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CMS PROMISES STRICTER MONITORING OF EXPENDITURES FOR DURABLE MEDICAL EQUIPMENT.

According to a report issued earlier this month by the U.S. General Accounting Office ("GAO"), the Center for Medicare & Medicaid Services ("CMS"), improperly paid approximately $900 million for durable medical equipment ("DME") and other supplies for fiscal year 2004. The GAO report claims that much of that expenditure was based upon the undetected submission of fraudulent claims and blames lax enforcement and compliance efforts by the National Supplier Clearinghouse ("NSC"), an entity contracted by CMS for the express purpose of scrutinizing DME claims. Citing evidence obtained as a result of recent criminal prosecutions, GAO pointed to testimony provided by a DME contractor convicted of Medicare fraud, who told investigators that she was able to open a sham DME business with no training, experience, technical know-how or capital. Noting that NSC did not conduct required on-site inspections of more than 600 suppliers, the report further criticized the entity for failing to require its inspectors to make adequate efforts to assure that equipment paid for by Medicare was truly supplied and similarly, whether alleged suppliers maintained credible inventory. If you are contacted by CMS, or any other governmental agency concerning such an investigation, feel free to contact Kern Augustine for guidance.

NATIONAL MEDICAL ERROR DISCLOSURE BILL INTRODUCED BY SENATORS CLINTON AND OBAMA.

U.S. Senators Hillary Rodham Clinton (D-NY) and Barack Obama (D-IL) have introduced the National Medical Error Disclosure and Compensation Act of 2005. This bill claims to seek the enhancement of patient safety and reduction of medical malpractice litigation costs by encouraging early disclosure of medical errors to patients together with early offers of compensation. In return, providers would receive legal protection for any statements made within the context the proposed disclosure and related pre-suit settlement negotiations. The bill was referred to the Senate Health, Labor and Pensions (HELP) Committee on which Senators Clinton and Obama sit. The HELP Committee has jurisdiction over medical malpractice and tort reform legislation.

MAJOR HMO MERGERS & ACQUISITIONS AFOOT IN NEW YORK

WellChoice, the giant health insurer, recently confirmed that it intends to acquire WellPoint the largest health insurer in New York State and the parent of Empire Blue Cross Blue Shield, for about $6.5 billion in cash and stock. The deal would give WellChoice, already the nation's largest health insurer with 28 million members, an even greater presence in the Northeast. In an unrelated move, Group Health Inc.'s ("GHI") Board of Directors approved a plan to merge with the Health Insurance Plan of New York ("HIP"). The proposed merger signals both carriers' readiness to abandon their positions as the last large nonprofit health plans in the New York area and comes at a time when regional providers in New York have been struggling to increase their membership. Physicians are advised to carefully review any and all new contracts or contract extensions which are generated as a result of such mergers and/or acquisitions.

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