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Colorado invites Medicaid fraud: Pays hundreds of millions in claims without provider ID numbers

The federal Health and Human Services Inspector General’s Office recently issued a report finding fault with Colorado Medicaid’s internal accounting controls. In 2011, it paid 798,411 Medicaid claims worth $425.4 million even though they were missing legally required National Provider Identification (NPI) numbers.

Services provided under the Home & Community Based Services Waiver generated 767,936 claims without NPIs. There were another 4,715 claims with invalid NPIs.

NPI numbers, issued by the federal government, uniquely identify physicians, health plans, suppliers and other organizations that provide health care, and all organizations and individuals covered by the federal Health Insurance Portability and Accountability Act (HIPAA). The audit notes that by paying claims without valid NPIs, the state may pay people who have been banned from the Medicaid program and limit “the success of reviews and fraud investigations.”

icon_blog_noteThe Colorado Department of Health Care Policy and Financing (HCPF) told the auditors that many of the claims with missing NPIs were associated with “atypical” providers, those who were not required to get NPIs. The audit states that the State was “unable to specifically identify” atypical claims. Though the state cited claims associated with transportation as an example of atypical claims, the audit notes that claims for emergency transportation generally would include ambulance companies required to have NPIs.

In FY 2007, taxpayers provided the Colorado Medicaid program $2.1 million in mostly Federal funds to upgrade the Colorado Medicaid Management Information System to accept NPIs. At the time, the state did not include controls to check that the NPIs were valid. In 2010, the federal Affordable Care Act (aka Obamacare) required that the state include internal controls to check that NPIs submitted are valid.

HCPF’s response claims that the audit finding relates “only to a technical issue and that the audit does not provide any finding that services were rendered improperly or that payments were made in error.” It wrote that it plans to introduce a new Medicaid Management Information System in 2016 that will comply with the state and federal regulations that were passed in March 2010.

As HCPF undoubtedly knows, desk audits of internal accounting controls are not designed to detect fraud or “improper payments.” Malcom Sparrow, a Harvard expert on health care fraud, has testified that state and federal programs that emphasize fast claims payments by automated systems need fraud detection programs that include visiting suppliers and making actual contact with those listed as patients. Otherwise, taxpayers are paying for a system in which “If you want to steal from Medicare or Medicaid,” all you have to do is “learn to bill your lies correctly.”

For example, in South Florida in 2007, unannounced visits to 1,581 durable medical equipment suppliers found that 31 percent either did not maintain a physical facility or were not open.

In 2014, investigators in Washington, DC discovered that the Maryland and District of Columbia Medicaid programs paid the owner of three home care agencies $75 million even though she had been banned from federal health care programs after her nursing license was revoked. One DC home care scam encouraged Medicaid beneficiaries to qualify for Medicaid home care by faking or exaggerating their symptoms and then paid them $200 every two weeks to sign false timesheets used to bill for phantom care.

In Florida, a $63 million fraud scheme fabricated records for the treatment of severe mental illness from 2004 through 2011. “Patients” at the facilities watched Disney movies, played bingo, and attended barbeques.”

Colorado Medicaid has had at least one case of fraud in which it paid $3.8 million to people who continued billing the program after an owner was put on the federal banned list in 2001.

Colorado is inviting Medicaid fraud by paying claims without provider identifier numbers. But never fear, the state hopes to start complying with rules passed in 2010 meant to prevent such fraud sometime next year.

Linda Gorman is health care policy center director at the Independence Institute, a free market think tank in Denver.