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A hard sell on DME: How suppliers try to game Medicare

Aggressive marketing tactics by durable medical equipment suppliers can put doctors in a tough spot with patients.

By Markian Hawryluk, amednews staff. Sept. 1, 2003.

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Melvin Kirschner, MD, was pleased to see his patient making progress walking after his hip surgery. The man had abandoned his walker for a cane.

But then the man's neighbor received a motorized scooter. And even though the patient didn't meet Medicare's criteria, he easily found a supplier who insisted he was entitled to one, too.

He brought an authorization form from the supplier to Dr. Kirschner, a family physician from Van Nuys, Calif. The heat was on.

"If I write down honestly what I know to be true about you, you won't get this scooter," Dr. Kirschner told the man.

The patient pondered the situation a moment. "Well, write down the truth, and we'll take our chances."

The gamble paid off for the patient, who got his scooter. But for Dr. Kirschner, the experience was just another example of how suppliers of durable medical equipment game the Medicare rules. He and other physicians are getting fed up.

"I want my patients to have what they need, but I don't want durable medical equipment people fishing around in the guise of filling a need," he said. "You name it, there's durable equipment being sold that the patient doesn't need or doesn't want."

Because Medicare requires a physician to certify that the equipment is medically necessary, doctors are stuck being the ones to tell patients "no" and to resist the hard sell from persistent vendors.

"Medicare is making us the cop, and the durable medical equipment suppliers are making us the patsy," Dr. Kirschner said. "There are caring people in the DME field, but there are also an awful lot of scalawags."

Some are outright fraudulent. Federal officials in Florida recently uncovered a multimillion-dollar scam in which a DME supplier sold $2,000 motorized scooters in senior centers and housing developments, and billed Medicare for $6,000 power wheelchairs. In some cases, physicians signed certificates of medical necessity without fully reviewing them. If the doctor refused, the vendor would find a "friendly" doctor or just forge the signature.

Selling what's hot

More often, suppliers are just engaged in aggressive, but not illegal, direct-to-consumer marketing. Medicare rules forbid telemarketing, but as anybody who's watched daytime television or picked up a magazine can attest, TV and print ads are fair game. And senior housing conveniently pools potential customers.

This mass marketing has resulted in tremendous DME sales growth in general, and in the patient-mobility sector specifically.

Annual DME spending per beneficiary has more than doubled, from $87.49 per person in 1993 to $185.05 per person in 2002. The highest growth area last year was for wheelchairs, increasing 40%, compared with 5% to 10% for other DME categories. Medicare spent $289 million for power wheelchairs in 1989, but will spend more than $900 million in 2003.

CMS officials said this explosive growth occurs on a regular basis as suppliers jump on an item with a good profit margin that is easy to market and then dump it for the next hot product after the government catches on.

Before wheelchairs and scooters, lymphedema pumps were the big seller. Medicare spending for the pumps surged from $18.5 million in 1991 to $106.7 million in 1995.

Then the Office of Inspector General began a national initiative to stem lymphedema-pump fraud and abuse. The government limited coverage for the most expensive models and required doctors to certify that more conservative -- and less expensive -- methods of treating the condition had failed. By 1996, spending for the pumps dropped to $8.8 million -- a 92% decrease in one year.

Part of the problem could be the payment rates, said Acting Principal Deputy Inspector General Dara Corrigan. "Medicare pays too much for certain items of medical equipment and supplies because reimbursement rates for these items are based on charges submitted to the program in 1987," she said. "As a result, Medicare payments bear little resemblance to prices currently available in the marketplace or to the actual cost of manufacturing and distributing the equipment."

An OIG study found that Medicare paid 31% to 88% more for DME than the Dept. of Veterans Affairs. And for 10 of the 16 products considered, Medicare paid more than the median retail price.

Bending the rules

Abuse of the system is not just commonplace, it's universal, said Robert Meyer, MD, a family physician from Goldsboro, N.C.

"Anyone who hasn't seen this abuse of the older patient isn't practicing medicine," he said. "Patients are told they can get DME stuff free and almost never are informed by the supplier of Medicare criteria. Physicians are made to be the heavy by denying the patient when we simply tell the truth and fill out a form honestly."

Dr. Meyer said he tells vendors of diabetic supplies how often patients test and how much product they are likely to consume. Nevertheless, his patients always get the maximum allowable under Medicare rules.

Physicians complain that DME suppliers have learned the rules of the game and try to make a sale for any item for which a patient can qualify, regardless of what the doctor has ordered.

Mary Frank, MD, a family physician from Rohnert Park, Calif., said she sees such tactics most often with respiratory products. She may order one thing for a patient and then have a supplier say the patient can qualify for a more expensive item.

Her asthma patients often come to her having seen TV ads for a home nebulizer to replace the metered dose inhalers she has prescribed.

"The patients are often wondering what's going on," she said. "Then you have to explain to them."

Dr. Frank said she's never come across suppliers that have made recommendations for patients who did not qualify for the equipment, but often the patient doesn't really need it. And sometimes, the patient cannot afford the lower cost item, but may qualify for a more expensive item from Medicare at a lower patient cost.

"It puts you in the position where they could get some of this paid for if I do it, but they don't really need it," she said.

Physicians also struggle with the issue of medical necessity. Medicare requirements for home oxygen sets, for example, rely on an objective test of blood oxygen levels. But for wheelchairs, it may not be as clear when a patient with mobility problems is bed-bound.

"There are some gray areas, naturally," said James Kopf, a former FBI agent and OIG investigator, who now consults on compliance and fraud issues as president of Healthcare Oversight, in New York City. "Sometimes the doctors don't have the time, and they know the patient and sign off on it," he said. "If they pay close attention to signing off on some of the equipment, this goes a long way toward fighting some of the fraudulent DME people."

Some experts say market forces, not opportunism, are fueling DME growth trends. For example, Medicare only allows wheelchairs for homebound beneficiaries, but it was only about five years ago that manufacturers started making power wheelchairs that people could maneuver in their homes, said Cara Bachenheimer, a Washington, D.C.-based attorney with Epstein, Becker & Green, who often represents DME interests.

"That, coupled with consumer awareness that these things are out there and they may qualify for them under the Medicare benefit, are largely responsible," she said. "I cannot imagine that the preponderance of the growth is due to bad actors."

Dr. Frank and other physicians noted that marketing campaigns do help to get the word out to patients and their families about potentially helpful products.

DME representatives agreed. "It's a misnomer to say they don't need them or they don't benefit from them," said Dave Williams, director of government relations for Invacare Corp., a wheelchair manufacturer based in Elyria, Ohio. "They're reaching patients who may not know otherwise that they're eligible for them."

But Williams said even some of the traditional, local suppliers look askance at well-financed mass marketers that don't wait for a physician referral. "They feel that these folks are charlatans that are coming in the night, making a quick buck, and when the door closes, then they'll just go away to someplace else and do another business," he said.

Seeking solutions

More than anything else, the problem lies with the Medicare coding system, Williams said. The program uses a single code for the motorized wheelchair category, despite a huge variety of products. Because each code corresponds to a single payment level, lower-end products carry high margins for suppliers.

The wheelchair industry has begun discussing coding changes with the Centers for Medicare & Medicaid Services. Breaking the category into separate codes and refining coverage criteria could reduce inappropriate incentives.

CMS Administrator Tom Scully has created an internal task force to address the wheelchair market's skyrocketing growth. Officials believe mass marketing is primarily responsible and are considering how to apply the brakes.

The agency could restrict coverage or try to address payment levels by using its inherent reasonableness authority. That allows CMS to cut prices up to 15% per year if it finds prices are substantially "unreasonable." Switching the basis of DME rates from charges in 1987 to charges from another year, however, would require congressional action.

CMS is also considering some countermarketing -- a public campaign appealing to beneficiaries and doctors to protect public resources. The OIG is expected to release in September the draft of a study on the Medicare wheelchair market.

That leaves many DME suppliers and manufacturers worried that CMS might take drastic action that could undermine the market.

Congress may address the DME issue. In the Medicare reform bills passed by the House and Senate, Medicare would move to a national competitive bidding system for DME. A competitive bidding demonstration project, conducted from 1999 through 2001 in Polk County, Fla., and San Antonio, generally resulted in lower DME prices. However, a final report on the project has not been released.

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