While testing the Medicare claims processing system under Competitive Bidding, CMS discovered a flaw in the payments allotted to grandfathered suppliers. According to a recent release from Palmetto GBA there is a “possible problem” with the way the system handles claims for certain accessories purchased for use with grandfathered equipment.

Under Competitive Bidding, non-contract suppliers should be able to submit claims for supplies and accessories billed with rented, grandfathered equipment, regardless of whether the supply itself is rented or purchased (Note: Only contracted suppliers may bill for supplies when the base equipment has capped). However, testing has found that the Medicare payment system is denying accessories associated with hospital beds, walkers, CPAPs and RADs when billed by grandfathered, non-contracted suppliers.

To resolve the issue, CMS has created a quick fix that will temporarily enable grandfathered suppliers to submit claims for HCPCS affected by the processing error. Effective January 1, 2011 suppliers must append the KY modifier to claims for the following HCPCS when billed as a purchase for a covered, grandfathered item currently under rental (not capped):  

• Continuous Positive Airway Pressure Devices, Respiratory Assistive Devices, and Related Supplies and Accessories: A4604, A7030, A7031, A7032, A7033, A7034, A7035, A7036, A7037, A7038, A7039, A7044, A7045, A7046, E0561, E0562
   
• Hospital Beds and Related Accessories: E0271, E0272, E0280, E0310
   
• Walkers and Related Accessories: E0154, E0156, E0157, E0158

This solution is not perfect. By appending the KY modifier, the system will incorrectly pay for the aforementioned HCPCS at Medicare’s standard fee schedule amount, rather than at the appropriately reduced single payment amount. This will result in grandfathered suppliers receiving higher payments than is allotted under Competitive Bidding.

At this time,­­ it is unclear whether CMS plans to go back and adjust these claims at a later date. According to the release, suppliers may mitigate the need for future claim adjustments by submitting the single payment amount (Competitive Bidding price in the patient’s home state) as their submitted charge for each affected accessory or supply on the claim.

We will keep you apprised of any updates as they are released.

This morning, Daniel Levinson, Inspector General, testified before the House Subcommittee on Health on the need to provide enhanced enrollment regulations for DMEPOS suppliers and better align Medicare payments with actual costs. A few experts from that testimony are below:

Enrollment: It has been too easy for fraudulent DMEPOS suppliers to obtain Medicare billing privileges

 OIG has identified systemic enrollment vulnerabilities for more than a decade. Since 1997, OIG has issued several reports that have assessed supplier compliance with standards by conducting unannounced site visits. We have consistently found that Medicare enrollment standards and oversight are not sufficient to prevent noncompliant and sham suppliers from obtaining Medicare provider numbers and billing privileges. Some Medicare-enrolled suppliers fail to maintain even the most basic Medicare standards – for example, maintaining a physical facility, or being open during reasonable business hours.

Payment: Medicare pays too much for certain DME items, resulting in waste for legitimate claims and making fraudulent billing more lucrative

 OIG reviews over the past two decades have determined that for certain items, the program pays too much. We have identified payment misalignments for a wide variety of DMEPOS items, ranging from power wheelchairs and oxygen equipment to wound care supplies and saline solution.

This pricing disparity also makes wheelchairs an attractive target for fraud. We have found that fraudulent suppliers often supply unneeded and unwanted wheelchairs to beneficiaries because the payment from Medicare exceeds their purchase costs by such a large margin that it is lucrative to supply unnecessary wheelchairs.

Compliance: Compliance programs and education can assist legitimate DME suppliers in billing appropriately

 OIG is planning a Provider Compliance Training Initiative to bring together representatives from a variety of government agencies to deliver compliance training at no cost to local provider, legal, and compliance communities. The training sessions are scheduled to be held in 2011 in several locations across the country. We aim to educate communities about fraud risk areas uncovered by OIG’s work and to share compliance best practices so that providers strengthen their own compliance efforts and more effectively identify and avoid illegal schemes that may be targeting their communities.

Oversight: Vigilant monitoring through data analysis and claims review is critical to preventing and detecting fraud, waste, and abuse

 In addition, it is critical that the Government vigilantly monitor the Medicare program to swiftly detect and respond to fraud, waste, and abuse when it does occur. Recently, innovative uses of information technology and data analysis have dramatically enhanced the Government’s ability to take a proactive approach to fighting fraud and abuse. Finally, a thorough review of claims and supporting documentation is sometimes necessary to determine whether DMEPOS claims were appropriately paid. Improper payments are a serious issue for DMEPOS in particular. In 2009, CMS reported an overall Medicare fee-for-service error rate of 7.8 percent; however, the payment error rate for Medicare DMEPOS claims was 51.9 percent.

Response: OIG-DOJ Strike Forces have responded swiftly and effectively to DME fraud schemes; CMS efforts to remedy program vulnerabilities are also essential

 OIG and DOJ are working in partnership to accelerate the Government’s response to fraud schemes by reducing the time needed to detect, investigate, and prosecute fraud. We have deployed Strike Forces in geographic “hot spots” with high concentrations of Medicare fraud.

Additional topics covered in the testimony include new authorities established under the Affordable Care Act to prevent fraud and abuse, and Competitive Bidding as a solution to Medicare payment misalignments. The full testimony may be read at:

http://www.oig.hhs.gov/testimony/docs/2010/testimony_levinson_09152010.pdf.