OIG: Medicare DME Program Vulnerable for Fraud

On Jan. 3, 2011, the Centers for Medicare & Medicaid Services (CMS) intends to implement changes to the Medicare claims-processing system that would end a temporary provision that allows suppliers to use their own national provider identifiers (NPI) in the referring provider field. The Office of Inspector General (OIG) says in an April report the implementation date of these edits has been delayed twice already permitting a claims-processing vulnerability for nearly two years now. 

Suppliers have been required to include NPIs for themselves as well as referring physicians on Medicare claims since May 23, 2008. CMS instituted at the same time what was supposed to be a temporary provision allowing suppliers to use their own NPIs if they cannot obtain the referring physician’s NPI.

For the second year since the temporary provision was implemented the OIG has issued a report warning of its affect on Medicare.

In accordance with the temporary provision, Medicare allowed $87 million for durable medical equipment (DME) and supply claims with identical physician and supplier NPIs between May 23, 2008 and Sept. 30, 2009. Because of the provision, however, CMS’ claims-processing systems did not verify that the DME and supplies associated with these payments were ordered by eligible physicians.

According to the OIG’s April report, claims with identical referring physician and supplier NPIs were found to involve a select group of HCPCS Level II codes in specific geographic locations.

Ten HCPCS Level II codes accounted for half of the $87 million the OIG identified; and 26 percent of the suppliers that recieved Medicare payments for claims with identical referring physician and supplier NPIs were paid by Medicare for this type of claim almost exclusively. These suppliers accounted for almost half (48 percent) of the Medicare payments the OIG identified.

Top 10 HCPCS Level II Codes for Medicare Payments with Identical Referring Physician and Supplier NPIs

Code                Short Description

E1390              Oxygen concentrator

A5500            Diabetic shoe insert including fitting and custom preparation

A5512             Diabetic shoe insert (prefabricated) molded for total contact with foot

A5513             Diabetic shoe insert (custom fabricated) molded for total contact with foot

V2020             Frame purchase for vision lenses

K0823             Standard power wheelchair with captain’s chair

V2203             Spherocylinder bifocals for vision lenses

L4360              Pneumatic, prefabricated walking boot

V2200             Sphere bifocals for vision lenses

L8030              Breast prosthesis, silicone or equal

Ten counties represented 19 percent of Medicare payments for DME and supply claims with identical referring physician and supplier NPIs. Three of the 10 counties included cities that the Health Care Fraud Prevention & Enforcement Action Team (HEAT) has identified as areas of significant Medicare fraud and in which Strike Forces have been set up to combat fraud (Los Angeles, Houston, and Detroit).

Read the full OIG April report for further details.

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