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REMARKS BY:

Michael  Leavitt, Secretary

PLACE:

Washington, DC

DATE:

Wednesday, May 09, 2007

Remarks as Delivered at the Durable Medical Equipment (DME) Fraud Press Conference


Thank you for joining us today. It's a pleasure to have the attorney general, Attorney General Gonzales, joining us.

Recently, HHS, the Department of Justice, the FBI, and others at the local level combined forces to form a joint Medicare fraud task force.

Together, we're fighting fraud among sham durable medical equipment dealers and other health care suppliers who are defrauding Medicare recipients and Medicare.

Most troubling, by defrauding Medicare, unscrupulous suppliers are really defrauding all seniors and people with disabilities who rely on Medicare to pay for their health care needs.

Many Medicare beneficiaries depend on durable medical equipment suppliers for items like walkers and wheelchairs, and equipment for testing their blood sugar.

When so-called suppliers break their promise to deliver equipment, they bill Medicare for it, and seniors go without the supplies that they need. And when they steal a beneficiary's Medicare number and bill equipment to it, it can make it harder for that senior to get supplies when they need them.

Even worse, in some cases, these fraudulent companies are purchasing Medicare numbers from seniors to conduct their illegal billing. This also affects innocent seniors, because money is being diverted from the program to pay for those engaged in fraud.

Unfortunately, that's exactly what's been happening in several areas around our country.

The strike force is making probable-cause arrests and bringing indictments against those suspected of this shameful activity. Attorney General Gonzales will be telling you more about this in just a moment.

The work of this strike force goes hand-in-hand with other efforts of HHS to fight fraud, including Operation Whack-a-Mole, and demonstration projects underway currently at CMS.

One place fraud is especially prevalent is in south Florida. In December, I went to south Florida as part of these operations. Teams led by HHS's Office of Inspector General visited more than 1,500 durable medical equipment suppliers in that area. They were unannounced visits, and they helped us determine if suppliers were meeting the basic standards that the law requires for participation.

While we expected a certain level of fraud, what we found was shocking.

More than 300 suppliers will be terminated from this program, because they didn't meet even the minimum standards required by the programs, such as keeping regular office hours.

Just to give you a sense of this, during the time I spent there, we visited several locations. You'd walk up to a strip mall, and there would be what looked to be a business. You'd look inside and there was no one there, but you could see a chair, a little medical equipment on the wall, and what was established to look like a business.

When you checked the Medicare records, you'd find that-from this essentially vacant business-that sometimes $1 million, $2 million, sometimes $3 million or more would have been billed in a relatively short time from this so-called business.

I went to an office building in the Miami area. I would say it was 20,000 square feet, maybe two stories. Inside this office building was a marquee listing probably 60 or 70 companies.

Fifty or so of these companies-my estimate-were durable medical equipment businesses. You'd walk down long corridors that would remind you of a dorm room, with a door roughly every 15 feet.

On the door would be a marquee that would say XYZ-the name of the durable medical equipment dealer-the hours and the phone number. Those three things happen to be requirements to get a Medicare billing number.

You'd knock on the door, try to open the door-no one there-door, after door, after door.

When you would find someone there, it would be generally someone caring for small children, and waiting for a Medicare inspector to come to help them get their number.

It was a shocking level of fraud to me. This kind of blatant fraud is hard to believe.

And yet, when you realize that every vacant storefront represents tens, hundreds, even thousands of seniors who have been cheated, it simply is intolerable.

Operation Whack-A-Mole and the demonstration projects were good first steps toward fixing this problem. In connection with these efforts, we've recovered more than $10 million from frozen bank accounts of fraudulent suppliers. We're currently pursuing another $7.5 million in similar assets that have been frozen.

But the name, "Whack-A-Mole," is sadly appropriate. This type of fraud resembles the arcade game where you hit a mole with a big paddled mallet, and then another one pops up. As soon as you hit one, another one pops up in its place.

We'll be applying the lessons that we've learned in south Florida to other problem areas around the country. We'll also be expanding our efforts to include Medicare's home health and infusion therapy providers. In addition, HHS will be taking steps to combat this kind of fraud and keeping it from resurfacing.

For regulatory reasons, I cannot go into great detail right now on our efforts. But I can tell you that our actions will focus on two primary areas.

The first will be strengthening our requirements to become a provider or a supplier of durable medical equipment, to make sure that only legitimate suppliers are able to participate in these programs. And second, we'll be increasing this level of scrutiny on existing providers, and assuring that we keep out the bad actors.

Working with the Department of Justice, we estimate that our proposed actions to improve the durable medical equipment supplier program will cost around $20 million every year. But we will prevent as much as $2.5 billion in fraud over the same time period.

We're sending a clear message, that those who would defraud the Medicare system will not be tolerated, and we're coming after them. By attacking fraud vigorously, wherever it exists, we all stand to benefit.

Taxpayers will save hundreds of millions of dollars every year. Medicare dollars that have gone to sham suppliers will be available for legitimate suppliers who can actually serve beneficiaries.

And most importantly, we can ensure that seniors and disabled persons are getting the supplies that they need in order to stay healthy.

There is both a moral and an economic imperative for us to defeat fraud of this nature.

I'd like to thank the attorney general for his partnership in this effort. I know that he would like to share some comments with you now.

Last revised: March 13, 2008