Dear Acting Administrator Tavenner:
As members of both House and Senate Committees overseeing the Medicare program, we have a responsibility to conduct oversight and ensure that the Centers for Medicare & Medicaid Services (CMS) is utilizing all possible resources and authorities to protect the Medicare program from fraud, waste, and abuse. It is in this role that we are writing to request additional information regarding CMS’s efforts to identify “nominee owners" and the type of fraud perpetrated by individuals and organizations establishing false storefronts and “shell companies" - paper-only firms with no real operations.
“On March 7, 2012, the Department of Justice (DOJ) indicted[2] an individual for allegedly swindling $20 million from the Medicare program over a five-year period by establishing two home health agencies using a nominee owner. This indictment, along with the other examples cited in this letter, demonstrate that CMS’s provider screening efforts are still not effectively safeguarding the Medicare program from individuals intent on committing fraud within the Medicare program and that CMS should revise its screening efforts to address nominee owners.
As you know, a nominee owner does not identify himself as an owner, but in fact exercises ownership and control of an entity. Thus, the true owner of the entity gives someone else limited authority to act on behalf of an entity, usually for a limited period of time, and usually during the initial formation of the entity. In fact, the Internal Revenue Service[3] (IRS) does not authorize the use of nominees to obtain an employer identification number (EIN), and the DOJ recently convicted [4] several individuals after they installed nominee Presidents to hide their control of five durable medical equipment companies that submitted fraudulent claims to Medicare. The Department of Health and Human Services’ Office of Inspector General (HHS-OIG) has expressed concerns regarding the use of nominee owners and recommended that CMS take aggressive action to identify them.[5] Thus far, it does not appear that CMS has addressed the concept of nominee owners, false storefronts, and shell companies in any of its enrollment regulations[6] or its Provider Screening statement of work.[7]
Accordingly, to address our concerns about the ongoing Medicare and Medicaid fraud, were request that CMS:
1. Describe CMS’s efforts to identify and detect nominee owners in the Medicare and Medicaid programs since publication of the Medicare, Medicaid, and CHIP screening rule on Feb. 2, 2011.
2. Explain whether or not CMS (directly or through the Medicare enrollment contractors) collaborates with the IRS, HHS-OIG, the Social Security Administration, the Department of Homeland Security and/or the DOJ to verify information regarding individuals listed as a prospective owner of a provider or supplier in the Medicare, Medicaid and CHIP programs.
3. Explain whether or not CMS has implemented payment caps to protect the Medicare program from “bust-out" schemes such as those described in the Reuters article cited below.[8].
4. Provide a list of the safeguards (i.e., use of smart card technology, authentic token, or multi-factor verification technology) currently utilized by the Medicare enrollment contractors to verify the identity of an individual practitioner, owner, or authorized/delegated official during the initial enrollment process, change of information, or enrollment revalidation submission.
5. Describe the process used by CMS to determine which categories of providers and suppliers are deemed “high risk" and explain why non-physician owned clinics are currently viewed as “low risk" by CMS.
In closing, we share your goal of ensuring that the Medicare, Medicaid, and CHIP programs have appropriate procedures in place to confirm the ownership interest of participating providers and suppliers. As such, we would like to better understand the steps CMS is taking to identify nominee owners and false storefronts prior to those individuals/entities ever gaining entry into the Medicare, Medicaid or CHIP programs. We appreciate your efforts in responding to this request and ask that you respond by April 20, 2012.
Sincerely,
HATCH COBURN BOUSTANY HERGER
