OIG report questions CMS’ fraud collections. Source: New Mexico Attorney General Office

The Department of Health and Human Services' (HHS) Office of Inspector General (OIG) is expected to file a final report this week criticizing the Centers for Medicare & Medicaid Services (CMS) for overstating its accomplishments in preventing Medicare fraud in the durable medical equipment (DME) industry.

A draft report from the OIG indicates that CMS inaccurately reported that it had reduced Medicare fraud in the industry to about $700 million, The New York Times reported. The CMS findings were based on improper auditing by AdvanceMed, a subsidiary of Computer Sciences, which was hired to audit spending. 

According to the OIG, CMS officials told AdvanceMed to ignore an auditing program, Comprehensive Error Rate Testing (CERT), which is required by law. Under CERT, claims are selected randomly and auditors compare invoices to physicians' records to ensure the spending is justified. The report said that AdvanceMed was told by CMS officials only to examine the invoices from DME suppliers.

The OIG report found that CMS failed to detect more than one-third of fraudulent DME spending in the 2006 fiscal year.

Using data from other Medicare reports, the undiscovered fraud would equal about $2.8 billion, according to the NY Times. The report found that AdvanceMed auditing revealed 7.5 percent of Medicare DME claims were not supported by documentation. The OIG report stated that AdvanceMed would have discovered that 31.5 percent of claims were not supported by documentation had it used CERT.

In response, lawmakers have said that the issue may be brought before the House Committee on Oversight and Government Reform in the fall.

“I want to know what happened, who's responsible, who will be held accountable and what [HHS Secretary Mike Leavitt] will do about it. If people cooked the books, manipulated the methodology or told the contractor to ignore the rules, those individuals need to take the heat,” said Sen. Chuck Grassley, R-Iowa, ranking member of the Senate Finance Committee.

CMS spokesperson Jeff Nelligan told the Miami Herald that the $3 billion figure for improper medical equipment payments that the NY Times attributed to the draft report is "an unsupported extrapolation at this time because the report only cited percentages."

Nelligan added that the agency has far exceeded its “expectations, having reduced the error rate beyond the 2006 goal of 5.1 percent.”