, and to require Medicare
     carriers to implement automated screens that would suspend for
     further review claims exceeding those thresholds; and

  undertake demonstration projects designed to assess the relative
     costs and benefits of alternative ways to reimburse nursing
     facilities for part B services and supplies; these alternatives
     should include such options as unified billing by the nursing
     facility and some form of capped payment. 


   AGENCY COMMENTS
------------------------------------------------------------ Letter :9

We provided HHS an opportunity to comment on our draft report, but it
did not do so in time for comments to be included in the final
report.  We did discuss the report's contents with HCFA officials who
generally agreed with our findings. 


---------------------------------------------------------- Letter :9.1

As agreed with your office, unless you publicly announce its contents
earlier, we plan no further distribution of this report until 15 days
from the date of this letter.  At that time, we will send copies of
this report to the Secretary of HHS, the Administrator of HCFA,
interested congressional committees, officials who assisted our
investigation, and other interested parties.  We will also make
copies available to others upon request. 

Please call me at (202) 512-7119 or Donald B.  Hunter or Roland A. 
Poirier, Jr.  at (617) 565-7500 if you have any questions. 

Sincerely yours,

Edwin P.  Stropko
Associate Director
 Health Financing Issues


SCOPE AND METHODOLOGY
=========================================================== Appendix I

To develop the information in this report, we interviewed officials
at HCFA's central office and the HHS Office of the Inspector General
in Baltimore; three Medicare carriers responsible for processing part
B claims in 9 geographic areas; three regional OIG Offices of
Investigations with combined investigative jurisdiction over 17
states; one durable medical equipment regional carrier responsible
for processing durable medical equipment, prosthetic, orthotic, and
supply claims in 14 states and 2 U.S.  territories; and trade
associations representing both the nursing home industry and
providers of services and supplies.  Because information we obtained
from the three Medicare carriers and OIG offices involves cases under
active investigation, we did not disclose the locations of these
offices nor did we reveal identifying details about these cases, such
as the providers' names and the states in which they operate. 

To examine the nature and extent of inappropriate and abusive billing
for services and supplies to nursing facility patients, we (1) asked
the carriers' fraud units to identify cases involving services and
supplies provided to patients in nursing facilities--both ongoing
cases and those referred to OIG in the previous 24 months;\17 (2)
performed a detailed file review of each identified case and obtained
and reviewed copies of relevant documents; (3) discussed cases with
carrier officials, as needed, and met with OIG officials to discuss
the status of cases that carriers had referred to them for
investigation; and (4) asked OIG officials to identify any additional
investigations completed within the previous 12 months and ongoing
investigations dealing with services and supplies furnished to
Medicare patients in nursing facilities.  In all, we reviewed 70
ongoing or completed investigations.  Nearly all of these
investigations were initiated by either the carrier or OIG offices
during the 1992 to 1994 time frame.  We interviewed carrier and OIG
officials.  We also reviewed several independent studies related to
the provision of services and supplies to nursing facility patients
done by OIG and the Senate Special Committee on Aging. 

To examine the reasons inappropriate and abusive billings for
services and supplies occur in the nursing facility setting, we
reviewed carrier case files for each investigation, obtained court
documents when applicable, and interviewed carrier and OIG
investigators working on those individual cases.  We analyzed this
information to try to identify the specific programmatic factors that
make services for beneficiaries in nursing facilities vulnerable to
fraud and abuse. 

Finally, to identify options for removing opportunities for fraud and
abuse, we reviewed the literature and held discussions with carrier,
OIG, and trade association officials to solicit their views on ways
to minimize fraud and abusive billing practices in the nursing
facility environment. 

We conducted our review between April 1994 and August 1995 in
accordance with generally accepted government auditing standards. 


--------------------
\17 The carriers we visited could not reliably identify all cases
under investigation that involved the provision of services and
supplies by outside providers to nursing facility patients. 
Carriers, accordingly, had to rely on memory when we asked them to
identify such cases. 


CLOSED FRAUD CASE SUMMARIES
========================================================== Appendix II

Following are summaries of fraud cases that were closed by the time
we completed our review.  The defendants pled guilty or were
convicted of the charges brought against them. 


   CASE A
-------------------------------------------------------- Appendix II:1

In August 1991, a carrier received the first of three complaints from
Medicare beneficiaries alleging that an optometrist was billing
Medicare for more services than he actually provided.  After
reviewing the supporting medical records, however, the carrier
determined that for these instances the services were documented as
billed.  In December 1991, another beneficiary called the carrier and
stated that she had not received the office services claimed by this
optometrist and in fact had not seen any physician during the month
he claimed services were provided.  Another complaint was received
from the daughter of a beneficiary residing in a nursing home.  The
daughter stated that she had only authorized an eye examination, but
the charges submitted to Medicare were for multiple services provided
for both eyes--although her father had only one eye.  In January
1992, the carrier's claims processing department alerted the
carrier's program integrity unit of 98 suspicious claims submitted by
this provider for services allegedly rendered in December to nursing
home patients.  All the claims cited exactly the same procedure codes
and diagnoses; the only differences were dates of service and
beneficiary identification information.  From this universe, the
carrier randomly sampled 10 beneficiary records from two nursing
homes and found that the nursing homes had no records documenting the
services claimed by this optometrist.  On May 21, 1992, the carrier
summarized this information and referred the case to OIG.  By that
time, Medicare had paid this provider $117,534 since 1990. 

OIG notified the carrier in June 1992 that it would not pursue this
case criminally but that it would retain jurisdiction for civil
prosecution.  At OIG's request, the carrier placed this provider on
100-percent prepayment review by the end of July, which meant that
every claim the provider submitted was reviewed before payment was
issued.  Additionally, the carrier completed a postpayment review on
this provider's billings and reported in January 1993 that medical
necessity appeared questionable for many claims and that nursing home
visits and consultation requests were not documented.  The
optometrist requested a hearing before the Medicare hearing officer
to review the carrier's continuing reimbursement denials.  The
hearing officer ruled in November 1993 that all 157 claims submitted
for diagnostic eye services for 154 nursing home patients between
August and October 1992 were questionable.  The carrier had denied
all but three of these claims, but the hearing officer ruled that
these too were overpaid.  According to carrier files, the optometrist
was still on prepayment review in March 1994.  Although the
optometrist's billing volume had significantly decreased, the carrier
noted that he continued to bill for the same type of procedures
previously denied.  As late as October 1994, the carrier was still
receiving complaints about this provider. 

On January 16, 1995, the optometrist signed a settlement agreement in
U.S.  District Court whereby he admitted to knowingly filing false,
misleading, or otherwise fraudulent Medicare claims for services
either not medically necessary or not provided from 1991 through 1993
for which Medicare had paid him over $191,276.  Under this agreement
he would repay $35,000 and be excluded from the Medicare program for
at least 3 years.  The exclusion would extend for as long as the
$35,000 assessed against him was not repaid. 


   CASE B
-------------------------------------------------------- Appendix II:2

A beneficiary's husband complained to the Medicare carrier that a
supplier was billing Medicare for more supplies than it actually
provided for his wife.  The carrier referred this case to OIG, which
opened its investigation on December 7, 1990.  The company in
question focused on publicly funded facilities in several states,
such as state veterans homes or state-funded chronic disease or
long-term care hospitals.  The owner would approach facility
administrators and offer to provide supplies for Medicare patients at
no cost to the facility.  This was an attractive proposition to these
facilities, which typically have limited financial resources.  The
facility administrators gave the provider complete access to patient
medical records.  The suppliers reviewed all records, identified
Medicare beneficiaries, obtained their Medicare numbers, developed
lists of supplies based on diagnoses, identified attending
physicians, and made copies of signed physician orders in the files. 
The supplier then billed Medicare for ostomy, enteral, or surgical
dressing supplies that it delivered after September 1990, but it also
billed for supplies it had never delivered to those beneficiaries
over the previous 2 years.  The supplier provided certificates of
medical necessity by forging the attending physicians' signatures on
the certificates using samples of signed orders found in the
patients' files.  The case involved about 4,000 fraudulent claims
totaling about $1.5 million. 

The defendant was indicted on April 6, 1994, and pled guilty on May
5, 1994, to mail fraud, engaging in monetary transactions in
criminally derived property, money laundering, and Medicare fraud. 
The defendant agreed to forfeit all property resulting from these
fraudulent transactions, including about $328,000 in several bank
accounts.  The defendant was sentenced on October 19, 1994.  This
judgment was amended on November 21, 1994, to finalize the
overpayment amounts.  He was sentenced to 54 months in federal
prison.  Upon release from imprisonment, the defendant would be on
supervised release for a term of 3 years provided he had made
restitution as ordered by the court of $971,000 to Medicare and
$60,000 to Medicaid. 


   CASE C
-------------------------------------------------------- Appendix II:3

A Medicare carrier's fraud and abuse unit received over 30 complaints
from beneficiaries, family members, and other informants that a
provider was billing for supplies that had not been furnished or were
not needed.  In August 1991, the carrier referred the case to OIG for
investigation.  OIG found that from April through June 1991, the
provider filed claims totaling $666,560 on behalf of 1,096
beneficiaries for 65,833 liquid skin barriers.  In addition, the
provider filed claims totaling $11,406 on behalf of 319 beneficiaries
for 1,210 adhesive removers or solvents.  Medicare had paid the
provider a total of $263,222 for both items, and most of the claims
were for beneficiaries who were residing in nursing homes in another
state.  In addition to the payments made, the carrier was withholding
payment on 9,500 claims totaling about $3.5 million. 

OIG visited the provider and found that the provider rented a small
office and apparently did not furnish any supplies from this
location.  The provider, in effect, was a storefront operation or
shell company.  OIG believed the supplies originated from the
provider's parent company located in another state that also owns
supply companies in at least six other states.  On the basis of its
investigation, OIG believed the provider had (1) billed Medicare for
items that were not supplied, (2) misrepresented the items that were
supplied, (3) misrepresented the place of service, (4) misrepresented
the medical conditions of patients who received the supplies, and (5)
paid kickbacks to nursing home officials to induce business.  Also,
OIG found that the provider gained access to patient medical records,
obtaining diagnostic information and the names of beneficiaries'
attending physicians.  The provider then entered the physicians'
names on claim forms; physician orders were often nonexistent.  OIG
concluded that the supplier served merely as a conduit for submitting
claims to the Medicare carrier and receiving checks.  The funds were
then transferred to the parent company. 

On April 24, 1995, an officer of the parent company pled guilty to
submitting more than $4.4 million of false and fraudulent claims to
one Medicare carrier and similarly submitting millions of dollars
worth of false and fraudulent claims to other Medicare carriers.  The
provider billed Medicare for supplies at inflated rates as well as
for supplies that were not provided or not medically
necessary--including billing supplies for patients who had died.  In
one instance, the provider billed Medicare $2,790 for surgical
dressing kits that were never provided; instead, the provider
furnished the patient 62 gauze bandages costing less than $20.  Under
a plea agreement, the officer of the company agreed to cooperate with
federal authorities in their attempts to identify others involved in
the conspiracy.  In return, the U.S.  Attorney will recommend a
prison term not to exceed 15 months. 


   CASE D
-------------------------------------------------------- Appendix II:4

After reviewing a Medicare explanation of benefits notice, a
beneficiary's son questioned why his mother--a nursing home
resident--received such large quantities of supplies.  In
investigating the matter, the Medicare carrier determined that the
provider was billing for supplies that were not provided.  OIG began
its investigation in July 1990.  On November 8, 1990, a federal grand
jury returned a 623-count indictment against the two providers it
alleged obtained payment for false, fictitious, and fraudulent claims
submitted for approximately 120 nursing home patients in three
facilities in different states.  One supplier (supplier #1) submitted
the false claims to the carrier knowing that the supplies had never
been provided.  Another supplier (supplier #2) had given supplier #1
billing information for the patients in the three nursing
facilities--patient names, Medicare numbers, diagnoses, treating
physicians, and so forth.  As part of the conspiracy, supplier #2
received a kickback from supplier #1 equal to 50 percent of the money
received from the carrier for the false claims.  Between June 7 and
August 8, 1990, the carrier paid about $813,973 for false claims--an
average of about $6,783 per patient. 

On September 30, 1991, as a result of plea-bargaining, supplier #2
pled guilty to one count of conspiracy to defraud the United States
with respect to claims, one count of submitting false claims, and one
count of mail fraud.  On January 9, 1992, the vice president of
supplier #2 was sentenced to 26 months in jail and ordered to repay
$75,000 to HHS and pay a special assessment of $150.  The company
itself was also fined $5,000 and ordered to pay a special assessment
of $100.  On November 6, 1991, supplier #1 was found guilty after
trial of all 623 counts.  On February 4, 1992, the president of
supplier #1 was sentenced to 24 months of incarceration and ordered
to repay $300,000 to HHS and pay a special assessment of $31,150. 
The company was also fined $1,000 and ordered to pay a special
assessment of $62,200. 

In November 1994, a civil case against supplier #1 was settled with a
summary judgment.  Supplier #1--which is out of business and
bankrupt--was ordered to pay $4,955,000.  Toward this amount, the
government applied the $407,121 seized from the company's corporate
account and has up to 30 years to recover the remainder of the funds
from the president of the company. 


   CASE E
-------------------------------------------------------- Appendix II:5

On February 3, 1992, a Medicare carrier received a complaint
forwarded from the daughter of a beneficiary.  The complaint
concerned a wheelchair cushion that should have cost less than $100
but that was charged to Medicare as a $1,503 custom-fitted body
jacket.  After receiving several complaints from family members of
other nursing home residents and nursing home staff, the carrier
noted the increased billings by the supplier submitting this claim
and started to review related nursing home records.  Carrier medical
staff determined that services the supplier billed Medicare for were
not provided, beneficiaries were not measured for a custom fit, the
beneficiaries' condition could not be improved by using the jackets,
physical therapy was billed for but neither ordered nor received, and
the physicians only signed prescriptions that had been prepared by
someone else.  By mid-May, the carrier had received 38 complaints
against this supplier of which 34 pertained to body jackets.  By
mid-August, the inquiries concerning this supplier had increased to
50.  The carrier referred this case to OIG on August 25, 1992. 

OIG's investigation revealed that this supplier actually started
marketing wheelchair cushions with adjustable straps as Medicare-
reimbursable custom-fitted body jackets in 1991.  Sales
representatives for the supplier would market the body jackets to the
directors of nursing as fully Medicare covered and promise that no
real attempt would be made to collect the co-payments from the
beneficiaries.  They would offer to go into the nursing facility
files to obtain the patient information needed to prepare claims and
certificates of medical necessity.  Usually, the facility allowed
such access; in other cases, the facility provided the necessary
information.  In some cases, the supplier gained access to nursing
homes by providing kickbacks in the form of payments on insurance
policies or to individuals to induce them to order exclusively from
this supplier. 

The sales people obtained physicians' signatures on the certificates
of medical necessity by assuring physicians that the director of
nursing had requested the items and that the items would cost the
patients nothing.  The certificates would be sent to the supplier's
headquarters, where employees would add or delete wording from the
signed certificates to guarantee Medicare payment.  By December 1992,
Medicare had paid this supplier over $1.6 million for wheelchair
cushions misrepresented as body jackets. 

Seven persons involved in this fraudulent scheme were indicted and
pled guilty; all were sentenced in fall 1994.  The owner of the
company was sentenced to 33 months in jail followed by 3 years on
supervised release and was ordered to make restitution to Medicare of
$386,508.  Two other principal defendants connected with the firm
were placed on probation for 5 years and each was ordered to make
restitution of $386,508.  Two persons convicted of receiving
kickbacks were each placed on probation for 5 years and fined $9,000
and $10,000, respectively.  (Two other defendants, who assisted in
the investigation, pled guilty to lesser charges and executed
agreements for pretrial diversion.  Under these agreements, if they
provided 100 hours of community service and abided by the conditions
of the agreement, charges against them would be dismissed after 1
year and the record would be erased.)


   CASE F
-------------------------------------------------------- Appendix II:6

In September 1992, the granddaughter of a beneficiary reported to the
carrier that her grandmother had never received a custom-fitted back
brace (commonly referred to as a body jacket) that had been billed to
Medicare by this supplier.  One month later, a similar complaint was
received from the husband of another beneficiary.  The following
month, the daughter of a third beneficiary wrote to the carrier
complaining of a claim for a body jacket that her mother did not need
or use.  When she went to the nursing home, she learned that her
mother and others had refused to accept the body jackets and the
nursing home had put them in storage.  After talking to the
administrator and nurses at the home, the daughter learned that a
representative of the supplier came to the nursing home, checked
patients' records, and left forms to be completed for products the
patients qualified for.  This complainant stated that this supplier
appeared to be operating out of a residence:  there was no telephone
listing for the company.  In December, the daughter of another
beneficiary wrote to the carrier complaining about the "ridiculous"
charge for a body jacket that was provided without her knowledge or
consent. 

This supplier was established for the sole purpose of selling body
jackets, which it sold primarily to nursing home patients.  Company
representatives went to nursing homes to sell wheelchair pads, which
they asserted were reimbursable by Medicare.  These representatives
told nursing home personnel and beneficiaries that the beneficiaries
would not be responsible for any costs not reimbursed by Medicare. 
The company representatives also prepared certificates of medical
necessity for the wheelchair pads sold and obtained physicians'
signatures.  The company then billed Medicare for body jackets. 
According to carrier correspondence, this supplier had been
reimbursed $564,808 for body jackets from July 1, 1992, through
December 31, 1993. 

On March 24, 1993, the carrier referred this case to OIG, noting that
on the basis of the allegations and information it had obtained, the
body jackets billed did not appear to be customized and the
prescriptions appeared to be completed by someone other than the
listed physicians.  In its referral letter, the carrier reported that
this supplier had received nearly $416,000 from Medicare during the
last 6 months of 1992.  All claims were for a $1,289 body jacket. 

On June 16, 1995, a plea agreement was filed in court in which the
company pled guilty to one count of mail fraud and agreed to repay
$450,000 to Medicare.  As part of the consideration for this plea
agreement, the president of this company agreed to testify before
grand juries or at trials on matters involving other persons under
investigation for this same type of fraudulent scheme. 


   CASE G
-------------------------------------------------------- Appendix II:7

A Medicare carrier's fraud and abuse unit began investigating a
laboratory on January 29, 1991, on the basis of a complaint by a
beneficiary's daughter.  The daughter stated her mother did not order
the services for which Medicare paid the laboratory $142.  Nor had
the services been ordered by the beneficiary's doctor or the nursing
home where the beneficiary resided.  The carrier reviewed the
pertinent medical records for 15 beneficiaries in three nursing homes
in two different states and found that none of the services were
medically necessary.  For 14 beneficiaries, there were no physician
orders requesting the services, and for the remaining beneficiary,
the diagnosis submitted with the claim was not documented.  The
carrier identified an overpayment of $10,520 for 19 claims paid
during a 4-month period. 

On August 13, 1991, the carrier referred this case to OIG for further
investigation.  Following this referral, the carrier received several
additional complaints against this laboratory.  For example, a
beneficiary's legal guardian learned that Medicare paid the
laboratory $706 for the telephonic transmission of 21
electrocardiogram (EKG) rhythm strips over a 2-week period.  She
contacted the beneficiary's physician and learned that the physician
did not authorize or have any prior knowledge of such tests.  In
another complaint, a former employee stated the laboratory's
salespeople contacted doctors regarding its cardiac monitoring
system.  If doctors signed up for the service, they had to provide
listings of their heart patients in nursing homes.  The laboratory
then sent people to the nursing homes to perform 21 EKGs on each
patient over an 11-day period, with the series of tests to be
repeated three more times during the year.  The laboratory charged
about $1,000 per patient for the 11-day study, or about $4,000 per
year per patient.  However, the doctors generally did not see the
results of the studies.  The laboratory operated all over the
country; one doctor alone had 275 patients on this program. 

As a result of its investigation, OIG concluded that most of the
laboratory's billings for these services were inappropriate.  OIG
found that the laboratory was billing Medicare for EKGs that were
rendered as routine screening diagnostic tests, with no evidence of a
physician evaluation and no indication that the patients were
experiencing an arrhythmia, symptom, or complaint.  OIG pursued the
case as a civil false claims case because the diagnoses entered on
the Medicare claim forms by the laboratory were false--they did not
accurately reflect the patients' conditions at the time the EKG
services were ordered and rendered.  OIG estimated that the actual
Medicare overpayment in this case was about $6 million. 

On February 10, 1994, the laboratory and its three principal owners
entered into an agreement to reimburse HHS $250,000 plus $16,118 in
interest for inappropriate claims.  In addition, the laboratory
waived any future demands for $655,086 in payments (identified
through a special prepayment review effort) that the Medicare carrier
had withheld--thus resulting in a total settlement of $921,204. 
Finally, the provider and its three owners were excluded from
participating in the Medicare program for a 5-year period effective
February 10, 1994. 


   CASE H
-------------------------------------------------------- Appendix II:8

The carrier initiated its review of this optometrist and the group
optometry practice he owns on September 11, 1990.  This review was
based on a beneficiary's letter to the carrier dated July 7, 1990,
alleging that the optometrist performed only an eye examination, not
the surgery he had claimed and had been reimbursed for by Medicare. 
By the time the carrier referred the case to OIG on July 30, 1991, it
had received 19 complaints against the group practice and 2 against
the individual; 19 of these complaints involved beneficiaries in
nursing homes.  The complaints alleged that the providers had billed
Medicare for services that were never furnished or that were not
necessary.  According to a nursing home administrator, a
representative of the group practice would visit nursing homes,
review patient records, and obtain the necessary patient information
to file Medicare claims.  Several days later, an optometrist would
visit the nursing home and render services. 

After reviewing nursing home medical records for 20 beneficiaries,
the carrier concluded that the services billed were not medically
necessary or not documented.  The provider submitted the same
diagnosis and tests on all claims.  The claims identified a referring
physician and charges for consultations, but the records contained no
orders requesting consultations.  On May 15, 1992, OIG requested that
the carrier place both the individual optometrist and the group
practice on 100-percent prepayment review. 

While this case was open, this optometrist wrote not only to the
carrier but also to his congressional delegation alleging
discrimination against him as an optometrist.  He also enlisted the
help of his patients to write to Medicare of his successes and to
provide copies of those letters to their Congress Members and
Senators.  However, the case had nothing to do with the technical
merits of his optometry practice.  He was billing Medicare for
services never rendered to patients and for consultations for which
the medical files showed no physician requests.  A civil settlement
was signed on December 14, 1994, and filed in U.S.  District Court on
January 20, 1995.  Although Medicare reimbursed this provider over
$451,617 based on false, misleading, or otherwise fraudulent claims,
the settlement involved a refund of $30,000 to be paid over a
35-month period and voluntary exclusion from the Medicare program for
3 years.  If the defendant defaults on the financial obligation, the
exclusion continues until the obligation is fully satisfied. 


RELATED GAO PRODUCTS
============================================================ Chapter 0

Fraud and Abuse:  Medicare Continues to Be Vulnerable to Exploitation
by Unscrupulous Providers (GAO/T-HEHS-96-7, Nov.  2, 1995). 

Medicare:  Modern Management Strategies Could Curb Fraud, Waste, and
Abuse (GAO/T-HEHS-95-227, July 31, 1995). 

Medicare:  Adapting Private-Sector Techniques Could Curb Losses to
Fraud and Abuse (GAO/T-HEHS-95-211, July 19, 1995). 

Medicare:  Rapid Spending Growth Calls for More Prudent Purchasing
(GAO/T-HEHS-95-193, June 28, 1995). 

Medicare:  Modern Management Strategies Needed to Curb Program
Exploitation (GAO/T-HEHS-95-183, June 15, 1995). 

Medicare:  Reducing Fraud and Abuse Can Save Billions
(GAO/T-HEHS-95-157, May 16, 1995). 

Medicare Claims Billing Abuse:  Commercial Software Could Save
Hundreds of Millions Annually (GAO/T-AIMD-95-133, May 5, 1995). 

Medicare and Medicaid:  Opportunities to Save Program Dollars by
Reducing Fraud and Abuse (GAO/T-HEHS-95-110, Mar.  22, 1995). 

Medicare:  High Spending Growth Calls for Aggressive Action
(GAO/T-HEHS-95-75, Feb.  6, 1995). 


*** End of document. ***