A new report by federal auditors says a Kansas-based company may have paid out as much as $4.2 million in potentially fraudulent Medicare claims for penis pumps, and the auditors are asking the company to refund the government the money.

The Health and Human Services inspector general said it sampled 100 claims made with Pos-T-Vac, the Dodge City-based penis-pump manufacturer, and found improprieties in more than half of payments for what are known as “male vacuum erection systems.”

The errors ranged from the company’s failing to maintain proof that it delivered the pumps to customers, to one instance when the physician’s approval order wasn’t even signed by the doctor.

Together, those claims from the small sample amounted to $18,007 in billings, and when multiplied across Pos-T-Vac’s entire set of 28,088 claims, the potential for fraudulent payments came to more than $4.2 million in 2008 and 2009, the auditors said.

“Pos-T-Vac submitted unsupported claims because it lacked adequate internal controls to ensure that it collected and maintained the required documentation,” the investigators said in their report, which was dated June 14.

The vacuum systems are considered durable medical equipment and are therefore eligible to be paid for as claims under Medicare, the federally funded health coverage program for the country’s senior citizens.

In a response to auditors on behalf of Pos-T-Vac, Wayne H. van Halem, president of the van Halem Group, a Medicare-compliance consultancy, said the company did try to maintain sufficient documentation to verify that the items were delivered properly.

Still, he said, the company is adding a new staffer to do more verification.

“In question here is not if these services were delivered, but the format of the proof of delivery,” he said. “We have provided proof that the packages were delivered, which includes the elements requested by Medicare and has been confirmed by the third-party delivery service.”

Mr. van Halem did acknowledge the claim paid out when there was no doctor’s signature and that two other claims where there was no clinical documentation of a problem were in error.

Mr. van Halem told The Washington Times that those errors were made by physicians, not by the company.

The Heartland Institute estimated that the federal government spent more than $250 million on penis pumps over the past decade, with claims steadily rising in recent years.

Reports of fraud have accompanied the expanding Medicare market, leading one Republican congressional aide who reviewed the auditor’s report to joke that it gave a new meaning to government spending as economic stimulus.

“Now we know what [economist and New York Times columnist] Paul Krugman and the Keynesians mean by priming the pump,” the aide said. “This is Exhibit A in the case against government-run health care.”

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