FBI Said To Be Looking Into PolyMedica's Medicare Billing Practices
By Mark Martinez
Metrics Editor
3/30/01 2:30 PM ET
The Federal Bureau of Investigation is looking into PolyMedica's (PLMD:Nasdaq) Medicare billing practices, according to one former employee who was interviewed by an agent last week.
FBI officials declined to confirm or deny that an inquiry is under way. PolyMedica officials say the company hasn't been contacted by any government agency over its billing practices and has done nothing wrong.
But a former employee says she was interviewed by an FBI agent, who asked questions about the billing and shipping practices of PolyMedica subsidiary Liberty Medical Supply. The agent, she says, was particularly interested in the way Liberty Medical billed Medicare.
In addition, the organization responsible for paying claims on behalf of Medicare is investigating Liberty Medical. Linda Soltis, a spokeswoman for the Durable Medical Equipment Regional Carrier, or DMERC, for the Northeastern states, says her organization "is one of the parties investigating Liberty Medical Supply, and we have been for quite some time. We have been collaborating with the DMERC in [the Southeastern states] on this investigation." The investigation involves Liberty's billing practices, she says.
PolyMedica officials said they weren't aware of a DMERC inquiry, although the company routinely responds to DMERC requests for documents.
Big Percentage
Medicare sales comprise 70% of PolyMedica's revenue, according to documents filed with the Securities and Exchange Commission, making it critical that the company stay in the good graces of the U.S. Department of Health and Human Services, which can approve or exclude companies from participating in Medicare and Medicaid. And PolyMedica, a national medical products and services company, is probably best known for its Liberty Medical unit, which is a leading supplier of diabetes test equipment. Liberty is responsible for about 80% of PolyMedica's revenue.
But PolyMedica has been dogged by concerns recently, which have knocked its stock down by about 45% over the past month.
Just last week the company received copies of government documents released under the Freedom of Information Act showing that the Health and Human Services' inspector general in Atlanta asked the FBI's health care fraud unit in 1999 to investigate Liberty Medical Supply's billing practices. According to the documents, HHS sent the matter to the FBI over allegations that Liberty Medical improperly billed Medicare for products that were returned, shipped products that were never ordered and billed Medicare for products that were never supplied.
In a statement released Friday, the company said: "The Freedom of Information Act response indicates that in June of 1999 there were four situation reports, which appear to be customer complaints. In light of the fact that the company currently ships between 60,000 and 90,000 orders per month, this is a very small number. After almost two years, the company stated that no one in senior management has been contacted by any government department or agency regarding these four situation reports or any other complaints."
Monday morning, PolyMedica repeated that in a conference call with analysts and investors, saying management wasn't aware of any investigation and no senior staff members have been contacted by any government agency regarding the complaints. Moreover, company officials said PolyMedica doesn't engage in the kinds of activities outlined in the government documents.
No Contact
"We stated that no management [official] has been contacted by the FBI or any other government agency concerning the complaint set out in the June 24, 1999, report and the almost two years intervening. This is still true," said Steven Lee, PolyMedica's founder and CEO. "Our goal has been and will continue to be to offer the highest quality service and full Medicare and Medicaid compliance in everything we do at PolyMedica and Liberty Medical Supply. Our long-term retention of hundreds of thousands of customers is an indication that we perform to this high standard."
In interviews during the past several weeks, two former employees of Liberty Medical told TheStreet.com that delivering supplies that were never ordered and not reimbursing Medicare for products that were returned were common practice between 1996 and 2000.
One former employee -- who did not want to be identified -- said many customers rejected products and sent them back. "At one point we were receiving 400 returned packages a day," from customers who never requested the items in the first place, said the former employee. The second former employee estimated that at one point the company received as many as 1,000 return packages per day. She said the company shipped the product, booked the sale, and billed Medicare -- but didn't notify Medicare if the product was returned. "The returns just sat on the shelves and we did not do any refunds. And if there were never requests to have a refund, then we never did," she said.
In a phone interview, Lee, PolyMedica's chief executive, denied that such practices took place. "Absolutely not," he said.
Sitting Around
The first former employee said in early 1999, as many as 10,000 returned packages sat in Liberty Medical's offices and in the shipping department. The company shipped around 25,000 to 30,000 packages per month during this time period.
According to the second former employee, the bulk of the returns consisted of "strips and lancets" used by diabetics to test glucose levels.
About 75% of PolyMedica's revenue comes from sales of so-called chronic care products. According to the company's 10-K filing, the majority of its chronic care net revenue is from testing supplies used by diabetics to "draw and test small quantities of blood for the purpose of measuring and monitoring glucose levels."
Among the other products shipped by Liberty Medical were penis pumps, which sometimes are prescribed to aid erections. According to the second former employee, sales staffers were rewarded with a $50 commission for every sale of a $399 penis pump. She said the pumps weren't only sent to male customers, but also to "women and dead people." Women called Liberty Medical to complain after receiving the pumps, saying they never ordered the products, she said.
When asked about the above, Lee said, "I cannot deal with this. This is the worst kind of yellow journalism." He then ended the telephone call.
Serious
Depending on the outcome, the present inquiry could have serious ramifications for PolyMedica. When it sent the Liberty Medical case to the FBI's health care fraud unit, the Inspector General for the Department of Health and Human Services asked to be apprised of the FBI's findings. "Please notify us of the results of your investigation so that we may take administrative action to exclude appropriate individuals and entities from participation in the Medicare and/or Medicaid programs," the document said.
According to Judy Holtz, a spokeswoman at the Office of the Inspector General, "It is rare to send cases to the FBI."
PolyMedica, in its most-recent 10-Q filing, repeats its standard warning that "any failure to comply with required Medicare reimbursement procedures could result in delays or loss of reimbursement and other sanctions, including fines and loss of Medicare provider status." |
