Statement of the Power Mobility Coalition

The following statement is respectfully submitted to the U.S. House of Representatives Committee on Ways and Means on behalf of the Power Mobility Coalition ("PMC"). The PMC is a coalition of suppliers and manufacturers who provide power mobility equipment and services, such as motorized wheelchairs and scooters, to Medicare beneficiaries nationwide. PMC members represent well over half of the nation’s power mobility market and our members are located in all regions of the country.

The members of the PMC would like to thank the Subcommittee on Health of the Committee on Ways and Means for its work on Medicare reform and for holding their recent hearing concerning H.R. 2768, the "Johnson-Stark Medicare Regulatory and Contracting Reform Act of 2001." We are grateful that the Subcommittee is addressing legitimate concerns raised by suppliers and providing regarding regulatory and administrative issues in the Medicare program.

Suppliers of power mobility equipment and services spend much of their time and effort interpreting and complying with Medicare’s complex regulatory and procedural requirements. In addition to dealing with Medicare laws and regulations, PMC members must also deal directly with the Durable Medical Equipment Regional Carriers ("DMERCs"), the entities that are charged with administering payment on behalf of CMS. While CMS has overall responsibility for program management, many of the responsibilities related to reimbursement and medical policy have been delegated by the agency to the DMERCs. Unfortunately, the DMERCs have used this authority to create new policies, often in direct contrast to existing policy published by CMS. For example, the DMERCs often conduct random audits of suppliers of so-called "high utilization" items without adhering to published standards governing such audits, and use "overpayment" calculation methods such as extrapolation to recoup funds that have already been appropriately paid out by the Medicare program.

These actions have led to an erosion of the due process afforded to those who choose to provide items and services to program beneficiaries. In this context, we offer the following comments.

The PMC supports legislation that prohibits recovery of overpayments until the Administrative Law Judge ("ALJ") level of appeal is completed.

The current system requires suppliers and providers to repay the government and then undergo a lengthy appeals process to win back monies to which they are entitled. It is not unusual for a supplier/provider to wait one or two years for a claim to be completely adjudicated.

During the appeals process, a supplier continues to provide the equipment and service to the beneficiary -- to do otherwise would force the supplier to forfeit its right to appeal. The appeals process typically results in payment to the supplier who provided equipment and service

pursuant to the order certified by the physicians in compliance with Medicare rules. According to statistics cited in the September 1999 Report issued by the Office of Inspector General of the Department of Health and Human Services, entitled "Medicare Administrative Appeals - ALJ Hearing Process," 78 percent of DME appeals studied were "reversed at the ALJ level" and 81 percent of home health appeals studied "were reversed at the ALJ level."

With a reversal rate of roughly 80 percent, it does not seem fair that a company would have to forfeit the right to reimbursement without having the ability to adjudicate these disputed claims prior to repayment. Further, the supplier who wins a case is, under the current law, not entitled to interest on reversed claims even though there has been no break in service, or removal of equipment from, the Medicare patient.

The current arbitrary use of the technique of extrapolation to calculate so called overpayments creates an undue hardship on suppliers and providers participating in the Medicare program. The PMC supports legislation that limits the use of extrapolation and would recommend that extrapolation not apply to customized items of equipment such as power mobility equipment.

Extrapolation works in the following manner: a carrier draws a "sample" of claims (often as few as thirty) from a universe of claims for that supplier a defined period of time. If, for example, the carrier reviewer determines that 50% of the claims should not have been paid (even though the treating physician has certified the need for the equipment), that non-payment amount is then "extrapolated" to the universe of claims. If there are a hundred claims in the universe, the company will owe repayment for 50 electric wheelchairs ($250,000) rather than 15 wheelchairs ($75,000). The overpayment amount is due within thirty days of the DMERC reviewer’s determination. Even though, typically, the supplier wins most, if not all, of the overpayment back on appeal, the business is severely damaged.

The indiscriminate use of extrapolation for costly, customized items of medical equipment such as electric wheelchairs, is creating hardships for dealers and has forced many businesses to face bankruptcy. Although CMS has the discretion to allow the supplier to pay back a large overpayment in installments, such payment arrangements are usually granted only for a twelve-month period, with interest of around 14% is assessed on all outstanding "overpayments" even while they are being appealed.

The use of extrapolation saddles the supplier, who is trying to provide a service in his/her community, with a large overpayment assessment, as well as additional costs including , fees for representation and interest on any assessed "overpayment." In addition, the supplier is required to pay back the government within thirty days. The company who finds itself in this position will take little comfort in the fact that the ultimate reversal rate for these cases is, according to CMS’s own figures, roughly 80 percent. That is because the business may very well not survive the next year or two of working through this CMS/DMERC controlled process. An appeal for relief to federal court is not possible until administrative remedies are exhausted.

C. AUDIT PROCESS

Medical Review and Audits Should Be Conducted Based on Good Cause

Medicare audits and medical reviews should be conducted based on good cause and should adhere to established standards and guidelines. Toward that end, CMS developed standards for the audit process in an August 7, 2000 Program Memorandum entitled the Medicare Review Progressive Corrective Action plan. These standards require that intermediaries/carriers should "subject providers only to the amount of medical review necessary to address the nature and extent of the identified problem."

Many of the audits conducted upon suppliers are not based on an "identified problem" but rather are triggered on the use of a code for equipment for which utilization has increased. For example, the Region D DMERC, the Medicare Part B carrier overseeing 17 states spanning the entire Western part of the country, has developed a series of pie charts highlighting the top suppliers of power wheelchairs for 3 month periods. Each of the suppliers cited on these pie charts are subsequently targeted for an audit based solely on the "high utilization" of this equipment.

What is troubling is the fact that the Region D DMERC's own pie charts demonstrate that the targeted suppliers are providing only between six and eight wheelchairs a month to Medicare beneficiaries. Providing less than ten wheelchairs a month does not constitute high utilization in a Region spanning 17 states. Further, the information provided to industry by the Region D DMERC appears to be inconsistent. One chart used by the Region D DMERC cited the top supplier for the first quarter of 2000 as providing 32 wheelchairs while another chart used by the same DMERC for the same quarter of 2000 cited a company as providing 39 wheelchairs.

The Region D DMERC audit process is consistent with CMS/carrier policy of targeting companies that may specialize in a particular area and/or companies that have developed a reputation for providing quality service and care to Medicare beneficiaries. CMS’s policy of targeting suppliers of a particular product creates a chilling effect on the ability of Medicare suppliers to provide equipment and services to patients who qualify for such equipment and services.

The Current Audit Process Should Not Penalize the Utilization of New Technology in the Marketplace

The current process by which companies are being audited raises a broader issue concerning CMS’s inability or unwillingness to acknowledge or recognize the importance of technological advancements in the health care field. The development of new technology in the power mobility industry has made this equipment available to a larger number of disabled people. It is now possible for beneficiaries to obtain smaller, more lightweight and maneuverable motorized wheelchairs for use inside a patient’s home. This new technology allows people to move about in small places (e.g., hallways, kitchens, and bathrooms) and complete their activities of daily living without being bed-bound or sent to nursing homes.

CMS’s targeting of companies based strictly on utilization fails to recognize the evolving health care marketplace or changing consumer needs and fails to appreciate the rationale for a particular product or service being provided to patients throughout our country.

Carrier Audit Determinations Should Be Consistent With Medical Necessity Standards Established By Congress and CMS

The CMS Medical Review Progressive Corrective Action plan states that "after validating that claims are being billed in error, target medical review activities at providers or services that place the Medicare trust funds at the greatest risk while ensuring the level of review remains within the scope of the budget for medical review."

Unfortunately, the criteria the carriers use to determine that "claims are being billed in error" are inconsistent with criteria already established by Congress and CMS. Current Medicare policy governing the use of power mobility equipment requires that a supplier submit, on behalf of a beneficiary, a certificate of medical necessity ("CMN") form signed and completed by the patient's treating physician, with each power mobility claim. Congress passed legislation in 1994 defining a CMN in the following manner:

A form or other document containing information required by the carrier to be submitted to show that an item is reasonable and necessary for the diagnosis or treatment of illness or injury to improve the functioning of a malformed body member.

CMS worked with the medical community on the development of the CMN for power mobility equipment (as well as CMNs for other DME items) and received approval from the Office of Management and Budget for these forms pursuant to the Paperwork Reduction Act. When submitting the CMN forms to OMB for approval, CMS explicitly declared that the CMN forms are "needed to correctly process claims and ensure that claims are properly paid" and that "these forms contain medical information necessary to make an appropriate claims determination." In fact, the treating physician (or clinician familiar with the patient’s condition) is required to complete the detailed medical necessity information on the CMN and certifies that such information is true and accurate.

The CMN process has been quite effective. The PMC sampled roughly 20,000 power mobility CMNs and discovered that over 75% of the patients failed to qualify based on responses to medical necessity questions established on the CMN form. Only the 25% of patients who have met the medical necessity requirements established on the CMN form were provided with power mobility equipment that was billed to the Medicare program.

Despite the legal/medical necessity significance of the CMN form as envisioned by Congress, CMS and the OMB, the DMERCs have often disregarded the information contained on the forms, particularly when conducting audits, to determine the validity of claims. On numerous occasions, power mobility suppliers have been assessed overpayments even though the equipment was provided pursuant to a properly completed CMN form signed and certified by the patients treating physician.

One power mobility supplier, a company with revenues between 1 and 2 million a year, was assessed an overpayment of nearly $500,000. Upon making this overpayment assessment, the carrier informed the supplier in writing that the "CMN represents nothing more than a Medicare pre-payment tool which has been abbreviated as much as possible to reduce physician paperwork." Another small power mobility supplier was assessed an overpayment of over $600,000 and informed by the carrier in writing that "the CMN itself does not provide sufficient documentation of medical necessity...Suppliers are not required, nor should they, sell equipment to unqualified beneficiaries merely because they have a physician's written order and a CMN."

In these cases, and in other similar cases throughout the country, the supplier had fully complied with the rules established by the Medicare program and yet were penalized based on new and arbitrary criteria developed by the carrier after the equipment had been delivered to the patient and after the claim had originally been paid. While these companies will most likely be vindicated during the appeal process, the damage to the company has taken place and the company's ability to survive has been impacted. As set forth above, the inability of CMS to effectively monitor the performance of the Part B carriers results in an unfair burden and cost to suppliers and providers who serve beneficiaries.

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The PMC appreciates the opportunity to submit written testimony. Please feel free to contact us at 202-776-7800 with any questions or comments concerning the issues raised in this statement.