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OIG’s Renewed Interest in Orthotic Audits and Investigations: What Your DME Company Needs to Know

UPIC Audits of Medicare Orthotic Claims are Increasing(February 8, 2019):  A series of recent reports out of the Department of Health and Human Services (HHS), Office of Inspector General (OIG) underscore the Federal government’s renewed concerns with respect to orthotic braces, including underlying medical need for these items.  From 1994 to 2000, OIG issued half a dozen reports pertaining to orthotics audits and investigations.  However, since 2000, OIG’s focus shifted to other areas of program integrity concern (such as home health and hospice).  Between November 2018 and January 2019, however, OIG issued three reports regarding orthotic braces, highlighting that these items are on OIG’s radar once again. These three OIG reports are: “Medicare Improperly Paid Suppliers for Durable Medical Equipment, Prosthetics, Orthotics, and Supplies Provided to Beneficiaries During Inpatient Stays” (A-09-17-03035) (November 2018); “Pacific Medical’s Billing of Medicare for Orthotic Braces” (A-09-17-03027) (December 2018); and “Kelley Medical Equipment and Supply, LLC, Received Unallowable Medicare Payments for Orthotic Braces” (A-09-17-03030) (January 2019).   Over the past month, we have seen a significant uptick in the number of new orthotic audits and investigations by Medicare contractors, including Unified Program Integrity Contractors (UPICs).  The purpose of this article is to discuss a number of the program integrity issues that Durable Medical Equipment (DME) suppliers are facing in connection with UPIC audits of orthotic claims billed to Medicare. 

I.     Medicare Coverage and Payment Requirements

Medicare Part B covers Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS), including orthotic braces. To be paid by Medicare, a service or an item must be reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member. Orthotic braces are defined as rigid and semi-rigid devices which are used for the purpose of supporting a weak or deformed body member or restricting or eliminating motion in a diseased or injured part of the body.” Examples of orthotic braces include back, knee, and ankle-foot braces.

The DME Medicare Administrative Contractors (MAC) have developed Local Coverage Determinations (LCDs) for most covered orthotic braces (one of the most notable exceptions, however, is shoulder braces). The LCDs outline the conditions under which DME MACs will pay suppliers for those braces. For example, the LCD for back braces or “spinal orthoses” (LCD L33790) provides that: “A spinal orthosis (L0450 – L0651) is covered when it is ordered for one of the following indications:

  1. To reduce pain by restricting mobility of the trunk; or
  2. To facilitate healing following an injury to the spine or related soft tissues; or
  3. To facilitate healing following a surgical procedure on the spine or related soft tissue; or
  4. To otherwise support weak spinal muscles and/or a deformed spine.

Before submitting a claim for an orthotic brace to the DME MAC, a supplier must have on file the following:

  • Written documentation of a verbal order or a preliminary written order from the treating physician,
  • A detailed written order from the treating physician,
  • Information from the treating physician concerning the beneficiary’s diagnosis,
  • Any information required for the use of specific modifiers, and
  • Proof of delivery of the orthotic brace to the beneficiary.

The Medicare Program Integrity Manual specifically emphasizes that a supplier should obtain as much documentation from the beneficiary’s medical record as it determines necessary to assure itself that the orthotic brace meets Medicare requirements”.

II.    OIG’s Recent Reports:

In the first of OIG’s recent reports, dated November 2018, OIG found that Medicare should not have paid suppliers any of the $34 million for DMEPOS items that were provided during inpatient stays. Notably, 43% of the total overpayment identified by OIG was for prosthetics and orthotics, including braces. Separate from the $34 million figure, OIG determined that Medicare beneficiaries inappropriately paid $8.7 million in deductibles and coinsurance to the suppliers for the DMEPOS items. Generally, during an inpatient stay, Medicare should not pay a supplier for DMEPOS items provided to a Medicare beneficiary. The items are supposed to be provided directly by the inpatient facility or under arrangements between the facility and the supplier. This is because the Medicare payments made to the facilities represent payments in full for all inpatient hospital services, including DMEPOS items. OIG attributed the inappropriate payments for these supplies, in part, to inadequate Common Working File (CWF) pre-payment and post-payment edits which failed to prevent or detect the overpayments. OIG determined that if the system edits had been designed properly since 2008, Medicare could have saved $223.1 million and beneficiaries could have saved $56.3 million in deductibles and coinsurance. Based on its findings, OIG recommended in part that the Centers for Medicare & Medicaid Services (CMS) recover the $34 million and that the suppliers refund the deductible and coinsurance amounts to the Medicare beneficiaries.

OIG’s other two reports, dated December 2018 and January 2019 respectively, were quite similar to one another. OIG audited a supplier of orthotic braces in Tracy, California and a supplier of orthotic braces in Durant, Oklahoma for the same audit period, January 1, 2015 through March 31, 2017. In both cases, the overpayments identified by OIG were exclusively attributed to the failure on the part of the suppliers to establish medical need for some of the orthotic braces. In the California case, OIG determined that the supplier billed for orthotic braces that were not medically necessary for nine claims and could not provide medical records for two claims. In the Oklahoma case, OIG determined that the supplier billed for orthotic braces that were not medically necessary for 67 beneficiaries and could not provide medical records for nine beneficiaries. OIG stated verbatim with respect to both suppliers: These deficiencies occurred because [the supplier] did not always obtain sufficient information from the beneficiaries’ medical records to assure itself that the claims for orthotic braces met Medicare requirements.” An example of a medically unnecessary back brace was provided by OIG as follows:

Medicare paid [the Oklahoma supplier] $754 for providing a back brace to a 62-year-old beneficiary. According to the physician order dated March 7, 2017, the brace was prescribed for lower back pain. However, the medical records did not indicate a complaint of back pain, and there was no mention of a back brace. Rather, according to the medical records, the beneficiary saw his physician on March 2, 2017, for relief of persistent cough and chest congestion. As a result, the independent medical review contractor found that the back brace was not medically necessary.

Based on its findings, OIG recommended to both suppliers that they (1) refund the identified overpayments; (2) assess their claims outside of OIG’s audit period and refund any identified overpayments within 60 days; and (3) obtain as much information from beneficiary medical records as the suppliers deem necessary to assure themselves that claims for orthotic braces meet Medicare requirements.

III.   Our Recommendations for Suppliers of Orthotic Braces:

Given the audit and investigation activity surrounding suppliers of orthotic braces, it is important for suppliers to reassess Medicare coverage and payment requirements and their documentation practices. In particular, suppliers need to ensure they are obtaining and maintaining sufficient medical records from the ordering providers. As we have discussed in previous articles, while suppliers are not entitled to make determinations regarding medical need, they are tasked with evaluating medical records and ensuring that the records support the Medicare beneficiary’s medical need for the orthotic brace prescribed. The OIG reports make very clear that the party responsible for an overpayment is the supplier, and not the ordering provider. In order to ensure you are satisfying your documentation obligations, we recommend that you:

  1. Consult with your healthcare attorney and have them review a sample of claims. The best way to ensure that your claims are satisfying Medicare coverage and payment rules, and that you are meeting your documentation obligations, is to have a third party with strong knowledge in this area assess a sample of your claims who can then give you objective feedback and constructive recommendations.
  2. Train and retrain your staff on Medicare coverage and payment rules and supplier documentation requirements. As a business owner, you are likely relying on a team of employees to obtain and review the necessary documentation and to process the claims for the orthotic braces. You are only as strong as your weakest link, as they say. Sharing these OIG reports with your employees and setting up a team conference to discuss them would be a great start! Your healthcare attorney can likely arrange a conference agenda and guide your team through OIG’s reports, as well as effectively educate you and your employees on Medicare coverage and payment rules and supplier documentation requirements.
  3. Implement a compliance plan tailored to the scale of your business and the DME supplies you distribute so that compliance will persist in the long-term. Ultimately, regular auditing of claims and regular training of employees, as well as sound policies and procedures, are the most effective ways to ensure long-term, ongoing compliance throughout the life of your business. Medicare rules and audit activity are constantly evolving. A compliance plan is the way to stay on your game.

We anticipate ongoing UPIC audits and investigations pertaining to orthotic braces on account of OIG’s findings and concerns. Our attorneys can assist you if you have received notice from your local UPIC, or if you are interested in taking proactive steps, like developing a compliance plan or auditing your claims internally.

Lorraine Rosado Healthcare AttorneyLorraine Rosado, JD, CMCO, CMRS, Lorraine Rosado, JD is an experienced health law attorney with the firm, Liles Parker, Attorneys & Counselors at Law.  She is also a Certified Medical Compliance Officer (CMCO) and a Certified Medical Reimbursement Specialist (CMRS). Lorraine represents DME suppliers and a wide variety of other healthcare providers around the country in connection with Medicare, Medicaid and private payor audits and investigations. You can reach Lorraine at (202) 298-8750



ZPIC Audits / UPIC Audits: The Impact of Transmittal 768 on the Medicare Appeals Process Timeline

Transmittal 768(April 12, 2018): A big concern with the Medicare appeals process is the ghastly backlog at the Office of Medicare Hearings and Appeals (OMHA) for an Administrative Law Judge (ALJ) hearing coupled with the government’s authority to recoup alleged overpayments after the second level of appeal (reconsideration). There is renewed buzz regarding the backlog and potential recourse given the Fifth Circuit’s decision on March 27, 2018 in Family Rehabilitation, Inc. v. Azar, No. 17-11337, which affirmed the possibility for providers to sue for an injunction to prevent Medicare Administrative Contractors (MACs) from recouping overpayments until administrative appeals are concluded under the collateral-claim exception. But what about the snail-like pace of postpayment reviews at the very beginning of this process?  As discussed below, Medicare’s Transmittal 768 may alleviate this continuing problem to some extent.

I.  Continuing Delays by ZPICs / UPICs in Completing an Initial Review – Overview of the Problem:

Before claims are appealable, they have to be denied on review. A major source of massive extrapolated alleged overpayments are postpayment reviews by Zone Program Integrity Contractors (ZPICs) and their successor Unified Program Integrity Contractors (UPICs). Our experience has been that these reviews usually take many months, even years. This is in spite of the fact that providers are required to turn over the requested records in somewhere between 15 and 30 days, maybe even 45 days if the provider requests an extension. The investigators typically remain tight-lipped throughout the review and investigation process. Inquiries about the status of a review are usually met with no response or cryptic feedback like “The review findings will be provided at the conclusion of the review.” In the meantime, providers are expected to sit on their hands. Then one day, a letter arrives which often reflects an unmanageable alleged overpayment figure for the provider and the provider is left to dispute the alleged overpayment through “Medicare’s Byzantine four-stage administrative appeals process” – in the words of Circuit Judge Jerry E. Smith in Family Rehabilitation, Inc. v. Azar.

II.  New Timelines Under Transmittal 768 for ZPICs / UPICs to Complete a Postpayment Review:

There has been a development that may effectuate speedier postpayment reviews by ZPICs and UPICs. The Centers for Medicare and Medicaid Services (CMS) issued guidance, which imposes a new timeline and requirements on these contractors effective March 1, 2018. Specifically, the transmittal adds the following requirements to Chapter 3 of the Medicare Program Integrity Manual:

the UPICs / ZPICs shall complete postpayment medical review and provide the lead investigator with a final summary of the medical review findings that includes reference to the allegations being substantiated/not substantiated by medical review, reasons for denials, and any observations or trends noted within 60 calendar days” and “[t]he counting for the 60-day time period begins when all of the documentation is received by the UPIC / ZPIC contractor.”

Please note, however, that this is an internal timeline for the contractors (as between the medical reviewer(s) and lead investigator), meaning that providers should not expect to receive the postpayment audit results within 60 days of having submitted the records to the UPIC / ZPIC. However, Transmittal 768 may be useful to put pressure on the contractors when reviews are pending for months or years on end.

For a detailed discussion of the ZPIC program and process, please see: ZPIC Audits.

Healthcare LawyerLorraine A. Rosado, J.D., is a Senior Associate at Liles Parker and has extensive experience representing Medicare providers and suppliers around the country in administrative claims audits, suspension and revocation cases.  She is also performed a number of IRO reviews in connection with annual CIA reviews by HHS-OIG.  Should you have any questions regarding an administrative enforcement action, please feel free to call Lorraine for a free consultation.  She can be reached at: (202) 298-8750.

Rise of the UPICs – Changes to the Medicare Program Integrity Contractor Landscape are on the Horizon

(August 16, 2013): In an effort to streamline the often-confusing audit structure of multiple Medicare and Medicaid contractors (many of which have overlapping responsibilities and jurisdictions), the Centers for Medicare and Medicaid Services (CMS) is reportedly preparing to establish a new consolidated program integrity contractor, to be known as a Unified Program Integrity Contractor (UPIC).  These changes are intended to combine the integrity duties currently undertaken by Zone Program Integrity Contractors (ZPICs) and Medicare Administrative Contractors (MACs).  Notably, MACs will continue to operate but their program integrity responsibilities will be largely transferred over to this new contractor with consolidated auditing duties.

I.  Program Integrity Contractor Duties of the UPIC:

As noted in CMS’ Request for Information (RFI), the Center for Program Integrity (CPI) plans to establish multiple regional UPICs (between five and fifteen).

The UPIC (“the Contractor”) shall work on a wide variety of activities that focus on identifying and reducing fraud, waste, and abuse by individuals and entities furnishing items and services (hereafter, for convenience, referred to as “providers”) under the Medicare and Medicaid programs.  (Page 3). 

II.   Anticipated UPIC Priorities:

The primary priority areas to be pursued by UPICs are anticipated to include cases involving:

  • Patient abuse or harm;
  • Ability to prevent future fraud, waste or abuse by taking administrative actions to remove providers or suppliers from the affected Program, or otherwise prevent inappropriate future payments;
  • Multi-State fraud;
  • High dollar amounts of potential overpayments;
  • Likelihood for an increase in the amount of fraud or enlargement of a pattern, including
    the potential that findings can be used to refine CMS’s anti-fraud prevention efforts and analytic models;
  • Fraud complaints made by Medicare supplemental insurers;
  • Law enforcement requests for assistance that involve court-imposed deadlines;
  • Law enforcement requests for assistance in ongoing investigations that involve interagency initiatives or projects;
  • Law enforcement requests for early administrative actions to prevent or mitigate losses to the affected Program(s); and,
  • Other new elements that may be identified by CMS through technical direction. (Page 5)
  • III.  Conclusion: 

On the positive side, the UPIC program is likely to go a long way towards streamlining the audit process and reducing the number of duplicative audit requests received from competing program integrity contractors.  In any event, CMS’ consolidation of these program integrity contractor duties is yet another clear indication that the government intends improve its efficiency in scrutinizing questionable Medicare and Medicaid billings. We strongly encourage all health care providers (not merely those participating in the Medicare and / or Medicaid programs) to develop and implement an effective Compliance Plan and overall Compliance Program.  Participating providers have an obligation to keep up with and follow all applicable statutory and regulatory requirements associated with Medicare and Medicaid services.  Now is the time to conduct a “GAP ANALYSIS” of your current practices so that any needed remedial actions can be taken.

Healthcare LawyerRobert W. Liles, JD, MBA, MS, serves as Managing Partner at Liles Parker, a boutique health law firm representing health care providers around the country in connection with audits, investigations, compliance and transactional health care projects.  For a free consultation regarding your case, please give Robert a call.  He can be reached at:  1 (800) 475-1906.