Medical equipment suppliers that defraud Medicare (search) or operate without a proper license often have little trouble regaining billing privileges so they can do it all over again, government investigators say.

The Government Accountability Office (search), which serves as a watchdog for Congress, said Wednesday that it identified 1,038 equipment suppliers suspended from Medicare in 2003, generally for violating multiple standards. Of these suppliers, 192 were re-enrolled as of May 31, 2004. Their average suspension lasted about three months.

The report gives no indication of the financial scope of the problem, such as how much money those 192 suppliers improperly billed the government. Investigators found enough examples to recommend that Congress consider specific waiting periods before suspended suppliers can regain their billing privileges.

"Suppliers whose previous performance was poor or that demonstrated a lack of integrity should not be allowed to quickly re-enter the program," investigators concluded.

Fraudulent billings result in higher taxes and premiums for the federal health insurance program, which serves about 43 million elderly and disabled Americans.

Investigators cited a couple of examples in which companies are suspected of defrauding the government, just months after they had been suspended from Medicare.

For example, one Miami supplier re-entered the program after a three-month suspension and billed Medicare almost $1.4 million for colostomy supplies. When contractors for the government became suspicious and began to ask for more documentation to support the billings, such as a physician's order, the company did not provide any.

So far, investigators have determined the company was overpaid at least $200,000. The company's name was not released because of criminal investigations.

The Centers for Medicare and Medicaid Services paid suppliers about $8.8 billion in the 2004 budget year. The agency contracted with the National Supplier Clearinghouse (search) to monitor the suppliers and make sure they meet certain standards.

But investigators said those standards are too weak to effectively screening out frauds.

They noted how one woman told the Senate Finance Committee she was able to open up a sham business with just $3,000. She then began billing Medicare.

"Having weak standards for suppliers helps individuals intent on defrauding Medicare to obtain billing privileges and be paid for fraudulent claims," investigators said.

The GAO said that, in addition to weak standards, the National Supplier Clearinghouse did not conduct hundreds of onsite inspections that were required.

"Complacency by the watchdogs hurts both taxpayers and beneficiaries," said Sen. Charles Grassley, chairman of the committee that has jurisdiction over Medicare.

"Money is wasted or lost to fraud, and quality of care can be jeopardized when products and services come from con artists rather than qualified suppliers," said Grassley, R-Iowa.

Investigators reviewed records from Florida, Illinois, Louisiana and Texas when conducting their review.

CMS said its contractor had already started conducting more onsite inspections in "vulnerable areas of the country," including Los Angeles and Miami, that has resulted in the revocation of billing privileges.

The agency's administrator, Mark McClellan, also said that the agency would pursue regulatory changes to strengthen the standards that suppliers must meet.