Medicare
Orthotics Ruling Has Implications for Beneficiary Access and Federal and State Costs Gao ID: GAO-02-330 May 22, 2002In the late 1980s and early 1990s, the Health Care Financing Administration (HCFA), now called the Centers for Medicare and Medicaid Services (CMS), became concerned that some suppliers were improperly billing Medicare for items that attach to wheelchairs and other equipment. Some suppliers were billing for such items using codes for orthodic devices, including arm, back, and neck braces that provide support for or immobilize weak or injured limbs, while others were billing using codes for durable medical equipment, which includes equipment such as wheelchairs and crutches that can withstand repeated use and is appropriate for home use. Whether an item is billed as an orthotic or DME device can affect whether such claims are paid. To clarify Medicare's payment policy on orthotics, HCFA issued a ruling stating that Medicare considered such items to be durable medical equipment rather than orthotics. HCFA issued Ruling 96-1 to clarify the circumstances under which certain items would be classified as orthotics or as DME for Medicare part B payment purposes. A federal appellate court found that HFCA had followed appropriate procedures to issue the rule as an interpretation of Medicare policy, the interpretation in the ruling was wholly supportable, and the treating of seating systems as DME was consistent with congressional intent. HCFA's ruling that attached bracing devices were in the DME benefits category and could no longer be billed as orthotics affects beneficiaries residing in Medicare-certified skilled nursing facilities and other institutions primarily engaged in providing skilled nursing care (SNF). Because Medicare part B does not cover DME in SNFs and other institutions primarily engaged in providing skilled nursing care, claims for such items are no longer paid for residents in nursing homes. This ruling affects residents of all nursing homes, not just SNFs. If HCFA's ruling were rescinded and Medicare's policy changed so that attached bracing devices were classified as orthotics, how much Medicare and Medicaid would spend for orthotics is uncertain. The increase in Medicare spending would depend on how extensively attached bracing devices would be provided to nursing home residents following the ruling's recission. The distinction between DME and orthotics would become less clear, which could lead to inappropriate billing. Therefore, if the ruling were rescinded, additional controls, such as closely monitoring billing and reviewing medical justification for customized items prior to payment, would be vital to help curb potentially inappropriate billing.
GAO-02-330, Medicare: Orthotics Ruling Has Implications for Beneficiary Access and Federal and State Costs
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United States General Accounting Office:
GAO:
Report to Congressional Requesters:
May 2002:
Medicare:
Orthotics Ruling Has Implications for Beneficiary Access and Federal
and State Costs:
GAO-02-330:
Contents:
Letter:
Results in Brief:
Background:
HCFA's Ruling Issued to Clarify Medicare Policy for Orthotics and DME:
HCFA's Ruling Affects Beneficiaries Who Reside in Nursing Homes:
Rescinding the Ruling Would Increase Medicare Payments, But Financial
Impact on States Would Vary:
Ruling's Rescission Would Have Implications for Medicare Program
Integrity:
Concluding Observations:
Agency Comments and Our Evaluation:
Appendix I: Scope and Methodology:
Appendix II: Excerpt from HCFA's Ruling 96-1:
Appendix III: Comments from the Centers for Medicare and Medicaid
Services:
Tables:
Table 1: Orthotic and DME Coverage for Medicare Beneficiaries:
Table 2: Attached Bracing Devices HCFA's Coding System Classified as
Orthotics Prior to the Ruling:
Figure:
Figure 1: Total Part B Annual Claims for Nine Attached Bracing Devices
Affected by the Ruling from 1993 through 2000:
Abbreviations
ALT: administrative law judge:
BIPA: Medicare, Medicare, and SCHIP Benefits Improvement and
Protection Act of 2000:
CMS: Centers for Medicare and Medicaid Services:
DME: durable medical equipment:
DMEPOS: durable medical equipment, orthotics, prosthetics, and
supplies:
DMERC: durable medical equipment Regional Carrier:
HCFA: Health Care Financing Administration:
HCPCS: Healthcare Common Procedure Coding System:
BI-IS: Department of Health and Human Services:
ICF: Intermediate care facility:
MDS: minimum data set:
NF: nursing facility:
OBRA: Omnibus Budget Reconciliation Act of 1990:
OEI: Office of Evaluation and Inspections:
OIG: Office of Inspector General:
RESNA: Rehabilitation Engineering and Assistive Technology Society of
North America:
SCHIP: State Children's Health Insurance Program:
SNF: skilled nursing facility:
[End of section]
United States General Accounting Office:
Washington, DC 20548:
May 22, 2002:
The Honorable Max Baucus:
Chairman:
The Honorable Charles E. Grassley:
Ranking Minority Member:
Committee on Finance:
United States Senate:
The Honorable W. J. "Billy" Tauzin:
Chairman:
The Honorable John D. Dingell:
Ranking Minority Member:
Committee on Energy and Commerce:
House of Representatives:
The Honorable William M. Thomas:
Chairman:
The Honorable Charles B. Rangel:
Ranking Minority Member:
Committee on Ways and Means:
House of Representatives:
In the late 1980s and early 1990s, the Health Care Financing
Administration (HCFA”now called the Centers for Medicare and Medicaid
Services or CMS)[Footnote 1]”became concerned that some suppliers were
improperly billing Medicare for certain items that attach to
wheelchairs and other equipment. These suppliers were billing such
items using codes for orthotic devices, which include leg, arm, back,
and neck braces that provide rigid or semi-rigid support to weak or
deformed body parts or restrict or eliminate motion in a diseased or
injured part of the body. However, other suppliers were billing
devices that served essentially the same purpose using codes for
durable medical equipment (DME), which is equipment”such as
wheelchairs and crutches”that serves a medical purpose, can withstand
repeated use, is not generally useful in the absence of an illness or
injury, and is appropriate for use in the home.[Footnote 2] Whether an
item is billed as an orthotic or DME device can affect whether such
claims are paid. To clarify Medicare's payment policy on orthotics,
HCFA issued Ruling 96-1 in September 1996. The ruling stated that
Medicare's longstanding policy was to consider items that attach to
DME (or to other equipment) as DME and not orthotics.
Medicare covers both orthotics and DME when medically necessary and
prescribed by a physician, but the type of coverage depends on where
the beneficiary receives care. For example, under part B, which is the
part of the program that pays for physician, laboratory, and certain
other services, Medicare covers both orthotics and DME for
beneficiaries in their homes or in institutions that serve as their
homes, but covers only orthotics for beneficiaries in a skilled
nursing facility (SNF).[Footnote 3] In contrast, some states' Medicaid
programs cover and pay for customized DME[Footnote 4] items for
program beneficiaries in SNFs, including wheelchairs with attachments
that have been measured and fitted to the beneficiary. Often such
residents are eligible for both Medicare and Medicaid benefits.
In addition to HCFA's concerns about billing for certain items that
attach to wheelchairs and other equipment as orthotic devices, the
Department of Health and Human Services (HHS) Office of Inspector
General (OIG) reported several times on other types of problems
related to inappropriate Medicare payment for orthotic devices.
[Footnote 5] For example, when the OIG reviewed a sample of
beneficiary medical records, it found that many orthotic devices were
not being provided to the beneficiaries as billed. The OIG also
reported that practitioners who had not been certified to dispense
these items were more likely than other suppliers to bill
inappropriately. To help address these program integrity concerns, in
March 2000 the OIG recommended that only qualified practitioners be
allowed to provide to beneficiaries custom-fabricated orthotic devices
that are individually made for a specific patient.[Footnote 6] In
response, the Medicare, Medicaid, and SCHIP Benefits Improvement and
Protection Act of 2000 (BIPA) restricted payment for custom-fabricated
orthotic devices that are individually fabricated over a positive
model of the patient”custom-molded devices”to practitioners and
suppliers meeting prescribed accreditation or other requirements.' The
BIPA requirement applies only to custom-molded orthotic items, but not
to other custom-fabricated orthotic devices.
Cognizant of program integrity issues and concerned that the HCFA
ruling could have adversely affected Medicare beneficiaries, the
Congress directed us in BIPA to study the ruling.[Footnote 7] We
addressed the following questions: (1) Why did HCFA issue its ruling
and did it follow required procedures in issuing it? (2) What has been
the impact of the ruling on Medicare beneficiaries? (3) If the ruling
were rescinded by CMS, what would be the financial impact on Medicare
and Medicaid? (4) Given the new BIPA requirement, what would be the
implications for Medicare program integrity if the ruling were
rescinded?
In preparing this report, we conducted interviews with officials and
representatives from CMS, and from durable medical equipment regional
carriers (DMERC), who are contractors that process orthotics and DME
claims. We interviewed representatives from state Medicaid programs to
determine the potential financial impact of changing the ruling on
states' Medicaid spending for individuals dually-eligible for Medicare
and Medicaid. We also interviewed representatives from the OIG,
advocacy groups, orthotic industry representatives, and provider
associations; reviewed federal statutes and regulations, documents
related to a legal challenge to the ruling, CMS documents, and
Medicare coverage policy; and analyzed data on orthotic claims and
characteristics of nursing home residents. Appendix I presents the
details of our methodology. We performed our work from January 2001
through March 2002 in accordance with generally accepted government
auditing standards.
Results in Brief:
HCFA issued Ruling 96-1 to clarify the circumstances under which
certain items would be classified as orthotics or as DME for Medicare
part B payment purposes. In the late 1980s and early 1990s, certain
suppliers of an item that consisted of many separate supports that
attached to a frame were billing part B for each support as a separate
orthotic brace, using multiple orthotics billing codes that described
braces expected to be used independently of other medical equipment.
As DMERCs became aware of this billing practice, they began to deny
these orthotics claims because the attached bracing devices[Footnote
9] being provided as a group appeared to be similar in function to a
seating system or customized wheelchair, which was considered DME. The
distinction between orthotics and DME is significant because orthotics
can be paid for beneficiaries in SNFs under part B, but DME cannot.
While contractors began to deny such orthotics claims, in one
significant case involving multiple claims, an administrative law
judge (ALI), who hears appeals of contractors' payment decisions,
overturned some of the claims denials. In order to clarify Medicare's
policy in a manner that would be binding on ALJs, HCFA ruled that leg,
arm, back, and neck braces that are used independently are orthotics,
whereas similar items that are attached to equipment are DME. The
validity of the agency's orthotics ruling was challenged in court,
with the plaintiffs charging that the ruling had been issued without
following required administrative procedures. However, a federal
appellate court found that HCFA had followed appropriate procedures to
issue the rule as an interpretation of Medicare policy, the
interpretation in the ruling was wholly supportable, and the treatment
of seating systems as DME was consistent with congressional
intent.[Footnote 10]
HCFA's ruling that attached bracing devices were in the DME benefit
category and could no longer be billed as orthotics affects
beneficiaries residing in Medicare-certified SNFs and other
institutions primarily engaged in providing skilled nursing care”which
include most nursing homes. The ruling had no impact on beneficiaries
living at home, or in settings such as assisted living facilities,
because Medicare covers both orthotics and DME under part B for them.
Therefore, claims for attached bracing devices are still paid as DME
for such beneficiaries following the ruling. However, because Medicare
part B does not cover DME in SNFs and other institutions primarily
engaged in providing skilled nursing care, claims for such items are
no longer paid for residents in nursing homes, who would therefore
need to purchase such devices with their own resources or through
other payers. Because attached bracing devices were clearly classified
as DME after the ruling, Medicare part B expenditures for such devices
declined by at least $1.4 million between 1996 and 1997 for
beneficiaries living in nursing homes and remained lower in subsequent
years. The ruling affected residents of all nursing homes, not just
SNFs, because the DMERCs' practice is not to pay for DME for any
nursing home residents, assuming that all nursing homes meet HCFA's
criteria for institutions primarily engaged in providing skilled
nursing care.
If HCFA's ruling were rescinded and Medicare's policy changed so that
attached bracing devices were classified as orthotics, how much
Medicare and Medicaid spending for orthotics would increase is
uncertain. With a rescission of the ruling, Medicare would pay for
attached bracing devices for any nursing home resident if medically
necessary. The increase in Medicare spending would depend on how
extensively attached bracing devices would be provided to nursing home
residents following the ruling's rescission. If utilization returned
to the pre-ruling level, Medicare's annual costs for attached bracing
devices for nursing home residents would grow by a modest amount”about
$1.8 million, given previous claims volume and current payment
amounts. However, the potential exists for even greater spending
increases. Estimates of the number of beneficiaries who live in
nursing homes, use wheelchairs, and thus might potentially use such
devices, are much higher than prior utilization levels. A payment
change would provide financial incentives for suppliers to furnish
attached bracing devices to such beneficiaries. Rescinding the ruling
would affect individual state Medicaid programs' spending differently,
depending on their existing coverage policies. States that separately
cover these devices for beneficiaries in nursing homes would likely
see a decrease in expenditures because most of the cost of providing
the devices would shift from Medicaid to Medicare. In contrast, states
not separately covering these devices would likely see some increase in
expenditures because they would be responsible for some costs not paid
by Medicare, such as copayments, for beneficiaries who are covered by
both programs. However, to the extent that the costs of such items
were part of the per diem rates paid to nursing homes, states may
decide to adjust their Medicaid per diem rates downward to reflect
this coverage change, which could moderate their spending increases.
There are a number of program integrity implications should the ruling
be rescinded. HCFA issued its ruling to address concerns about
inappropriate billing for attached bracing devices under part B and
thereby clarified the distinction between DME and orthotics. If the
ruling were rescinded, the distinction between DME and orthotics would
become less clear, which could lead to inappropriate billing. Should
the ruling be rescinded, the requirement added by BIPA that restricts
payment to qualified providers for custom-molded orthotics would not
safeguard against inappropriate billing because none of the types of
attached bracing devices that we identified as affected by the ruling
are fabricated in this manner. Therefore, if the ruling were
rescinded, additional controls, such as closely monitoring billing and
reviewing medical justification for customized items prior to payment,
would be vital to help curb potentially inappropriate billing.
In commenting on a draft of this report, CMS generally agreed with the
report's conclusions. CMS further noted that the federal appellate
court, which had held that the orthotics ruling was properly issued,
had also found that the content of the ruling was wholly supportable
and that the ruling well effectuated congressional intent by
classifying seating systems as DME. In addition, CMS also raised
concerns about the potential impact that rescinding the ruling could
have on the provision of other types of equipment as orthotics in SNFs.
Background:
CMS, an agency within HHS, is responsible for much of the federal
government's multi-billion dollar payments for health care, primarily
through the Medicare and Medicaid programs. Medicare covers about 40
million individuals 65 years old and older, as well as some disabled
individuals. Eligible individuals enroll to receive part A insurance,
which helps pay for inpatient hospital, SNF, hospice, and certain home
health services. Most Medicare beneficiaries also elect to purchase
part B insurance, which helps pay for physician, outpatient hospital,
laboratory, and other services.
Medicaid is a state-administered health insurance program, jointly
funded by the federal and state governments, that covers approximately
40 million eligible low-income individuals including children and
their parents, the aged, blind, and disabled. Each state administers
its own program and determines, under broad federal guidelines,
eligibility for, coverage of, and reimbursement for specific services
and items, such as orthotics and DME. In 2000, about 5.5 million low-
income aged and disabled Medicare beneficiaries were also covered by
Medicaid.[Footnote 11] For such beneficiaries, Medicare serves as
their primary health care coverage, while Medicaid pays for certain
other health care costs. The extent of their Medicaid coverage is
primarily dependent on their income. For the lowest income
beneficiaries, Medicaid covers long-term care, prescription drugs, and
their Medicare part B premiums, deductibles, and copayments, as well
as other items and services not available through Medicare. For those
dually-eligible beneficiaries with somewhat higher incomes, Medicaid
support is limited to cost sharing and/or part B premiums.
Benefits covered by Medicare are broadly established in statute and
further delineated through regulation and other means, such as
rulings. Generally, a regulation is a substantive requirement
promulgated by a federal agency that has the force and effect of law.
Such regulations are generally first proposed, to allow for a period
of public notice and comment, before they are finalized. In addition
to such substantive regulations, CMS also issues interpretive rules”
including administrative rulings”that are decisions of the agency's
administrator that serve as final opinions and statements of policy
and interpretation. They provide clarification on, and interpretation
of, complex or ambiguous provisions of the law or regulations relating
to Medicare, Medicaid, and related matters. CMS characterizes rulings
as interpreting previously promulgated policies, rather than
establishing new policies. Rulings are final upon issuance without
prior public notice or comment period.
Medicare pays for orthotic devices and DME under both its part A and
part B benefits. Through its post-hospital extended care services
benefit under part A, Medicare pays for inpatient skilled nursing care
and rehabilitative services furnished by a SNF. To qualify for this
benefit, a Medicare beneficiary must be admitted to the SNF within a
short period (generally 30 days) after a hospital stay of at least 3
days and receive daily skilled nursing care or rehabilitative services
for a condition related to hospitalization. Medicare's part A per diem
payment generally covers all necessary services and supplies provided
by the SNF, such as room, board, and drugs, for as long as the need
for daily skilled care continues, up to 100 days[Footnote 12] of care
per benefit period.[Footnote 13] Medicare also covers both orthotics
and DME under the part A per diem payment for a beneficiary in a SNF.
HCFA considered whether orthotics should be separately reimbursed
under part B when the SNF payment method was being developed. In
advising the Congress on what to include in the part A per diem
payment, the agency took the position that it would be appropriate to
include orthotics in the SNF part A per diem payment, because
orthotics were frequently used, and could be overprovided, if
separately reimbursed under part B.[Footnote 14]
Medicare also covers orthotic devices and DME under part B in some
instances. Orthotic devices are covered under part B for a beneficiary
who is not in a part A-covered SNF or hospital stay. In contrast, DME
is not covered under part B for a beneficiary in a facility that is
primarily engaged in providing skilled nursing or rehabilitative
services. These facilities include SNFs certified for Medicare part A
payment and other facilities that meet criteria developed by HCFA and
used to determine whether a facility is a SNF for DME payment
purposes. However, Medicare part B covers both orthotics and DME for a
beneficiary living at home or in an institution (other than a Medicare-
certified SNF or other facility that meets HCFA's SNF criteria) that
serves as a home. Information summarizing Medicare coverage for
orthotics and DME is presented in table 1.
Table 1: Orthotic and DME Coverage for Medicare Beneficiaries:
Location of beneficiary: Skilled nursing facility or hospital (part A
stay);
Medicare coverage: Medicare's per diem under part A:
* includes orthotics and;
* includes DME.[A]
Location of beneficiary: Skilled nursing facility (not part A stay);
Medicare coverage: Medicare part B:
* covers orthotics, but;
* does not cover DME.[A]
Location of beneficiary: Home, including an institution serving as
home;
Medicare coverage: Medicare part B:
* covers orthotics and;
* covers DME.
[A] Part B payment for DME is allowed within 2 days prior to discharge
from a SNF to allow for fitting of equipment for use in the home and
training the beneficiary in its use.
Source: GAO analysis of Medicare coverage policy.
[End of table]
Suppliers and practitioners bill Medicare part B for orthotics and DME
using the Healthcare Common Procedure Coding System (HCPCS) codes.
Certain HCPCS codes are designated for orthotic devices, while others
are designated for DME. Orthotic HCPCS code listings give a brief
description of the device and state whether the device is
prefabricated or custom-fabricated. Prefabricated, off-the-shelf
devices are manufactured in quantity, such as an adjustable, semi-
rigid, knee-joint brace. A prefabricated orthotic may be trimmed,
bent, adjusted, or otherwise modified for use by a specific patient.
An orthotic device that is custom assembled from prefabricated
components is still considered prefabricated. Custom-fabricated
devices are individually made for a specific patient, starting with
basic materials, such as plastic, metal, leather, or cloth. These
would include devices such as an ankle and foot brace that is attached
to a shoe to control stability of the ankle and has been custom
fabricated based on measurements of the patient's ankle and foot.
Custom-fabricated orthotics include custom-molded devices, which are
molded to a model of the patient”such as an ankle and foot brace
custom-molded on a casting made from an impression of the patient's
ankle and foot.[Footnote 15]
Orthotics and DME suppliers and providers claim reimbursement for the
services and products provided to Medicare beneficiaries under part B
from CMS's four DMERCs.[Footnote 16] DMERCs are responsible for
checking the validity of, and paying, orthotics and DME claims.
Medicare part B has different methodologies, specified in law, for
determining payment amounts for different categories of DME,[Footnote
17] but generally uses separate fee schedules for each state, based on
historical charges that have been updated some years to reflect
inflation.[Footnote 18] There are also upper and lower limits on the
fees paid for DME.[Footnote 19] For orthotics, Medicare uses 10
regional fee schedules, which are also based on historical supplier
charges and are subject to upper and lower limits.[Footnote 20]
Payments for DME and orthotics are based on the lesser of the fee
schedule amount or the submitted charge. DME and orthotics fee
schedules include amounts for newly purchased items, rented items, and
for purchase of used devices. The beneficiary is responsible for a 20
percent copayment for DME and orthotics covered under part B.
HCFA‘s Ruling Issued to Clarify Medicare Policy for Orthotics and DME:
HCFA issued its orthotics ruling in September 1996 to clarify the
distinction between certain DME and orthotics for Medicare part B
billing purposes. HCFA‘s ruling helped address concerns about the
manner in which some suppliers were billing Medicare for a system
consisting of leg, arm, neck, and back supports that attached to a
base. These suppliers were billing for each attached support as a
separate orthotic brace. HCFA‘s ruling stated that it has been Medicare‘
s longstanding policy to treat braces attached to DME or other medical
or nonmedical equipment as DME. The ruling also said that only braces
that could be used independently qualified as orthotics. Attached
devices that brace individuals, such as items that attach to
wheelchairs, would not be paid under Medicare‘s orthotics benefit.
Shortly after it was issued, several beneficiaries, a manufacturer,
and several suppliers of attached bracing devices challenged the
ruling in court, claiming HCFA did not follow appropriate procedures
because it should have promulgated this decision as a regulation after
public notice and comment. However, a federal appellate court found
that HCFA had acted properly in issuing it as a ruling, which is an
appropriate way to interpret existing policy. The court also found
that the interpretation in the ruling was wholly supportable and that
the treatment of seating systems as DME was consistent with
congressional intent.
HCFA's Ruling Clarified the Distinction Between Orthotics and DME:
In the late 1980s and early 1990s, HCFA and its contractors had become
increasingly concerned about how certain suppliers were billing
Medicare. Particular concern was raised by the way in which suppliers
of an item manufactured by a company called OrthoConcepts[Footnote 21]
were billing Medicare. The OrthoConcepts system consisted of leg, arm,
neck, and back supports that attached to a base that could be put on
wheels. OrthoConcepts said that its adjustable system of multiple
supports provided orthotic support to the body, which would be
particularly helpful to individuals with severe neurological problems
who needed to be properly positioned. Suppliers of its system were
billing each attached support as a separate orthotic brace, using
multiple orthotics billing codes that described braces expected to be
used independently of other medical equipment. As DMERCs became aware
of this billing practice, they began to deny these orthotics claims
because the attached bracing devices being provided as a group
appeared to be similar in function to a seating system or customized
wheelchair, which were both considered DME. However, some of the
claims denials were subsequently overturned by an ALJ, who hears
Medicare appeals on denied claims.
These decisions by an ALT prompted HCFA to issue its September 1996
ruling, which is binding on these judges. HCFA's ruling limited
payment for orthotics under Medicare part B to leg, arm, back, and
neck braces that can be used independently of other equipment. (See
appendix II for an excerpt from the Conclusions and Illustrations section
of the ruling to demonstrate its practical application.) As a result
of the ruling, attached bracing devices, such as OrthoConcepts' items
and other attached devices, were placed in the DME benefit category
and could no longer be billed as orthotics.
The ruling cited the Congress' action in the Omnibus Budget
Reconciliation Act of 1990 (OBRA) as evidence for Medicare's policy on
whether attached items could be considered orthotics. OBRA provided
that wheelchairs measured, fitted, or adapted for a particular
patient, and assembled or ordered with customized features,
modifications, or components intended for a specific patient's use,
were considered customized DME.[Footnote 22] A committee report on the
OBRA legislation discussed how wheelchairs could be customized by
adding attachments, such as postural control devices and custom-molded
cushions, inserts, or lateral supports designed to brace the
individual using the wheelchair.[Footnote 23] HCFA concluded in its
ruling that, while the Congress specifically addressed only customized
wheelchairs and their accessories in OBRA, it also intended that
devices attached to noncustomized wheelchairs be considered part of
the wheelchair and, therefore, DME.
Court Finds HCFA Acted Properly in Issuing the Ruling:
Concern about whether HCFA's issuance of its ruling violated statutory
requirements was the focus of a court challenge in 1997. The ruling
was challenged by OrthoConcepts, whose seating system was affected by
the ruling; two Medicare beneficiaries, who used the OrthoConcepts
product; and three DME suppliers of the OrthoConcepts product. These
parties argued that the ruling was invalid because it was adopted
without following the prescribed notice and comment procedures for a
substantive rule and that the agency's refusal to classify the
OrthoConcepts seating system as orthotics was arbitrary and capricious.
After these parties were initially successful in challenging the
ruling in the United States District Court for the District of
Massachusetts, HCFA appealed the lower court's decision. On July 27,
1998, the United States Court of Appeals for the First Circuit found
that HCFA's characterization of the OrthoConcepts seating system as
DME was consistent with the agency's earlier stated position covering
such devices and that the agency had merely clarified its policy.
Further, the court held that HCFA was not required to provide for
public notice and comment before issuing the ruling because it was
interpretive rather than legislative or substantive. Because HCFA had
followed federal requirements for an interpretive rulemaking, the
court also held that the agency had not acted in an arbitrary and
capricious manner in issuing the ruling. Furthermore, the court found
that the interpretation in the ruling was wholly supportable and that
the ruling's treatment of seating systems as DME was consistent with
congressional intent. The Supreme Court denied a request to hear a
further appeal.
HCFA's Ruling Affects Beneficiaries Who Reside in Nursing Homes:
As a result of HCFA's ruling, attached bracing devices are now clearly
classified as DME and cannot be billed as orthotics, which affects
beneficiaries who live in nursing homes. Part B no longer pays claims
for attached bracing devices for beneficiaries in institutions
primarily engaged in providing skilled nursing care because part B
does not cover DME in these settings. HCFA and the DMERCs developed
criteria and guidance on how to define such institutions that prohibit
payment for DME for beneficiaries in most nursing homes”not just
Medicare-certified SNFs. These beneficiaries would need to purchase
such devices with their own resources or through other payers.
When Medicare was established in 1965, facilities providing skilled
nursing care under part A were expected to serve as a bridge between
the hospital and other, less skilled care or home.' Medicare part B
did not cover medical and other health services”such as DME”provided
in what were then called extended care facilities and are now called
SNFs.[Footnote 25] Medicare part B did pay for DME in facilities that
provide a lesser level of care, but as the nursing home industry
evolved, fewer did not provide skilled care. In 2001, most nursing
homes were certified as SNFs. A significant number of Medicare
beneficiaries reside more or less permanently in SNFs or other nursing
homes that DMERCs consider as meeting HCFA's criteria for a SNF for
DME payment purposes. Such beneficiaries are therefore unable to
obtain Medicare coverage for DME, while other beneficiaries living in
congregate settings such as assisted living facilities, as well as
those living at home, do receive DME coverage.
HCFA's Ruling Reduced Medicare Payments For Beneficiaries in Nursing
Homes by at Least $1.4 Million:
Following the ruling, claims were no longer paid for attached bracing
devices for beneficiaries living in nursing homes, which caused a drop
in the number and amount of such claims paid by Medicare. Medicare
expenditures for such devices declined by at least $1.4 million
[Footnote 26] between 1996 and 1997, and expenditures remained lower
in subsequent years. Prior to the ruling, the HCPCS coding system had
nine codes that described bracing devices that attached to
wheelchairs.[Footnote 27] Suppliers used these codes to bill for such
items under Medicare's orthotics benefit category and DMERCs paid such
claims. These devices included one back support to position wheelchair
users and eight mobile arm supports to assist them in moving their
hands and arms. (See table 2 for information on these nine devices.)
These codes were unlike other orthotics codes because most of the
other HCPCS orthotics codes were for braces designed to be used
independently of other equipment. In addition, most other items that
attached to wheelchairs”such as special headrests to provide postural
support”had codes that categorized them as DME and were paid under the
DME benefit category.
Table 2: Attached Bracing Devices HCFA's Coding System Classified as
Orthotics Prior to the Ruling:
Device name: Back support system;
HCPCS code: K0114;
Description: Prefabricated back support system, with inner frame, for
use with wheelchair;
Fee schedule amount[A] (floor-ceiling): $616.56-725.36.
Device name: Shoulder elbow orthosis;
HCPCS code: L3964;
Description: Prefabricated mobile arm support attached to wheelchair.
Cost includes fitting and adjustment;
Fee schedule amount[A] (floor-ceiling): $505.08-594.21.
Device name: Shoulder elbow orthosis;
HCPCS code: L3965;
Description: Prefabricated Rancho type mobile arm support attached to
wheelchair. Cost includes fitting and adjustment;
Fee schedule amount[A] (floor-ceiling): $805.96-948.19.
Device name: Shoulder elbow orthosis;
HCPCS code: L3966;
Description: Prefabricated mobile arm support attached to wheelchair.
Cost includes fitting and adjustment;
Fee schedule amount[A] (floor-ceiling): $607.16-714.31.
Device name: Shoulder elbow orthosis;
HCPCS code: L3968;
Description: Prefabricated mobile arm support attached to wheelchair.
Cost includes fitting and adjustment;
Fee schedule amount[A] (floor-ceiling): $768.34-903.93.
Device name: Shoulder elbow orthosis;
HCPCS code: L3969;
Description: Prefabricated mobile arm support attached to wheelchair.
Cost includes fitting and adjustment;
Fee schedule amount[A] (floor-ceiling): $537.30-632.12.
Device name: Shoulder elbow orthosis;
HCPCS code: L3970;
Description: Addition to mobile arm support, which elevates arm;
Fee schedule amount[A] (floor-ceiling): $214.93-252.86.
Device name: Shoulder elbow orthosis;
HCPCS code: L3972;
Description: Addition to mobile arm support;
Fee schedule amount[A] (floor-ceiling): $136.67-160.79.
Device name: Shoulder elbow orthosis;
HCPCS code: L3974;
Description: Addition to mobile arm support;
Fee schedule amount[A] (floor-ceiling): $115.92-136.38.
[A] Fee Schedule amount is for new item.
Source: 2001 Durable Medical Equipment, Prosthetics/Orthotics, and
Supplies Fee Schedule.
[End of table]
To develop a conservative assessment of the effect of the ruling on
claims payment, we analyzed Medicare claims data for the nine attached
bracing devices that were classified in the DME”rather than the
orthotic”benefit category as a result of the clarification in the
ruling. Our analysis showed that Medicare part B expenditures for the
nine attached bracing devices provided to beneficiaries in nursing
homes dropped by about $1.4 million between 1996 and 1997[Footnote 28]
and the number of claims paid for these beneficiaries for such devices
declined from about 3,200 claims in 1996 to only 11 claims in 1997.
Furthermore, the reduction has continued, with no claims paid for the
nine attached bracing devices for beneficiaries in nursing homes in
either 1999 or 2000. (See figure 1.) However, our estimate of the
change in Medicare spending for attached bracing devices for nursing
home residents prior to and after the ruling is conservative because
payment under the nine codes we analyzed does not represent all
payments for such devices. Some suppliers-”such as those providing
OrthoConcepts' products--were billing for attached bracing devices
using codes for nonattached braces. Because both attached and
nonattached items were being billed using these codes, we could not
isolate the claims for attached items from claims for nonattached
items. As a result, we could not analyze all billing in the orthotics
benefit category for attached bracing devices prior to the ruling.
Figure 1: Total Part B Annual Claims for Nine Attached Bracing Devices
Affected by the Ruling from 1993 through 2000[A]:
[Refer to PDF for image: stacked vertical bar graph]
Each vertical bar represents the number of claims from Nursing homes
and Homes/other for the years 1993 through 2000.
[A] Calendar year data for 1998 were not available in CMS's Medicare
part B extract and summary system for all nine devices.
[B] Eleven claims were paid for beneficiaries in nursing homes in 1997.
Source: GAO analysis of data from CMS's Medicare part B extract and
summary system.
[End of figure]
The effect of the ruling was to make beneficiary place of residence
pivotal as to whether Medicare would reimburse for attached bracing
devices under part B. HCFA's ruling did not affect Medicare
beneficiaries living in their own homes, or settings such as assisted
living facilities, because attached bracing devices that are
considered DME are covered for beneficiaries in those settings.
[Footnote 29] The ruling affected beneficiaries who are long-term
residents of SNFs and other institutions primarily engaged in
providing skilled nursing care because DME is not covered by part B
for beneficiaries in these facilities. If the beneficiary is in a part
A-covered stay, both orthotics and DME are included in the per diem
part A payment. However, when a beneficiary is not in a Medicare part
A-covered stay, part B will cover orthotics, but not DME, including
customized DME items that are uniquely constructed or substantially
modified for a specific beneficiary.
Some beneficiaries who reside in SNFs and other institutions primarily
engaged in providing skilled nursing care and need attached bracing
devices that are not paid for through Medicare can obtain them through
other sources. For example, certain state Medicaid programs separately
cover attached bracing and similar devices as customized DME for
nursing home residents, and other Medicaid programs may include
payment for these devices in their per diem rates. However, other
beneficiaries may have to pay out of pocket or forgo using such
devices.
DME Coverage Policy Predates Evolution of Nursing Home Industry:
The policy of not covering DME for beneficiaries in facilities
primarily engaged in providing skilled nursing care has its roots in
the early years of the Medicare program. When the Congress created the
Medicare program in 1965, part A was designed to cover only
hospitalizations and relatively short-term, post-hospital care in the
home or in a facility that provided skilled nursing care.[Footnote 30]
Part A post-hospital care in such a facility was expected to involve
skilled nursing or rehabilitative care, which would serve as a bridge
between the hospital and other, less intense nursing care or therapy.
In this skilled nursing home environment, Medicare did not pay for any
service, drug, or other items under part A”including DME and orthotics”
that could not be paid for if furnished in a hospital. Payment under
part A for a beneficiary's SNF stay would cover only such needs as
would be covered for a beneficiary's hospital stay. When the Medicare
program began, facilities providing skilled nursing care were not
expected to serve as patients' residences past the immediate recovery
from their hospitalization.
Medicaid's coverage of nursing home care is broader than Medicare's,
because Medicaid also covers institutional care for beneficiaries who
do not need skilled nursing care. In 1971, the Congress expressly
designated intermediate care facilities (ICF) as a service states
could cover under Medicaid. ICFs were defined as providing regular
health-related care and services to individuals who needed
institutional care and services above the level of room and board, but
not the level of care a hospital or a SNF would provide.[Footnote 31]
State Medicaid policies, rather than the statute's distinction in the
types of care provided, determined whether nursing homes were
designated as SNFs or ICFs. In some states, almost all nursing homes
were designated as SNFs, although many of these SNFs served longer
term residents who would be receiving care similar to that provided by
ICFs in other states.
Under the original 1965 Medicare statute, part B did not pay for
medical and health services provided by hospitals, extended care
facilities (now known as SNFs), or home health agencies.[Footnote 32]
As a result, DME and other ancillary services-”such as physical
therapy”-were not paid for under part B in a SNF. In 1967, the law was
changed to eliminate the prohibition on part B payment for certain
ancillary services provided in a SNF. In a report accompanying the
1967 legislation, the Senate Finance Committee noted that retaining a
sweeping part B prohibition against paying for any services under part
B in a SNF would deprive a beneficiary who had exhausted, or never
qualified for, part A benefits of any payment for services that-”in
another setting”-would be separately coverable under part B.[Footnote
33] However, the Congress added language that retained the prohibition
on paying for DME under part B in a SNF, at the same time that it
allowed part B payment in a SNF for other ancillary services.[Footnote
34]
HCFA and its carriers had to delineate when a facility was primarily
engaged in providing skilled nursing care, particularly for facilities
that were not Medicare- or Medicaid-certified SNFs, such as ICFs. In
1982 and 1984, HCFA published rulings with criteria to determine under
what circumstances a facility would be classified as primarily engaged
in providing skilled nursing care.[Footnote 35] A facility has to meet
five criteria to be considered as primarily engaged in providing
skilled nursing care:
* Nursing services are provided under the direction or supervision of
one or more registered, licensed practical, or vocational nurses.
* Nursing personnel, including nursing aides or orderlies, are on duty
on a 24-hour basis.
* On average, the ratio of full-time equivalent nursing personnel to
the number of beds (or average patient census) is no less than 1 to 15
per shift.
* Bed and board are provided to inpatients in connection with the
furnishing of nursing care, plus one or more medically related health
services, such as physicians' services; physical, occupational, or
speech therapy; diagnostic and laboratory services; and administration
of medication.
* The facility is not licensed or certified solely as an ICF.
These criteria provided a means for identifying facilities that may
not meet all of the requirements for SNFs but could be classified as
primarily engaged in providing skilled nursing care for the purposes
of prohibiting part B DME coverage.[Footnote 36] In a 1985 court case,
HCFA indicated that about 90 percent of the 11,000 ICFs were
classified as primarily providing skilled nursing care, leaving about
10 percent of ICFs as being facilities in which beneficiaries could
have part B coverage for their DME.
ICF as a category of nursing home distinct from a SNF under Medicaid
disappeared when the Omnibus Budget Reconciliation Act of 1987
combined them into a single category, nursing facility (NF).[Footnote
37] A single set of requirements was developed for all nursing homes
participating in Medicare and Medicaid. With the single set of
participation requirements and more generous Medicare coverage of
stays, many more nursing homes became wholly or partially[Footnote 38]
certified as Medicare SNFs to be eligible for part A payment.[Footnote
39] Most of their residents would, however, still need longer term
less skilled services that would not qualify for part A coverage.
In 2001, most nursing home residents were in SNFs, including Medicare
beneficiaries who were long-term residents.[Footnote 40] Although they
are in SNFs, these Medicare beneficiaries may not be receiving a level
of care that would qualify them for the Medicare part A-covered SNF
benefit or otherwise might not be eligible for this coverage, which is
only post-hospital and for a maximum of 100 days. Such beneficiaries
who are paying for their care out of their own pockets or through
other payers are not eligible for part B DME benefits that they could
receive if living at home or in an assisted living facility. This
prohibition includes even paying for items that need to be customized
for them, such as customized wheelchairs.
Beneficiaries in NFs are also included in the group for which DME is
not payable under part B. The four DMERCs have issued guidance to
suppliers indicating that they will not pay for DME under part B in
any nursing home. For example, the region B DMERC supplier manual,
dated June 2000, states "DME and related supplies and accessories are
not covered by
Medicare part B and claims must not be submitted to the DMERC for
patients in a SNF or NF, regardless of whether the patient is in a
Medicare covered stay or not. This is true even if the nursing
facility could be considered the patient's permanent residence." CMS
officials noted that DMERCs do not pay for DME in nursing homes
because DMERCs presume that these facilities meet the criteria for
being primarily engaged in providing skilled nursing care for DME part
B payment purposes and, therefore, cannot be considered as a
beneficiary's home.
Rescinding the Ruling Would Increase Medicare Payments, But Financial
Impact on States Would Vary:
If the ruling were rescinded by CMS and attached bracing devices were
paid as orthotics, annual spending under Medicare part B for such
devices for beneficiaries in nursing homes would increase modestly if
utilization returned to the pre-ruling level. However, several factors
suggest that utilization could increase more with the ruling's
rescission. The effect on Medicaid expenditures is less certain.
Because state Medicaid coverage policies are not uniform, rescinding
the ruling would have a varying effect on states' Medicaid
expenditures.
It is difficult to predict with confidence how much Medicare payments
might increase if the ruling were rescinded. For example, if the
utilization level returned to the pre-ruling level, spending increases
would be modest. Rescinding the ruling would move the nine HCPCS codes
for attached bracing devices back into the orthotics benefit category.
If the change were limited to billing under those nine codes and we
assumed no growth in future billing, claims volume might only return
to the pre-ruling level. This would be an increase of about 3,000
claims, and payment increases of about $1.8 million per year”given the
amounts Medicare currently pays for these items, which generally now
cost between $500 and $800.[Footnote 41] However, as discussed above,
this estimate is based on a claims analysis that does not include all
the billing for attached devices that occurred before the ruling.
Because some suppliers billed attached bracing devices using codes
that were not specific for such devices, all of the claims paid prior
to the ruling for attached bracing devices cannot be identified with
certainty.
Moreover, several factors could lead to considerable growth in the use
of such devices, which would increase Medicare costs more
substantially than our conservative estimate. First, the number of
Medicare beneficiaries is likely to grow significantly over time, with
the number over age 85 growing fastest, which would likely increase
demand for bracing devices in nursing homes.[Footnote 42] In addition,
estimates of the number of beneficiaries who might use attached
bracing devices are higher than the prior utilization levels for the
devices we identified. Our analysis of data maintained by CMS on
characteristics of nursing home residents identified about 53,000
nursing home residents from July 1999 through June 2000 who at that
time were 65 years and older, were likely eligible for Medicare part
B, and were wheelchair-bound with disabling medical conditions,
pressure ulcers, and functional limitations. Others have also
developed estimates on the number of elderly nursing home residents
with characteristics that indicate that they could potentially use
attached bracing devices. These estimates vary considerably”ranging
from 35,000 individuals by OrthoConcepts[Footnote 43] to almost
170,000 individuals by researchers at the University of Pittsburgh.
[Footnote 44] HCFA developed an estimate of as many as 80,000
individuals who might potentially use these attached bracing devices.
Second, should the ruling be rescinded, Medicare part B would pay for
attached bracing devices for nursing home residents, providing
financial incentives that could lead to increased utilization.
[Footnote 45] For example, suppliers who could profitably furnish
attached bracing and related devices to beneficiaries in nursing homes
would have a financial incentive to supply that market. Manufacturers
would have incentives to develop new products that fit within the
orthotics definition”such as chairs that provide "orthotic" support”if
such items could be paid for under part B. Many items that support and
position wheelchair-bound individuals could be described as having an
orthotic benefit, including the chair itself. Furthermore, some
nursing homes might shift a portion of the costs of their beneficiary
services to Medicare. For example, to increase their revenues, nursing
homes could substitute orthotics devices that could be paid separately
under part B for items of DME that are not separately paid under part
B. Finally, if the ruling were rescinded, the distinction between DME
and orthotic devices would be blurred, making it more confusing for
providers who are trying to bill appropriately and more difficult for
DMERCs to identify and deny claims that were inappropriately billed.
In addition to increasing Medicare expenditures, rescinding HCFA's
ruling would also affect state Medicaid expenditures for beneficiaries
who are dually eligible for Medicare and Medicaid.[Footnote 46] These
effects also cannot be quantified with certainty. The impact on a
particular state's spending would depend on its current coverage
policies for customized DME, increases in the use of such items, and
changes in state reimbursement policies. For example, states paying
separately for customized DME”for example, Michigan, Ohio, and
Washington”would likely see their expenditures decrease. Since
Medicare would become the primary payer for such items, these states
would be responsible only for the copayments and deductibles for these
beneficiaries. However, increases in the use of such devices could
significantly affect potential Medicaid cost savings. Other states”
such as Florida”do not separately cover customized DME. If the ruling
were rescinded, these states would become responsible for copayments
and deductibles for Medicaid-eligible beneficiaries, which could cause
states' payments to increase. However, these states may offset
potential cost increases if they reduced their Medicaid per diem
rates. Such reductions could be justified because these states would
now be required to separately cover a portion of the cost of items
that had been previously covered in their nursing homes' per diem rate.
Ruling's Rescission Would Have Implications for Medicare Program
Integrity:
The rescission of HCFA's ruling on orthotics would raise program
integrity concerns. If HCFA's ruling on orthotics were rescinded by
CMS, the requirement in BIPA aimed at increasing program integrity by
restricting payment for custom-molded orthotics to qualified providers
would not apply to the attached bracing devices we identified as being
affected by the ruling. Even if some attached bracing devices were
affected by the new BIPA requirement after the ruling's rescission,
this requirement may have limited potential for curbing inappropriate
orthotic payments because most Medicare payments are for orthotics not
covered by the requirement and, if industry trends continue,
proportionally fewer devices may be covered by the requirement in the
future. In addition, the ruling's rescission could lead to
inappropriate billing because suppliers would have more difficulty
determining if items should be billed as orthotics or DME, given that
the distinction between some items in these two benefit categories
would be less clear. Furthermore, Medicare beneficiaries in nursing
homes have been the target of fraudulent or abusive billing in the
past for orthotics, DME, and other services. Therefore, should the
ruling be rescinded, additional controls would be needed.
BIPA Requirement Added to Safeguard Orthotics Payments:
The BIPA requirement was developed because the HHS OIG had reported on
problems related to Medicare orthotics in recent years, including
inappropriate billing practices associated with these devices.
[Footnote 47] For example, the OIG found that, compared to certified
suppliers, noncertified suppliers are more likely to inappropriately
provide or bill for orthotics. The OIG recommended that HCFA require
that only qualified practitioners provide beneficiaries with certain
kinds of orthotic devices.
BIPA modified the Medicare requirements related to customized items to
stipulate that Medicare will pay for custom-molded orthotics only if
furnished by a qualified practitioner and fabricated by a qualified
practitioner or supplier.[Footnote 48] The statutory definition of
qualified practitioner includes a physician; an orthotist who is
licensed, certified, or has credentials and qualifications approved by
the HHS Secretary; or a qualified physical therapist or occupational
therapist. The language added by BIPA describes a custom-fabricated
orthotic as an item that (1) requires education, training, and
experience to fabricate, (2) is included in a list of items to be
developed by CMS, and (3) is individually fabricated over a positive
model of the patient. CMS will be working with experts in the
field of orthotics, using a negotiated rulemaking process,[Footnote
49] to develop the list of custom-fabricated orthotic items subject to
the new requirement.[Footnote 50]
Professionals in the field of customized seating and orthotics told us
that they believe the new BIPA requirement relating to qualified
providers will help address some problems related to inappropriate
billing. They also said that the requirement will improve the quality
of care provided to beneficiaries by ensuring that providers have the
knowledge and skills needed to craft and fit custom-molded orthotic
devices.
However, the BIPA requirement regarding qualified practitioners and
suppliers may have limited potential for curbing inappropriate
orthotic payments in the program as a whole for several reasons.
Medicare expenditures for custom-molded orthotics amounted to less
than 30 percent of Medicare spending for orthotics in 2000.[Footnote
51] Furthermore, the requirement may apply to an even smaller
percentage of covered orthotic devices in the future, because due to
technological advances, more prefabricated devices that can serve
functions similar to customized components with little or no
alteration are entering the market. Therefore, if this trend
continues, proportionately fewer devices will be covered by the new
BIPA requirement because the payment restriction is limited to custom-
molded orthotics. Finally, limiting payment to qualified practitioners
and suppliers does not, in itself, completely resolve questionable
billing practices because some of these providers have also billed
Medicare inappropriately. For example, in 1997, the HHS OIG reported
that certified orthotists billed improperly for items that were not
medically necessary or not provided as billed, but to a lesser degree
than other suppliers. In 1999, the OIG also reported on instances of
improper billing for therapy by physical and occupational therapists
working in SNFs[Footnote 52]-”professionals who can be considered
qualified practitioners and may supply custom-molded orthotics under
the BIPA requirement.
Further Controls Would Better Ensure Program Integrity If The Ruling
Were Rescinded:
If the ruling were rescinded, the new requirement in BIPA that
Medicare pay only qualified practitioners and suppliers for custom-
molded orthotics would not apply to the attached bracing devices that
we identified as affected by the ruling. BIPA's requirement applies
only to custom-molded orthotic devices, not all custom-fabricated
ones. The devices we identified as being affected by the ruling are
not custom-molded because they are not made over a positive model of
the patient's body part.
If HCFA's ruling on orthotics were to be rescinded, a heightened level
of oversight of orthotics billing would be critical to safeguard
program dollars. Concerns about improper billing prompted HCFA to
issue its orthotics ruling to clarify the distinction between DME and
orthotics for Medicare part B billing purposes in the first place.
Rescinding the ruling would once again blur the distinction between
DME and orthotics, increasing the potential for inappropriate billing”
both intentional and unintentional.
A heightened level of oversight would be also be critical, because the
OIG and we have reported that Medicare beneficiaries in nursing homes
can be an attractive target for fraudulent or abusive billing for
orthotics, DME, and other services.[Footnote 53] Because nursing homes
are institutions with a large number of co-located beneficiaries,
providing services to multiple individuals in this setting can help
maximize profits for providers and suppliers. Although most providers
and suppliers are honest and bill appropriately,[Footnote 54] some,
including certain durable medical equipment and orthotics suppliers,
have been involved in fraudulent or abusive billing of Medicare for
services and supplies furnished to nursing home residents.[Footnote 55]
Other controls could enhance safeguards associated with Medicare
reimbursement for orthotics, should the ruling be rescinded. In the
past, Medicare expenditures have increased more than anticipated after
a coverage policy change, due, in part, to inappropriate billing.
[Footnote 56] Without adequate monitoring of orthotics payments,
rescinding the ruling could have a similar outcome. DME claims are
currently monitored so that DMERCs can follow payment trends over time
for groups of codes for similar types of items (such as leg braces).
If the ruling were rescinded, DMERCs might have to extend their
monitoring in order to analyze payment trends for attached devices.
Through monitoring claims billing, DMERCs would be more likely to spot
any questionable trends. If such trends were identified, DMERCs could
examine a sample of questionable claims and their related medical
records and take other steps as needed to determine if the items were
medically necessary and provided as billed.
A prior authorization process, such as those used by some state
Medicaid programs for higher priced or other selected orthotic or DME
items, may also provide better control, should the ruling be
rescinded. These Medicaid programs review medical justifications and a
description of the orthotic or customized DME item before it is
provided to the beneficiary. If the item is justified, Medicaid
notifies the supplier in advance that it will pay for the item and the
amount it will pay. The Medicaid prior authorization process helps
ensure program integrity because it establishes that the device is
medically necessary. Some providers and suppliers also noted that
prior authorization protects them from the risk of supplying devices
without knowing whether and what they will be paid. However, the use
of the prior authorization process by the Medicaid program involves an
investment of time and resources for prior review of supporting
documentation.
For Medicare, DMERCs do not use all the elements of a prior
authorization process. However, they have begun to use a process for
determining coverage”but not payment”in advance for a few items of
DME. As of October 1, 2001, as part of ongoing program integrity
efforts, DMERCs will accept requests from beneficiaries and suppliers
for an advance determination of Medicare coverage for customized DME,
which is an item that has been uniquely constructed or substantially
modified for a specific beneficiary.[Footnote 57] This process differs
from the prior authorization used by Medicaid programs in the states
whose processes we reviewed because an advance determination of
Medicare coverage does not guarantee a specific amount that Medicare
will pay for an item. As a result, suppliers will be uncertain about
how much reimbursement to expect for customized wheelchairs and
accessories that they supply to beneficiaries. Practitioners reported
that such uncertainty affects suppliers' willingness to provide
customized items to beneficiaries.[Footnote 58]
Concluding Observations:
HCFA's 1996 ruling on orthotics more clearly delineated the
circumstances under which Medicare would consider an item as an
orthotic or DME for payment policy, and HCFA's issuance of the ruling
was found to be proper in court. The ruling affected relatively few
devices and only a small percentage of overall Medicare program
expenditures. Without the ruling, there would be some confusion for
suppliers about whether bracing devices that are attached to
wheelchairs should be billed as DME or orthotics and for DMERCs about
whether particular claims should be paid. Revising Medicare payment
policy to treat attached bracing devices as orthotics would likely
increase program expenditures, although to what degree is uncertain.
We would caution that taking such a step without addressing program
integrity concerns could lead to an increase in inappropriate payments
by Medicare and Medicaid.
Agency Comments and Our Evaluation:
We provided a draft of this report to CMS for its review and comment.
(See appendix III for CMS's comments.) CMS generally agreed with our
conclusions. In its comments, CMS observed that, in addition to
holding that the orthotics ruling had been properly issued, the U.S.
Court of Appeals decision in Warder v. Shalala had also found that the
content of the ruling was wholly supportable and that the ruling well
effectuated congressional intent by classifying seating systems as
DME. We agreed and added language to that effect to our final report.
CMS also suggested that our report clearly indicate the precedent-
setting effect that rescinding the ruling could have on the provision
of certain types of equipment as DME in SNFs. For example, CMS said
that if the ruling were rescinded, other components of a wheelchair
could be construed to be an orthotic, such as the backrest of a
wheelchair. In our report, we discuss and provide examples of the
potential impact of rescinding the ruling, stating that there would be
financial incentives that could lead to increased utilization if
Medicare part B paid for attached bracing devices for nursing home
residents. We also note that, if the ruling were rescinded, the
distinction between DME and orthotic devices would be blurred, making
it more confusing for providers who are trying to bill appropriately
and more difficult for DMERCs to identify and deny claims that were
inappropriately billed. In general, we agree with CMS's comments, but
we did not change the report because we believe that we had adequately
addressed the concerns. CMS also provided technical comments that we
incorporated as appropriate.
We are sending copies of this report to the Administrator of the
Centers for Medicare and Medicaid Services, appropriate congressional
committees, and other interested parties. We will also make copies
available to others upon request. In addition, the report will be
available at no charge on the GAO Web site at [hyperlink,
http://www.gao.gov].
If you or your staffs have any questions about this report, please
call me at (312) 220-7600 or Sheila K Avruch at (202) 512-7277. Other
key contributors to this report were Barrett Bader, Sandra Gove, and
Craig Winslow.
Signed by:
Leslie G. Aronovitz:
Director, Health Care”Program:
Administration and Integrity Issues:
[End of section]
Appendix I: Scope and Methodology:
To determine why the Health Care Financing Administration (HCFA)
issued its orthotics ruling and if the agency followed required
procedures in issuing it, we conducted interviews with officials and
representatives from the agency, two Durable Medical Equipment
Regional Carriers (DMERC), and reviewed the ruling and agency
documents related to its development and issuance. We also interviewed
a plaintiff and legal representatives involved in the legal challenge
to the ruling and reviewed relevant documents, including the federal
district and appellate courts' decisions on whether HCFA had
appropriately followed the proper statutory procedures in issuing the
ruling.
To assess the impact of the ruling on Medicare beneficiaries, we
reviewed Medicare payments and coverage policies for orthotics and
durable medical equipment (DME). We analyzed Medicare claims data from
the Medicare part B extract and summary system for the Healthcare
Common Procedure Coding System (HCPCS) codes associated with the nine
attached bracing devices moved from the orthotic to the DME benefit
category as a result of the ruling. We also discussed the impact of
the ruling on beneficiaries living in nursing homes with Centers for
Medicare and Medicaid Services (CMS) officials, and state Medicaid
officials in Florida, Indiana, Michigan, Ohio, Pennsylvania, and
Washington. We judgmentally chose these states to attain geographic
diversity and because these states have a large proportion of elderly
Medicare beneficiaries.
We also discussed the impact of the ruling with four providers and
suppliers of attached bracing and other customized seating
accessories, in addition to national organizations representing them,
[Footnote 59] seven clinicians with experience in the seating and
positioning needs of elderly and disabled individuals, and two
manufacturers of attached bracing and similar devices. We chose the
clinicians, providers, suppliers, and manufacturers to interview based
on those recommended for their expertise by the national organizations.
To assess the financial impact of rescinding the ruling, we reviewed
Medicare and Medicaid coverage and payment policies and then
interviewed representatives from CMS and Medicaid programs in Florida,
Indiana, Michigan, Ohio, Pennsylvania, and Washington. We also
developed an estimate of the number of beneficiaries who could use
these devices by analyzing national data on nursing home residents
from the minimum data set (MDS),[Footnote 60] and we reviewed
demographic findings from other studies. Our MDS analysis used data
from July 1999 through June 2000 and was limited to Medicare
beneficiaries with all of the following characteristics: (1)
functional limitations that required the use of wheelchairs as their
primary means of locomotion, (2) one or more of eight neurological
conditions[Footnote 61] that experts told us could indicate a need for
attached bracing devices because individuals with such conditions can
have poor motor control and may not be able to readily brace or
reposition themselves in their wheelchairs, (3) pressure ulcers
ranging from mild to severe, and (4) limited ability to move while in
bed or get out of bed without requiring extensive assistance from
either one or two other people.
To evaluate the implications for Medicare program integrity if the
ruling were rescinded, we interviewed officials from the Department of
Health and Human Services Office of the Inspector General (HHS-OIG)
and reviewed pertinent OIG reports. In order to assess the scope of
the requirement and its possible effect on attached bracing devices,
we analyzed claims data from the statistical analysis durable medical
equipment regional carrier[Footnote 62] associated with custom-
fabricated orthotics as defined by the Medicare, Medicaid, and SCHIP
Benefits Improvement and Protection Act of 2000. We also interviewed
providers and suppliers and organizations representing them and
reviewed documents that they provided to us to further assess the
effect of the requirement on these devices. We performed our work from
January 2001 through March 2002 in accordance with generally accepted
government auditing standards.
[End of section]
Appendix II: Excerpt from HCFA's Ruling 96-1:
The following discussion is excerpted from the Conclusions and
Illustrations section of HCFA's ruling to demonstrate its application.
"A supplier manufactures and supplies medical devices to individuals
who are generally elderly and suffer from Alzheimer's or other
debilitating neuromuscular diseases that have caused them to be non-
ambulatory, immobile, and confined to a chair or bed. Due to their
immobility, these patients may suffer from secondary complications,
such as pressure sores, multi-sited contractures, musculoskeletal
degeneration and deformities, and circulatory problems.
Under a physician's order, the supplier furnishes individually fitted
attachments designed to be used in conjunction with a chair to seat
and position the patient. The attachments, which the supplier labels
"orthotic braces," are alleged to position limbs and other body parts
properly; restrict motion or weight bearing; immobilize and protect
weak musculoskeletal segments; reduce load; retard progression of
musculoskeletal deformity; and improve function. The design of the
supplier's "orthotic braces" requires them to be attached to the chair
frame, and the "orthotic braces" cannot function or be used apart from
the chair to which they are attached.
Discussion: Although the devices in question may support or restrict
movement in parts of the body, they are not braces within the meaning
of [42 U.S.C. § 1395x(s)(9)] because they are integral parts of a
seating system and are not designed or intended to be used apart from
the seating system."
[End of section]
Appendix III: Comments from the Centers for Medicare and Medicaid
Services:
Department Of Health & Human Services:
Centers for Medicare & Medicaid Services
7500 Security Boulevard:
Baltimore, MD 21244-1850:
May 6, 2002:
To: Leslie G. Aronovitz:
Director, Health Care”Program Administration and Integrity Issues:
General Accounting Office:
From: [Signed by] Thomas A. Scully:
Administrator:
Centers for Medicare & Medicaid Services:
Subject: General Accounting Office (GAO) Draft Report: Medicare:
Orthotics Ruling Has Implications for Beneficial), Access and Federal
and State Costs (GAO-02330):
Thank you for the opportunity to review the above-referenced GAO draft
report. While generally we agree with the report's conclusion, we ask
that the conclusion specify that the U. S. Court of Appeals decision
in Warder v. Shalala not only held that the ruling was properly
promulgated, but also found that the content of the ruling was wholly
supportable and it well effectuated congressional intent by
classifying seating systems as durable medical equipment (DME). Also,
we ask that the conclusion more clearly indicate the precedent setting
effect on other types of equipment that could result from rescinding
this ruling. It is uncertain to what extent such a revision would
logically lead to covering other accessories and attachments to
medical equipment (such as beds, wheelchairs, and walkers) as braces
rather than as DME. For example, to circumvent the statutory
requirement that DME is not covered by Medicare Part B in skilled
nursing facilities (SNFs), it could be argued that attachments to
posture chairs and beds provide support to the patient and, therefore,
should be covered as orthotics rather than being considered as DME
accessories. In addition, if this ruling is rescinded, other
components of a wheelchair could be construed to be an orthotic, such
as the backrest of a wheelchair.
According to the ruling and the court case, the devices in question
are DME accessories and not braces. However, throughout the report and
in the conclusion these devices are described as bracing devices, but
we believe it would be more appropriate to refer to these items as
supporting devices. We also ask that the report more explicitly
explain that the Medicare statute is so structured that authorized
benefit categories are the key for determining the scope of Medicare
coverage. Therefore, it is important to have workable and supportable
criteria for determining which benefit category may apply to a
particular item or service.
We appreciate the effort that went into this report and the
opportunity to provide comments. We look forward to working with GAO
on this and other issues.
[End of section]
Footnotes:
[1] On June 14, 2001, the Secretary of Health and Human Services
announced that the name of the Health Care Financing Administration
(HCFA) had been changed to CMS. In this report, we will continue to
refer to HCFA where the actions or statements occurred before June 14,
2001.
[2] 42 C.F.R. § 414.202 (2001).
[3] The Medicare provision pertaining to DME does not explicitly say
that a SNF can never be considered a beneficiary's home. 42 U.S.C. §
1395x(n) (Supp. IV 1998). Through cross-reference to part of the
Medicare definition of a SNF, it provides that an institution (or a
distinct part of an institution) "primarily engaged in providing"
skilled nursing care or rehabilitation services may not be considered
a beneficiary's home. 42 U.S.C. § 1395i-3(a)(1) (1994). For DME
purposes, CMS interprets the definition to encompass any nursing home
primarily engaged in providing skilled nursing care or rehabilitation
services, whether or not it is certified as a SNF.
[4] Customized DME is uniquely constructed or substantially modified
for a specific beneficiary. 42 C.F.R. § 414.224 (2001).
[5] Office of Inspector General, Department of Health and Human
Services, Medicare Payment for Orthotics: Inappropriate Payments, OEI-
02-99-00120 (Washington, D.C.: March 2000); Office of Inspector
General, Department of Health and Human Services, Medicare Orthotics,
OEI-02-95-00380 (Washington, D.C.: October 1997); and Office of
Inspector General, Department of Health and Human Services, Medicare
Payments for Orthotic Body Jackets, OEI-04-92-01080 (Washington, D.C.:
June 1994).
[6] See OEI-02-99-00120. In 1997, the OIG made a similar
recommendation”see OEI-02-95-00380.
[7] Pub. L. No. 106-554, App. F, § 427(a), 114 Stat. 2763, 2763A-520
(to be codified at 42 U.S.C. § 1395m(h)(1)(F)).
[8] BIPA § 427(c).
[9] In this report, we are using the term "attached bracing devices"
to refer to the type of items referenced in HCFA's orthotics ruling
that are attached to equipment and support a body part, which is not
meant to imply that they are braces or orthotics under the Medicare
statute or for part B payment purposes. CMS and its DMERCs determine
whether an item is a brace or orthotic under the Medicare statute or
for part B payment purposes.
[10] Warder v. Shalala, 149 F.3d 73 (1st Cir 1998), cert. denied, 526
U.S. 1064 (1999).
[11] These individuals, called "dual eligibles," receive Medicare
benefits and also some form of Medicaid assistance. Dual eligibles
include individuals who either receive full Medicaid benefits (i.e.,
prescription drugs and nursing home care) and Medicaid coverage of
Medicare's cost-sharing and premiums or individuals who only receive
some assistance with Medicare cost-sharing and premiums.
[12] The beneficiary is responsible for up to $99 per day for days 21
through 100.
[13] A benefit period begins on the first day of an inpatient hospital
stay and ends 60 days after the beneficiary is discharged from the
hospital or from a SNF or other inpatient facility providing skilled
nursing or rehabilitative services. There is no limit to the number of
benefit periods for a beneficiary.
[14] U.S. General Accounting Office, Skilled Nursing Facilities:
Services Excluded From Medicare's Daily Rate Need to be Reevaluated,
[hyperlink, http://www.gao.gov/products/GAO-01-816] (Washington, D.C.:
Aug. 22, 2001).
[15] Molded to a patient model refers to the process in which an
impression is made of a specific body part, and the impression is used
to make a positive model of the body part. The orthotic device is then
molded using this positive model.
[16] In October 1993, HCFA began processing all Medicare part B claims
for medical equipment, orthotics, prosthetics, and supplies through
DMERCs. Each DMERC serves a separate region of the country.
[17] For DME and other covered medical supplies, there are six payment
categories. These are (1) inexpensive and other routinely purchased
items, (2) items requiring frequent and substantial servicing, (3)
certain customized items, (4) oxygen and oxygen equipment, (5) other
covered items (not DME), and (6) other DME (frequently referred to as
capped rental items). 42 U.S.C. § 1395m(a)(2)-(7) (1994 & Supp. IV
1998). Separate provisions address Medicare payments for covered
prosthetics and orthotics. 42 U.S.C. § 1395m(h) (1994 & Supp. IV 1998)
and BIPA § 427(a).
[18] Prior to 1998, these fees were adjusted each year using formulas
tied to the Consumer Price Index. No update was provided from 1998
through 2000 or in 2002, although updates were provided in 2001. 42
U.S.C. § 1395m(a)(14) (Supp. IV 1998); Medicare, Medicaid and SCRIP
Balanced Budget Refinement Act of 1999, Pub. L. No. 106-113, App. F, §
228, 113 Stat. 1501, 1501A-356; and BIPA § 425.
[19] The upper limit is equal to the median or midpoint of the
statewide fee schedule amounts. The lower limit is equal to 85 percent
of the median of the statewide fee schedule amounts.
[20] For orthotics, the upper limit is based on 120 percent of the
average of the regional statewide fees. The lower limit is based on 90
percent of the average of the regional statewide fees.
[21] OrthoConcepts is an orthotic management company that has
developed an adjustable seating system for nursing home residents.
[22] Pub. L. No. 101-508, § 4152(c)(4), 104 Stat. 1388, 1388-79. The
law established relevant criteria applicable to items furnished after
January 1, 1992, unless regulations establishing other criteria were
developed before that date. Regulations establishing other criteria,
closely related to those in the law, 42 C.F.R. § 414.224 (2001), were
finalized on December 20, 1991. 56 Fed. Reg. 65,995.
[23] H. R. Rep. No. 101-881, at 268 (1990), reprinted in 1990
U.S.C.C.A.N. 2017, 2270.
[24] S. Rep. No. 89-404, pt. 1, at 30 (1965), reprinted in 1965
U.S.C.C.A.N. 1943, 1971.
[25] Social Security Amendments of 1965, Pub. L. No. 89-97, § 102(a),
sec. 1861(s), 79 Stat. 286, 321.
[26] This amount is based on the difference between calendar year 1996
and 1997 claims payment for nine codes that described attached bracing
devices that were classified as DME after the ruling.
[27] Having applicable codes does not mean that items are covered by
Medicare, or that they are in the appropriate benefit category.
[28] The total decrease in expenditures for the nine attached bracing
devices is based on 1996 and 1997 claims for beneficiaries in nursing
homes. We used data from 1996 and 1997 because payment changes for the
nine devices were implemented on January 1, 1997.
[29] Deficit Reduction Act of 1984, Pub. L. No. 98-369, § 2321, 98
Stat. 494, 1085 (codified as amended at 42 U.S.C. § 1395x(n) (1994))
explicitly defined DME to include certain items used in the home,
including in an institution used as a home, other than one primarily
providing hospital or skilled nursing facility services.
[30] Outpatient hospital diagnostic services were originally covered
under part A also. Social Security Amendments of 1965, Pub. L. No. 89-
97, sec. 102(a), § 1812(a)(4), 79 Stat. 286, 29192.
[31] H.R. Conf. Rep. 92-747 at 9 (1971), reprinted in 1971
U.S.C.C.A.N. 2436, 2439. This included services in a public
institution for the mentally retarded if the primary purpose of such
an institution was to provide health or rehabilitative services”
therefore, the provision of rehabilitative services did not exclude a
facility from being designated as an ICF.
[32] Social Security Amendments of 1965, Pub. L. No. 89-97, § 102(a),
sec. 1861(s), 79 Stat. 286, 321.
[33] S. Rep. No. 90-744, at 85 (1967), reprinted in 1967 U.S.C.C.A.N.
2834, 2908.
[34] Social Security Amendments of 1967, Pub. L. No. 90-248, § 144(a)
and (d), 81 Stat. 821, 859.
[35] 47 Fed. Reg. 54,551 (Dec. 3, 1982) and 49 Fed. Reg. 10,710 (Mar.
22, 1984). According to HCFA, the first four criteria outlined in the
1982 ruling had been in use since 1966. Miller v. Heckler, 601 F.
Supp. 1471, 1475 (E.D. Tex. 1985). The fifth criterion was added
through the 1984 ruling as a result of a court order in Kron v.
Heckler, Civil Action No. 80-1332 (E.D. La., Oct. 17, 1983).
[36] The full statutory definition of a SNF includes being primarily
engaged in providing skilled nursing care, but includes other
requirements as well. The prohibition on providing DME is tied only to
the first part of the statutory definition.
[37] Pub. L. No. 100-203, § 4211, 101 Stat. 1330, 1330-182 (codified
at 42 U.S.C. 1396r(a)(1) (1994). A NF is defined somewhat more broadly
than a SNF. A NF includes an institution (or distinct part of an
institution) primarily engaged in providing skilled nursing care or
rehabilitative services. A NF also includes an institution primarily
engaged, on a regular basis, in providing health-related care and
services to individuals who, because of their physical or mental
condition, require care and services (above the level of room and
board) that can be made available to them only through institutional
facilities, which were formerly called ICFs. 42 U.S.C. § 1396r(a)(1).
[38] Medicare allows nursing facilities to designate some beds as a
distinct part that qualifies as a SNF. Beneficiaries in those beds may
be eligible for part A coverage and payment.
[39] Between 1989 and 1997, the number of SNFs participating in the
program increased from 8,638 to 14,619.
[40] About 80 percent of federally-certified nursing homes are
certified as both SNFs and NFs, about 7 percent only as SNFs, and
about 13 percent as only NFs.
[41] This estimate is based on 1996 claims volume for these nine
devices for beneficiaries in SNFs and NFs and 2001 fee schedule
amounts for these items. We used 1996 data on claims volume because
payment changes for the nine devices were implemented on January 1,
1997.
[42] According to estimates by the Urban Institute, assuming no change
in the eligibility rules, the number of beneficiaries in the Medicare
program will grow by 77 percent by the year 2025, from about 40
million to an estimated 70 million. The Institute of Medicine
estimated that if current trends continue, the number of people over
age 85 will triple by 2030, reaching about 8.8 million. This rapid
growth in the oldest population will have a major effect on the demand
for long-term care services.
[43] OrthoConcepts officials estimated that about 10 percent of these
individuals”or about 3,500 residents of nursing homes”would be
suitable candidates for their seating system, which is designed to
meet the needs of the most severely disabled with complex seating
needs.
[44] Geyer, et al, Efficacy of Seat Cushions in Preventing Pressure
Ulcers for At Risk Elderly Nursing Home Residents: Research Issues,
Departments of Rehabilitation Science and Technology and Epidemiology,
University of Pittsburgh, (Pittsburgh: June 26-30, 1998) pp. 122-124.
[45] For examples of changes in provider and supplier behavior
associated with changes in financial incentives, see U.S. General
Accounting Office, Medicare Home Health Care: Prospective Payment
System Could Reverse Recent Declines in Spending, [hyperlink,
http://www.gao.gov/products/GAO/HEHS-00-176] (Washington, D.C.: Sept.
8, 2000); U.S. General Accounting Office, Medicare: HCFA Faces
Challenges to Control Improper Payments, [hyperlink,
http://www.gao.gov/products/GAO/T-HEHS-00-74] (Washington, D.C: Mar.
9, 2000); and Technical Review Panel on the Medicare Trustees Report,
Review of the Assumptions and Methods of the Medicare Trustees'
Financial Projections, Dec. 2000.
[46] There are 1.5 million residents of nursing homes, and about 75
percent are covered by Medicare, Medicaid, or both programs.
[47] OEI-02-99-00120, OEI-02-95-00380, and OEI-04-92-01080.
[48] BIPA § 427(a) (to be codified at 42 U.S.C. § 1395m(h)(1)(F)).
[49] Negotiated rulemaking is a process for developing a proposed rule
using a committee of representatives with interests that may be
significantly affected by the rule, chartered as an advisory committee
under the Federal Advisory Committee Act. The committee works to reach
consensus on key elements of the rule before it is formally published
as a proposal. An impartial mediator assists the committee, which is
open to the public.
[50] BIPA required that CMS publish a regulation with a list of
specific items by December 21, 2001. On March 22, 2002, CMS published
a notice of intent in the Federal Register to form a negotiated
rulemaking committee. CMS has begun the chartering process for the
committee, and agency officials do not anticipate that the committee
will begin the required negotiations to develop a list of custom-
fabricated orthotic items subject to the new BIPA requirement before
the summer of 2002.
[51] For items covered by the BIPA requirement”custom-molded orthotic
devices”Medicare paid practitioners and suppliers approximately $70
million. In contrast, expenditures in 2000 for orthotic devices not
covered by the requirement amounted to more than $184 million.
[52] Office of Inspector General, Department of Health and Human
Services, Physical and Occupational Therapy in Nursing Homes: Medical
Necessity and Quality of Care, OEI-09-97-00121 (Washington, D.C.:
August 1999).
[53] Office of Inspector General, Department of Health and Human
Services, Part B Services in Nursing Homes, An Overview, OEI-06-92-
00865 (Washington, D.C.: March 1996); U.S. General Accounting Office,
Nursing Homes: Too Early to Assess New Efforts to Control Fraud and
Abuse, [hyperlink, http://www.gao.gov/products/GAO/T-HEHS-97-114]
(Washington, D.C.: April 16,1997); and U.S. General Accounting Office,
Fraud and Abuse: Providers Target Medicare Patients in Nursing
Facilities, [hyperlink, http://www.gao.gov/products/GAO/HEHS-96-18]
(Washington, D.C.: Jan. 24, 1996).
[54] The OIG reported that the majority of health care providers
submit claims to Medicare for services that are medically necessary,
billed correctly, and documented properly. See Office of Inspector
General, Department of Health and Human Services, Improper Fiscal Year
2000 Medicare Fee-for Service Payments, A-17-00-02000 (Washington,
D.C.: February 2001).
[55] [hyperlink, http://www.gao.gov/products/GAO/HEHS-96-18].
[56] U.S. General Accounting Office, Medicare: Lessons Learned From
HCFA's Implementation of Changes to Benefits, [hyperlink,
http://www.gao.gov/products/GAO/HEHS-00-31] (Washington, D.C.: Jan.
25, 2000).
[57] Previously, there was a process that only considered whether
power-driven vehicles, seat-lift mechanisms, and transcutaneous
electrical nerve stimulators would be covered.
[58] Prior to this, suppliers had to code customized wheelchairs and
accessories as miscellaneous items and DMERCs made individual coverage
and payment decisions after the items were supplied to beneficiaries.
As a result, suppliers had no guarantee that Medicare would reimburse
them for an item at all.
[59] These included the American Orthotic and Prosthetic Association,
the American Occupational Therapy Association, and the American
Physical Therapy Association.
[60] Since 1991, nursing homes have been required to periodically
collect information on all residents using MDS, a uniform assessment
instrument. The MDS contains over 500 individual assessment items
regarding a resident's medical condition, cognitive and motor skills,
and expected use of other services. MDS assessments are conducted
within 14 days of admission and at routine intervals thereafter unless
there is a significant change in condition.
[61] These conditions were cerebral palsy, multiple sclerosis,
osteoporosis, paraplegia, Parkinson's disease, quadriplegia, stroke,
and traumatic brain injury. Individuals with these conditions are
susceptible to a number of secondary complications, including pressure
ulcers. About 456,000 nursing home residents were aged 65 years and
older and may have been eligible for part B coverage, had one or more
of these eight conditions, and used wheelchairs as their primary means
of locomotion.
[62] The statistical analysis durable medical equipment regional
carrier is under contract with CMS to produce standard quarterly
reports and provide analyses of claims data to identify trends and
aberrant billing patterns. It also conducts postpayment review of
national suppliers in order to determine if future corrective action
is needed. The four DMERCs use these data to identify for prepayment
review those DME and orthotic suppliers who have unusual billing
patterns or high-dollar and high-volume claims.
[End of section]
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