07.22.15

New GAO Report Finds Serious Vulnerabilities to Waste and Fraud with Medicare Provider List

Thousands of invalid addresses, ineligible providers leave program funds at risk

Washington, D.C. – Today, a new report found that the list maintained by the Centers for Medicare and Medicaid Services (CMS) of physicians and other providers authorized to bill Medicare has serious shortfalls and inaccuracies, leaving Medicare vulnerable to hundreds of millions of dollars in in waste and fraud. According to the Government Accountability Office (GAO), the list, known as the Provider Enrollment and Chain/Ownership System (PECOS), included thousands of suspicious and invalid addresses, such as vacant lots, empty offices, and even a fast food location. 

The report, “Medicare Actions Needed to Improve the Eligibility Verification of Provider and Suppliers” (GAO-15-448), requested by Senators Tom Carper (D-Del.), Claire McCaskill (D-Mo.), Susan Collins (R-Maine), Sheldon Whitehouse (D-R.I.), and Ron Johnson (R-Wis.), estimates that of the 980,000 providers in Medicare examined, about 23,000 are potentially ineligible due to invalid addresses. GAO’s report describes about 300 providers who list addresses that are mail box rental stores, 3,200 vacant addresses, and more than 19,000 otherwise invalid or non-existent addresses.  Based on statistical projections, GAO estimates that 2,600 of these providers with invalid addresses each may have billed $500,000 or more during the time frame between 2005 and 2013, which points to as much as an estimated $1.3 billion in potentially invalid Medicare payments between 2005 and 2013.

The report found similar vulnerabilities with the way CMS verifies provider licenses. GAO identified 147 physicians whose records contained instances of misconduct such as convictions for health care fraud or other crimes, but who remained on Medicare’s list of eligible providers.

GAO makes a number of recommendations for CMS to address these problems.  For example, the U. S. Postal Service has a complete database of invalid addresses available for purchase. GAO also recommends that CMS access an additional, nation-wide database of physician licenses.

The report was the focus of today’s Senate Special Committee on Aging Committee hearing, “The Doctor’s Not In: Combating Medicare Provider Enrollment Fraud.”

Sen. Sheldon Whitehouse, Member of the Special Committee on Aging: "Our seniors have earned their Medicare benefits through a lifetime of hard work, and they deserve to know that their tax dollars are being spent wisely.  While I'm encouraged to hear that CMS has made progress in recent years toward eliminating fraud and abuse by health care providers, the possibility that billions of dollars continue to be wasted is frustrating.  I'm committed to strengthening Medicare so future generations of seniors can look forward to the same benefits enjoyed by their parents and grandparents, and I look forward to working with my colleagues in the Senate to put an end to these abuses."

Sen. Tom Carper, Ranking Member, Homeland Security and Governmental Affairs Committee: “The hard truth is that every year, Medicare and Medicaid lose billions of taxpayer dollars to waste, fraud and criminal activity. This report identifies serious shortfalls in how we ensure that only real doctors and other authorized health care providers can bill Medicare. While there's no silver bullet that can stop all instances of health care waste, fraud and abuse, there are a number of proven and effective preventive measures that can lead to real savings.  By taking the simple, common-sense steps laid out by the Government Accountability Office, we can quickly move to close a glaring set of vulnerabilities that leave Medicare -- and taxpayer dollars -- at risk. Without a doubt, we must ensure that Medicare continues to provide critical care to our nation’s seniors and at the same time finds ways to contain the growth of health care costs.  I believe we can do both.  But it will need to be a team effort by Medicare officials and Congress – an effort that will require appropriate and smart oversight. Fortunately, Medicare officials have said that they recognize the importance of this problem and will take steps to fix them. My colleagues and I will make sure that happens.”

Sen. Claire McCaskill, Ranking Member, Special Committee on Aging:  “Registering Medicare providers at vacant storefronts and UPS stores is embarrassing and opens the door to obvious cases of fraud and abuse. Every dollar spent inappropriately is a dollar less than we could and should be spending on the tens of millions of American seniors who deserve and need quality care from Medicare. Fixing this provider enrollment problem will not only cut down on fraud, but will strengthen and extend the life of the program.”

Sen. Susan Collins, Chairman, Special Committee on Aging: “In 1998, when I was Chairman of the Permanent Subcommittee on Investigations, we held a series of hearings to examine fraud in the Medicare program. Those hearings uncovered dramatic examples, such as payments of $117,000 to two so-called physicians whose address was actually a laundromat in Brooklyn, and $6 million to durable medical equipment companies supposedly headquartered in the middle of a runway at Miami International Airport.  Seventeen years after I chaired those hearings, I am dismayed to learn that improper payments are still flowing to con artists who bilk the system from fictitious or inappropriate locations. “

Sen. Ron Johnson, Chairman of the Senate Homeland Security and Governmental Affairs Committee said, “I am dedicated to identifying and exposing waste in federal programs. The GAO’s report on eligibility verification for CMS physicians and suppliers highlights a serious vulnerability.  I applaud the GAO for its report and I will work with my colleagues in the Senate to ensure that Medicare spends taxpayer dollars efficiently and effectively.”

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