Medical Device Daily Washington Editor

Mark Twain is credited with having said that he would never use profanity "except in discussing house rent and taxes." If a recent report by the Government Accountability Office is any indication, he has a lot of company among healthcare providers, given that the June 13 posting at the GAO web site shows that Medicare providers are not always in a hurry to pay taxes.

On the other hand, the Centers for Medicare & Medicaid Services has a few problems with some of the math used by GAO.

According to the GAO report, an audit of 2006 data of more than 27,000 providers disclosed that those providers owed Uncle Sam more than $2 billion. That figure is up substantially from an earlier report filed by GAO, which indicated a tax debt of better than $1 billion owed by roughly 21,000 providers (Medical Device Daily, March 23, 2007). As was the case last year, CMS at present has no policy for mandating that Medicare providers be screened via public records for unpaid taxes. Providers are also not required to allow CMS to inquire with IRS about unpaid debts.

Among the more egregious cases is that of a nursing home that took in $7 million in Medicare monies in 2006, but owes the federal government $13 million. GAO says that the company "has a history of not paying all payroll taxes owed since the early 2000s" and that the company was the subject of an IRS investigation into offshore accounts.

Part of the full report was a copy of a May 19 letter signed by IRS commissioner Douglas Shulman, which states that the agency is able to provide CMS with the relevant data upon request, but also noted that the two agencies will roll out a pilot program in October that will channel some portion of payments to fee-for-service providers to the IRS for payment of tax liabilities under the federal levy payment program (FPLP).

In a May 29 letter, acting CMS administrator Kerry Weems reiterates the point that IRS cannot disclose tax liabilities without the provider's consent and acknowledges that CMS has no policy for checking for tax liens levied against a provider.

However, Weems takes exception to some of the GAO report. He says that the GAO report "suggests that CMS has not incorporated most of its debt into the FPLP since the passage of the Taxpayer Relief Act of 1997," which authorized the program. Weems rebuttal is that at present, "more than $11 billion in payments per month are subject to the FPLP, representing 30% of Medicare monthly payments." This ratio will rise to 60% with the commencement of the Healthcare Integrated General Ledger Accounting System (HIGLAS), which Weems says will replace the 75 different accounting systems that currently make up the agency's accounts payable system.

Weems also says that the GAO calculation that the 27,000 providers make up 6% of all participating Part A and Part B providers does not match up well with the fact that "there are approximately one million Part B providers and suppliers alone," let alone the total when Part A providers are tallied.

After detailing a few other objections, Weems writes that CMS "would like to again acknowledge our appreciation to the GAO for its efforts."

Two-man firm gets warning

Who says the ultra-small device business is dead?

FDA yesterday posted an April 10 warning letter to Don Tay Industries (New Berlin, Wisconsin) for deviations from the quality systems regulations in the firm's production of Softy Trode disposable electrocardiogram electrodes. Don Tay is owned and operated by the company president and his father, the founder, and they are the only employees of the company at present.

The warning letter stated that Don Tay had no design history files documenting design controls, validation or risk analysis, and that the company lacked documentation of verification and validation of changes to the company's electrodes.

The agency cited Don Tay for lack of a device master record that describes "specifications for the non-woven fabric component" or testing of that component, and for lack of a quality system for several QSR requirements, including complaint handling and medical device reporting.

The company's president, Jeffrey Arndt, told Medical Device Daily that Don Tay is "in the process of sending a response" and that the company is not shipping electrodes at present. However, Arndt said "we're definitely going back into that" as soon as he can get a quality system in place. He said he expects to hear from FDA on the corrections by year's end.

Arndt said "the issues were on bookkeeping and tracking items," and that the company has been making the electrodes "for about 25 years." However, he and his father are not eager to ship to Europe, given the burden of dual certification. "At this time, it's really not a cost effective thing we'd like to get into," he said.