Medicare Implements New Payment Rule After Alleged $3 Billion Fraud

Lina Portman2 days ago

0 3 minutes read

Federal authorities are seeking to overhaul how Medicare pays health care providers after an alleged $3 billion fraud scheme aimed at defrauding the program, believed to be one of the largest such scams in its history.

For more than a year, officials said, a dozen companies submitted bills to the Centers for Medicare and Medicaid Services for tens of millions of urinary catheters, using the personal information of Medicare beneficiaries and doctors — some of whom still wonder how the companies obtained their private data and used it to bill the federal health program for catheters they never wanted or received.

Experts say the alleged catheter fraud ring is just the latest reminder that Medicare is a tempting target for crooks. The nearly $1 trillion agency has long battled a flood of fraudulent claims for durable medical equipment, and CMS leaders have urged Congress to provide them with additional resources to crack down on would-be thieves.

Health care providers also urged the government to crack down on the companies, saying the alleged system threatened to distort Medicare payments by making it appear that doctors were ordering massive quantities of unnecessary catheters and by distorting the government's formula for reimbursing providers.

“We’ve never seen anything like this” in terms of scale and scope, said Clif Gaus, CEO of the National Association of Accountable Care Organizations, which helped uncover and bring the alleged fraud to light earlier this year. Several accountable care organizations — groups of hospitals and physicians that receive federal incentives to provide high-quality, low-cost health care — have said they could each lose more than $1 million in payments if the fraudulent bills are not addressed.

In February, The Washington Post first reported that the FBI and other agencies had opened an investigation into the alleged fraud ring, sparking anger among lawmakers who questioned why potentially fraudulent claims were allowed to continue to be filed for months. Sen. Mike Braun (R-Ind.) and his colleagues have called on the Government Accountability Office to open an investigation into Medicare’s anti-fraud efforts and whether the agency should step up prevention.

This week, federal officials declined to confirm whether they were investigating the allegations, saying they did not want to jeopardize the process. Authorities have also repeatedly declined to say whether criminal charges have been filed or to share details about how the alleged fraudsters obtained patient and provider data.

But in a proposed settlement released Friday, the CMS said an investigation was “ongoing and we have taken initial steps in response.”

“We have made referrals to law enforcement, recovered improper payments from Medicare, and terminated some Medicare providers,” the agency added in its proposed rule. CMS also said it would change its payment formula for accountable care organizations, citing the surge in “large, abnormal, and highly suspicious” bills related to urinary catheters. The change effectively protects organizations from rising catheter bills.

Medicare officials separately confirmed this week that 11 companies were collectively responsible for $3.16 billion in questionable billings for urinary catheters between January 2023 and March 2024, saying the agency had successfully blocked payments to the companies.

The ACO said it had identified 12 companies involved in the alleged fraud, which it believes dates back to late 2022 or earlier.

Gaus, a 50-year health care veteran, said he has never heard of a revision of Medicare payment rules in response to alleged fraud — a conclusion shared by several current Medicare officials who spoke to The Post. He warned that similar plans are likely on the horizon.

“These fraudsters can get patient IDs, provider IDs and maybe use AI to go through these massive files of patient data that they're collecting from everywhere,” Gaus said.

Patients involved in the alleged fraud said they were left confused and nervous about the consequences of the fraudsters knowing their personal information.

“I’m really worried this is going to mess things up,” said Amy Rosenwasser, a 70-year-old retired Chicago public school teacher who called Medicare in December to report a fraudulent bill for more than $6,000 for catheter supplies. She has yet to hear back from the agency after reporting the allegations. “What if I can’t get a prescription?” Rosenwasser asked.

Disgruntled patients like Rosenwasser often don’t get answers when they report fraud allegations, said Gabriel L. Imperato, a partner at the law firm Nelson Mullins and a former attorney for the Department of Health and Human Services. Instead, Medicare often focuses on suspending payments to questionable providers, rather than a comprehensive effort to follow up with every patient who reports fraud.

“Things go as they come,” Imperato said. “It's a draconian measure, but it's the only one they have to try to keep money from being wasted.”