Department of Health and Human Services 
OFFICE OF 
INSPECTOR GENERAL 
Health Care Financing Administration 
Controls Are Not Preventing Duplicate 
Payments 
JUNE GIBBS BROWN 
Inspector General 
MAY 2000 
OEI-04-97-00460  OFFICE OF INSPECTOR GENERAL 
The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, as 
amended by Public Law 100-504, 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, 
inspections, 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 Office of Evaluation and Inspections (OEI) is one of several components of the Office of 
Inspector General.  It 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. 
OEI's Atlanta Regional Office prepared this report under the direction of Jesse J. Flowers, 
Regional Inspector General, and Christopher H. Koehler, Deputy Regional Inspector General. 
Principal OEI staff included: 
Rodney Holliman, Lead Analyst

Tricia Davis, Program Specialist

Graham Rawsthorn, Team Leader

Brian Ritchie, Program Analyst

Barbara Tedesco, Mathematical Statistician

To obtain copies of this report, please call the Atlanta Regional Office at 404-562-7723.  Reports 
are also available on the World Wide Web at our home page address: 
http://www.dhhs.gov/progorg/oei  June Gibbs Brown

Inspector General

Health Care Financing Administration Controls are not Preventing Duplicate Payments, 

OEI-04-97-00460

Nancy-Ann Min DeParle

Administrator

Health Care Financing Administration

The Health Care Financing Administration (HCFA) and contractor staff expressed concerns

that regional home health intermediaries and durable medical equipment regional carriers

were being inappropriately billed twice for medical equipment and supplies.  At their

request, we initiated an evaluation to quantify the extent of the duplicate payments.

We found vulnerabilities that allowed for duplicate payments to be made for supplies and

equipment provided to Medicare home health beneficiaries.  First, intermediaries do not

know what supplies they are paying for because the coding system allows providers to

submit claims for a wide variety of supplies using non-descriptive codes.  Second, only

about 3 percent of home health providers are subjected to complete audits that would

potentially reconcile supply claims.  Finally, HCFA Common Working File (CWF) edits do

not check for duplication of payments on most equipment and supplies.

The actual inappropriate payments, slightly over $530,000 in 1997, were relatively small

compared to other payment error vulnerabilities in the Medicare program.  Of this,

$379,510 was for supplies and $150,722 was for equipment.

The vulnerabilities for supplies may be eliminated when Medicare implements the

prospective payment system for home health, scheduled for October 2000.  At that time,

payment for supplies will be included in the prospective payment rate.  However, the

vulnerabilities for supplies will remain until the prospective payment system goes into 

effect. 

The vulnerabilities for equipment will continue indefinitely, unless steps are taken to

eliminate them.  We suggest that HCFA examine its payment, coding, and editing practices

to enable carriers and home health intermediaries to avoid duplicate equipment payments. 

For example, HCFA could require all medical equipment bills be submitted to the durable

medical equipment regional carriers using the HCFA common procedure coding system. 

Another potential solution would be to expand CWF system edits to detect duplicate

billings between both entities.  The HCFA may also want to assess other potential cost

effective solutions.
 Page 2 
BACKGROUND 
The HCFA has primary responsibility for protecting the Medicare Trust Fund from fraud, 
waste, and abuse.  To accomplish this goal, HCFA contracts with private insurance companies 
to process Medicare claims and conduct program integrity functions. 
Claims Jurisdiction and Responsibility 
The HCFA contracts with five regional home health intermediaries to process claims for home 
health care.  Which intermediary processes home health claims generally depends on the State 
in which the home health agency is located.  Home health providers file claims under both Part 
A and Part B. 
The HCFA contracts with four durable medical equipment regional carriers to process claims 
for durable medical equipment, prosthetics, orthotics and supplies.  Which carrier processes 
equipment and supply claims is governed by a beneficiarys place of residence.  Suppliers are 
required to file claims under Part B. 
The HCFAs claims submission requirements differ for submitting medical equipment and 
supply claims to intermediaries and carriers.  Figure 1 highlights such similarities and 
differences. 
FIGURE 1

Claims Submission Requirements 

Part A  Part B

Providers  Suppliers

Supplies 
Revenue codes  HCPCS codes 
required  required 
Intermediaries  Carriers 
Revenue and HCPCS  HCPCS codes 
codes required  required 
Equipment  Page 3 
Medical Equipment Claims 
The HCFA requires home health providers to use both HCFA Common Procedure Coding 
System (HCPCS) codes and revenue codes when billing intermediaries for medical equipment. 
The HCPCS codes generally relate to specific items while revenue codes are used to group 
supply items.  Providers are reimbursed for medical equipment according to the HCPCS fee 
schedule. 
The HCFA also requires suppliers to use HCPCS codes when billing carriers for medical 
equipment.  The codes are itemized and reimbursed according to the HCPCS fee schedule. 
Medical equipment processed through the intermediaries share the same HCPCS codes as 
medical equipment processed through the carriers. 
Supply Claims 
The HCFA guidelines require home health providers to use revenue codes to bill intermediaries 
for medical supplies.  Suppliers, on the other hand, are required to use HCPCS codes when 
billing carriers for supplies. 
Program Safeguards 
The HCFA requires intermediaries and carriers to conduct focused medical reviews on a 
certain percentage of processed claims.  Present practices limit the reviews to providers and 
suppliers with aberrant billing histories.  Intermediaries, when reviewing aberrant providers, 
request detailed descriptions and medical justifications for billed services and supplies. 
Intermediary and carrier claims are processed through a CWF.  The CWF is used to obtain, 
maintain, and distribute beneficiary specific Medicare data.  The CWF uses a Part A/B 
crossover edit that alerts intermediaries and carriers to potential duplicate payment situations. 
The CWFs system edit for potential duplicate payments is triggered when dates of service and 
procedure codes are the same for intermediary and carrier claims.  Questionable claims are 
then manually reviewed to ensure appropriate payment. 
Prospective Payment System 
The Balanced Budget Act of 1997 requires HCFA to implement a prospective payment system 
for home health agencies.  The new payment system is schedule for October 1, 2000.  The 
statute requires that payment for most items and services be made to the agency that 
established a plan of care.  Medical equipment is not included in the prospective payment 
system.  Page 4 
METHODOLOGY 
We conducted a national inspection of home health providers and medical equipment 
suppliers equipment and supply claims.  We analyzed equipment and supply billings for 
Calendar Year 1997. 
We interviewed HCFA central office and regional staff to determine what controls were in 
place to prevent duplicate payments.  Additionally, we visited one intermediary and one carrier 
to discuss billing and payment processes and vulnerabilities.  We also reviewed HCFA policies, 
carrier manuals, and the proposed home health prospective payment system regulation. 
Finally, we reviewed prior Office of Inspector General and General Accounting Office (GAO) 
reports and interviewed officials who prepared them. 
We used a 5 percent sample of the 1997 National Claims History file and identified 50,946 
Medicare beneficiaries with medical equipment or supply claims processed through 
intermediaries and carriers.  These beneficiaries had over $26 million in intermediary charges 
for equipment and supplies.  We randomly sampled 500 beneficiaries, 50 with equipment 
claims and 450 with supply claims. 
We compiled applicable equipment and supply claims data for each sampled beneficiary.  To 
quantify duplicate billings, intermediary and carrier medical review staff reviewed and analyzed 
our data.  Attachment A provides further details on our methodology. 
QUESTIONABLE PAYMENTS 
We identified $5,789 as possible duplicate payments for equipment and supplies for 33 
beneficiaries in our sample.  The amount of questionable payments totaled $2,326 for 
equipment and $3,463 for supplies.  The following examples illustrate such questionable 
payments. 
<	 One beneficiary had a wheelchair billed to a carrier and a similar wheelchair billed to an 
intermediary for two overlapping months.  The rental charges for the second 
wheelchair totaled about $240. 
<	 Both a carrier and intermediary paid for surgical dressings for the same beneficiary for 
the same month.  The questionable payments totaled $480. 
<	 In September 1997, an intermediary processed diabetic supply claims for a beneficiary. 
During the same month, a carrier reimbursed a supplier $71 for the same diabetic 
supplies. 
<	 A home health provider billed an intermediary for various equipment including a leg 
rest, walker, and commode in July 1997.  A carrier paid $278 for the same equipment 
during the same month and for the same beneficiary. 
We projected the $5,789 in questionable payments made to suppliers for our sampled 
beneficiaries to the Medicare population that had both Part A and Part B claims as described  Page 5 
in our methodology.  We estimated that the amount of payments made in error to the suppliers 
was approximately $530,000 (+/- $57, 200 at the 95% confidence level). 
VULNERABILITIES 
In a 1995 report,1 GAO recommended controls to prevent duplicate payments by 
intermediaries and carriers for supplies.  The HCFA did not implement the recommendations 
because it believed a proposed Medicare Transaction System would alleviate the identified 
problems.  However, the new system was not implemented.  Therefore, HCFA did not tighten 
controls to prevent duplicate payments for equipment and supplies.  Thus, HCFAs payment 
process for equipment and supplies is still vulnerable to duplicate billing. 
Cost Reports 
Intermediaries pay supply claims without knowing specifically what they are paying for.  To 
illustrate, HCFA policies allow home health providers to bill for a wide variety of supplies 
under revenue codes.  The revenue codes do not adequately describe the type and amount of 
supplies billed for under each code.  For example, one of the beneficiary claims that we 
reviewed had $3399 billed under revenue code 270 for medical supplies.  The bill did not 
provide any other details that would allow the intermediary to determine the appropriateness of 
the charges.  We requested that the provider submit supporting documentation and discovered 
that the intermediary had paid for such items as 4x4 gauze, tape, ostomy pouches, sterile Q-
tips, and gel wipes.  The supplies were all appropriate in this example. 
Furthermore, according to HCFA and intermediary staff, intermediaries would obtain and 
analyze supporting documentation for supplies only if providers were subjected to a complete 
audit.  Intermediaries annually conduct complete audits on about 3 percent of home health 
providers. 
Common Working File 
All claims processed through intermediaries and carriers are also processed through a CWF. 
The HCFA uses the CWF to compare all claims with historical beneficiary data to verify 
eligibility for benefits and payment.  The HCFA also uses the CWF to conduct many types of 
automated edits to determine if payment for claims should be approved or rejected.  The CWF 
edits, however, do not prevent duplicate payments for equipment and supplies billed to 
intermediaries and carriers. 
Supply claims processed through intermediaries and carriers do not share a common identifier. 
Therefore, identifying potential duplicate situations for supplies is very difficult.  Although the 
CWF edits do not rely on an exact code match, the time period that the edit covers is too 
restrictive to identify duplicate payments.  For example, the CWF edit would only identify a 
1  Medicare: Excessive Payments for Medical Supplies Continue Despite Improvements, GAO/HEHS-95-171  Page 6 
potential duplicate payment if a carrier was billed for supplies for a specific date of service and 
an intermediary received a claim for an appropriate supply revenue code for the exact same 
date of service and same Medicare beneficiary. 
Claims for equipment, on the other hand, use HCPCS codes whether billed to intermediaries or 
carriers.  Even with this common identifier, the time window used for CWF edits, as mentioned 
above, is too restrictive.  Therefore, the CWF edits do not adequately prevent duplicate 
payments for equipment. 
Finally, the CWF does not have duplicate payment edits for the majority of the equipment and 
supplies processed by intermediaries and carriers. 
CONCLUSION AND RECOMMENDATIONS 
The HCFA and contractor staff raised concerns about duplicate payments for equipment and 
supplies under the Medicare home health program.  As described in this report, we found 
vulnerabilities that allowed this to happen.  However, the inappropriate payments were small 
relative to other vulnerabilities in the Medicare program.  Furthermore, the prospective 
payment system for home health, when implemented, may eliminate the problem for medical 
supplies which will be included in the prospective payment rate.  However, the vulnerabilities 
for supplies will remain until the prospective payment system goes into effect.  Medical 
equipment remains vulnerable as it will not be included in the prospective payment rate. 
We suggest that HCFA examine its payment, coding, and editing practices to enable carriers 
and home health intermediaries to avoid duplicate equipment payments.  For example, HCFA 
could require all medical equipment bills be submitted to the durable medical equipment 
regional carriers using HCPCS codes.  Another potential solution would be to expand CWF 
system edits to detect duplicate billings between both entities.  The HCFA may also want to 
assess other potential cost effective solutions. 
I hope that you find this information responsive to HCFAs request.  Please do not hesitate to 
call me or George Grob, Deputy Inspector General for Evaluation and Inspections, or have 
your staff contact Stuart Wright at (410) 786-3144 with any comments or questions. 
COMMENTS 
The HCFA concurred with our findings and recommendations.  Specifically, that payment, 
coding and editing practices be modified to enable carriers and home health intermediaries 
avoid duplicate payments. The full text of their comments is attached in appendix B. 
Attachments  Attachment A 
Detailed Inspection Methodology 
We used a 5 percent sample of the National Claims History file and identified 77,842 Medicare 
beneficiaries for whom providers had billed intermediaries for equipment and supplies totaling 
$33.8 million.  Using the same file, we determined that 50,946 of the 77,842 beneficiaries also 
had equipment or supply claims billed to carriers.  These beneficiaries had over $26 million in 
intermediary charges for equipment and supplies. 
Hence, we started with 50,946 Medicare beneficiaries who could have had questionable 
equipment and supply claims made on their behalf to both intermediaries and carriers.  Out of 
the 50,946 beneficiaries, we identified 162 who had equipment claims and 50,784 who had 
supply claims at intermediaries and carriers in calendar year 1997. 
Equipment 
We randomly sampled 50 of the 162 beneficiaries with equipment claims.  Using the National 
Claims History file, we compiled applicable equipment claims submitted to intermediaries and 
carriers for Calendar Year 1997.  Equipment claims submitted to intermediaries or carriers 
share a common identifier (HCPCS codes).  Intermediary and carrier medical review staff 
reviewed our data to identify questionable payment situations. 
Supplies 
We pulled a stratified random sample of 450 of the 50,784 beneficiaries with supply claims. 
Supply claims submitted to intermediaries and carriers do not share a common identifier. 
Carriers use HCPCS codes that identify individual supply items while intermediaries use 
revenue codes to group many supply items.  Therefore, sampling beneficiaries with supply 
claims required several steps. 
First, intermediary and carrier medical review staff compiled a listing of HCPCS codes for 
supplies that were billable to carriers and would also likely be billed to intermediaries using 
supply revenue codes. 
Next, we reviewed claims for the 50,784 beneficiaries and identified 11,994 beneficiaries who 
had one or more of the likely HCPCS codes paid in Calendar Year 1997.  The remaining 
308,790 beneficiaries did not have any of the likely codes paid in 1997.  Therefore, we 
grouped them as unlikely supply matches.  That is, they had supplies billed at both 
intermediaries and carriers during calendar year 1997, but the supplies billed to a carrier were 
not considered the type of supplies that should be billed to an intermediary.  However, since 
we could not determine what specific supplies were billed to the intermediaries because of their 
use of non-descriptive revenue codes, we did not exclude the unlikely population from our 
sample. 
1
 Attachment A 
We stratified the 11,994 beneficiaries that we considered likely based on dollar ranges of 
allowed charges.  Table 1 illustrates our sample. 
TABLE 1 
SAMPLE FOR SUPPLIES 
Strata  Population  Sample 
SUPPLIES - UNLIKELY  38,790  50 
SUPPLIES - LIKELY 
likely matches < $100  5,340  50 
likely matches from $100 < $500  3,575  50 
likely matches from $500 < $3,000  2,580  100 
likely matches equal to or greater than $3,000  499  200 
Sub Total of Supplies - Likely  11,994  400 
TOTAL  50,784  450 
Next, using the National Claims History data, we identified the intermediary that processed 
each beneficiarys home health claims.  Each intermediary requested the appropriate home 
health provider to submit the supporting documentation for the 450 beneficiaries sampled from 
our supply strata.  We obtained medical records and lists of billed items, including supply 
items, from home health providers for 384 of the 450 beneficiaries.  Home health providers did 
not provide requested documentation for the remaining 66 beneficiaries. 
Intermediary and carrier nurses reviewed the lists of billed items.  Based on the line item 
descriptions, the nurses identified supply items that were billable to the carriers and assigned 
them HCPCS codes.  Finally, armed with compilations of supply items billed to intermediaries 
and carriers for the 384 beneficiaries, the nurses identified questionable payments. 
2
 Attachment A 
We did not reconcile whether the home health provider or the supplier billed appropriately for 
each questionable payment.  Instead, we assumed the carrier payment was the questionable 
payment.  Therefore, we calculated the questionable payments for supplies based on the actual 
carrier allowed charges. 
Confidence Intervals 
Sample Size  Questionable  +/- Lower 95%  Upper 95% 
Payments  Confidence Interval  Confidence Interval 
500  $530,232  $57,200  $473,032  $587,432 
3
 Attachment B 
4
 Attachment B 
5