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Government investigators set up two fake companies to sell medical equipment like wheelchairs. Even though the fictional suppliers had no clients and offered no inventory, a report to Congress stated that these companies were approved by Medicare.

According to a GAO report, the bogus companies, from Maryland and Virginia, were okayed after the Government Accountability Office provided false documents and left an unclear message on the answering machine of the contractor responsible for investigating the applications.

Medicare has admitted to making about $1 billion in improper payments of the $10 billion spent in the year that ended in March 2007 on wheelchairs, prosthetic devices, canes and other equipment, partly because of fraud, according to the GAO, the investigative arm of Congress.

The GAO reported that "if real fraudsters had been in charge of the fictitious companies, they would have been clear to bill Medicare from the Virginia office for potentially millions of dollars of false supplies." Investigators weren't able to complete billing tests for the Maryland front company because they didn't receive the necessary passwords from Medicare.

The report also stated that one real company fraudulently billed Medicare for $4.4 million in supplies and services never delivered. It received $2.2 million in payments. The only person not in on the fraud was the company's secretary who reported that there was no business activity in the office. The owner was sentenced to four years in prison and ordered to repay the $2.2 million in March 2007.

The Centers for Medicare and Medicaid Services acknowledged that covert testing showed gaps in its ability to oversee billing. The agency said it is putting into place new requirements for medical suppliers.

Watch DOTmed Online News for ongoing reports detailing Medicare fraud. Recent examples include:
http://www.dotmed.com/news/story/6545/
http://www.dotmed.com/news/story/6453/
http://www.dotmed.com/news/story/6397/