Department  of  Health  and  Human  Services 
OFFICE  OF 

INSPECTOR  GENERAL 

MEDICARE  ORTHOTICS 
JUNE  GIBBS  BROWN 
Inspector  General 
OCTOBER  1997 
OEI-02-95-00380  OFFICE  OF INSPECTOR  GENERAL 
The mission  of the Office of Inspector  General  (OIG), as mandated  by Public  Law 95-452,  is to 
protect  the integrity  of the Department  of Health and Human  Services  programs  as well as the 
health and welfare of beneficiaries  served by them.  This statutory  mission  is carried  out through  a 
nationwide  program  of audits,  investigations,  evaluations,  sanctions,  and fraud alerts.  The 
Inspector  General informs  the Secretary  of program  and management  problems  and recommends 
legislative,  regulatory,  and operational  approaches  to correct  them. 
OFFICE OF EVALUATION  AND INSPECTIONS 
The OIGs Office of Evaluation  and Inspections  (OEI) conducts  short-term  management  and 
program  evaluations  (called inspections)  that focus on issues of concern  to the Department,  the 
Congress,  and the public.  The inspection  reports  provide  findings  and recommendations  on the 
efficiency,  vulnerability,  and effectiveness  of departmental  programs. 
OEIs New York Regional Office prepared  this report  under  the direction  of Alan S. Meyer, 
Ph.D.,  Regional  Inspector  General.  Project  staff included: 
New York Retion  Headquarters 
Nancy Harrison,  Project Leader 
 Stuart Wright 

Lucille  Cop,  R.N. 
 Brian P. Ritchie 

Thomas  Bollyky 
 Barbara R. Tedesco 

Jennifer  Caves 

Carmen  Sanchez,  Administration  on Aging 
For additional  copies of this report,  please contact the New York Regional  Office at 
(212) 264-1998.  Department  of Health  and  Human  Services 
OFFICE  OF 

INSPECTOR  GENERAL 

MEDICARE 
 ORTHOTICS 
sERV 
JUNE  GIBBS  BROWb 
Inspector  General 
OCTOBER  1997 
OEI-02-95-00380  EXECUTIVE  SUMMARY 
PURPOSE 
To determine  the extent  of questionable  billing  practices  for Medicare  orthotics  and how it 
relates  to the orthotics  industry  and to carrier  policies  and procedures. 
BACKGROUND 
An orthosis  is a device,  sometimes  called  a brace,  applied  to the outside  of the body  that 
supports a body  part.  Recent  Office  of Inspector  General  (OIG) studies have raised  concerns 
about orthotics  in general.  This inspection  is one of many  the OIG has undertaken 
addressing  durable  medical  equipment  and related  devices. 
Any  supplier  with a HCFA  provider  number  can provide  and bill  for orthotics.  Suppliers  of 
orthotic  devices  include  durable  medical  equipment  companies,  orthotists,  pharmacies,  and 
doctors  offices.  Some suppliers  specialize  in orthotics  while  others  supply orthotics  as well 
as a wide range  of durable  medical  equipment.  Suppliers  may manufacture  the devices  in 
their  own workshops  or obtain  devices  from  other companies.  An orthotist  is a health 
professional  who treats musculoskeletal  disorders  by designing  and fitting  custom-made 
orthoses.  Orthotists  are certified  by professional  organizations.  No State presently  licenses 
orthotists  but several  States are currently  considering  licensing  legislation. 
We used a combination  of methods  in conducting  this inspection.  A medical  records  review 
by medical  experts determined  if the physical  conditions  of our sample Medicare 
beneficiaries  warranted  the use of an orthotic  device.  We then examined  the billing  records 
of each beneficiary  to look  at additional  aspects of the use of orthotics  and related  Part B 
services.  We supplemented  these reviews  with a mail  survey  to Medicare  beneficiaries,  a 
mail  survey to orthotic  suppliers,  telephone  interviews  with carrier  representatives,  and a 
review  of carrier  policies. 
FINDINGS 
At Least Nineteen  Percent  of Orthotics Provided are Medically  Unnecessary 
The medical  record  review  found that at least  19 percent  of the orthotic  devices provided  are 
medically  unnecessary.  Some beneficiaries  who received  orthotics  did not have conditions 
that warrant  the use of a device.  This represents  $6.4 million  in Medicare  payments.  Many 
of the unnecessary  orthotics  are not rehabilitative,  as required.  Another  5 percent  of orthotic 
devices  are medically  questionable,  which  represents  $1.5 million.  In many  of these cases,  a 
more  sophisticated  and expensive  device  was provided  when  a lesser device  would have 
offered  the same benefit. 
Our method  of medical  review  focused  on the sample device  and did not address the other  devices provided  to the beneficiary  in the sample year.  Therefore,  the percent  of devices 
that are medically  unnecessary  is probably  understated.  To gain additional  insights  we 
conducted  a review  of billings.  We found that 54 percent  of the billing  cases have some type 
of questionable  orthotic  billing.  The two most common  problems  are many  devices  being 
billed  over a short time frame  and several  seemingly  unnecessary  add-on  devices  being 
billed. 
Durable  Medical Equipment  Companies  are More Likely than  Orthotists to Supply 
Questionable  Orthotics 
The Medicare  orthotics  industry  is fairly  evenly  divided  between  two very  different  types of 
suppliers:  orthotists  and durable  medical  equipment  companies.  According  to the billing 
review,  68 percent  of questionable  cases are supplied by a durable  medical  equipment 
company,  in contrast  to 35 percent  of orthotist  cases.  Devices  that do not have fitting 
requirements,  such as upper  limb devices,  and devices provided  in the southeast  region  of the 
country  are all more  likely  to be questionable  and more  likely  to be supplied  by durable 
medical  equipment  companies.  Also,  beneficiaries  supplied by durable  medical  equipment 
companies  are more  likely  than beneficiaries  supplied by orthotists  to report  never  getting  the 
device. 
Over Two-thirds of the Orthotics Billings in Nursing  Facilities are Questionable 
Sixty-eight  percent  of the cases in nursing  facilities  are questionable.  Durable  medical 
equipment  companies  are more  likely  than orthotists  to supply orthotics  to beneficiaries  in 
nursing  facilities.  Orthotists  generally  supply orthotics  to beneficiaries  who live at home. 
Most of the questionable  cases in nursing  facilities  involve  devices that do not have  fitting 
requirements.  All four medical  equipment  carriers  believe  there  are problems  in the way 
devices  are supplied to beneficiaries  in nursing  facilities.  They  are particularly  concerned 
that residents  are receiving  devices  that are not rehabilitative,  as required.  Another  concern 
is over-utilization. 
The Billing  Controls of the Durable  Medical Equipment  Regional  Carriers  are Limited 
The medical  equipment  carriers  have no policies  for the great majority  of the orthotic  billing 
codes.  The codes that do have policies  account  for 38 percent  of the allowed  Medicare 
dollars  for orthotics  in  1995.  The carriers  do not have policies  for upper  limb devices, 
which  we have  identified  as most likely  to be problematic.  Two main reasons  cited  for the 
paucity  of policies:  the complexity  of orthotics  and the lack of clear medical  consensus  on 
the use of orthotic  devices.  Due to lack of policies,  carrier  prepayment  checks  are limited  to 
utilization  and supplier  screens. 
All the carriers  report  upcoding  and unbundling  as major  problems.  The carriers  say these 
problems  exist because the current  coding  system is outdated  and has not kept up with 
changes  in orthotic  technology. 
ii  RECOMMENDATIONS 
We recognize  and support the HCFA  initiative  underway  with the Durable  Medical 
Equipment  Regional  Carriers  medical  directors  to find better  ways of assuring  proper 
payments  for orthotics.  Based on the nature  of unnecessary  devices  and questionable  billing 
that we identified,  we recommend  that HCFA,  in concert  with the Durable  Medical 
Equipment  Regional  Carriers: 
Develop  guidelines  that better  define  orthotic  devices,  distinguishing  among  categories 

of devices  such as custom-made  and off-the-shelf; 

Develop  policies  for orthotic  codes,  giving  priority  to upper  limb devices,  which  we 

have  identified  as most problematic; 

Develop  screens for billing  many  orthotic  devices  on the same day or within  a short 

time frame; 

Pay special attention  to billing  for orthotics  in nursing  facilities; 

Work  with the American  Orthotic  and Prosthetic  Association  to develop  a table of 

devices  that should not be used together;  and 

Consider  stricter  standards  for who is allowed  to bill  for orthotics,  such as requiring 

professional  credentials  for orthotic  suppliers. 

COMMENTS 
The HCFA  concurred  with all of our recommendations.  The full text of HCFAs  comments 
is in Appendix  E. 
,.. 
111  TABLE  OF  CONTENTS 
PAGE 
EXECUTIVE  SUMMARY 
INTRODUCTION  * . . . . . . ..s  a.....,  a . . . . . . . . . . . . . . . . . . . . . . .  1 
FINDINGS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  7 
 Medical  Necessity  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  7 
 Problems  with DME Companies  . . . . . . . . , . . . . . . . . . . . . . . . . . . . . . .  8 
 Nursing  Facilities  . . . . . . . . . ~ . . . . . ~ I ~ . . . . . . . . . . . . . . . . . . . . . .  10 
 Billing  Controls  . . , . . ~ s . . . . ~ o . o . . . . D. ~ . . n . . . . . I . o . e ~ D0 D. 0 11 
RECOMMENDATIONS  , . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  14 
APPENDICES 
A:  Sample  .............................................  A-l 
B:  Part B Services  ........................................  B-l 
c:  Confidence  Intervals  .....................................  C-1 
D:  Non-respondent  Analyses  ..................................  D-1 
E:  Comments  ...........................................  E-l 
iv  INTRODUCTION 
PURPOSE 
To determine  the extent  of questionable  billing  practices  for Medicare  orthotics  and how it 
relates  to the orthotics  industry  and to carrier  policies  and procedures. 
BACKGROUND 
Orthotic Devices 
An orthosis  is a device,  sometimes  called  a brace,  applied  to the outside  of the body that 
supports  a body part.  The practice  of providing  orthoses  is called  orthotics,  which  literally 
means the systematic  pursuit  of straightening  or correcting.  The devices  are usually  made of 
rigid materials  and are customized  for an individuals  use.  People  who need orthotics  range 
from the severely  disabled,  such as paraplegics  or quadriplegics,  to someone  who requires  an 
ankle brace  for better gait.  A person  may need to wear the orthotic  all the time  for life,  or 
every  day until  the condition  improves,  or some other time frame as prescribed  by the 
physician.  Since each orthotic  is fitted  for a particular  patients  use,  an orthotic  device 
cannot  be used properly  by any one else. 
Recent  Office  of Inspector  General  (OIG) studies have  identified  problems  with certain 
orthotic  devices  and raised concerns  about orthotics  in general.  A 1994 OIG study, 
Medicare  Payments  for Orthotic  Body Jackets  (OEI-04-92-01080),  found  95 percent  ($14 
million)  of claims  for an orthotic  device called  a body jacket  paid by Medicare  in 1992 were 
for non-legitimate  devices.  A related  study,  Marketing  of Orthotic  Body Jackets  (OEI-04-
92-01081),  identified  problems  in the marketing  of body jackets.  The present  inspection  is a 
result of the questions  raised  in the body jacket  studies,  which  highlighted  the need to look 
more broadly  at orthotics  as a whole.  It is one of many  inspections  the OIG has undertaken 
addressing  durable  medical  equipment  (DME) and related  devices. 
Medicare  Coverage  of Orthotics 
Section  1834(h) of the Social  Security  Act (the Act) provides  for payment  of orthotics  and 
prosthetics  as described  in section  1861(s)(9).  Prosthetics  is the replacement  of a body part. 
This inspection  does not address prosthetics.  The Health  Care Financing  Administration 
(HCFA)  explains  the definition  of orthotic  devices  in 42 CFR 414.202  of its regulations, 
which  states,  leg, arm,  back,  and neck braces,  and artificial  legs,  arms,  and eyes,  including 
replacements  if required  because of a change  in the beneficiarys  physical  condition.    A 
recent  HCFA  ruling  clarifies  that the Acts orthotics  benefit  regarding  braces is limited  to 
leg,  arm back,  and neck braces that are used independently  of other medical  or non-medical 
equipment. 
Orthotic  devices  are mainly  covered  under  Medicare  Part B.  As with  all Part B Medicare 
services,  covered  orthotics  must be reasonable  and necessary  for the diagnosis  or treatment 
1  of an illness  or injury  or to improve  the functioning  of a malformed  body member.  Payment 
is prohibited  for medical  services  that are for prevention,  palliation,  research  or 
experimentation. 
In order  for an orthosis  to be covered  by Medicare,  it must be a rigid  or semi-rigid  device 
that is 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.  Orthotics  claims  must have a 
prescription  and/or  a certificate  of medical  necessity  signed by a physician.  Unlike  DME, 
orthotics  may be provided  in a skilled  nursing  facility,  a nursing  home,  or in the 
beneficiarys  home. 
The HCFA  developed  a coding  system called the HCFA  Common  Procedure  Coding  System 
(HCPCS) used for billing.  The HCPCS  codes LO100 through  L4380,  called  L-codes,  are 
designated  for orthotic  devices.  There  are other miscellaneous  and temporary  codes but this 
inspection  focuses on L-codes  only.  There  are 465 different  L-codes  for orthotics.  In  1995, 
approximately  $188 million  was allowed  for claims  for these codes. 
The L-code  listings  give a brief  description  of the device  and state whether  the device  needs 
to be molded  to a patient  model,  custom  fabricated,  custom  fitted,  or have no fitting 
specifications.  The durable  medical  equipment  carriers  explain  custom  fitted  as when 
substantial  adjustments  are made to a prefabricated  item by a specially  trained  professional 
to meet the needs and/or  unique  shape of an individual  patient.  Custom  fabricated  means 
the  brace is made for a specific  patient  from his/her  individualized  measurements  and/or 
pattern.   Molded  to patient  model  is the  process in which  an impression  is made of the 
specified  body  part.  The impression  is used to make a positive  model  of the body part. 
Then the orthotic  is custom  fabricated  and/or  fitted using the model.  For the purposes  of 
this inspection,  we consider  a device  to have  HCFA fitting  requirements  if the L-code 
definitions  include  the specifications  of molded,  custom fabricated,  or custom  fit. 
Medicare  Durable  Medical Equipment  Regional  Carriers 
Medicare  Part B claims  are processed  by carriers  under  contract  with HCFA.  Carriers  are 
responsible  for ensuring  that coverage  requirements  are met before  approving  payment.  In 
October  1993, HCFA  began processing  claims  for durable  medical  equipment,  prosthetics, 
orthotics,  and supplies through  four regional  carriers  called  the Durable  Medical  Equipment 
Regional  Carriers  (DMERCs).  The four carriers,  from  regions  A, B, C, and D, cover  all 
the States, the District  of Columbia,  and Puerto  Rico from  their  separate headquarters. 
Although  fiscal  intermediaries  also process  some claims  for orthotics  and other  DME,  this 
report  focuses only  on the Part B payments  made by the regional  carriers  for orthotic 
devices. 
The Statistical  Analysis  Durable  Medical  Equipment  Regional  Carrier  (SADMERC)  is under 
contract  to produce  standard  quarterly  reports  and provide  analyses  of claims  data to identify 
trends and aberrancies.  It also conducts  postpayment  medical  review  of national  suppliers  in 
order to determine  if future  corrective  action  is needed.  All four medical  equipment  carriers 
2 
 use these data to identify  suspicious  durable  medical  equipment  and orthotic  suppliers  and 
high dollar  and high volume  claims for prepayment  review. 
Fee  Schedule 
The carrier  determines  fee schedules  for most DME and prosthetic  and orthotic  devices.  The 
fee schedule  for orthotics  gives the floor  and ceiling  allowed  amounts  for each L-code. 
Payment  for orthotic  devices  is made on a lump-sum  purchase  basis using the lesser of the 
fee schedule  amount  or the actual submitted  charge.  Orthotics  are not rented.  Medicare 
pays for 80 percent  of the allowed  amount.  The beneficiary,  or the beneficiarys  secondary 
insurance,  is responsible  for paying  the remaining  20 percent.  The cost for orthotic  devices 
range from  $10 for a simple device to $2800 for a more  sophisticated  one.  A supplier  is 
paid the same amount  from  the fee schedule  regardless  of how many  support  services,  such 
as teaching  and fitting  the beneficiary,  it provides 
Suppliers 
Any  supplier  with a HCFA  provider  number  can provide  and bill  for orthotics.  Suppliers 
need no financial  investment  and experience,  and little  verification  is done of their 
applications.  Suppliers  of orthotic  devices  include  DME companies,  orthotists,  pharmacies, 
and doctors  offices.  Some suppliers  specialize  in orthotics  while  others  supply  orthotics  as 
well as a wide range  of DME equipment.  Suppliers  may manufacture  the devices  in their 
own workshops  or obtain  devices  from  other companies. 
Orthotists 
An orthotist  is a health  professional  who treats musculoskeletal  disorders  by designing  and 
fitting  custom-made  orthoses ,  Two organizations  offer  orthotist  certification:  the American 
Board for Certification  in Orthotics  and Prosthetics,  Inc.,  commonly  known  as ABC,  and the 
Board of Certification  (BOC).  The ABC sets standards  of competency  and grants a Certified 
Orthotist  (CO) credential.  To qualify  for ABC certification  in orthotics,  an individual  must 
have a college  degree,  have completed  a postgraduate  orthotist  certificate  program  from  an 
accredited  institution,  and have at least  1 year  of patient  management  experience.  The 
candidate  must also pass two written  exams and a 3 day clinical  exam that tests the ability  to 
design,  fabricate,  and fit a variety  of orthoses.  Certified  practitioners  must meet continuing 
education  requirements  every  5 years to renew their  credentials.  Currently,  there  are 
approximately  2,124  ABC certified  orthotists  in the United  States. 
The BOC also certifies  orthotists.  There are more  than 900 BOC certified  orthotists.  In 
order  to sit for the BOC certification  examination,  which  includes  written  and practical 
components,  the applicant  is required  to have a high  school  diploma  and minimum  of 40 
hours  of unspecified  formal  education.  In addition,  all prospective  BOC orthotists  need to 
have experience  fitting  orthoses. 
As of now,  no State licenses  orthotists.  Several  States, however,  are currently  considering 
licensing  legislation. 
3 
 According  to ABC,  the orthotist  works from  a physicians  prescription  when providing  an 
orthosis.  The physician  writes the prescription  and the patient  then  sees an orthotist  for an 
evaluation.  Ideally,  the orthotist  and physician  work together  to determine  the most effective 
course of action.  The orthotist  is responsible  for:  formulating  the orthosiss  design  and 
selecting  materials  and components;  making  all necessary  casts,  measurements,  model 
modifications,  and layouts;  performing  fittings;  evaluating  the orthosis  on the patient; 
instructing  the patient  in its use; and maintaining  patient  records,  all in conformity  with the 
prescription.  Since the orthotist  is the supplier  of the device,  the orthotist  can bill  Medicare 
for it. 
American  Orthotic  and Prosthetic  Association 
The American  Orthotic  and Prosthetic  Association  (AOPA)  is a trade association  for 
suppliers  of orthotic  and prosthetic  devices.  The AOPA publishes  several journals  and 
materials  for patient  education,  lobbies  for insurance  reimbursement  policies,  monitors 
legislation,  and conducts  business  education  programs  for members. 
Operation Restore  Trust 
This inspection  is a part of the Department  of Health  and Human  Services  anti-fraud 
initiative  called  Operation  Restore  Trust (ORT) designed  to target fraud,  waste,  and abuse 
related  to home health  agencies,  nursing  homes,  and durable  medical  equipment.  The ORT 
initiative  targets  five States that account  for 40 percent  of the nations  Medicare  beneficiaries 
and program  expenditures:  California,  Florida,  New York,  Illinois,  and Texas. 
METHODOLOGY 
We used a combination  of methods  in conducting  this inspection.  A medical  record  review 
by medical  experts  was done to determine  if the physical  conditions  of sample Medicare 
beneficiaries  warranted  the use of an orthotic  device.  We then examined  the billing  records 
of each beneficiary  to look  at additional  aspects of orthotics  and related  Part B services.  We 
supplemented  these reviews  with a mail  survey  to Medicare  beneficiaries,  a mail  survey to 
orthotic  suppliers,  telephone  interviews  with carrier  representatives,  and a review  of carrier 
policies * 
Sample 
We selected a stratified  random  sample of 658 line  items from Medicare  claims  for orthotics. 
Before  selecting  the sample,  we first chose 20 orthotic  L-codes.  The 20 codes,  which 
together  represent  approximately  50 percent  of the allowed  charges  for all orthotics  in 1995, 
were selected based on one or more  of the following  three criteria:  allowed  dollars;  rate of 
growth;  and/or  having  been identified  during  preinspection  as potentially  problematic.  From 
the HCFA  1995 1 percent  Common  Working  file database  of claims,  we identified  a universe 
of 1,708 line items that had one of the 20 sample L-codes.  A claim  line  item shows the L-
code and number  of devices  billed  for that code.  More than one device  for one code may be 
billed  on the same line item. 
4 
 The sample was stratified  by seven major  groupings  of codes so we could compare  code 
groups.  It was not our intention  to compare  one specific  L-code  to another  because the 
number  of individual  claims  in the sample cells was too small.  The grouping  of codes was 
based on the part of the body the devices  are supposed to support.  We identified  the 
beneficiary,  the supplier,  and the referring  physician  for each device  in the sample.  See 
Appendix  A for more  information  on our sample selection  and response  rates and Appendix 
D for non-respondent  analyses. 
Medical Record  Review 
A medical  records  review  was done by a medical  review  contractor.  The review  determined 
whether  or not the records  showed the beneficiary  had a condition  that warranted  the use of 
the orthotic  device that came up in our sample.  The reviewers  did m  look  at additional 
orthotic  devices  that may have been provided  to the beneficiary  throughout  the year.  For 
each beneficiary  identified  in the sample,  we requested  their  medical  records  from  their 
physician,  home health  agency,  or nursing  facility.  We received  334 medical  records  for a 
response  rate of 51 percent.  Another  8 percent  of the providers  indicated  that they  did not 
prescribe  the device.  We analyzed  the number  of medical  records  received  in relation  to our 
billing  history  review.  Those beneficiaries  for whom we received  no medical  records,  were 
more  likely  to have questionable  billing  histories.  The records,  prescriptions  and certificate 
of medical  necessity,  and any other  documentation  received  from the supplier  to determine 
the medical  necessity  of the devices billed,  were sent to a medical  review  contractor.  The 
contractor  had physical  or occupational  therapists  screen the records  and,  when appropriate, 
refer  the records  for further  review  to a physician  with a specialty  in rehabilitative  medicine. 
Billing  Review 
In addition  to the medical  review,  we also examined  all orthotics  billing  records  for each 
beneficiary  in our sample.  This review  showed us additional  aspects of the use of orthotic 
devices that the medical  review  could  not.  The billing  review  determined  the following 
questionable  categories: 
1) 	 multiple  devices  (more than two of the same device)  or many 
devices  billed  in a short time frame, 
atypical  specialty  for referring  physician  (such as pathologists 
2) 	
who do not see patients), 
3) 	 many  add-on devices  (parts added to basic devices  that  seem to 
be duplicates  of parts already  on device)  billed,  and 
4)  a combination  of the problems  listed. 
While  the medical  review  focused on the sample device,  the billing  review  included  all the 
orthotic  and related  Part B services.  Each sample device  had a related  case history  that 
showed all  1995 orthotics  billings  for the beneficiary  who got the sample device.  This gave 
us 658 case histories.  A beneficiarys  condition  may require  an orthotic  device  and therefore 
the sample device  would be deemed medically  necessary  by the medical  reviewer,  but if the 
sample device had several  add-on  items or if the devices  components  were billed  separately, 
the case would be deemed  questionable  based on the billing  records. 
5  The Medicare  Part B beneficiary  billing  records  include  not only  the sample device,  but all 
1995 orthotic  L-codes  and related  Part B services  such as physical  therapy,  occupational 
therapy,  and orthotic  training  billed  for each beneficiary  in the sample.  See Appendix  B.  A 
registered  nurse from  the OIG project  team reviewed  the beneficiary  histories,  paying  close 
attention  to the diagnosis,  the types  and number  of devices billed,  the time frame  for the 
billings,  the related  therapies  billed,  place  of service,  and the specialty  of the referring 
physician.  Based solely  on the information  in the histories,  which  did m  include  the 
medical  records,  the nurse made a judgment  as to whether  or not the histories  raised 
concerns  of questionable  billing. 
Supplier  Survey 
We identified  the 370 different  suppliers  that supplied  all the devices  in the sample  and 
contacted  them by mail.  The supplier  response  rate was 77 percent  of the 658 cases.  We 
asked the suppliers  to send us a picture,  detailed  description,  and any brochures  of the 
sample device  billed.  We requested  the certificates  of medical  necessity  and/or  prescription 
for each case in the sample.  They  were also asked to provide  their  most recent  annual 
report,  when applicable.  We mailed  the suppliers  questionnaires  about certain  aspects of 
their  business,  such as how many  orthotists  they have on staff,  who does the custom-fitting, 
who instructs  the beneficiary,  and how the coding  and billing  are done.  The suppliers  also 
identified  themselves  as DME companies,  orthotist  practices,  or some other business. 
Beneficiary  Survey 
Since the sample was picked  using  line items,  some of the same beneficiaries  were 
represented  in more than one case.  Of the 658 sample cases,  576 different  beneficiaries 
were identified,  128 of whom are deceased.  A mail questionnaire  was sent to the remaining 
448 beneficiaries  identified  in the sample.  If the beneficiary  was identified  in more than one 
sample case,  he or she was asked to fill  out one questionnaire  for each device.  Beneficiaries 
were asked to describe  the type of orthotic  provided  to them and compare  it to a sketch of 
the device  from the AOPA manual  that is used throughout  the orthotics  field.  The 
beneficiaries  were also asked about the process by which  the device  was provided  and their 
experience  with the device.  The beneficiary  response  rate was 61 percent. 
Carrier  Interviews 
We interviewed  representatives  from  all four Durable  Medical  Equipment  Regional  Carriers 
by telephone.  We asked them to identify  any prepayment  screens and edits they  employ 
regarding  orthotics.  We also obtained  and reviewed  all medical  policies  and educational 
materials  the carriers  have that address orthotics.  We discussed each carriers  process  for 
creating  screens and edits and asked them what additional  screens and edits they would like 
to have. 
This inspection  was conducted  in accordance  with the Quality  Standards  for Inspections 
issued by the Presidents  Council  on Integrity  and Efficiency. 
6 
 FINDINGS 
AT LEAST NINETEEN  PERCENT  OF ORTHOTICS  PROVIDED  ARE MEDICALLY 
UNNECESSARY 
Many beneficiaries  receiving  orthotics do not have conditions that warrant the use of a 
device 
The medical  record  review  found that at least  19 percent  of the orthotic  devices  provided  are 
medically  unnecessary.  We project  that the medically  unnecessary  devices  represent  $6.4 
million  in Medicare  payments.  See Appendix  C. 
Medically  unnecessary  orthotic  devices  are those that the physician  medical  reviewer 
concluded  are inappropriate  based on the information  in the medical  record.  A device  is 
labeled unnecessary  for several  reasons:  if the beneficiarys  condition  does not warrant  an 
orthotic  device;  if the device  offers  no functional  benefit;  if the device  is for prevention;  or if 
it is for palliation,  One example  that is representative  is a non-weight  bearing  patient, 
demented  from  Alzheimers  Disease,  who received  two knee orthoses.  The medical  reviewer 
believes  that passive  range  of motion  exercises  would be sufficient  to prevent  the increase  of 
the contractures  and that the orthoses  were not functional  devices,  Another  example  is a 
patient  receiving  an immobilizing  hand device  where a cotton  mitten  or glove  would prevent 
the patient  from  scratching  herself. 
Compared  to the devices  that were reviewed  and found medically  necessary,  the medically 
unnecessary  devices  are more  likely  to have no HCFA  fitting  requirements,  more  likely  to be 
upper limb devices,  more  likely  to be provided  in the southeast  region  of the country,  and 
more likely  to be provided  to beneficiaries  in nursing  facilities.  The medically  unnecessary 
devices  are also more likely  to be judged  problematic  in our review  of orthotics  billing.  The 
characteristics  of the unnecessary  devices will be expanded upon  in the subsequent  findings 
of this report 
Another  5 percent  of orthotics are medically questionable 
The 5 percent  of orthotics  that are medically  questionable  represent  $1.5 million  in Medicare 
payments.  Medically  questionable  orthotic  devices  are those where the physician  medical 
reviewer  has questions  about the medical  necessity  of the device.  Often the device provided 
is more  sophisticated  and expensive  compared  to the device  that the beneficiarys  condition 
actually  warranted.  An example  is a bedbound  multiple  sclerosis  patient  who received  two 
knee orthoses  to prevent  contractures  of the knee joints  when the reviewer  felt that bivalved 
casts could be used just  as effectively.  Another  example  is a patient  who had a stroke 
several years  ago and the medical  record  showed a little  tightness  in the hip.  This patient 
received  a sophisticated  abduction  device while  the medical  reviewer  felt a simpler  device 
was indicated. 
7 
 Like the medically  unnecessary  devices,  the medically  questionable  devices  also involve  those 
with no HCFA  fitting  requirement,  upper limb devices,  and devices that were judged 
problematic  in our review  of orthotics  billing. 
Fifty-four  percent  of beneficiaries  have questionable  billings. 
Since the medical  record  review  looked  at only  the sample device billed,  it probably 
understates  the total number  of devices that are medically  unnecessary.  Therefore,  to gain 
additional  insights,  we conducted  a further  review  of orthotic  billings.  Each sample device 
has a related  case history  that shows the orthotic  billing  for the beneficiary  who received  the 
sample device.  Fifty-four  percent  of these cases show questionable  billings.  The two most 
common  problems  are many  devices billed  over a short time frame  (43 percent  of the 
questionable  billings)  and several  seemingly  unnecessary  add-on devices billed  (42 percent). 
Other problems  were less common:  6 percent  of the questionable  cases are due to an atypical 
physician  specialty,  such as pathologists  and psychiatrists,  and 9 percent  have a combination 
of the problems  listed above.  An example  of questionable  billing  is the 86 year  old nursing 
home resident  with a diagnosis  of decubitus ulcer.  The devices billed  for this beneficiary 
include  three hand/wrist  devices  with multiple  add-ons  for thumb  and hand  and add-ons  to 
lower  limb devices.  In this example  a DME company  supplied  the devices. 
DURABLE MEDICAL EQUIPMENT  COMPANIES  ARE MORE LIKELY THAN 
ORTHOTISTS  TO SUPPLY QUESTIONABLE  ORTHOTICS 
The Medicare  orthotics  industry  is fairly  evenly  divided  between  two very  different  types of 
suppliers:  orthotists  and DME companies.  Orthotists  account  for 43 percent  of Medicare 
orthotics  supplied;  DME companies  account  for another  50 percent.  Doctors  offices, 
pharmacies,  and rehabilitation  centers  supply the remaining  7 percent.  The findings 
presented  here  will focus on orthotists  and DME companies  only.  As discussed  in the 
introduction,  orthotists  usually  have  some type of professional  certification.  Their  offices 
usually  have few employees,  Durable  medical  equipment  companies,  on the other  hand,  are 
not certified  and may or may not have a certified  orthotist  on staff.  A. few DME companies 
supply only  orthotics,  but most DME companies  supply general  durable  medical  equipment 
such as wheelchairs,  support  surfaces,  and wound care supplies,  as well as orthotics.  In 
general,  DME companies  have more  employees  than orthotists  offices. 
Sixty-eight percent  of the cases where a DME  company  supplies the device are 
questionable,  in contrast to 35 percent  of orthotistcases. 
Many  devices  billed  in a short time was the most common  problem  noted  in the questionable 
DME company  cases.  In one case,  a beneficiary  was billed  for the same expensive  upper 
limb device  on the same day of every  month  for 5 consecutive  months.  It is important  to 
note that orthotic  devices  are purchased,  not rented.  In another  example,  a 72 year  old 
beneficiary  with contractures  received  five orthotic  devices  on the same day.  A few days 
later,  the supplier  billed  for replacement  laces.  The allowed  charges  for the replacement 
laces alone  total  $1,322.  In many  cases, multiple  add-on  devices  were billed  for a 
beneficiary  supplied by a DME company.  One beneficiary  was billed  a hand/wrist  device, 
8  only  to get two more hand/wrist  devices  with multiple  add-ons  for the thumb and hand  6 
weeks later. 
Devices that do not have fitting  requirements  were more  likely to be questionable  and more 
likely to be supplied by DME  companies 
About half the devices  supplied  have HCFA  fitting  requirements  and half  do not.  More than 
two-thirds  (69 percent)  of cases without  HCFA  fitting  requirements,  however,  were 
questionable  while  39 percent  with fitting  requirements  are questionable. 
Durable  medical  equipment  companies  supply the majority  (69 percent)  of the devices 
without  HCFA  fitting  requirements  while  orthotists  supply only  22 percent.  The reverse  is 
true of devices  with fitting  requirements:  65 percent  of them are supplied by orthotists  and 
22 percent  are supplied by DME companies. 
The devices  that do not have fitting  requirements  are often called  off-the-shelf  in the 
industry.  These devices  typically  come in small,  medium,  and large and may have  some 
type of strap or fastening  mechanism  to secure on the patient.  Because these devices  are not 
made specifically  for an individual,  many  in the industry,  especially  orthotists,  do not 
consider  them to be  true orthotics  and believe  they  should not be included  in the same 
category  as orthotics.  Orthotists  supply 90 percent  of the devices  with the mold  fitting 
requirement,  which  is the most complex  fitting  requirement,  compared  to 7 percent  supplied 
by DME companies.  Molded  devices  must be made specifically  for an individual  patient.  A 
mold  is taken  of a patients  body part and the device  is constructed  from  that mold. 
Sixty-eight  percent  of cases where the supplier  (either  orthotist  or DME company)  buys the 
devices  already  assembled  are questionable  in contrast  to 34 percent  of the cases where 
suppliers  make their  own devices.  Almost  three  quarters  (74 percent)  of orthotists  report 
manufacturing  the devices  they  supply whereas  very  few DME companies  (2 percent)  report 
manufacturing  devices.  The DME companies  say they usually  get the whole  device  from  the 
manufacturer. 
Cases with upper  limb devices  are the most likely  to be questionable.  Almost  all upper  limb 
devices  do not have fitting  requirements.  Seventy-four  percent  of the upper  limb cases have 
problems  compared  to 44 percent  of the lower  limb cases.  Durable  medical  equipment 
companies  supply the great majority  (88 percent)  of upper  limb devices.  Orthotists  supply 
just  5 percent  of the upper  limb devices.  Orthotists  are more likely  to supply lower  limb 
devices,  most of which have  fitting  requirements. 
Durable  medical  equipment  companies provide fewer  services than  orthotists; and  suppliers 
that provide few  services are more  likely to supply questionable  orthotics 
Most cases (83 percent)  with suppliers  that report  they do not teach patients  how to use 
devices  are questionable  and a little  less than half  (49 percent)  the cases with suppliers  that 
did report  teaching  are questionable.  Only 20 percent  of beneficiaries  supplied  by DME 
companies  say they  were taught to use the devices  and many  of these beneficiaries  were 
9  taught by nurses or therapists  who are not associated  with the supplying  company.  Another 
12 percent  of beneficiaries  supplied by DME companies  say that no one taught them how to 
use the device.  In contrast,  60 percent  of beneficiaries  supplied by orthotists  say they were 
taught. 
We found that over three quarters  (78 percent)  of cases with suppliers  that report  they  do not 
fit devices  on patients  are questionable.  Durable  medical  equipment  companies  usually  do 
not fit the devices.  Only  one quarter  of the beneficiaries  supplied  by DME companies  report 
being  fit by a company  representative.  Almost  75 percent  of the beneficiaries  supplied  by 
orthotists,  however,  report being  fit with the device by the orthotist.  According  to 
beneficiary  responses,  orthotists  are also more  likely  than DME companies  to take 
measurements  before  supplying  the device.  If a DME company  has an orthotist  on staff, 
however,  it is more likely  than companies  that have no orthotists  on staff to offer  more 
services,  such as fitting  devices  and teaching  patients. 
Beneficiaries  supplied by DME  companies  are more  likely to report never  getting  the device 
Twenty-three  percent  of the beneficiaries  supplied by DME companies  report  never  receiving 
any type of device  or receiving  a device  that looked  nothing  like the sketch in the American 
Orthotic  and Prosthetic  Association  manual  that we sent them.  The sketches  in the manual 
are used throughout  the industry  to identify  devices under  L-codes.  Only  5 percent  of the 
beneficiaries  supplied  by orthotists  report  never  receiving  a device  or receiving  one that 
looked  nothing  like the sketch. 
Orthotics provided  in the southeast region  of the country  are more  likely to be questionable 
Sixty-one  percent  of the cases in the southeast,  compared  to 48 percent  in the rest of the 
country,  are questionable.  Usually,  this is because too many  devices  are billed  in a short 
time period.  The devices  provided  in the southeast  are more  likely  to be supplied  by DME 
companies  and more  likely  to have no fitting  requirements. 
OVER TWO-THIRDS  OF THE ORTHOTICS  BILLINGS IN NURSING  FACILITIES 
ARE QUESTIONABLE 
Sixty-eight percent  of the orthotics in nursing  facilities  are questionable  and DME 
companies  are more  likely than orthotists to supply to beneficiaries  in nursing  facilities 
Overall,  two-thirds  of the beneficiaries  getting  orthotic  devices  live at home  and one-third 
live in some type of nursing  facility.  Orthotists  generally  supply to beneficiaries  who live at 
home and DME companies  generally  supply to beneficiaries  in nursing  facilities.  Of those 
beneficiaries  at home,  60 percent  are supplied by orthotists  and 33 percent  are supplied by 
DME companies.  Of those beneficiaries  in facilities,  however,  11 percent  of the 
beneficiaries  are supplied  by orthotists  while  a far greater  percentage  (82 percent)  are 
supplied by DME companies.  The beneficiaries  supplied by DME companies  seem to 
include  more  of those in poor  health:  71 percent  of the beneficiaries  who are now deceased 
had been supplied by DME companies  whereas  15 percent  had been supplied  by orthotists. 
10  Most of the questionable  cases in nursing  facilities  (72 percent)  involve  devices  that do not 
have fitting  requirements.  A common  problem  noted in nursing  facilities  is the billing  of 
multiple  hand/wrist  devices  on the same day or within  a very  short time period. 
The majority  of DME companies  (74 percent)  report  that they get referrals  from physical  or 
occupational  therapists  and nursing  facilities.  In contrast,  only  7 percent  of orthotists  say 
that therapists  and nursing  facilities  are referral  sources  Orthotists  are more  likely  to get 
physician  referrals  than are DME companies.  A great majority  of orthotists  (92 percent) 
report  that they most often  get their  referrals  from physicians,  while just  13 percent  of the 
DME companies  report  the same, 
Medical  equipment  carriers  have concerns  about the use of orthotics in nursing  facilities 
All four medical  equipment  carriers  believe  there  are problems  in the way devices  are 
supplied to beneficiaries  in nursing  facilities.  A major  concern  is whether  the residents 
receiving  orthotic  devices  are rehabilitative,  as required.  The carriers  believe  that many 
devices  supplied  are not medically  necessary.  For instance,  a rolled  up wash cloth  might  be 
better  for certain  hand contractures  than a sophisticated,  cumbersome,  and expensive 
wrist/hand  device.  A few carriers  point  out that a lot of orthotic  devices,  especially  in 
nursing  facilities,  are prescribed  by general  physicians  who give vague descriptions  such as 
ankle brace,  then it is left up to the supplier  to decide exactly  what to supply and bill. 
Another  concern  in nursing  facilities  is over-utilization.  One carrier  representative  reports, 
In one case,  the same knee and lower back orthotics  were issued to every  patient  in a 
particular  nursing  facility.   At least one supplier  agrees with the carriers  by saying, 
individuals  or companies  have sales people  on a quota and all they care about is putting 
orthotic  devices  on anybody.  They just  go in a nursing  home  and tell nursing  [staffl  that 
these people  need splints and most of them dont.  
The carriers  also complain  that contradictory  devices  are commonly  billed  to a single nursing 
home patient.  The AOPA  is currently  developing  a table that  show codes that should not be 
used in combination  with each other. 
THE BILLING CONTROLS  OF THE DURABLE MEDICAL EQUIPMENT 
REGIONAL  CARRIERS ARE LIMITED 
The medical  equipment  carriers  have no policies for  the great  majority of the orthotic L-
codes 
The medical  equipment  carriers  have  specific  medical  policies  addressing  only  15 percent  of 
the orthotic  L-codes.  These codes account  for 38 percent  of the allowed  Medicare  dollars 
for orthotics  in 1995.  Presently  the carriers  have published  policies  for spinal,  ankle-foot, 
knee-ankle-foot,  and ankle positioning  orthoses.  They do not have policies  for upper  limb 
devices,  which  we have identified  as most likely  to be problematic.  The policies  the carriers  do have offer  general  definitions  of devices  that could be billed 
under  the codes.  The policies  also give indications  for the general  purpose  and use of the 
devices.  For example,  a policy  indication  would be to reduce pain by restricting  the 
mobility  of the trunk.   Some policies  also have requirements  for supplemental 
documentation,  such as photographs  of the device,  or medical  documentation  to justify  the 
prescription  of a particular  device. 
The carriers  cite two primary  reasons  for the paucity  of policies:  the complexity  of orthotics 
and the lack of clear  medical  consensus  on the use of orthotic  devices.  However,  policies 
for other durable  medical  equipment  groups  such as support  surfaces have been developed 
despite the complexity  of the issue and lack of medical  consensus.  The carriers  explain  that 
orthotics  is a complicated  subject due to the large number  of devices  and various  L-codes  and 
because there  are significant  differences  between  devices  fabricated  from  raw materials  for a 
particular  individual  and the  off-the-shelf  devices.  These differences  have yet to be 
defined.  According  to the carriers,  they are currently  working  on developing  policies  for 
more orthotic  codes and much of that work  is directed  towards  delineating  between  the 
custom-fabricated  and  off-the-shelf  devices.  The carriers  also say that the medical 
community,  orthotists,  and suppliers  have not been able to build  consensus  on the proper  use 
of orthotic  devices.  This disagreement  makes  it all the more difficult  to develop  policies. 
One carrier  representative  noted,  Without  a medical  consensus,  it is a very  complicated, 
slow process.  
Due to lack of policies, carrier prepayment checks are limitedto utilizationand supplier 
screens 
A carrier  cannot  implement  widespread  procedures  for processing  claims  without  a 
corresponding  published  policy.  Therefore,  claims  are generally  paid in good faith  for those 
L-codes that are not addressed  in a policy.  When policies  do exist,  guidelines  for that code 
are usually  automated  to assist the claims processor.  Carriers  have utilization  screens that 
target billing  for a particular  code.  An example  of this type of screen is a limit  of one 
particular  device  in the same year for the same beneficiary. 
The carriers  also develop  screens if they conclude  there  is a problem  supplier.  When  a 
supplier  is under  review,  all claims  from that supplier  are evaluated.  Usually  medical 
justification  is required  for each claim.  Problem  suppliers  are generally  identified  through 
beneficiary  complaints,  utilization  screens or post-payment  reviews. 
The carners cite problems withcoding 
All the carriers  report upcoding  and unbundling  as problems.  Upcoding  is the practice  of 
billing  the device provided  under  a more expensive  code than that device  merits 
Unbundling  is the separate billing  of components,  such as add-ons,  that make up a single 
device.  The carriers  say upcoding  and unbundling  have become problems  because the 
existing  coding  system is outdated  and has not kept up with changes  in orthotic  technology. 
They  say the L-codes  were established  when most orthotic  devices  were individually 
12 
 manufactured  or if the device  was already  made,  it was substantially  customized  for the 
patient.  Now the devices  are increasingly  off-the-shelf  in nature. 
Carriers  believe  it is relatively  easy to receive  a provider  number  and supply orthotics.  They 
suggest that the review  of prospective  suppliers  be more rigorous.  Another  common 
recommendation  was that provision  of complicated,  molded  devices  be limited  to certified 
orthotists D 
13 
 RECOMMENDATIONS 
We recognize  and support the HCFA  initiative  underway  with the Durable  Medical 
Equipment  Regional  Carriers  medical  directors  to find better  ways of assuring  proper 
payments  for orthotics.  Based on the nature  of unnecessary  devices  and questionable  billing 
that we identified,  we recommend  that HCFA,  in concert  with the Durable  Medical 
Equipment  Regional  Carriers: 
Develop  guidelines  which better define  orthotic  devices,  distinguishing  among 
categories  of devices  such as custom-made  and off-the-shelf; 
Develop  policies  for orthotic  codes,  giving  priority  to upper  limb devices,  which  we 
have identified  as most problematic; 
Develop  screens for billing  many  orthotic  devices  on the same day or within  a short 
time frame; 
Pay  special attention  to billing  for orthotics  in nursing  facilities; 
Work  with the American  Orthotic  and Prosthetic  Association  to develop  a table of 
devices  that should not be used together;  and 
Consider  stricter  standards  for who is allowed  to bill  for orthotics,  such as requiring 
professional  credentials  for orthotic  suppliers. 
COMMENTS 
The HCFA  commented  on our draft  report  and concurs  with all of our recommendations. 
The full text of HCFAs  comments  is in Appendix  E. 
The HCFA  agrees with our recommendation  to better define  orthotic  devices,  and is 
preparing  a report  to Congress  that describes  prosthetic  devices,  orthotics,  and prosthetics 
covered  under  Part B that do not require  individualized  or custom  fitting  and adjustment. 
This report  is recommending  that the Medicare  statute be revised  to change  the payment 
methodology  for all prosthetic  devices,  orthotics,  and prosthetics. 
The HCFA  agrees with our recommendation  to develop  policies  for orthotic  codes,  and is 
currently  working  with the durable  medical  equipment  carriers  (DMERCs)  on the feasibility 
of issuing revised  regional  medical  review  policies. 
The HCFA  agrees with our recommendation  to develop  billing  screens for orthotic  devices, 
and will work  with the DMERCs  to ensure that utilization/frequency  edits are in place  after 
the development  and implementation  of the new medical  review  policies. 
14 
 The HCFA  agrees with our recommendation  to pay attention  to billing  in nursing  facilities 

and believes  that the development  of policies  and edits will  strengthen  their  ability  to control 

inappropriate  billings  for orthotics  in nursing  facilities 

In addition,  the Balance Budget Act of  1997 contains  a number  of nursing  home reforms 

including  creating  a prospective  system for Part A covered  services.  This bundled  payment 

will eliminate  separate payment  for orthotics  as provided  under  a Part A stay.  Also,  for 

stays not covered  by Part A, the statute requires  the nursing  facility  to bill  for items such as 

orthotics.  When  implemented,  these reforms  should help control  inappropriate  billings  in 

nursing  facilities. 

The HCFA  agrees with our recommendation  to work with the American  Orthotic  and 

Prosthetic  Association  to identify  devises that should not be used together.  The HCFA 

indicates  that they  are consulting  with them and other relevant  professional  organizations  in 

developing  the regional  medical  review  policies. 

The HCFA  agrees with our last recommendation,  to consider  stricter  standards  as to who can 

bill  for orthotics.  Since HCFA  traditionally  relied upon  States to determine  the extent  to 

which physicians  and other  health  care professionals  must be licensed  in order  to furnish 

health  care services  there  is no explicit  Medicare  statutory  authority  in this regard. 

However,  there  is authority  under  section  1662(a)(A) of the Medicare  statute to develop 

standards  for  reasonable  and necessary  medical  services.  Using this statute,  HCFA  expects 

to establish  more  stringent  standards  where State licensure  is found to be inadequate.  The 

HCFA  is also considering  limiting  who will be eligible  to supply  orthotics  in the proposed 

regional  medical  review policies. 

15 
 APPENDIX  A 

L-CODES  INCLUDED  IN SAMPLE 
CODE  HCFA  DESCRIPTION 
LO420  - Thoracic-Lumber-Sacral  Orthoses  (TLSO) , two piece construction,  molded  to 

patient  model 

LO430  - TLSO,  with interface  material  custom-fitted 

LO700  - Cervical-TLSO,  molded  to patient  model  (Minerva  type) 

L1680  - Hip Orthoses  (HO),  abduction  control  of hip joints,  dynamic  pelvic  control, 

adjustable  hip motion  control,  thigh  cuffs 

L1686  - HO,  Abduction  control  of hip joint,  post-operative  abduction  hip type,  custom-

fitted 

L1832  - Knee Orthoses  (KO), adjustable  knee joints,  positional  orthoses,  rigid  support, 

custom fitted 

L1844  - KO,  single upright,  thigh  and calf,  with adjustable  flexion  and extension  joint, 

medial-lateral  and rotation  control,  molded  to patient  model 

L1845  - KO, double upright,  thigh  and calf,  with adjustable  flexion  and extension  joint, 

medial-lateral  and rotation  control,  custom fitted 

L1855  - KO, molded  plastic,  thigh  and calf sections,  with double upright  knee joints 

L1960  - Ankle-Foot  Orthoses  (AFO),  posterior  solid ankle,  molded  to patient  model, 

plastic 

L1970  - AFO,  plastic,  molded  to patient  model,  with ankle joint 

L1990  - AFO,  double upright  free plantar  dorsiflexion,  solid stirrup,  calf band/cuff 

(Double  Bar BK Orthoses) 

L2036  - Knee-Ankle-Foot  Orthoses  full plastic,  double upright,  free knee,  molded  to 

patient  model 

L3730  - Elbow  Orthoses  (EO),  Double  upright  with forearm/arm  cuffs, 

extensiomflexion  assist 

L3740  - EO,  Double upright  with forearm/arm  cuffs,  adjustable  position  lock with 

active control 

L3805  - Wrist-Hand-Finger-Orthoses  (WHFO),  long opponens,  no attachment 

L3860  - WHFO,  addition  to short and long opponens,  adjustable  M.P.  flexion  control 

and I.P. 

L3904  - WHFO,  electric  powered 

L3963  - Shoulder-Elbow-Wrist-Hand  Orthoses,  molded  shoulder,  arm,  forearm,  and 

wrist,  articulating  elbow joint 

LA310  - Multi-podus  or equal orthotic  preparatory  management  system for lower 

extremities 

A-l  TABLE  A-l 
SAMPLE  STRATIFICATION 
STRATA  DESCRIPTION  OF  STRATA  Number  in  Number  in 
Universe  Sample 
1  Body  89  60 
2  Upper limb;  more expensive  102  102 
3 	 Upper limb;  less expensive,  line  item  33  33 
allowed  charge  is more  than $280* 
4 	 Upper limb;  less expensive,  line item  396  80 
allowed  charge  less than or equal to $280 
5  Lower  limb;  more expensive  154  154 
6 	 Lower  limb;  less expensive,  line  item  79  79 
allowed  charge  is more than  $740 
Lower  limb;  less expensive,  line  item  855  150 
allowed  charge  is less than or equal to 
$740 
1,708  658 
*  In the majority  of the cases, the line item was higher  than the ceiling  price  listed  in 
the HCFA  schedule because more than  1 device  was billed  on that line of the claim. 
A-2 
 TABLE  A-2 
RESPONSE  RATES 
STRATA  Questionnaires  Received  Medical  Records 
Beneficiary*  Supplier  Received*  * 
6  35 (56%)  65 (82%)  41 (52%) 
7  99 (76%)  114 (76%)  82 (55%) 
Total:  324 (61%)  504 (77%)  334 (51%) 
*  Beneficiary  response  rates are based on questionnaires  received  from  the 530 
live beneficiaries. 
**  In an additional  52 (8 percent)  of the cases,  the referring  physician  on HCFAs  record 
did not prescribe  the device. 
A-3 
 APPENDIX  B 

PART B SERVICES  INCLUDED  IN BILLING  RECORDS 
Code  Description 
97110  - Therapeutic  procedure,  one or more areas,  each  15 minutes;  therapeutic 
exercises  to develop  strength  and endurance,  range of motion  and flexibility. 
97112  - Neuromuscular  reeducation  of movement,  balance  coordination,  kinesthetic 
sense, posture  and proprioception. 
97113  - Aquatic  therapy  with therapeutic  exercises 
97116  - Gait training  (includes  stair climbing) 
97139  - Unlisted  therapeutic  procedure 
97150  - Therapeutic  procedure(s),  Group  (two or more  individuals) 
97500  - Orthotics  training  (dynamic  bracing,  splinting  upper  and/or  lower  extremities; 
initial  30 minutes,  each visit 
97501  - Each additional  15 minutes 
97530  - Therapeutic  activities,  direct  (one on one) patient  contact  by the provider  (use 
of dynamic  activities  to improve  functional  performance),  each  15 minutes 
97535  - Self care/home  management  training  (eg. activities  of daily  living  [ADL] and 
compensatory  training,  meal preparation,  safety procedures,  and instructions  in 
use of adaptive  equipment)  direct  one on one contact  with provider,  each  15 
minutes 
97703  - Checkout  for orthotic/prosthetic  use, established  patient,  each  15 minutes 
97799  - Unlisted  physical  medicine/rehabilitation  service  or procedure 
99002  - Handling,  conveyance,  and/or  any other  service  in connection  with the 
implementation  of an order  involving  devices  (eg. designing,  fitting, 
packaging,  handling,  delivery  or mailing)  when devices  such as orthotics, 
protectives,  prosthetics  are fabricated  by an outside  laboratory  or shop which 
items have been designed,  and are to be fitted  and adjusted by the attending 
physician 
B-l  APPENDIX  C 
CHI-SQUARE  TESTS  AND  CONFIDENCE  INTERVALS 
Chi-Square Values 
We computed  chi-square  values for differences  in questionable  billing  histories  for the five 
variables  upon  which  our major  findings  are based.  Chi-square  values  show that differences 
on all five variables  were significant  at the 95 percent  confidence  level. 
Table  C-l 
CHI-SQUARE Valuesfor  Testing Significance of Differences in Questionable 
Billing Historiesfor  Type of Supplier, Type of Device, Fining Requirements, 
Region, and Residence 
II 
VARIABLE  I  DF*  I  CHI-SQUARE 
Type of Supplier 
 2  42.15 
Type  of Device 
 2  50.27 
Fitting  Requirements 
 1  51.42 
Region 
 1  9.04 
Residence 
 1  20.65 
*Degrees of Freedom 
C-l  Table  C-2 
Projectionsof Cost Savings 
Based on Unnecessaryand QuestionableServices 
Service  Outcomes  Sample Size  Weighted  Boundaries  for 
Projections  95% 
Confidence 
Interval 
1) services  medically  334  $6,437,786  +/- $1,871,542 
unnecessary  (n=  61) 
2) services medically  334  $1,532,776  + /- $703,498 
questionable  (n =  20) 
c-2  APPENDIX  D 

NON-RESPONDENTANALYSES 
An important  consideration  in studies of this type  is the bias that may be introduced  into the 
results  if non-respondents  differ  from respondents  to the data collection  instruments.  To test 
for the presence  of any bias,  we first obtained  information  from  the HCFAs  one percent 
Common  Working  File  (CWF)  for all 658 beneficiaries  in our sample,  including  both 
respondents  and non-respondents.  We then analyzed  the variables  that might  influence 
whether  an individual  would respond  to the survey  or that might  affect the responses  given. 
For our sample,  we looked  at place of residence  (home vs facility),  region  of the country 
(Southeast  vs rest of U. S.), and device  fitting  requirements  (special  requirements  vs none). 
Differences  between  respondents  and nonrespondents  for each of the three  variables  were 
tested for significance  using  Chi-square  with the appropriate  degrees  of freedom.  Analyses 
of respondents  and non-respondents  are presented  separately  for the medical  records  review 
and the orthotics  supplier  survey. 
A. Medical Records Review 
For this portion  of the inspection,  a beneficiary  whose medical  records  were not obtained  and 
reviewed  is a non-respondent.  There  were 324 non-respondents,  including  272 beneficiaries 
for whom we received  no records  and another  52 whose physicians  indicated  that no orthotic 
devices  were ordered  (and,  therefore,  no relevant  records  existed).  The remaining  334 
beneficiaries  for whom  records  were received  and reviewed  are our respondents. 
The results  of this analysis  are presented  in Tables D-l,  D-2,  and D-3 below.  The Chi-
square values given  in the tables provide  a test of significance  for the differences  in the 
distribution  of respondents  and non-respondents  for each variable  of interest.  Also provided 
in the tables are the response  rates for the different  values of the variables. 
Tables D-l  and D-3 show no statistically  significant  differences  between  respondents  and 
non-respondents  for the variables  tested. 
Table D-2 shows a statistically  significant  difference  between  respondents  and non-
respondents  with respect to the region  of the country  in which they  live  (Southeast  vs rest of 
U.S.).  In order  to test whether  this difference  introduced  any bias,  we analyzed  answers to 
two key medical  record  review  questions  for differences  between  regions:  1) whether  the 
claim  was medically  questionable  (e.g.,  a simpler  device  was indicated),  and 2) whether  the 
device  was medically  unnecessary. 
The proportion  of claims  deemed medically  questionable  in the Southeast  was within  1 
percentage  point  of that for the rest of the country,  a statistically  insignificant  difference. 
However,  the proportion  of orthotics  determined  to be medically  unnecessary  differed  by  12 
D-f  percentage  points  between  regions,  so further  analysis  was required.  Assuming  that non-
respondents  and respondents  from the same geographic  region  had the same proportion  of 
medically  unnecessary  devices,  we calculated  a hypothetical  global  rate for medically 
unnecessary  devices  for all 658 beneficiaries  in the sample.  This calculation  gave only  a 
slightly  higher  medically  unnecessary  rate of 20 percent  (compared  to 19 percent  for 
respondents).  This difference  is not statistically  significant. 
TABLE  D-l 
BENEFICIARY  PLACE  OF  RESIDENCE 
Respondents  Non-respondents  Total  Response 
Rate 
Home  234  70%  209  65%  443  53% 
Facility  100  30%  115  35%  215  47% 
Total  334  324  658  51% 
CHI-SQ  =  2.306 
Degrees  of Freedom  =  1 
TABLE  D-2 
BENEFICIARY  REGION  OF  COUNTRY 
Respondents  Non-respondents  Total  Response 
Rate 
Southeast  107  32%  160  49%  267  40% 
Rest  of  U.S.  227  68%  164  51%  391  58% 
Total  334  324  658  51% 
I/ 
CHI-SQ  =  20.524 
Degrees  of Freedom  =  1
D-2 
 TTAABBLLEE   DD--33  
DEVICE  FITTING  REOUIREMENTS 
NNoonn--rreessppoonnddeennttss  
Total  334  324  658  51% 

CHI-SQ  =  1.190 

Degrees  of Freedom  =  1 

D-3 
 B. Beneficiarv Survev 
For this part of the inspection,  a beneficiary  for whom a survey  was not received  is a non-
respondent.  There  were 324 non-respondents  and 206 respondents. 
The results  of this analysis  are presented  in Tables D-4,  D-5,  and D-6 below.  The Chi-
square values given  in the tables provide  a test of significance  for the differences  in the 
distribution  of respondents  and non-respondents  for each variable  of interest.  Also provided 
in the tables are the response  rates for the different  values of the variables. 
All three tables  show statistically  significant  differences  between  respondents  and non-
respondents  with respect to each of the three variables  analyzed.  In order  to test whether 
these differences  introduced  any bias,  we analyzed  answers to the key beneficiary  survey 
question  used in our findings:  whether  or not the beneficiary  received  a device  which  looked 
like the one for which Medicare  was billed.  For each variable  analyzed  (e.g.,  place  of 
residence),  the distribution  of answers given by different  segments of the sample (e.g.,  at 
home vs in facility)  were within  two percentage  points  of each other.  These differences  are 
not statistically  significant. 
TABLE  D-4 
II 
BENEFICIARY  PLACE  OF  RESIDENCE 
Respondents  Non-respondents  Total  Response 
Rate 
Home  260  80%  130  63%  390  67% 
Facility  64  20%  76  37%  140  46% 
Total  324  206  530  61% 
CHI-SQ  =  19.034 
Degrees  of Freedom  =  1 
D-4 
 TABLE  D-5 
BENEFICIARY  REGION  OF  COUNTRY 
Respondents  Non-respondents  Total  Response 
Rate 
Southeast  126  39%  98  48%  224  56% 
Rest  of  U.S.  198  61%  108  52%  306  65% 
Total  324  206  530  61% 
II 
CHI-SQ  =  3.892 
Degrees  of Freedom  =  1
TABLE  D-6 
DEVICE  FITTING  REQUIREMENTS 
Respondents  Non-respondents  Total  Response 
Rate 
Has  211  65%  114  55%  325  65% 
requirement 
No  113  35%  92  45%  205  55% 
requirement 
Total  324  206  530  61% 
CHI-SQ  =  5.082 
Degrees  of Freedom  =  1 
D-5 
 APPENDIX  E 
COMMENTS  ON  THE  DRAFT  REPORT 
In this appendix,  we present  in full the comments  from the Health  Care Financing 
Administration. 
E-l  .-?&L,  ,.,..  
Health  Care  Ftnancing  Administrat, 
DEPARTMENT  OF HEALTH  29 HUMAN  SERV1CES 
The  Admlnlstrator 

Washington,  D.C.  20201 

BATE:  AUG  1  I  W7 

TO:  June  Gibbs  Brown 

FROM: 
SUBJECT: 	 Office  of Inspector  General  (OIG)  Draft  Report:  Medicare  Orthotics, 
(OEI-02-95-00380) 
We reviewed  the above-referenced  report  that examines  the  extent  of questionable  billing 
practices  for Medicare  orthotics  and how  it relates  to the  orthotics  industry  and to carrier 
policies  and  procedures. 
Our detaileci  comments  are attached  for your  consideration.  Thank  you  for the 
opportunity  to review  and comment  on this report. 
Attachment  , 
Comments  of  the  Health  Care  Financmrr  .\dmimstranon  (HCF.\)  on 
Office  of Inspector  General  (OIG)  Draft  Report  Entitled: 
r\/tedicare  Orthotics,  (OEI-02-95-00380) 
HCFA  should,  in concert  with  the durable  medical  equipment  regional  caxiers 
(DMERC,s):
Ir-, s 
OIG  Recommendation 
Develop  guidelines  that  better  define  orthotic  devices,  distinguishing  among  categories  of 
devices  such  as custom-made  and off-the-shelf. 
HCFA  Response 
We concur.  As required  by section  13 l(c)  of the Social  Security  Act Amendments  of 
1994, we are preparing  a report  to Congress  tha: describes  prosthetic  devices,  orthotics, 
and  prosthetics  covered  under  Part B of the Medicare  program  that do not require 
individualized  or custom  fitting  and adjustment.  This report,  presently  in final  -
Departmental  clearance,  provides  a list of devices  that are not prefabricated  for proper  fit * 
or require  individualized  modification  or custom  fitting.  Ln addition,  a listing  is provided 
of those  products  that need  fairly  minor  adjustments  and generally  do not require  the 
expertise  of an orthotist.  The report  recommends  the kledicare  statute  be revised  to 
change  the payment  methodology  for all prosthetic  devices,  orthotics,  and prosthetics: 
regardless  of whether  they  require  fitting  or adjustments.  It also recommends  the fee 
schedules  be recomputed  from  the base year,  and regional  fee schedules  be estimated. 
Accordingly,  the median  value  would  be used as a payment  limit,  as in the current 
methodology  for DME covered  under  the Medicare  program.  We estimate  these 
recommendations  could  save up to $390 million  over the next  5 years. 
OIG  Recommendation 
Develop  policies  for orthotic  codes,  giving  priority  to upper  limb  devices,  which  we   
identified  as most  problematic. 
HCFA  Response 
We concur.  We are currently  working  with  the  D\lERCs  on the feasibility  of issuing 
revised  regional  medical  review  policies  (R~NPs  ) that will  provide  further  guidance.on 
the scope  and  meaning  of prosthetics  and orthoncs  as a Medicare  benefit.  The  development  of these  revised  RMRPs  are in the prehmin~  stages.  The DMERCs  are 
holding  fact gathering  meetings  with  various  representatives  of the medical  community  on 
the  use of prosthetics  and orthotics  in various  settings.  We expect  to issue  draft policies 
for public  comment  early  next year. 
--OIG  Recommendation 
Develop  screens  for billing  many  orthotic  devices  on the same  day or within  a short time 
f%me. 
HCFA  Response 
We concur.  Subsequent  to development  and implementation  of new  medical  review 
policies  and  procedure  codes,  HCFA  will  work  with  the  DMERCs  to ensure  that 
utilization/frequency  edits  are in place.  We agree  that  edits  will  limit  the suppliers 
ability  to upcode  or unbundle  when  billing  -Medicare for orthotic  equipment. 
. 

.

OIGRecommendation 
Pay  special  attention  to billing  for orthotics  in nursing  facilities. 
-. 

HCFA  Response 
We concur.  Based  on the findings  in the OIG report,  we recognize  there  is a need to 
closely  monitor  billing  practices  in nursing  homes.  We believe  the development  of 
policies  and edits  will  strengthen  our ability  to control  inappropriate  billings  for oxthotics 
in nursing  facilities.  Additionally,  we will  continue  to work  with  the DMERCs  to 
determine  the other  methods  for ensuring  that orthotics  billed  to Medicare  meet medical 
necessity  requirements. 
. 

OIG  Recommendation  . 
Work  with  the American  Orthotic  and Prosthetic  Association  to develop  a table  of 
devices  that  should  not be used together. 
HCFA  Response 
We concur.  We are consulting  with  the American  Orthotic  and  Prosthetic  Association,  as 
well  as other  relevant  professional  organizations.  as part of the development  of the RMRP 
on prosthetics  and orthotics  previously  mentioned  OIG  Recommendation 
Consider  stricter  standards  for who  is allowed  to bill for orthotics,  such  as requiring 
professional  credentialsfor  orthotic  suppliers. 
4f-, I 
HCFA  Resnonse 
We concur.  Because  there  is no explicit  -Medicare statutory  authority  in this regard,  we 
traditionally  relied  upon  states  to determine  the extent  to which  physicians  and other 
health  care  professionals  must  be licensed  in order to furnish  health  care  services.  In this 
respect,  all  health  care providers  under  -Medicare are required  to meet  any  applicable  state 
licensurerequirements.  There  is, however,  authority  under  section  1962(a)(l)(A)  of the 
Social  Security  Act to develop  standards  for what is reasonable  and necessary  medical 
services.  Under  this authority,  we expect  to establish  more  stringent  standards  where 
state  licensure  is found  to be inadequate  for Medicare  purposes.  In this  context,  we are 
ako  considering  limiting  who  will  be eligible  to supply  orthotics  in the proposed  RMRP 
I 
for prosthetics  and orthotics.