For the first time in history, federal health officials said Friday they will ban certain types of Medicare and Medicaid providers in three high-fraud cities from enrolling in the tax-payer funded programs for the poor as part of an effort to prevent scams.
The strict moratoriums, which start Tuesday, give federal health officials unprecedented power to choose any region and industry with high fraud activity and ban new Medicare and Medicaid providers from joining the programs for six months.
The administrator of the Centers for Medicare and Medicaid Services said the agency is targeting providers of home health care in eight counties in the Miami and Chicago areas. All ambulance providers would be banned in eight counties in the Houston area.
The moratorium, which was first reported by The Associated Press, will also extend to Children's Health Insurance Program providers in the same areas, agency administrator Marilyn Tavenner said in a statement.
It's unclear how many providers will be shut out of the programs. There were 662 home health agencies in Miami-Dade in 2012 and the ratio of home health agencies to Medicare beneficiaries was 1,960 percent greater in Miami Dade County than other counties, according to figures from federal health officials.
South Florida, long known as ground-zero for Medicare fraud, has also had several high profile prosecutions involving that industry. In February, the owners and operators of two Miami home health agencies were sentenced for their participation in a $48 million Medicare fraud scheme.
The number of home health providers in Cook County, Ill., increased from 301 to 509 between 2008 and 2012. There were 275 ambulance suppliers in Harris County, Texas, in 2012. The ratio of providers to patients in both regions was also several hundred times greater than in other counties, federal health officials said.
Top Senate Republicans have criticized the agency for not using the powerful moratoriums sooner as a tool to combat an estimated $60 billion a year in Medicare fraud. Senators Chuck Grassley, who is the ranking Republican on the Judiciary Committee, and Orrin Hatch, who is the ranking Republican on the Finance Committee, sent a letter to federal health officials in 2011 urging them to use moratoriums.
"While it's certainly better late than never, it's unfortunate that it took CMS three years to use the tools it's had to protect seniors," Grassley said in a statement Friday, adding he hoped "to see more action like this."
Officials for the Department of Health and Services inspector general lobbied hard to ensure moratorium power was included under the Affordable Care Act as the Obama administration focuses on cleaning up fraud on the front end by preventing crooks from getting into the program in the first place.
In the past, federal health officials tried to stall new provider applications from being processed, hoping to slow the number flocking to high-fraud sectors. But when providers inevitably complained, the agency had to process their paperwork.
The federal agency can also revoke the IDs of suspicious providers, but those are temporary and many companies are able to reenroll later or enroll under a different name.
Federal health officials have been reluctant to use one of its most powerful new tools, worrying moratoriums may harm legitimate providers and hamper patients' access to care. Tavenner said in the statement that would not happen, but the agency didn't elaborate. Agency officials said they intend to consider other moratoriums in different industries in other cities going forward.
The ability to target certain industries and cities is especially helpful as Medicare fraud has morphed into complex schemes over the years, moving from medical equipment and HIV infusion fraud to ambulance scams, as crooks try to stay one step ahead of authorities. Fraudsters have also spread out across the country, bringing their scams to new cities once authorities catch onto them.
The scams have also grown more sophisticated, using recruiters who are paid kickbacks for finding patients, while doctors, nurses and company owners coordinate to appear to deliver medical services that they are not.
The moratoriums come as budget cuts are forcing federal health officials to retract its watchdog arm as it launches its largest health care expansion since the Medicare program.
Health and Human Services inspector general officials said they are in the process of cutting 20 percent of its staff, from 1,800 at its peak to 1,400, and cancelling several high profile projects, including an audit that would have investigated technology security in the federal and state health exchanges launching in October. The project was slated to examine issue including whether patient information was secure from hackers on the online marketplace, where individuals and small businesses can shop for health insurance. The agency also said it was cancelling an audit into the number of antipsychotic drugs prescribed to nursing home patients and another project investigating how many fraudulent Medicare providers get back into the program after their license is revoked.