Department of Health & Human Services 
OFFICE OF 
 
INSPECTOR GENERAL 
 
 
 
 
 
 
 
 
Q   B
UESTIONABLE  ILLING BY 
 
S L L
UPPL  IERS OF  OWER  IMB 
.  
P  
ROSTHESES
 
   
 
 
 
 
Daniel R. Levinson  
Inspector General 
 
August 2011 
OEI-02-10-00170 
   
   
 E X E C U T I V E   S U M M A R Y  
OBJECTIVES
 
1.  To identify payments for lower limb prostheses in 2009 that did not 
meet certain Medicare requirements. 
2.  To identify Medicare payments for lower limb prostheses in 2009 
for beneficiaries with no claims from their referring physicians. 
3.  To identify suppliers of lower limb prostheses that had 
questionable billing in 2009. 
4.  To describe the program safeguards in place in 2009 and the first 
half of 2010 to prevent inappropriate payments for lower limb 
prostheses.   
BACKGROUND 
Medicare covers lower limb prostheses under its Part B Durable 
Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) 
benefit.  Between 2005 and 2009, Medicare spending for lower limb 
prostheses increased 27 percent, from $517 million to $655 million, 
while the number of Medicare beneficiaries receiving lower limb 
prostheses decreased by 2.5 percent, from almost 76,000 to about 
74,000.   
Lower limb prostheses are designed to replace, as much as possible, 
the function of a missing limb.  A prosthesis joins the beneficiarys 
residual limb at one of several sites, such as the hip, above or below 
the knee, the ankle, or the foot.  Medicare requires that a supplier 
have an order from a physician before providing prostheses to the 
beneficiary.  This physician is known as the referring physician.  After 
receiving the order, the supplier fits the beneficiary with the most 
appropriate prostheses.  Medicare also requires that suppliers follow 
local coverage determination policies, which provide guidelines for 
determining the beneficiarys potential functional level and specify 
how suppliers must submit claims for certain types and combinations 
of prostheses.   
The Centers for Medicare & Medicaid Services (CMS) contracts with 
Durable Medical Equipment (DME) Medicare Administrative 
Contractors (MAC) to process and pay claims for lower limb 
prostheses.  These contractors also apply processing edits and conduct 
data analysis that may lead to medical reviews.  In addition, CMS 
  OEI-02-10-00170  QUESTIONABLE BILLING BY SUPPLIERS OF LOWER LIMB PROSTHESES  i 
     
   
E X E C U T I V E   S U M M A R Y  
contracts with Zone Program Integrity Contractors (ZPIC) and DME 
Program Safeguard Contractors (DME PSC) to conduct analyses for 
aberrant billing and to investigate allegations of fraud. 
We based this study on an analysis of Medicare Part B claims for 
lower limb prostheses from 2009 and an analysis of Part A and B 
claims from 2004 to 2009 for beneficiaries who received lower limb 
prostheses in 2009.  We also interviewed CMS contractors.  
FINDINGS 
In 2009, Medicare inappropriately paid $43 million for lower limb 
prostheses that did not meet certain requirements; these 
payments could have been prevented by using claims processing 
edits.  These payments were for claims that did not meet the 
requirements specified in the local coverage determination.  The  
$43 million is based solely on an analysis of claims data and does not 
include payments that a medical record review may find to be 
unreasonable or unnecessary.  Most of these payments were made to 
suppliers that incorrectly billed for prostheses for both the right and 
left limbs using two claims, rather than one.  Billing in this manner 
allows these suppliers to appear to be billing for only one limb when in 
fact they are billing for both limbs.  In other cases, the claims did not 
include any information about the beneficiaries potential functional 
level when it was required, or the claims were for prostheses that were 
not medically necessary given the beneficiaries potential functional 
level.   
Medicare paid an additional $61 million for beneficiaries with no 
claims from their referring physicians.  These beneficiaries had no 
Medicare Part A or Part B claims that included their referring 
physicians during the last 5 years, meaning they did not have an office 
visit with or receive any other services from their referring physicians 
during this time.  Billing for prostheses when the beneficiary had no 
claims from the referring physician raises questions about whether 
the physician ever evaluated the beneficiary and whether these 
devices were medically necessary.   
In 2009, 267 suppliers of lower limb prostheses had questionable 
billing.  In 2009, 136 suppliers frequently submitted claims that did 
not meet certain Medicare requirements or were for beneficiaries with 
no claims from their referring physicians.  An additional 131 suppliers 
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E X E C U T I V E   S U M M A R Y  
had other questionable billing, such as billing for a high percentage of 
beneficiaries with no history of an amputation or missing limb.  
Medicare contractors conducted varying degrees of program 
safeguard activities related to lower limb prostheses.  The four DME 
MACs had varying claims processing edits in place, but none had edits 
for all requirements.  In addition, none of the DME MACs conducted 
medical reviews, and not all conducted data analyses or provided 
education related to lower limb prostheses.  All five ZPICs and DME 
PSCs conducted data analyses and opened investigations related to 
lower limb prostheses. 
RECOMMENDATIONS 
We recommend that CMS: 
Implement additional claims processing edits to prevent 
inappropriate payments.  CMS should instruct the four DME MACs 
to implement claims processing edits based on all of the local coverage 
determination requirements.   
Strengthen monitoring of billing for lower limb prostheses.  CMS 
should instruct the DME MACs, ZPICs, and DME PSCs to monitor 
billing for lower limb prostheses using the measures discussed in this 
report.  CMS should develop thresholds for these measures and 
instruct its contractors to conduct additional reviews of suppliers that 
exceed the thresholds.   
Implement requirements for a face-to-face encounter to establish 
the beneficiarys need for prostheses.  We recommend that CMS 
implement requirements that the referring physician document that a 
face-to-face encounter occurred.  This would help ensure that lower 
limb prostheses provided to beneficiaries are medically necessary.   
Revise the requirements in the local coverage determination.  CMS 
should work with the DME MACs to clarify several aspects of the local 
coverage determination.  First, CMS should clarify the definitions of 
beneficiaries functional levels.  Second, CMS should revise the local 
coverage determination or take other steps to require that 
licensed/certified medical professionals, such as physical therapists, 
evaluate beneficiaries to determine their potential functional levels.  
Finally, CMS should consider denying as medically unnecessary 
certain combinations of prostheses.   
  OEI-02-10-00170  QUESTIONABLE BILLING BY SUPPLIERS OF LOWER LIMB PROSTHESES  iii 
     
   
E X E C U T I V E   S U M M A R Y  
Enhance screening for currently enrolled suppliers of lower limb 
prostheses.  Federal regulations place new DMEPOS suppliers at the 
high-risk level and currently enrolled DMEPOS suppliers at the  
moderate-risk level.  CMS should consider placing current suppliers of 
lower limb prostheses at the high-risk level, thus subjecting them to the 
more rigorous screening procedures. 
Take appropriate action on suppliers with questionable billing.  In 
a separate memorandum, we will refer the suppliers that we identified 
to CMS for appropriate action.   
AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 
RESPONSE 
CMS concurred with five of the six recommendations.  In response to 
our first recommendation, to implement additional claims processing 
edits, CMS concurred and stated it would instruct the DME MACs to 
implement consistent claims processing edits based on local coverage 
determination requirements. 
In response to our second recommendation, to strengthen monitoring 
of billing for lower limb prostheses, CMS concurred and stated it 
would issue guidance to the DME MACs and instruct them to consider 
the measures used in this report as supplemental criteria for detecting 
high-risk suppliers.   
In response to our third recommendation, to implement requirements 
for a face-to-face encounter to establish the beneficiarys need for 
prostheses, CMS concurred and stated it is exploring its current 
authorities to implement such requirements.  CMS also stated that it 
would issue an educational article to further explain policy 
requirements for lower limb prostheses to providers and suppliers. 
In response to our fourth recommendation, to revise the local coverage 
determination, CMS concurred and stated it would review the 
definitions for the functional levels and develop refinements as 
appropriate.  CMS also stated it would consider adapting an algorithm 
to guide determination of the functional status of the beneficiary.  
CMS did not explicitly comment on our recommendation to consider 
requiring that an objective party determine the functional level.  We 
ask CMS to consider this approach because it would further ensure 
  OEI-02-10-00170  QUESTIONABLE BILLING BY SUPPLIERS OF LOWER LIMB PROSTHESES  iv 
     
   
that beneficiaries receive only prostheses appropriate for their 
functional levels.    
In response to our fifth recommendation, to enhance screening for 
currently enrolled suppliers of lower limb prostheses, CMS did not 
concur and stated that it has in place sufficient tools that allow for 
increased scrutiny of existing DMEPOS suppliers.  CMS noted that if 
an existing supplier meets one of several triggering events, that 
supplier automatically is elevated to the high-risk level.  Based on this 
report and the findings of other Office of Inspector General reports on 
DMEPOS, we maintain that all current suppliers of lower limb 
prostheses should be placed at the high-risk level. 
In response to our sixth recommendation, to take appropriate action 
on the suppliers with questionable billing, CMS concurred and stated 
it would share our information with the DME MACs and the Recovery 
Auditors.  Recovery Auditors review Medicare claims on a 
postpayment basis to identify inappropriate payments.     
  OEI-02-10-00170  QUESTIONABLE BILLING BY SUPPLIERS OF LOWER LIMB PROSTHESES  v 
     
   
 TT AA BB LL EE    OO FF    CC OO NN TT EE NN TT SS   
EX ECUT I VE  SUM M ARY  .....................................i 
 
I NT RO DU CT I O N  ............................................ 1 
 
 
F I NDI NG S  .................................................  11 
In 2009, Medicare inappropriately paid $43 million for lower limb 
prostheses that did not meet certain requirements; these payments    
could have been prevented by using claims processing edits  ....  11 
Medicare paid an additional $61 million for beneficiaries with no 
claims from their referring physicians. ......................  12 
In 2009, 267 suppliers of lower limb prostheses had questionable 
billing ................................................  13 
Medicare contractors conducted varying degrees of program  
safeguard activities related to lower limb prostheses ..........  16 
 
RECO M M END AT I O N S  .....................................  18 
 
 
AG EN CY  CO M M E NT S  AN D O F F I CE  O F   I NSP ECT O R  
G EN ERAL   R E SPO N SE  ....................................  20 
 
 
APP EN DI X  ................................................  22 
A:   Medicare Payments for Lower Limb Prostheses, by Type, 
2009 ..............................................  22 
B:   Centers for Medicare & Medicaid Services Comments ......  23 
 
ACKNO WL E DG M E N T S .....................................  27 
  OEI-02-10-00170  QUESTIONABLE BILLING BY SUPPLIERS OF LOWER LIMB PROSTHESES  vi 
     
   
 I N T R O D U C T I O N  
 
OBJECTIVES 
1.  To identify payments for lower limb prostheses in 2009 that did not 
meet certain Medicare requirements.  
2.  To identify Medicare payments for lower limb prostheses in 2009 for 
beneficiaries with no claims from their referring physicians. 
3.  To identify suppliers of lower limb prostheses that had questionable 
billing in 2009. 
4.  To describe the program safeguards in place in 2009 and the first 
half of 2010 to prevent inappropriate payments for lower limb 
prostheses.   
BACKGROUND 
Medicare covers lower limb prostheses under its Part B Durable 
Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) 
benefit.  Between 2005 and 2009, Medicare expenditures for lower limb 
prostheses increased 27 percent, from $517 million to $655 million, 
while the number of Medicare beneficiaries receiving lower limb 
prostheses decreased by 2.5 percent, from almost 76,000 to about 
74,000.1  In 2009, lower limb prostheses represented 81 percent of 
Medicare Part B payments for all prostheses.  
Recently, in a number of cases, suppliers fraudulently billed for lower 
limb prostheses.  For example, one supplier was convicted of health 
care fraud after billing Medicare nearly $1 million for prostheses that 
were not medically necessary.2  In another case, a husband and wife 
were indicted on charges of billing Medicare $1.5 million for prostheses 
and other items for deceased beneficiaries as well as for beneficiaries 
who had never been evaluated by their referring physicians.3  
 
1 Office of Inspector General (OIG) analysis of Part B claims data from the Centers for 
Medicare & Medicaid Services (CMS) National Claims History File for 2005 and 2009.   
2 Melissa Correa Velazquez, El Vocero, Lluvia de fraudes al Medicare, July 28, 2010.  
Accessed at http://www.vocero.com/noticias/ley-y-orden/9412-lluvia-de-fraudes-al-
medicare.html on September 26, 2010.  The information is no longer available online. 
3Department of Justice (DOJ) and the Department of Health and Human Services (HHS), 
Maria and Armando Montiel Charged in a 469 Count Indictment for Medicare Fraud, 
August 11, 2010.  Accessed at http://www.stopmedicarefraud.gov/HEATnews/puertorico.html 
on August 10, 2011. 
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I N T R O D U C T I O N  
Further, during initial discussions about this study, staff at CMS 
raised a number of concerns about lower limb prostheses.  They were 
concerned that suppliers were providing higher priced prostheses when 
lower priced ones were more appropriate, noting that these practices 
result in inappropriate Medicare payments.    
This evaluation was conducted as part of the Health Care Fraud 
Prevention and Enforcement Action Team (HEAT) initiative, which 
focuses on reducing health care fraud through innovative data analysis 
and enhanced cooperation between DOJ, OIG, and CMS.4 
Lower Limb Prostheses   
Lower limb prostheses are designed to replace, as much as possible, 
the function of a missing limb.  A beneficiary typically requires lower 
limb prostheses after amputation because of complications from a 
disease, such as diabetes.  Other beneficiaries need prostheses because 
they were born without one or both lower limbs.  A prosthesis joins the 
beneficiarys residual limb at one of several sites, such as the hip, 
above or below the knee, the ankle, or the foot.5   
Prostheses can be temporary or definitive.  Temporary prostheses are 
used when the amputated limb is still maturing.  Once the residual 
limb has matured, the supplier fits the beneficiary with definitive 
prostheses.  Definitive prostheses are meant for prolonged use and are 
typically replaced every 3 to 5 years.  They are also typically more 
expensive than temporary prostheses.   
Prostheses are further divided into base prostheses and additions.  A 
supplier will typically fit a beneficiary with a base prosthesis and then 
enhance the base prosthesis with several additions.  For example, a 
base prosthesis for a beneficiary with an above-the-knee amputation 
typically consists of a foot, an ankle, a shin, a knee, and a socket that 
interfaces with the residual limb.  The additions include enhancements 
to the base prosthesis, such as a more sophisticated socket or knee or 
an insert or suspension system for the socket.   
Medicare pays suppliers for prostheses according to a national fee 
schedule.  Medicare payments for a given prosthesis vary across 
States; however, they cannot be higher than the ceiling price or lower 
 
4 DOJ and HHS, HEAT Task Force Success, Accessed at  
http://www.stopmedicarefraud.gov/heatsuccess/index.html on January 11, 2010. 
5 For the purpose of this report, we refer to each of these sites as a site of amputation. 
OEI-02-10-00170    QUESTIONABLE BILLING BY SUPPLIERS OF LOWER LIMB PROSTHESES  2   
   
I N T R O D U C T I O N  
 
than the floor price set by CMS.  In 2009, over one-quarter of the            
$655 million that Medicare spent on lower limb prostheses was for 
sockets ($167 million), followed by inserts or suspension systems  
($113 million) and base prostheses ($107 million).  See Appendix A for 
2009 Medicare spending for each type of lower limb prostheses.   
Medicare Requirements for Lower Limb Prostheses 
Provisions of the Social Security Act (the Act) govern Medicare 
payment for all items or services, including lower limb prostheses.  The 
Act states that Medicare will cover only services and items considered 
reasonable and necessary for the diagnosis or treatment of illness or 
injury or to improve the functioning of a malformed body part.6   
In addition, Medicare requires that a supplier have an order from a 
physician before providing prostheses to the beneficiary.7  This 
physician is known as the referring physician.  Upon receiving the 
order, the supplier consults with the referring physician as needed to 
confirm the order and to recommend any necessary changes and 
evaluates the beneficiary.8  The supplier fits the beneficiary with the 
most appropriate prostheses.  The supplier then determines the group 
of codes that best describes the prostheses provided, choosing from  
178 Healthcare Common Procedure Coding System (HCPCS) codes 
that are specific to lower limb prostheses.9  In this report, we refer to 
each HCPCS code as a prosthesis. 
Further, local coverage determination policies provide additional 
Medicare requirements for lower limb prostheses.  These policies, 
consistent with policies for other DMEPOS, are identical across the 
country.10  The local coverage determination specifies how suppliers 
 
6 The Act  1862(a)(1)(A), 42 U.S.C.  1395y(a)(1)(A). 
7 CMS, Medicare Program Integrity Manual (PIM), Pub. No. 100-08, ch.5,  5.2.1 (as of 
Rev. 242; effective 03-01-08).  A new physician order is required when there is a change in 
the order, when an item needs to be replaced, and when there is a change in the supplier.  
CMS, Medicare PIM, Pub. No. 100-08, ch.5,  5.2.4 (as of Rev. 242; effective 03-01-08). 
8 CMS, DMEPOS Quality Standards, October 2008. 
9 HCPCS is a standardized coding system maintained by CMS to ensure uniform billing.  
The 178 HCPCS codes for lower limb prostheses include all defined codes from L5000 to 
L5999. 
10 CMS, Medicare PIM, Pub. No. 100-08, ch.13,  13.1.4.  The four identical local coverage 
determinations are entitled Local Coverage Determination for Lower Limb Prostheses.  In 
addition, four identical policy articles on lower limb prostheses provide additional 
requirements.  For the purposes of this report, we refer to all eight documents as the local 
coverage determination.  We used the version of the local coverage determination that was 
in effect in 2009. 
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I N T R O D U C T I O N  
 
must submit claims for certain types and combinations of prostheses.  
In particular, it states that each claim must include a modifier to 
indicate whether the prosthesis is for the right or left limb.  When a 
supplier provides a prosthesis for each limb on the same date, the 
supplier must submit only one claim and include both the right and 
left modifiers on the claim.11   
The local coverage determination also has guidelines for determining 
the beneficiarys potential functional level.  Specifically, it states that a 
beneficiary is placed at one of five potential functional levels based on 
the reasonable expectations of the supplier and the referring 
physician.  When determining the potential functional level, suppliers 
must take into account the beneficiarys history, current condition, and 
desire to walk.  The supplier then uses a modifier on the claim to 
indicate the beneficiarys potential functional level (K0 to K4).   
Prostheses are not considered medically necessary if the beneficiary 
has the lowest potential functional level (K0), which indicates that he 
or she does not have the ability or the potential to walk.  In addition, 
for some prostheses, the local coverage determination specifies the 
minimum potential functional level that the beneficiary must have for 
the prosthesis to be considered medically necessary.      
Further, the local coverage determination limits the number of certain 
prostheses that can be billed on a claim.  If the number of units of 
these prostheses exceeds the limit, the additional items will be denied 
as not medically necessary.  The local coverage determination also 
considers certain combinations of prostheses to be medically 
unnecessary.  For example, certain sockets are not allowed for use with 
temporary base prostheses.  Finally, the local coverage determination 
states that HCPCS L5990, a specific type of foot addition, will be 
denied as not medically necessary.12 
In addition, CMS recently established new screening procedures for 
provider enrollment.  Screening may include, for example, licensure 
and criminal background checks.  CMS created three levels of 
screeninglimited, moderate, and highbased on the risk of fraud, 
 
11 Typically, a supplier bills for a set of prostheses on one claim, listing each prosthesis as a 
separate line item on that claim.  For the purposes of this report, we refer to claim line items 
as claims.    
12 While not covered by Medicare, this HCPCS code may be covered by other health care 
insurers.   
OEI-02-10-00170    QUESTIONABLE BILLING BY SUPPLIERS OF LOWER LIMB PROSTHESES  4   
   
I N T R O D U C T I O N  
waste, and abuse.13  New DMEPOS suppliers were placed at the  
high-risk level, while currently enrolled DMEPOS suppliers were 
placed at the moderate-risk level.14   
Lastly, recent legislation established a face-to-face encounter 
requirement for certain DMEPOS.15  For specified DMEPOS that 
require a written order prior to delivery, the referring physician must 
document that a physician, physician assistant, nurse practitioner, or 
clinical nurse specialist has had a face-to-face encounter with the 
beneficiary before writing the order for the item.16    
Claims Processing and Program Safeguard Activities 
CMS contracts with four DME Medicare Administrative Contractors 
(MAC) to process and pay claims in different areas of the country.  In 
addition to developing local coverage determinations, the DME MACs 
apply processing edits to reject, deny, or suspend claims.  If the DME 
MAC rejects a claim, the supplier may resubmit it after making the 
necessary corrections.  If the DME MAC suspends a claim, it reviews 
the medical records to determine whether the claim should be paid.  
DME MACs may also conduct medical reviews of claims based on 
proactive data analysis to prevent improper payments or to collect 
overpayments.  In addition, they conduct outreach and education to 
suppliers.  
CMS also contracts with Zone Program Integrity Contractors (ZPIC) 
and DME Program Safeguard Contractors (PSC) to identify fraud and 
abuse in their jurisdictions.  These contractors conduct data analysis to 
check for aberrant billing and to investigate allegations of fraud and 
abuse.  They may refer claims to DME MACs to collect overpayments 
or to law enforcement for further investigation.  CMS is transitioning 
the role of the PSCs to the ZPICs. 
 
13 76 Fed. Reg. 5862, 5867 (Feb. 2, 2011).   
14 42 CFR  424.518 (b)(1)(x) and (c)(1)(ii), effective March 25, 2011. 
15 In addition to establishing the new requirement for DMEPOS, section 6407(c) of the 
Patient Protection and Affordable Care Act (ACA), P.L. 111-148, authorized CMS to apply 
the face-to-face encounter requirement to other Medicare items and services based on a 
decision that it would reduce the risk of waste, fraud, or abuse. 
16 Section 6407(b) of the ACA, amending 1834(a)(11)(B) of the Act.  CMS can specify that 
the requirements at 1834(a)(11)(B) for a written order before delivery and for a face-to-face 
encounter apply to any durable medical equipment (DME) (see section 1834(a)(13) of the 
Act) or any orthotics or prosthetics (see sections 1834(h)(3) and (h)(4)(C) of the Act).  As of 
May 2011, CMS had not applied the face-to-face requirement to lower limb prostheses. 
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I N T R O D U C T I O N  
METHODOLOGY   
We based this study on:  (1) an analysis of all paid Part B claims for 
lower limb prostheses from 2009; (2) an analysis of paid Part A and 
Part B claims17 from 2004 to 2009 for beneficiaries who received lower 
limb prostheses in 2009; and (3) structured interviews with staff from 
the following CMS contractors:  the DME MACs, ZPICs, and DME 
PSCs.   
Using CMSs National Claims History File, we identified all paid 
Part B claims for lower limb prostheses (HCPCS codes L5000 to 
L5999) for 2009.18  For beneficiaries who had a prosthesis claim in 
2009, we identified all of their paid Part A and Part B claims during 
the 5 years prior to their first prosthesis claim in 2009.19  We used the 
beneficiarys Health Insurance Claim Number to link these Part A and 
Part B claims to the 2009 prostheses claims.   
Identification of Medicare Payments for Lower Limb Prostheses That Did 
Not Meet Certain Requirements or Were for Beneficiaries With No 
Claims From Their Referring Physicians 
We first analyzed the claims data to determine the number of claims 
that did not meet the requirements specified in the local coverage 
determination and the total Medicare payments for these claims.  We 
considered a paid claim to not meet these requirements if the supplier  
(1) did not indicate whether the prosthesis was for the right or left 
limb, (2) billed for a prosthesis for both limbs on the same date using 
two claims,20 (3) did not meet potential functional level 
requirements,21 (4) billed for a higher number of units of a prosthesis 
than allowed on a claim, (5) billed for combinations of prostheses that 
were not allowed, or (6) billed for prostheses that were not covered.   
 
17 Note that we did not include DME claims. 
18 We included all claims from the 50 States, the District of Columbia, Puerto Rico, the 
U.S. Virgin Islands, American Samoa, and Guam. 
19 For the purposes of this report, we refer to the 5 years prior to the beneficiarys first 
prosthesis claim in 2009 as the last 5 years.    
20 The supplier should bill for prostheses for both limbs on the same claim, using a right 
and a left modifier.  
21 In this report, we did not verify whether the potential functional level assigned to the 
beneficiary was appropriate.  We did verify:  (1) whether the supplier indicated the 
beneficiarys potential functional level on each claim and (2) whether the prostheses were 
medically necessary for the potential functional level indicated on the claim. 
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I N T R O D U C T I O N  
 
Next, we analyzed the claims data to determine the number of claims 
for beneficiaries with no claims from their referring physicians during 
the last 5 years and the Medicare payments for these claims.  Using 
the National Provider Identifier and Unique Physician Identification 
Number on the prostheses claims, we identified each beneficiarys 
referring physician.  We then used these physician identifiers to 
determine whether the referring physician was included on any of the 
beneficiarys Part A and Part B claims, which would indicate that the 
beneficiary had an office visit or received other services from the 
referring physician.  If a beneficiary had more than one referring 
physician in 2009, we determined whether the beneficiary had a  
Part A or Part B claim with any of the referring physicians. 
Identification of Suppliers That Had Questionable Billing 
Medicare paid 4,575 suppliers for lower limb prostheses in 2009.  To 
identify the suppliers that had questionable billing, we based our 
analyses on suppliers that had at least 10 beneficiaries and that were 
paid at least $100,000 for lower limb prostheses in 2009.  These 
included 1,632 of the 4,575 suppliers and accounted for 92 percent of 
the $655 million billed for lower limb prostheses.   
For each supplier, we first determined the percentage of its claims that 
did not meet Medicare requirements specified in the local coverage 
determination.  If that percentage was greater than the 75th percentile 
plus two times the interquartile range, we considered the supplier to 
have an unusually high percentage of claims that did not meet these 
requirements.22  We conducted a similar analysis to identify suppliers 
that had an unusually high percentage of claims for beneficiaries with 
no claims from their referring physicians during the last 5 years.  
Next, we identified suppliers of lower limb prostheses that had other 
questionable billing.  We developed seven measures based on the 
results of past OIG analyses and fraud investigations related to lower 
limb prostheses, as well as input from CMS staff and contractors.  As 
above, we considered a supplier to be unusually high on a measure if it 
was greater than the 75th percentile plus two times the interquartile 
range.  The seven measures include:   
 
22 This is a standard method for identifying members of a population with unusually high 
values on a statistic compared to the rest of the population.  See J.W. Tukey, Exploratory 
Data Analysis, Addison-Wesley, 1977.   
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I N T R O D U C T I O N  
 
  The percentage of beneficiaries that suppliers have in common.  We 
based this measure on the number of each suppliers beneficiaries 
who also received lower limb prostheses from another supplier. 
  The percentage of beneficiaries who had no Part A or Part B history 
related to an amputation during the last 5 years.  We based this 
measure on the number of each suppliers beneficiaries who did not 
have a Part A or Part B claim that included a diagnosis code 
associated with a missing lower limb or a procedure code associated 
with a lower limb amputation or prosthesis fitting.    
  The percentage of beneficiaries with unusual combinations of 
prostheses.  We considered two prostheses billed on the same date 
for the same limb to be unusual if they were both definitive base 
prostheses or were for different sites of amputation.  While certain 
prostheses may be provided more than once for the same limb on the 
same date, definitive base prostheses should be provided only once.  
Also, if a supplier routinely provides prostheses for different sites of 
amputationsuch as below the knee and above the kneefor the 
same limb, that is a cause for concern.23   
  The percentage of beneficiaries who received prostheses for both 
limbs.  Nationwide, 15 percent of Medicare beneficiaries who had 
lower limb prostheses in 2009 received prostheses for both limbs.24 
  The percentage of beneficiaries who received prostheses for      
above-the-knee amputations.  On average, the payment per 
beneficiary for prostheses for above-the-knee amputations is more 
than twice the payment for below-the-knee amputations.25   
  High average payment per beneficiary for above-the-knee 
prostheses.26  We based this measure on the total payment for   
 
23 For this analysis, we included prostheses that were appropriate for only one site of 
amputation, such as a below-the-knee socket.  Of the 181 lower limb prostheses, about  
100 are appropriate for one site of amputation, while the remaining prostheses are 
appropriate for multiple sites.   
24 OIG analysis of prostheses claims data from the National Claims History File for 2009. 
25 Prostheses for above-the-knee and below-the-knee amputations accounted for 88 percent 
of all Medicare spending on lower limb prostheses.  Prostheses for other sites accounted for 
the remaining 12 percent of total spending.  OIG analysis of prostheses claims data from the 
National Claims History File for 2009.   
26 To determine the average payment per beneficiary, we included prostheses that are 
appropriate for one site of amputation or for multiple sites.  If a prosthesis was appropriate 
for multiple sites, we identified the site based on other prostheses provided on the same date 
for the same limb.   
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I N T R O D U C T I O N  
 
above-the-knee prostheses divided by the number of each suppliers 
beneficiaries who received these prostheses.  For this analysis, we 
included suppliers that provided above-the-knee prostheses to at 
least 10 beneficiaries.  Additionally, because the price for a given 
prosthesis varies by State, we used CMS floor prices so that we could 
compare suppliers across States.   
  High average payment per beneficiary for below-the-knee 
prostheses.  We based this measure on the total payment for    
below-the-knee prostheses divided by the number of each suppliers 
beneficiaries who received these prostheses.  As we did in the above 
analysis, we included suppliers that provided below-the-knee 
prostheses to at least 10 beneficiaries.  We also used CMS floor 
prices so that we could compare suppliers across States.   
Next, we compared the characteristics of the suppliers that had 
questionable billing to those of other suppliers.  Specifically, for both 
groups of suppliers, we calculated the percentage of suppliers that 
were independently owned, rather than owned by a chain, and the 
percentage of suppliers in each State.27  We identified the States in 
which the percentage of suppliers that had questionable billing was at 
least twice as high as the percentage of other suppliers. 
Identification of Program Safeguards To Prevent Inappropriate Payments 
for Lower Limb Prostheses  
We conducted structured telephone interviews with staff from the four 
DME MACs, the three ZPICs, and the two DME PSCs.  We discussed 
the program safeguard activities they conducted from January 2009 to 
August 2010.28    
We asked the DME MACs about their claims processing edits and any 
medical reviews and analyses they conducted, as well as any education 
they provided about billing for lower limb prostheses.  We then asked 
the ZPICs and DME PSCs about any data analyses and investigations 
they conducted regarding suppliers of lower limb prostheses.  We 
completed these interviews between August and September 2010. 
 
27 We used data from the National Supplier Clearinghouse to identify the State where the 
supplier practiced and determine whether the supplier was independently owned or owned 
by a chain.   
28 Eight of these contractors were able to discuss the safeguard activities they conducted 
since January 2009.  The ninth contractor began operations in January 2010 and was able to 
discuss its activities since that time.  
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I N T R O D U C T I O N  
 
In addition, we reviewed documentation from all of the contractors.  
Specifically, we requested and reviewed documentation related to their 
claims processing edits, data analyses, investigations, and any 
education they provided.   
Limitations 
The findings in this report are based on analysis of claims data; we did 
not conduct a medical review of any claims to determine the medical 
necessity of the prostheses.  In addition, the measures included in our 
analysis are not intended to be a comprehensive set of measures for 
identifying questionable billing.   
Standards  
This study was conducted in accordance with the Quality Standards 
for Inspection and Evaluation issued by the Council of the Inspectors 
General on Integrity and Efficiency. 
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 F I N D I N G S  
In 2009, Medicare inappropriately paid $43 million for  Of the $655 million that 
lower limb prostheses that did not meet certain  Medicare paid for lower 
limb prostheses in 2009, 
requirements; these payments could have been 
$43 million was for claims 
prevented by using claims processing edits  
that did not meet the 
requirements specified in the local coverage determination.  These 
paymentsfor 32,260 claims for 9,265 beneficiariescould have been 
prevented if claims processing edits had been in place.29  The            
$43 million is based solely on an analysis of claims data and does not 
include payments that a medical record review may find to be 
unreasonable or unnecessary.   
As shown in Table 1, Medicare paid $20.1 million to suppliers that 
incorrectly billed for a prosthesis for both the right and left limbs on 
the same date using two claims, rather than one claim.  Billing on 
different claims enables suppliers to appear to be billing for only one 
limb, when, in fact, they are billing for both limbs.     
 
 
Table 1:  Inappropriate Medicare Payments for Lower Limb 
  Prostheses, 2009   
 
Inappropriate  Percentage of 
 
Payment Amount  All Paid Claims 
 
Billed for a prosthesis for each limb on the 
  same date using two claims, rather than one  $20.1 million  3.3% 
claim 
  Did not meet potential functional level 
requirements  $17.8 million  1.0% 
  Did not indicate whether the prosthesis was 
for the left or right limb  $2.7 million  0.4% 
 
Billed for combinations of prostheses that 
were not allowed  $1.6 million  0.4% 
 
Billed for a higher number of units of 
prostheses than allowed  $0.9 million  0.1% 
 
Billed for prostheses that were not covered  $0.4 million  < 0.1% 
 
Total*  $42.6 million  5.2% 
  * The figures in the last two columns do not sum to the total because a claim may have 
failed to meet multiple requirements.   
 
Source:  OIG analysis of Part B prostheses claims, 2010. 
 
29 This amount may not be the total cost savings to the Medicare program.  In some cases, 
when a claims processing edit rejects a claim, the supplier may resubmit the claim after 
making the necessary corrections. 
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Medicare paid another $17.8 million for claims that did not meet 
potential functional level requirements.  As noted, beneficiaries have 
one of five potential functional levels, depending on their health status 
and desire to walk.  In most cases, the claims did not include any 
information about the beneficiaries potential functional level when it 
was required.  In other cases, Medicare paid for prostheses that were 
not medically necessary given the potential functional level of the 
beneficiaries as indicated on the claims.  For example, some suppliers 
billed for a knee addition that was designed for the highest potential 
functional level, even though the beneficiary had a lower potential 
functional level. 
Further, Medicare inappropriately paid $2.7 million for claims that did 
not indicate whether the prostheses were for the right or left limb.  It 
also paid $1.6 million for combinations of prostheses that were not 
allowed.  Most commonly, Medicare inappropriately paid for a 
definitive socket in combination with a temporary base prosthesis.  
Lastly, Medicare paid over $1 million for a higher number of units of 
certain prostheses than was allowed and for prostheses that were not 
covered by the program.   
 
In addition to the $43 million 
Medicare paid an additional $61 million  
that did not meet certain 
for beneficiaries with no claims  
Medicare requirements, another  
from their referring physicians 
$61 million was for beneficiaries 
with no claims from their referring physicians.  Specifically, these 
beneficiaries had no Medicare Part A or Part B claims that included 
their referring physicians during the last 5 years, indicating they did 
not have an office visit or receive any other services from their 
referring physicians during this time.  These payments were for 55,274 
claims for 7,066 beneficiaries.    
Medicare requires the beneficiarys referring physician to write an 
order specifying the beneficiarys need for prostheses.  Billing for 
prostheses when the beneficiary had no claims from the referring 
physician raises questions about whether the physician ever evaluated 
the beneficiary and whether these devices were medically necessary. 
 
 
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F I N D I N G S  
In 2009, 136 suppliers 
In 2009, 267 suppliers of lower limb  
frequently submitted claims 
prostheses had questionable billing 
that did not meet certain 
Medicare requirements or were for beneficiaries with no claims from 
their referring physicians.  An additional 131 suppliers had other 
questionable billing, such as billing for a high percentage of 
beneficiaries with no history of an amputation or missing limb or a 
high percentage of beneficiaries with unusual combinations of 
prostheses.  
These 267 suppliers differed from other suppliers of lower limb 
prostheses.  For example, two-thirds of these suppliers were 
independently owned, rather than owned by a chain, compared to      
41 percent of other suppliers.  In addition, these suppliers were at least 
twice as likely as other suppliers to be in Alabama, Mississippi, Puerto 
Rico, or Wyoming.   
In 2009, 136 suppliers frequently submitted claims that did not meet 
certain Medicare requirements or were for beneficiaries with no claims 
from their referring physicians 
These 136 suppliers accounted for $22 million of the payments in 2009 
that did not meet certain Medicare requirements or were for 
beneficiaries with no claims from their referring physicians.  One 
supplier alone accounted for $2.5 million of these payments.  As shown 
in Table 2, 114 suppliers frequently submitted claims that did not 
meet Medicare requirements specified in the local coverage 
determination.  Between 16 and 89 percent of their claims did not meet 
these Medicare requirements, whereas half of all suppliers had            
2 percent or less of claims that did not meet these requirements.  In 
addition, 33 suppliers frequently submitted claims for beneficiaries 
with no claims from their referring physicians during the last 5 years.  
Between 32 and 100 percent of these suppliers claims were for 
beneficiaries with no claims from their referring physicians. 
 
 
 
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Table 2:  Suppliers That Frequently Submitted Claims That Did Not Meet Certain 
Medicare  Requirements or Were for Beneficiaries With No Claims From Their 
Referring Physicians, 2009 
 
Suppliers With  
Unusually High Values* 
  Median Among All 
 
Suppliers 
Range of  Number of 
 
Percentages  Suppliers 
 
Percentage of claims that did not meet certain 
Medicare requirements  2 percent  16 to 89 percent  114 
 
Percentage of claims for beneficiaries with no 
claims from  their referring physicians  8 percent  32 to 100 percent  33 
 
Total**      136 
 
* We considered a suppliers percentage to be unusually high if it was greater than the 75th percentile plus two 
times the inte rquartile range. 
** The figures do not sum to the total because 11 suppliers frequently submitted both types of claims.   
 
Source:  OIG analysis of Part B prostheses claims, 2010. 
 
An additional 131 suppliers had other questionable billing 
One hundred thirty-one suppliers had unusually high values for at 
least one of the seven other measures we reviewed.  In addition, 34 of 
the suppliers that frequently submitted claims that did not meet 
certain Medicare requirements or were for beneficiaries with no claims 
from their referring physicians also had unusually high values for at 
least 1 of the 7 measures listed in Table 3.   
As shown in Table 3, 56 suppliers routinely had beneficiaries in 
common with other suppliers.  These suppliers had between 23 and  
92 percent of their beneficiaries in common with other suppliers, 
whereas half of all suppliers had 4 percent or less of their beneficiaries 
in common with other suppliers.  In addition, 13 suppliers frequently 
had beneficiaries with no history of an amputation or missing limb 
during the last 5 years.  At least 65 percent of the beneficiaries of these 
suppliers had no amputation or missing limb history, whereas half of 
all suppliers had no history of an amputation or missing limb for  
28 percent or less of their beneficiaries.  
Further, 68 suppliers frequently billed for unusual combinations of 
prostheses.  Specifically, these suppliers frequently billed for two 
prostheses on the same date for the same limb that were either   
(1) both definitive base prostheses or (2) prostheses for different sites 
of amputation.  Most commonly, these suppliers billed for a  
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F I N D I N G S  
below-the-knee definitive base prosthesis (L5301) in combination with 
a socket that is appropriate for an ankle amputation (L5632). 
 
Table 3:  Suppliers With Other Questionable Billing, 2009 
Suppliers With  
Unusually High Values* 
Median Among All 
 
Suppliers 
Number of 
Range of Values 
Suppliers 
Percentage of beneficiaries that suppliers 
have in common  4%  23 to 92%  56 
Percentage of beneficiaries with no history 
of an amputation or missing limb    28%  65 to 95%  13 
Percentage of beneficiaries with unusual 
combinations of prostheses  3%  18 to 89%  68 
Percentage of beneficiaries who received 
prostheses for both limbs  13%  36 to 77%  13 
Percentage of beneficiaries who received 
prostheses for above-the-knee amputations  16%  45 to 92%  16 
Average payment per beneficiary for  
above-the-knee prostheses  $14,695  $29,798 to $40,070  4 
Average payment per beneficiary for  
below-the-knee prostheses  $6,128  $12,166 to $17,348  10 
Total**      165 
This table includes the 36 suppliers that also frequently submitted claims that did not meet certain Medicare 
requirements or were for beneficiaries with no claims from their referring physicians. 
* We considered a suppliers value to be unusually high if it was greater than the 75th percentile plus two 
times the interquartile range. 
** The figures do not sum to the total because a supplier may have unusually high values for more than one 
measure.  
Source:  OIG analysis of Part B prostheses claims, 2010. 
 
Further, as shown in Table 3, many suppliers had an unusually high 
percentage of beneficiaries who received prostheses for both limbs or 
for above-the-knee amputations.  Finally, a number of suppliers had 
unusually high average payments per beneficiary for either above-the-
knee prostheses or for below-the-knee prostheses.  These suppliers 
commonly billed for significantly more prosthesesor for more 
complex prosthesesfor each beneficiary, compared to other suppliers.   
  
OEI-02-10-00170    QUESTIONABLE BILLING BY SUPPLIERS OF LOWER LIMB PROSTHESES  15   
   
F I N D I N G S  
The four DME MACs had 
Medicare contractors conducted varying 
varying claims processing edits 
degrees of program safeguard activities related 
in place for lower limb 
to lower limb prostheses 
prostheses; however, none had 
edits in place for all of the requirements specified in the local coverage 
determination.  These edits might have prevented the $43 million that 
Medicare inappropriately paid in 2009 for lower limb prostheses that 
did not meet these requirements.  
Additionally, between January 2009 and August 2010, none of the four 
DME MACs conducted medical reviews and not all conducted data 
analyses or provided education that was specific to lower limb 
prostheses.  In contrast, during the same period, all five ZPICs and 
DME PSCs conducted data analyses and opened a number of 
investigations related to lower limb prostheses.  
The four DME MACs had varying claims processing edits in place, but 
none had edits for all requirements  
The DME MACs most commonly had edits in place that checked for 
whether the prosthesis was for the right or left limb and whether the 
beneficiary had the required potential functional level.  Additionally, 
two contractors had implemented edits related to the different 
combinations of prostheses that were not allowed, and two had edits 
for prostheses that were not covered.  None of the four contractors had 
edits to check for billing for a prosthesis for each limb on the same date 
on different claims or for billing for a higher number of prostheses 
than allowed.  Interestingly, the contractor that had the most edits in 
place had not implemented them until June 2010.   
None of the DME MACs conducted medical reviews, and not all had 
conducted data analyses or provided education related to lower limb 
prostheses 
None of the four DME MACs conducted medical reviews of lower limb 
prostheses between January 2009 and August 2010.  Staff at the DME 
MACs noted that medical reviews of prostheses claims were very 
difficult and required specialized knowledge because of the complicated 
components that needed to be reviewed.  Staff also commonly noted 
that assessing the beneficiarys potential functional level was difficult 
because the local coverage determination did not clearly define the five 
different levels.  Staff reported that the vague definitions made it 
difficult to determine whether the more complex prostheses allowed for 
higher potential functional levels were medically necessary. 
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In addition, only two of the DME MACs conducted analyses on lower 
limb prostheses claims.  One contractor looked for inappropriate 
combinations of prostheses and unusually high use of certain 
prostheses.  The other contractor looked for prostheses that were not 
medically necessary based on the beneficiaries potential functional 
levels indicated on the claims.   
Finally, three of the four DME MACs provided education to suppliers 
regarding coverage or billing instructions for lower limb prostheses.  
This usually consisted of presentations to suppliers or general 
information that the contractors posted on their Web sites.   
All ZPICs and DME PSCs conducted data analyses and opened 
investigations related to lower limb prostheses 
All five ZPICs and DME PSCs reported conducting data analyses 
related to lower limb prostheses between January 2009 and        
August 2010.  Specifically, four of the five contractors looked at 
replacement frequencies.  Two looked at trends involving the 
beneficiaries potential functional levels indicated on the claims.  One 
checked for medical histories consistent with an amputation.  In 
addition, four contractors conducted analyses to identify high 
utilization or billing spikes among suppliers of lower limb prostheses.   
All five ZPICs and DME PSCs reported opening investigations based 
on their analyses, referrals, or beneficiary complaints.  In total, they 
reported opening 19 investigations that were specific to lower limb 
prostheses.  The issues typically investigated included suppliers 
providing prostheses that were not needed by the beneficiary or 
suppliers billing for, but not providing, prostheses.  According to the 
contractors, the investigations have had differing results.  For 
example, three contractors referred three suppliers to law 
enforcement.  However, another closed two cases because it could not 
substantiate that the beneficiaries did not need the more complex 
prostheses that are allowed for higher potential functional levels. 
 
   
OEI-02-10-00170    QUESTIONABLE BILLING BY SUPPLIERS OF LOWER LIMB PROSTHESES  17   
   
 R E C O M M E N D A T I O N S  
 
Our findings show a number of problems with Medicare payments for 
lower limb prostheses.  In 2009, Medicare inappropriately paid  
$43 million for lower limb prostheses that did not meet certain 
Medicare requirements.  These payments could have been prevented 
by using claims processing edits.  Medicare also paid an additional  
$61 million for beneficiaries with no claims from their referring 
physicians.  Further, we found that 267 suppliers of lower limb 
prostheses had questionable billing.  These included, for example, 
suppliers that frequently billed for beneficiaries who had no history of 
an amputation or missing limb or for unusual combinations of 
prostheses.  Lastly, we found that the DME MACs had varying claims 
processing edits in place for lower limb prostheses; however, none had 
edits in place for all of the requirements specified in the local coverage 
determination.  We recommend that CMS: 
Implement additional claims processing edits to prevent inappropriate 
payments  
CMS should instruct the DME MACs to implement claims processing 
edits based on all of the local coverage determination requirements.  
These edits should check:  whether the right or left limb is indicated on 
the claim, how a prosthesis for each limb on the same date is billed, 
potential functional level requirements, the number of units allowed 
for certain prostheses, inappropriate combinations of prostheses, and 
noncovered prostheses.   
Strengthen monitoring of billing for lower limb prostheses  
CMS should instruct the DME MACs, ZPICs, and DME PSCs to use 
the measures discussed in this report to periodically profile suppliers 
of lower limb prostheses and focus resources on those that are most 
likely to present a risk to the program.  Specifically, the contractors 
should determine for each supplier:  (1) the percentage of claims that 
did not meet certain Medicare requirements, (2) the percentage of 
claims for beneficiaries with no claims from their referring physicians, 
(3) the percentage of beneficiaries who had no Part A or Part B history 
related to an amputation, (4) the percentage of beneficiaries who 
received unusual combinations of prostheses, (5) the percentage of 
beneficiaries that suppliers have in common, (6) the percentage of 
beneficiaries who received prostheses for both lower limbs, (7) the 
percentage of beneficiaries who received prostheses for above-the-knee 
amputations, (8) the average payment per beneficiary for above-the-
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R E C O M M E N D A T I O N S  
knee prostheses, and (9) the average payment per beneficiary for 
below-the-knee prostheses.  CMS should develop thresholds for these 
measures and instruct its contractors to conduct additional reviews of 
suppliers that exceed the thresholds.   
The contractors should use this information to target their efforts to 
more effectively prevent inappropriate payments and identify fraud or 
abuse.  Contractors could conduct medical reviews of a sample of 
claims from suppliers that exceed the thresholds on the above 
measures and use their findings to recover inappropriate payments, 
place certain suppliers on prepayment review, and initiate fraud 
investigations.   
Implement requirements for a face-to-face encounter to establish the 
beneficiarys need for prostheses 
We recommend that CMS use its authority to implement 
requirements that the referring physician document that a face-to-face 
encounter occurred.  This would help ensure that lower limb 
prostheses provided to Medicare beneficiaries are medically necessary.   
Revise the requirements in the local coverage determination 
We recognize that the DME MACs have an initiative to revise the local 
coverage determination for lower limb prostheses.  CMS should work 
with the DME MACs to clarify several aspects of the local coverage 
determination.   
First, CMS should clarify the definitions of beneficiaries potential 
functional levels.  In particular, CMS should set an expectation for 
when the beneficiary should achieve the level of walking ability 
indicated by his or her potential functional level.  After creating 
improved definitions, CMS should consider specifying the range of 
potential functional levels that are appropriate for each prosthesis.  
These changes would help ensure that prostheses are matched to 
beneficiaries needs and that CMS contractors can assess the medical 
necessity of these devices.   
Second, CMS should revise the local coverage determination or take 
other steps to require that licensed/certified medical professionals, 
such as physical therapists, evaluate beneficiaries to determine their 
potential functional levels.  To further ensure an objective 
determination of the beneficiarys functional level, CMS should 
require that this person not be financially affiliated with the supplier.  
The evaluation should include a written report that provides detailed 
information supporting the determined functional level, and the report 
OEI-02-10-00170    QUESTIONABLE BILLING BY SUPPLIERS OF LOWER LIMB PROSTHESES  19   
   
R E C O M M E N D A T I O N S  
should be made available to CMS upon request.  While Medicare 
would need to cover this additional service, the cost would be offset by 
ensuring that beneficiaries receive only prostheses appropriate for 
their functional levels. 
Lastly, CMS should consider revising the local coverage determination 
to deny as medically unnecessary certain combinations of prostheses, 
such as more than one definitive base prosthesis or prostheses for 
different sites of amputation billed for the same limb on the same date. 
Enhance screening for currently enrolled suppliers of lower limb prostheses 
Federal regulations place new DMEPOS suppliers at the high-risk 
level and currently enrolled DMEPOS suppliers at the moderate-risk 
level.  Given the high costs of prostheses and the high rates of 
questionable billing, CMS should consider placing current suppliers of 
lower limb prostheses at the high-risk level, thus subjecting them to 
the more rigorous screening procedures.   
Take appropriate action on suppliers with questionable billing   
In a separate memorandum, we will refer the suppliers that we 
identified to CMS for appropriate action.   
AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 
RESPONSE 
CMS concurred with five of the six recommendations.  In response to 
our first recommendation, to implement additional claims processing 
edits, CMS concurred and stated it would instruct the DME MACs to 
implement consistent claims processing edits based on local coverage 
determination requirements. 
In response to our second recommendation, to strengthen monitoring 
of billing for lower limb prostheses, CMS concurred and stated it would 
issue guidance to the DME MACs and instruct them to consider the 
measures used in this report as supplemental criteria for detecting 
high-risk suppliers.   
In response to our third recommendation, to implement requirements 
for a face-to-face encounter to establish a beneficiarys need for 
prostheses, CMS concurred and stated it is exploring its current 
authorities to implement such requirements.  CMS also stated that it 
would issue an educational article to further explain policy 
requirements for lower limb prostheses and to providers and suppliers.   
OEI-02-10-00170    QUESTIONABLE BILLING BY SUPPLIERS OF LOWER LIMB PROSTHESES  20   
   
R E C O M M E N D A T I O N S  
In response to our fourth recommendation, to revise the local coverage 
determination, CMS concurred and stated it would review the 
definitions for the functional levels and develop refinements as 
appropriate.  CMS also stated it would consider adapting an algorithm 
to guide determination of the functional status of the beneficiary.  
CMS did not explicitly comment on our recommendation to consider 
requiring that an objective party determine the functional level.  We 
ask CMS to consider this approach because it would further ensure 
that beneficiaries receive only prostheses appropriate for their 
functional levels.   
In response to our fifth recommendation, to enhance screening for 
currently enrolled suppliers of lower limb prostheses, CMS did not 
concur and stated that it has in place sufficient tools that allow for 
increased scrutiny of existing DMEPOS suppliers.  CMS noted that if 
an existing supplier meets one of several triggering events, that 
supplier automatically is elevated to the high-risk level.  Based on this 
report and the findings of other OIG reports on DMEPOS, we maintain 
that all current suppliers of lower limb prostheses should be placed at 
the high-risk level. 
In response to our sixth recommendation, to take appropriate action on 
the suppliers with questionable billing, CMS concurred and stated it 
would share our information with the DME MACs and the Recovery 
Auditors.  Recovery Auditors review Medicare claims on a 
postpayment basis to identify inappropriate payments.   
For the full text of CMSs comments, see Appendix B. 
OEI-02-10-00170    QUESTIONABLE BILLING BY SUPPLIERS OF LOWER LIMB PROSTHESES  21   
   
 A P P E N D I X ~ A  
 
Medicare Payments for Lower Limb Prostheses, by Type, 2009 
Type of Lower Limb  Total Medicare Payments  Average Medicare Payments 
Prostheses  (millions)  per Prosthesis 
Base  $107  $1,935 
Addition prostheses 
Socket  $167  $684 
Insert or suspension system  $113  $508 
Knee  $92  $3,020 
Foot  $87  $2,370 
Other  $79  $542 
Ankle  $10  $659 
Total*  $655   
* The figures in this column do not sum to the total because of rounding. 
Source:  Office of Inspector General analysis of Part B prostheses claims, 2010. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
OEI-02-10-00170    QUESTIONABLE BILLING BY SUPPLIERS OF LOWER LIMB PROSTHESES  22  x 
A  P  PEN  D  8 
Agency Comments 
(~~"""""C~A"';;' 
\, 4(. DEPARTMENT OF HEALTH & HUMAN SERVICES  Centers for Medicare & Medicaid Services 
-~------------.--~ 
"-l~V<lll11 t  Administ'rator 
Washington, DC 20201 
IJUN 2 42D111 
DATE: 
TO:  Daniel R. Levinson 
Inspector General 
FROM:  Donald M. Berwick, M.D. 
Administrator 
SUBJECT:  Office ofInspector General (OIG) Draft Report: "Questionable Billing b) 
Suppliers of Lower Limb Prostheses" (OBI -02-10-00170) 
Thank you for the opportunity to review and comment on the OIG draft report titled, 
"Questionable Billing by Suppliers of Lower Limb Prostheses." The Centers for Medicare & 
Medicaid Services (CMS) appreciates the time and resources OIGhas invested to determine the 
extent to which Medicare improperly paid claims for lower limb prostheses. 
Lower limb prostheses are covered by Medicare to replace, as much as possible, the function of a 
missing limb.  Local coverage determinations for lower limb prostheses further explain libw 
claims must be submitted and what is covered as reasonable and necessary. 
Through data analysis and structured interviews with Medicare contractors, OIG concluded that 
in 2009:  1) Medicare inappropriately paid $43 million for lower limb prostheses; 2) Medicare 
paid for prostheses despite the fact the beneficiaries had no claims from their referring 
physicians; 3) 267 suppliers oflower limb prostheses had questionable billing; and 4) Medicare 
contractors conducted program safeguard activities related to lower limb prostheses to varying 
degrees.  . 
The CMS will work to improve our oversight oflower limb prostheses in the future and move 
forward in establishing the necessary changes. OIG made the following recommendations. 
OIG Recommendation 1 
Implement additional claims processing edits to prevent inappropriate payments. 
eMS Response 
. The CMS concurs and will instruct the Durable Medical Equipment Medicare Administrative 
Contractors (DME MACs) to implement consistent claims processing edits based on local 
coverage determination requirements. 
OEI021000170  QUESTIONABLE BILLING BY SUPPLIERS OF LOWER LIMB PROSTHESES  23   
   
A P P E N D I X   ~   B  
 
 
OEI-02-10-00170    QUESTIONABLE BILLING BY SUPPLIERS OF LOWER LIMB PROSTHESES  24   
   
A P P E N D I X   ~   B  
OEI-02-10-00170    QUESTIONABLE BILLING BY SUPPLIERS OF LOWER LIMB PROSTHESES  25   
   
A P P E N D I X   ~   B  
 
OEI-02-10-00170    QUESTIONABLE BILLING BY SUPPLIERS OF LOWER LIMB PROSTHESES  26   
   
 AA PC PK EN NO DW ILXE~DCG  M E N T S  
 
This report was prepared under the direction of Jodi Nudelman, 
Regional Inspector General for Evaluation and Inspections in the New 
York regional office, and Meridith Seife, Deputy Regional Inspector 
General.   
Judy Bartlett and Judy Kellis served as the team leaders for this 
study.  Other principal Office of Evaluation and Inspections staff from 
the New York regional office who contributed to the report include  
Christine Moundas, Shanti Nandiwada, and Rachel Siman; other 
central office staff who contributed include Robert Gibbons, Scott 
Manley, and Berivan Demir Neubert.  
 
 
OEI-02-10-00170    QUESTIONABLE BILLING BY SUPPLIERS OF LOWER LIMB PROSTHESES  27   
Office of Inspector General 
http://oig.hhs.gov 
 
The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, as 
amended, is to protect the integrity of the Department of Health & Human Services (HHS) 
programs, as well as the health and welfare of beneficiaries served by those programs.  This 
statutory mission is carried out through a nationwide network of audits, investigations, and 
inspections conducted by the following operating components: 
Office of Audit Services 
The Office of Audit Services (OAS) provides auditing services for HHS, either by conducting 
audits with its own audit resources or by overseeing audit work done by others.  Audits 
examine the performance of HHS programs and/or its grantees and contractors in carrying 
out their respective responsibilities and are intended to provide independent assessments of 
HHS programs and operations.  These assessments help reduce waste, abuse, and 
mismanagement and promote economy and efficiency throughout HHS. 
Office of Evaluation and Inspections 
The Office of Evaluation and Inspections (OEI) conducts national evaluations to provide 
HHS, Congress, and the public with timely, useful, and reliable information on significant 
issues.  These evaluations focus on preventing fraud, waste, or abuse and promoting 
economy, efficiency, and effectiveness of departmental programs.  To promote impact, OEI 
reports also present practical recommendations for improving program operations.  
Office of Investigations 
The Office of Investigations (OI) conducts criminal, civil, and administrative investigations 
of fraud and misconduct related to HHS programs, operations, and beneficiaries.  With 
investigators working in all 50 States and the District of Columbia, OI utilizes its resources 
by actively coordinating with the Department of Justice and other Federal, State, and local 
law enforcement authorities.  The investigative efforts of OI often lead to criminal 
convictions, administrative sanctions, and/or civil monetary penalties. 
Office of Counsel to the Inspector General 
The Office of Counsel to the Inspector General (OCIG) provides general legal services to 
OIG, rendering advice and opinions on HHS programs and operations and providing all 
legal support for OIGs internal operations.  OCIG represents OIG in all civil and 
administrative fraud and abuse cases involving HHS programs, including False Claims Act, 
program exclusion, and civil monetary penalty cases.  In connection with these cases, OCIG 
also negotiates and monitors corporate integrity agreements.  OCIG renders advisory 
opinions, issues compliance program guidance, publishes fraud alerts, and provides other 
guidance to the health care industry concerning the anti-kickback statute and other OIG 
enforcement authorities.