Health Law Daily DME supplier overbilled Medicare $250k for orthotic braces
Friday, January 4, 2019

DME supplier overbilled Medicare $250k for orthotic braces

By Laura Lefkow, J.D.

An OIG audit determined that a California-based supplier of durable medical equipment prosthetics, orthotics, and supplies (DMEPOS) billed Medicare for almost $250,000 worth of orthotic braces that did not meet Medicare requirements. Prior OIG reviews found that orthotic braces were vulnerable to fraud and were among the top 20 DMEPOS items with the highest improper payment rates. Federal regulations require suppliers to report and return any overpayments within 60 days. During the audit period from January 1, 2015, through March 31, 2017, Medicare paid about $1.3 billion for orthotic braces. Pacific Medical, Inc., the supplier under investigation, received $6.2 million in Medicare Part B payments during the audit period for 25,656 paid claims for orthotic braces (OIG Report, No. A-09-17-03027, December 31, 2018).

Orthotic braces are rigid and semi-rigid devices that support a weak or deformed body part or restrict motion in an injured body part. Under Medicare Part B, CMS, through Medicare administrative contractors, reimburses suppliers for orthotic braces based on a fee schedule. Suppliers must submit documentation with claims for orthotic braces, including a detailed written order from the treating physician, the beneficiary’s diagnosis, any information about specific modifiers, and proof of delivery of the brace to the beneficiary. If the supplier lacks information in the medical record to support the medical necessity of the brace, then the supplier is responsible for the payment amount.

The audit. The audit reviewed a stratified random sample of 100 claims totaling $47,772. Of the 100 claims submitted, the supplier complied with requirements for 89 of the claims, but billed for orthotic braces that were not medically necessary in nine claims and could not provide medical records for two claims. The supplier’s failure occurred because it did not have sufficient information from the beneficiaries’ medical records. In one example, Medicare paid $666 for a knee brace for a beneficiary who had no injury, recent surgery, or evidence of instability in the knee’s ligaments. In short, the brace was not medically necessary. The audit extrapolated that the supplier received at least $247,493 in unallowable Medicare payments.

Recommendation. The OIG recommended that the supplier reimburse Medicare for the $247,493 in unallowable payments, exercise reasonable diligence to identify and return any similar overpayments outside the audit period, and obtain necessary beneficiary medical information going forward. The supplier disagreed with the recommendation to return the estimated overpayment, claiming the amount requested was egregious, unjustified, and unreasonable. The OIG maintained its recommendations, noting that the federal courts have upheld statistical sampling and extrapolation as a valid means to determine overpayments.

Companies: Pacific Medical, Inc.

MainStory: TopStory OIGReports CMSNews AuditNews BillingNews DMENews MDeviceNews MedicareContractorNews PaymentNews ProgramIntegrityNews ProviderNews

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