Department  of Health  and Human  Services 
OFFICE  OF 
INSPECTOR  GENERAL 
MEDICARE  PAYMENTS  FOR  ORTHOTIC

BODY  JACKETS

JUNE  GIBBS BROWN 
Inspector  General 
JUNE  1994 
OEI-O4-92-O1O8O  OFFICE  OF INSPECTOR  GENERAL 
The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, as 
amended, is to protect the integrity of the Department  of Health and Human Services (HHS) 
programs as well as the health and welfare of beneficiaries served by those programs.  This 
statutory mission is carried out through a nationwide network of audits, investigations, and 
inspections conducted by three OIG operating components:  the Office of Audit Services, the 
Office of Investigations, and the Office of Evaluation and Inspections.  The OIG also informs 
the Secretary of HHS of program and management problems and recommends courses to 
correct them. 
OFFICE  OF AUDIT  SERVICES 
The OIGS Office of Audit Services (OAS) provides all auditing services for HHS, either by 
conducting audits with its own audit resources or by overseeing audit work done by others. 
Audits examine the performance of HHS programs and/or its grantees and contractors in 
carrying out their respective responsibilities and are intended to provide independent 
assessments of HHS programs and operations in order to reduce waste, abuse, and 
mismanagement and to promote economy and efficiency throughout the Department. 
OFFICE  OF INVESTIGATIONS 
The OIGS Office of Investigations (01) conducts criminal, civil, and administrative 
investigations of allegations of wrongdoing in HHS programs or to HHS beneficiaries and of 
unjust enrichment by providers.  The investigative efforts of 01 lead to criminal convictions, 
administrative sanctions, or civil money penalties.  The 01 also oversees State Medicaid fraud 
control units which investigate and prosecute fraud and patient abuse in the Medicaid program. 
OFFICE  OF EVALUATION  AND INSPECHONS 
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 findings and recommendations contained in these inspection

reports generate  rapid, accurate, and up-to-date information on the efficiency, vulnerability,

and effectiveness of departmental  programs.

OEISAtlanta Regional Office prepared this report under the direction of Jesse J. Flowers,

Regional Inspector General, and Christopher Koehler, Deputy Regional Inspector General.

Principal OEI staff included:

Atlanta Retion  Headquarters

Jacqueline Andrews, Project Leader  Tom Noplock

Betty Apt, Team Leader  Barbara Tedesco

Peggy Daniel

Josiah Townsel

For additional copies of this report, please contact the Atlanta Regional Office at 404-730-

9452.
 Department  of Health  and Human  Services 
OFFICE  OF 
INSPECTOR  GENERA  . 
MEDICARE  PAYMENTS  FOR  ORTHOTIC 
BODY  JACKETS  EXECUTIVE  SUMMARY

PURPOSE 
To  determine  whether  or not  Medicare  is appropriately  billed  for orthotic  body 
jackets. 
BACKGROUND 
In February  1992, the  Office  of Inspector  General  (OIG)  received  an  allegation  from 
a company  which  provides  Medicare  billing services  to nursing  homes.  The  allegation 
was that  durable  medical  equipment  (DME)  suppliers  were  billing  Medicare 
approximately  $1,200 per  device  for devices  consisting  of nothing  more  than  a $50 
piece  of foam  rubber.  The  bills were  submitted  to Medicare  under  HCFAS Common 
Procedure  Coding  System  (HCPCS)  code  L0430.  This  code  represents  an  orthotic 
device  commonly  used  to treat  injuries  to the  spine  such  as vertebra  fractures  and 
compressions,  and  to facilitate  healing  following  a surgical  procedure  on the  spine  or 
related  tissue. 
FINDINGS 
MedicareClaimsandAllowed Cha~esfor OrthoticBodyJacketsHave Increased 
SubstantiallySince1990 
Medicare  claims  paid  under  HCPCS  code  L0430 remained  relatively  steady  until  1990. 
The  number  of claims  submitted  to Medicare  increased  6,400 percent  by the  end  of 
FY  1992.  Likewise,  allowed  Medicare  charges  increased  over  8,200 percent. 
Preliminary  data  for  1993 shows a 50 percent  reduction  in claims  submitted  and 
Medicare  allowed  charges.  However,  the  claims  and  charges  are  still significantly 
higher  than  the  1990 levels. 
Ninety-FivePe~ent of the OrthoticBodyJack%CikirnsPaidbyMedicare WereForNon-
LegitimateDwces 
Ninety-five  percent  of the  devices  claimed  under  code  L0430  did not  meet 
construction  requirements  and  medical  purpose  of a legitimate  body jacket.  Many  of 
the  devices  were  primarily  used  to keep  patients  upright  in a wheelchair. 
Medicare Paynmm For Non-LegitimateDewcesErceeded $7 Millwn In 1991 
Total  Medicare  payments  for non-legitimate  devices  exceeded  $7 million  in 1991, and 
may have  increased  to as much  as $13.7 million  in 1992.  Medicaid  funds were  also at 
risk.  Payment  of the  20 percent  Medicare  co-payment  by Medicaid  could  have 
resulted  in as much  as $670 thousand  of inappropriate  payments  in 1991. 
i  Non-LegitimateDmces WereMarketedAs An AlternativeToRewrainti 
We  observed  that  the  significant  increase  in claims  for body jackets  occurred  shortly 
after  enactment  of the  Omnibus  Budget  Reconciliation  Act  of 1990 (OBRA  90).  The 
Act gave nursing  home  residents  the  right  to be  free  from  chemical  and  physical 
restraints.  DME  suppliers  marketed  non-legitimate  body jackets  to nursing  homes  as 
alternatives  to restraints. 
Mtiical  SupplienUsedLuopholesihHCFA GuidanceandMonitotig  To ClaimNon-
Lq#irnate Devices As Bo@ Jackm 
Suppliers  were  able  to claim  devices  that  were  non-legitimate  because  HCFA 
guidelines  generally  defined  medical  necessity  and  construction  requirements  for a 
body jacket.  Suppliers  took  advantage  of the  vague  definitions  to assert  that  their 
non-legitimate  devices  met  the  requirements  of a body jacket.  In addition,  Medicare 
regulations  only required  carriers  to conduct  postpayment  reviews  for the  upper  three 
percent  of codes  with the  highest  Medicare  payments.  Since body jacket  codes  were 
not  in the  upper  three  percent,  carriers  did not  rapidly  detect  the  significant  increase 
in code  L0430  claims. 
Recent HCFA Eflom May Reduce Inapproptite Payrnenfi 
On  October  1, 1993, HCFA  started  processing  DME,  orthotics,  and  prostheses  claims 
through  four  regional  carriers  called  the  Durable  Medical  Equipment  Regional 
Carriers  (DMERCS).  One  DMERC,  called  the  Statistical  Analysis  DMERC 
(SADMERC),  will track  spending  and  utilization  trends  for all DMERCS.  DMERCS 
also developed  new  coverage  and  medical  review  guidelines  for orthotic  body jackets. 
RECOMMENDATIONS 
We  recommend  that  HCFA  require  the  DMERCS  to closely monitor  claims  for body 
jackets.  If inappropriate  body jacket  claims  are  not  discontinued  in FY  1994, HCFA 
should  implement  more  stringent  controls.  Finally,  HCFA  should  inform  suppliers  and 
physicians  about  the  abuse  of body jacket  codes  and  stress  its intent  to prevent  such 
abuse.  Through  stringent  monitoring  of orthotic  body jacket  codes,  HCFA  will 
consematively  avoid  paying  $7 million  for non-legitimate  devices  in the  future.  Claims 
that  were  found  inappropriate  by this study will be  turned  over  to HCFA  for recovery. 
AGENCY  COMMENTS 
The  HCFA  Administrator  commented  on our  draft  report  and  agreed  with  our 
recommendations.  HCFA  staff believe  that  the  regionalization  of durable  medical 
equipment  claims processing  and  the  development  of medical  review  policies  will 
strengthen  their  ability to monitor  use the  use and  payment  of orthotic  body jackets. 
We  encourage  HCFA  to take  quick  corrective  action  if their  monitoring  shows that 
inappropriate  body jacket  claims  have  not  discontinued. 
ii  TABLE  OF  CONTENTS

PAGE 
EXECUTIVE  SUMMARY 
INTRODUCTION  . . . . . . . . . . . . . . . . . . ...............................1

FINDINGS 
Medicare  Claims  and  Allowed  Charges  for

Orthotic  Body Jackets  Have  Increased

Substantially  Since  1990  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3

Ninety-Five  Percent  ofthe  Body Jacket  Claims

Paid  by Medicare  Were  ForNon-Legitimate  Devices  . . . . . . . . . . . . . . . . . . . .  4

Medicare  Payments  for Non-Legitimate

Devices  Exceeded  $7 Million  in 1991.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7

Non-Legitimate  Devices  Were  Marketed  asan

Alternative  to Restraints  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...8

Medical  Suppliers  Used  Loopholes  in HCFA

Guidance  and  Monitoring  To  Claim  Non-Legitimate

Devices  As Body Jackets  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...9

Recent  HCFAEfforts  May Reduce  Inappropriate

Payments  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...10

RECOMMENDATIONS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...11

AGENCY  COMMENTS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...12

APPENDICES 
Medicare  and  Medicaid  Payments  for

Non-Legitimate  Devices  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..A-1

HCFAComments  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..B-1
 INTRODUCTION

PURPOSE 
To  determine  whether  or not  Medicare  is appropriately  billed  for  orthotic  body 
jackets. 
BACKGROUND 
MedicareI+ogram 
Medicare  is a Federal  health  insurance  program  for individuals  age  65 or older  and 
certain  categories  of disabled  people.  It is administered  by the  Health  Care  Financing 
Administration  (HCFA),  Department  of Health  and  Human  Services  (DHHS).  The  -

Medicare  program  has  two types  of insurance,  Part  A and  Part  B.  Part  A (hospital

insurance)  helps  pay for inpatient  hospital  care,  some  inpatient  care  in a skilled

nursing  facility, skilled  home  health  care,  and  hospice  care.  Part  B (medical

insurance)  covers  physician  services,  outpatient  hospital  services,  and  other  medical

services  and  supplies.  This report  focuses  on payments  for orthotic  body jackets

purchased  under  Medicare  Part  B.

Medicare  Part  B claims  are  processed  by private  insurance  companies,  called  carriers,

under  contract  with  HCFA.  Carriers  are  responsible  for ensuring  that  coverage

requirements  are  met  before  approving  payment.  Carriers  use  a coding  system  to

process  Medicare  claims  and  determine  payment  amounts.  HCFA  developed  the

coding  system,  called  the  HCFA  Common  Procedure  Coding  System  (HCPCS)  in 1983

to bring  about  uniformity  in defining  and  billing for medical  services  and  supplies.  A

supplier  places  a HCPCS  code  on a Medicare  claim  form  to designate  what  type  of

supply was rendered  to a beneficiary.

Allegation of Inapproptite Billing 
In February  1992, the  Office  of Inspector  General  (OIG)  received  an allegation  from 
a company  which  provides  Medicare  billing  services  to nursing  homes.  The  allegation 
was that  suppliers  were  billing Medicare  approximately  $1,200 per  claim  for  devices 
consisting  of nothing  more  than  a $50 piece  of foam  rubber.  The  bills were 
submitted  to Medicare  under  HCPCS  code  L0430.  Code  L0430 is for a device  that  is 
defined  by HCFA  as a Thoracic  Lumbar  Sacral  Orthosis  (TLSO),  Anterior-Posterior-
Lateral  Control  (Body  Jacket)  with interface  material  custom  fitted. 
SCOPE 
We  focused  on HCPCS  code  L0430 because  our  analysis  of 1991 data  for all body 
jacket  codes  showed  that  code  L0430  had  the  most  significant  increase  in number  of 
claims.  We  conducted  our  inspection  between  May and  October,  1993. 
1  METHODOI.OGY 
We  reviewed  all claims  for code  L0430  contained  in HCFAS  1991 Common  Working 
File which  is a one  percent  random  sample  of all Medicare  claims.  This  sample 
consists  of 120 claims.  We  dropped  25 of the  120 claims  from  our  sample  because 
carriers  disallowed  them  for payment.  This left us with  a sample  size of 95 paid 
claims. 
To  determine  the  purpose  of a body jacket  and  how one  should  be  constructed,  we 
consulted  five licensed  orthotists,  three  of whom  were  members  of the  American 
Orthotic  and  Prosthetic  Association  (AOPA).  Orthotic  practitioners  must  have  either 
a BS or BA degree  in Orthotics.  Then,  they must  serve  a one-year  internship  prior  to 
taking  written,  oral,  and  practical  examinations.  Finally,  orthotic  practitioners  must 
take  required  continuing  education  courses  to maintain  certification.  AOPA  is a 
national  organization  which represents  more  than  800 allied  health  care  firms  that 
provide  orthotic  and  prosthetic  semices. 
To  determine  what  type  of devices  were  supplied  to beneficiaries  in our  sample,  we 
obtained  descriptions  from  suppliers,  nursing  homes,  and  DHHS  OIG  Office  of 
Investigations  (01).  Because  some  suppliers  were  under  investigation  by 01,  we used 
01  as a source  of information  rather  than  contact  those  suppliers  directly.  To  inspect 
the  construction  and  purpose  for devices  sold under  code  L0430, we visited  two 
suppliers  not  under  01  investigation  and  two nursing  homes.  Using  the  licensed 
orthotists  and  AOPA  criteria  for the  construction  and  purpose  of a body jacket,  we 
determined  whether  or not  the  devices  supplied  to beneficiaries  in our  sample,  and 
billed  to Medicare,  were  body jackets. 
To  determine  whether  or not  Medicare  beneficiaries  in our  sample  had  a medical 
need  for  a body jacket,  we obtained  information  from  Medicare  claims,  physician 
prescriptions,  and  Certificates  of Medical  Necessity  (CMNS).  Sixty-four  of the  claims 
in our  sample  were  accompanied  by CMNS.  The  prescribing  physicians  address  is 
typically  listed  on the  CMN.  Of the  64 CMNS, 55 listed  the  physicians  address.  We 
contacted  these  55 physicians  to verify beneficiaries  medical  need  for body jackets. 
Forty  of the  55 physicians  responded  to our  questionnaire. 
To  determine  marketing  practices  of the  suppliers  that  sold devices  to beneficiaries  in 
our  sample,  we interviewed  44 nursing  home  administrators  by telephone  and  visited  2. 
We  also reviewed  marketing  brochures  for each  supplier. 
This inspection  was conducted  in accordance  with the  Quality  Standards  for  Inspections 
issued  by the  Presidents  Council  on Integrity  and  Efficiency. 
2
 FINDINGS

MEDICARE  CLAIMS  AND  ALLOWED  CHARGES  FOR  ORTHOTIC  BODY 
SINCE
JACKETS  HAVE  INCREASED  SUBSTANTIAL  Y  1990
Medicare  claims  for body jackets  paid  under  HCPCS  code  L0430  remained  relatively 
steady  until  1990.  The  number  of claims  submitted  to Medicare  increased  from  275 in 
1990 to  17,910 in 1992--a 6,400 percent  increase.  Figure  1 illustrates  the  increase. 
FIGURE  1 
Claims in Thousandk 
20, 
1 
17910 
,5  .............................................. 
,~  .........................  10,085 
5... ... 
253  275 
0$  1 
1989  1990  1991  1992 
Year 
Total  Medicare  allowed  charges  for code  L0430  also increased  significantly  since  1990. 
Total  allowed  charges  increased  from  $217 thousand  in 1990 to $18 million  in 1992--a 
8,200 percent  increase 2.  Figure  2 illustrates  the  dramatic  increase. 
2Thedisparitybetweenpercentageincreasefsorclaimsandallowedchargesisattributedtodifferenceasllowedon 
individuacllaimsandincreaseisn allowed amounts  in recent years. 
3  FIGURE  2

Millions 
20 
$18,049,000 
15 
10 
/ 
5  ..... .  ,,  ...,..  ,,, ,,.  .. 
$217,000 
$191*(XN) 
0  1
389  1990  1991  199: 
Year 
Through  September  1993, HCFAreports  that  about  5,000claims  were  submitted  to 
Medicare  and$5,2million  wasallowed  fororthotic  body jackets.  According  to HCF~ 
the  1993 allowed  amounts  represents  about  60 percent  of the  expected  total  for the 
year.  Therefore,  we project  that  approximately  $8.6 million  will be  allowed  in  1993. 
This represents  a decrease  of about  50 percent  from  the  1992 levels.  However,  the 
projected  number  of claims  submitted  and  allowed  charges  still are  significantly  higher 
than  the  1990 levels. 
NINETY-FIVE  PERCENT  OF  ORTHOTIC  BODY  JACKET  CLAIMS  PAID  BY 
MEDICARE  WERE  FOR  NON-LEGITIMATE  DEVICES 
Ninety-five  percent  of our  sampled  claims  (90 of 95) submitted  under  code  L0430, 
were  for  devices  which were  not  orthotic  body jackets.  Hereafter,  we will refer  to 
these  as non-legitimate  devices.  The  remaining  5 percent  (5 of 95) were  for legitimate 
body jackets.  We  noticed  that  the  legitimate  body jackets  in our  sample  were  supplied 
by certified,  licensed  orthotists  whose  primary  occupation  is supplying  orthotic  and 
prosthetic  devices  to patients.  The  non-legitimate  body jackets  in our  sample  were 
supplied  by Durable  Medical  Equipment  (DME)  suppliers  that  primarily  supply  DME 
equipment  and  supplies,  not  orthotics. 
4
 According  to the licensed  orthotists  and  members  of AOPA  we  consulted,  a body 
jacket  should  be made  of rigid plastic  material  that  conforms  to  the  body  and  provides 
a high  de~ee  of immobility.  It should  also be  custom  fitted,  which  means  that  it can 
be adjusted  to meet  the  specific  needs  of a patient.  Body jackets  are  most  commonly 
used  to  treat  spinal  and  muscular  diseases  such  as scoliosis and  muscular  dystrophy. 
They  are  also used  to  treat  injuries  to the  spine  such as vertebra  fractures  and 
compressions,  and to facilitate  healing  following  a surgical  procedure  on the  spine  or 
related  tissue. 
A legitimate  body jacket  is illustrated  in Figure  3.  This body jacket  is made  of a rigid 
plastic  material.  It applies  pressure  to certain  points  along  the  abdomen  and  back 
limiting  motion  in the  spine.  It is custom  fitted  because  it has  three  adjustable  straps 
that  can  be tightened  or loosened  to apply  more  or less pressure  to  certain  points 
along  the  abdomen  or back,  depending  on the  needs  and  shape  of a patient. 
FIGURE  3 
LEGITIMATE  BODY  JACKET 
5
 We visited  three  beneficiaries  residing  in nursing  homes  to inspect  devices  they  had 
purchased  through  Medicare  as body jackets.  Oneofthe  devices  we inspected  is 
shown in Figure  4 below.  The  other  two devices we inspected,  as well as 87 other 
devices  supplied  to  sampled  beneficiaries,  were  almost  identical  to the  device  in Figure 
4.  According  to the  licensed  orthotists  and  AOPA  members  we consulted,  the  device 
in Figure  4 is not  a legitimate  body jacket.  It is not  properly  constructed  and  does  not 
serve the  medical  purpose  of a body jacket. 
FIGURE  4 
NON-LEGITIMATE  BODY  JACKET 
The  device  in Figure  4 has the  following  construction  features  that  are  inconsistent 
with a legitimate  body jacket. 
1.	 The  device  is constructed  of soft material  which  is not  rigid 
and  does  not conform  to  a patients  body.  It consists  of 
two sides,  a back  and  bottom  piece  that  are  made  of a 
soft foam  material  covered  in vinyl.  Each  piece  is about 
two inches  thick. 
6  2. The  device  neither  conforms  to the  patients  body  nor 
restricts  motion  in the  spine.  We  obselved  that  one 
beneficiary  who was using this device was extremely 
slumped  over  the  arm  of his wheelchair. 
3. The  device  is not  custom  fitted  because  it does  not  offer 
any adjustability  to meet  the  unique  shape  of an individual 
or the  specific  need  of a patient. 
Device Did Not Seine the Medical Rupose of An OrthotikBody Jacket 
HCFA  requires  that  body jacket  claims be  accompanied  by a physicians  prescription 
and/or  a certificate  of medical  necessity.  A prescription  must  include  a patient 
diagnosis,  reason  the  equipment  is required,  and  an estimate  of the  duration  of need. 
A CMN  typically  provides  more  detailed  information  on a patients  condition  than  that 
provided  by a prescription.  Prescriptions  and  CMNS must  be  signed  by a physician. 
Our  analyses  of prescriptions,  CMNS, and  statements  by prescribing  physicians  and 
nursing  home  administrators  showed  that  many  of the  devices  in our  sample  were 
primarily  used  to keep  patients  upright  in a wheelchair.  Ninety-two  percent  of the 
beneficiaries  for whom  we had  CMNS (59 of 64) are  listed  as wheelchair  bound.  Sixty-
eight  percent  of the  prescribing  physicians  who responded  to our  questionnaire  (27 of 
40) stated  that  the  device  they  prescribed  was used  to keep  a patient  upright  in a 
wheelchair. 
The  orthotists  and  AOPA  members  we consulted  stated  that  it is very unusual  for a 
body jacket  to be  prescribed  for a wheelchair  bound  person.  One  orthotist  stated  that 
less than  1 percent  of elderly  people  who need  body jackets  are  wheelchair  bound. 
The  40 physicians  who  responded  to our  survey identified  the  medical  conditions  of 
the  beneficiaries  in our  sample.  They  typically identified  schizophrenia,  anemia, 
diabetes,  parkinsons  disease,  alzheimers  disease,  and  dementia.  According  to 
licensed  orthotists  we consulted,  these  medical  conditions  are  not  normally  treated 
with a body jacket.  The  physicians  assumed  suppliers  had  billed  Medicare  for 
wheelchair  seating  devices  rather  than  custom-fit  orthotic  body jackets. 
MEDICARE  PAYMENTS  FOR  NON-LEGITIMATE  DEVICES  EXCEEDED  $7 
MILLION  IN  1991 
In  1991, about  95 percent  (90 of 95) of the  devices  purchased  through  Medicare  under 
code  L0430 were  non-legitimate  devices.  Total  Medicare  payments  for those  devices 
exceeded  $7 million.  Furthermore,  assuming  that  the  percent  of Medicare  claims  for 
non-legitimate  devices  remained  at 95 percent  in 1992, inappropriate  payments  would 
have  increased  to about  $13.7 million. 
7
 For  orthotics,  Medicare  pays 80 percent  of either  the  actual  charge  or the  fee  schedule 
amount,  whichever  is less.  A beneficiary,  or the  beneficiarys  secondary  insurance,  is 
responsible  for paying  the  remaining  20 percent  co-payment.  Sixty-six percent  of the 
claims  (44 of 67)3 show that  Medicaid  was responsible  for paying  the  remaining  20 
percent  co-payment.  Therefore,  Medicaid  funds were  also at risk.  State  Medicaid  fee 
schedules  vary,  and we could  not  determine  the  precise  amount  Medicaid  paid  on 
each  claim.  However,  payment  of the  entire  20 percent  co-payment  by Medicaid 
could  have  resulted  in $670 thousand  of inappropriate  Medicaid  payments  in 1991. 
We  did not  determine  inappropriate  Medicaid  payments  for  1992 because  we did not 
know how many  Medicaid  claims were  filed. 
Appendix  A describes  in detail  how we determined  Medicare  and  Medicaid  payments 
for non-legitimate  devices. 
NON-LEGITIMATE  DEVICES  WERE  MARKETED  AS AN ALTERNATIVE  TO 
RESTRAINTS 
Eighty  percent  of the  nursing  home  administrators  (35 of 44) we interviewed  said the 
device  was marketed  to them  as an alternative  to restraints.  Restraints  are  prohibited 
by the  Omnibus  Budget  Reconciliation  Act  of 1990 (OBRA  90).  The  Act  gave 
nursing  home  residents  the  right  to be  free  from  chemical  and  physical  restraints.  We 
observed  that  the  significant  increase  in claims  for body jackets  occurred  shortly  after 
enactment  of OBRA  90 legislation. 
Ninety-four  percent  of the  beneficiaries  for whom  we had  claims  in 1991 (63 of 67) 
resided  in nursing  homes.  The  following  statements,  taken  directly  from  suppliers 
brochures,  indicate  that  suppliers  sold the  devices  to nursing  homes  as an alternative 
to restraints,  not  to treat  a medical  condition. 
These do  not  only  maintain  functional  alipment,  they  eliminate  the  need 
to restrain  the resident 
Addresses  restorative  legislative  mandates  of OBRA  90 
Restraint-free  management  tool  reduces  chance  of resident  inj.uy  and  non-
compliance  with  restraint  regulations 
3Weobtained  paper  claims for 67 beneficiaries  in our sample.  Tbe remaining  53 claims were processed 
electronically  and we were not able to obtain  paper  claims. 
8  MEDICAL  SUPPLIERS  USED  LOOPHOLES  IN HCFA  GUIDANCE  AND 
MONITORING  TO  CLAIM  NON-LEGITIMATE  DEVICES  AS BODY  JACKETS 
HCFA!SGeneralDefinitionsAllbwedSuppliensto ClaimlVon-LegitimateDewcesasBody 
Jackxu% 
Suppliers  were  able  to  claim  non-legitimate  devices  as body jackets  because  HCFA 
had  not  clearly  defined  medical  necessity  and  construction  of a body jacket.  HCFA 
classifies  body jackets  as back  braces  in section  2133 of the  carriers  manual.  Back 
braces  are  used  for the  purpose  of supporting  a weak  or deformed  body  member  or 
restricting  or eliminating  motion  in a diseased  or injured  part  of the  body.  Suppliers 
took  advantage  of this general  definition  to assert  that  their  devices  were  medically 
necessary.  They  said the  device  met  the  definition  because  it supported  a patients 
back.  However,  most  of the  devices  in our  sample  were  merely  used  to assist patients 
in sitting  upright  in wheelchairs.  According  to the  orthotists  we consulted,  a body 
jacket  claimed  under  code  L0430 is more  sophisticated  and  should  do more  than 
simply support  a wheelchair  patient. 
Some  suppliers  used  HCFAS general  definition  for code  L0430  to justify  that  their 
devices  were  legitimate.  They  alleged  that  the  devices  were  custom  fitted  because  the 
arm  cushions  came  in different  heights.  However,  the  devices  did not  conform  to a 
patients  body.  According  to the  orthotists  we consulted,  custom  fit means  that  the 
device  is designed  to conform  to the  shape  of a patients  body,  and  the  device  must 
help  meet  a patients  specific  medical  need. 
Linited MonitoringAiYowedPaymenfifor Non-@tinzate  Dmces 
In  1991, when  claims  for body jackets  began  to significantly  increase,  HCFA  only 
required  that  carriers  look for aberrant  payment  trends  for the  upper  three  percent  of 
codes  with  the  highest  Medicare  payments.  Since body jacket  codes  were  not  in the 
upper  three  percent,  carriers  did not  rapidly  detect  the  increase  in code  L0430  claims. 
In addition,  while  carriers  could  look  at their  own payment  trends,  there  was no 
mechanism  to compare  trends  for  all carriers  and,  therefore  determine  if the  number 
of orthotic  body jackets  claimed  were  excessive. 
Most  carriers  learned  of the  abusive  claims from  physicians  and beneficiaries,  not  from 
their  own internal  reviews.  Once  they were  told  about  the  abuse,  they  reviewed 
payment  trends.  These  payment  trends  showed  the  increase  in the  number  of claims 
and  identified  suppliers  who were  submitting  large  numbers  of body jackets  claims.  In 
early  1992, when  carriers  began  to detect  claims for non-legitimate  devices,  they 
established  medical  reviews  to curtail  payments.  For  example,  some  carriers  in our 
sample  contacted  physicians,  some  required  that  a picture  of the  device  accompany  a 
4Thoracic  Lumbar  Sacral Orthosis,  Anterior-Posterior-Lateral  Control  (body jacket)  with interface  material 
custom  fit. 
9
 claim,  some  coded  all L0430  claims  under  a lower  reimbursed  code,  and  a few simply 
required  that  a prescription  accompany  the  claim.  Some  suppliers  were  referred  to 
the  OIG  for investigation.  However,  medical  suppliers  claims  for non-legitimate 
devices  continued  to increase  through  1992.  In  1993, preliminary  data  on body jacket 
claims  and  payments  indicate  a decrease  of about  50 percent  from  the  1992 level. 
However,  the  claims  and  payments  remain  significantly  higher  than  the  1990 level. 
RECENT  HCFA  EFFORTS  MAY  REDUCE  INAPPROPRIATE  PAYMENTS 
HCFA  recently  took  steps  to reduce  inappropriate  payments  for body jackets,  as well 
as other  orthotic,  prosthetic,  and  DME  items.  In June  1993, HCFA  notified  the 
regional  fraud  and  abuse  coordinators  of the  abuse  of body jacket  codes  who,  in turn, 
notified  the  carriers.  On  October  1, 1993, HCFA  started  processing  DME,  orthotics, 
and  prostheses  claims  through  four  regional  carriers  called  the  Durable  Medical 
Equipment  Regional  Carriers  (DMERCS).  The  DMERCS  will process  claims  formally 
processed  by 33 carriers.  HCFA  plans  to phase-in  all claims  by June  of 1994.  One 
DMERC,  in addition  to claims  processing  functions,  will track  spending  and  utilization 
trends  for  all DMERCS.  This  DMERC  will be  referred  to as the  Statistical  Analysis 
DMERC  (SADMERC). 
For  payment  through  the  DMERCS,  HCFA  identified  100 DME,  orthotic,  and 
prostheses  items  which had  the  highest  level  of Medicare  payments.  Further,  the 
DMERCS  developed  coverage  and  medical  review  guidelines  to be  published  in a 
DMERC  manual.  Code  L0430 was identified  as one  of the  top  100 items.  The 
guidelines  give DMERCS  basic  characteristics  of a body jacket,  a definition  of custom 
fit, and  coding  guidelines.  The  guidelines  also give medical  indications  for  a body 
jacket  such  as to reduce  pain  by restricting  mobility  of the  trunk,  or to otherwise 
support  weak  spinal  muscles  and/or  a deformed  spine. 
In addition,  HCFA  required  that  the  DMERCS  perform  postpayment  review  activities. 
Through  enhanced  computer  capabilities,  the  DMERCS  will have  access  to national 
and  local  carrier  claims  data.  This will enable  DMERCS  to compare  local  data  to 
national  data  for all codes.  As a result,  drastic  increases  in claims  such  as those 
experienced  for body jackets  in 1991 and  1992 can be  detected  and  reviewed  early  for 
propriety  of payment.  In the  past,  data  was run  off a mainframe  computer  and  could 
only be  accessed  semi-annually.  The  new system will be  available  on personal 
computers  and  will allow greater  flexibility for reviewing  and  determining  that 
payments  are  appropriate. 
10
 RECOMMENDATIONS 
Preliminary  data  for the  first half  of 1993 for body jacket  claims  and  allowed  charges 
show a decline  from  the  1992 level by about  50 percent.  We  did not  determine  the 
cause  of the  decline.  However,  it may have  resulted  from  actions  taken  by carriers 
late  in 1992 to assure  propriety  of payments  for orthotic  body jacket  claims,  and  from 
market  saturation. 
HCFAS recent  establishment  of the  DMERCS  and  related  guidance  should  help 
further  reduce  payments  for non-legitimate  devices  in the  future.  However,  the 
number  of claims  and  allowed  charges  remains  significantly  higher  than  the  1990 level, 
and  it is likely that  non-legitimate  devices  are  still being  paid  by Medicare.  If the 
percentage  of inappropriate  body jacket  claims being  paid  by Medicare  remains  as 
high as it was in 1991, Medicare  could  stand  to lose at least  $7 million  annually. 
Therefore,  we recommend  that  HCFA  require  the  DMERCS  to 
Closely  monitor  claims  for body jackets.  A monitoring  system  that  includes  the 
following  could  be  implemented  by the  SADMERC. 
Routinely  analyze  payment  trends  for body jacket  codes  to 
	
identify  abusive  patterns  and  aberrant  providers. 
Provide  other  DMERCS  an early warning  of abusive  practices. 
 
Develop  methods  to closely monitor  suppliers  who have  engaged 
	
in abusive  practices. 
If inappropriate  orthotic  body jacket  claims  are  not  discontinued  in FY  1994, HCFA 
should  implement  more  stringent  controls  such as 
requiring  physicians  to obtain  prior  approval  from  DMERCS  for 
	
body jackets,  and/or 
programming  computer  systems  to identify  and  allow payment  for 
	
code  L0430  claims  only when  they match  appropriate  medical 
diagnoses. 
Finally,  HCFA  should  inform  the  medical  CQmmunity about  non-legitimate  devices 
coded  under  HCPCS  code  L0430 and  indicate  its intent  to closely monitor  the  use of 
body jacket  codes,  as a deterrent  to further  abuse. 
Claims  that  we found  inappropriate  during  our  study will be  turned  over  to HCFA  for 
recovery.  AGENCY  COMMENTS 
The  HCFA  Administrator  agreed  with our  recommendations.  He  stated  that 
regionalization  of durable  medical  equipment  claims  processing  and  development  of 
medical  review  policies  will strengthen  HCFAS ability  to monitor  use  of and  payment 
for  orthotic  body jackets.  We  encourage  HCFA  to take  immediate  corrective  action  if 
their  monitoring  shows that  inappropriate  body jacket  claims  have  not  discontinued. 
In response  to HCFAS technical  comments,  we made  appropriate  revisions  to the 
report.  Appendix  B contains  the  full text  of the  HCFA  Administrators  comments. 
12
 APPENDIX  A

MEDICARE  PAYMENTS  FOR  NON-LEGITIMATE  DEVICES 
1991  Paymentsfor Non-~timate  Dmces 
1.	 Add  total  allowed  amounts  in the  HCFA  Part  B Extract  Statistical  System 
(BESS)  1 percent  file and  then  subtract  all allowed  amounts  for the  legitimate 
claims  to determine  total  allowed  for non-legitimate  claims. 
$92,262  (Total  allowed  entire  1 percent  file) 
- 4,499  (Total  allowed  for legitimate  claims) 
---------
$87,763  (Total  allowed  non-legitimate  claims) 
2. Multiply  total  allowed  for non-legitimate  claims by 100 to get total 
allowed  in universe. 
$87,763 x 100 = $8,776,300  (Average  allowed  in universe) 
3. Multiply  total  allowed  in the  universe  by 80 percent  to determine  total 
Medicare  payments  for non-legitimate  devices. 
$8,776,300 x .80 =  $7,021,040  (Total  Medicare  payments  for non-
legitimate  devices) 
Confiiknce Interval&: 
Universe  Size  Sample  Size  Estimated  Lower  95%  Upper  95% 
Overpayment  Confidence  Confidence 
Interval  Interval 
12,000  120  $7,021,040  $6,261,629  $7,780,450 
A-1
 1992 Paymentsfor Non-@tirnate  Devices 
1.	 Total  allowed  amount  for HCPCS  code  L0430 in the  100 percent  HCFA 
BESS  file was $18,049,881. 
2. From  the  1991 data,  we found  95 percent  (standard  error  of .021) of the 
payments  were  made  for non-legitimate  devices. 
3. Apply  this percentage  (95 percent)  to the  1992 allowed  amounts  to get 
the  total  allowed  amount  for non-legitimate  devices. 
$18,049,881  x .95 =  $17,147,386  (Allowed  for non-legitimate  devices) 
4. Apply  the  80 percent  Medicare  portion  to determine  total  Medicare 
payments  for non-legitimate  devices. 
$17,147,386 x .80 =  $13,717,909  (Total  Medicare  payments  for 
non-legitimate  devices) 
Con@ience Intemak 
Estimated  Overpayment Lower  959%Confidence  Upper  95%  Confidence 
Interval  Interval 
$13,717,909  $13,125,872  $14,338,824 
A-2
 1991 MEDICAID  PAYMENlll  FOR  NON-LEGITIMATE  DEVICES 
1.  Add  total  Medicaid  allowed  amounts  in the  HCFA  BESS  1 percent  file. 
$34,353  (Total  Medicaid  allowed  non-legitimate  claims) 
2.  Multiply  total  Medicaid  allowed  for non-legitimate  claims  by 100 to get 
total  allowed  in the  universe. 
$34,353 x 100 =  $3,435,800  (Total  allowed  in universe) 
3.  Multiply  total  allowed  in the  universe  by 20 percent  to determine  total 
Medicaid  payments  for non-legitimate  devices. 
$3,435,800 x .20 =  $687,160  (Total  Medicaid  payments  for 
non-legitimate  devices) 
Con.ce  Intervak 
Universe  Size  Sample  Size  Estimated  Lower  95%  Upper  95% 
Overpayment  Confidence  Confidence 
Interval  Interval 
12,000  120  $687,000  $495.674  $878,325 
A-3
 APPENDIX  B 
HCFA COMMENTS 
B-1  .* @qm?.o&.  Health  Care 
. .. ,+-
* DEPARTMENTOF HEALTH& HUMAN SERVICES  Financing  Administration 
: 
: 
-0  -@ 
% Memorandum
%ztid,a 
> 
Date 
Bruce  C. VIadeck-
From  / 
Administrator 
\%
Subject	 Office  of Inspector  General  (OIG)  Draft  Report:  Medicare  Payments  for  Orthotic 
Body Jackets  (OEI-O4-92-O1O8O) 
To 
June  Gibbs  Brown 
Inspector  General 
We  reviewed  the  above-referenced  draft  report  which  analyzed  claims  and  charges 
for  orthotic  body jackets.  The  report  correctly  identifies  anumber  of instances  of 
overutilization  and  abuse;  as a result,  Medicare  payments  for  orthotic  body jackets 
have  increased  tremendously  in recent  years. 
We  are  aware  of the  increased  number  of claims  for  body jackets  and  believe  that 
as a result  of regionalization  of durable  medical  equipment  claims  processing,  and 
the  development  of regional  medical  review  policies  for  spinal  orthoses,  we  have 
/ 
/  strengthened  our  ability  to  monitor  the  use  and  payment  of orthotic  body jackets. 
\ 
Our  detailed  comments  on  the  report  findings  and  recommendations  are  attached 
for your  consideration.  Thank  you  for  the  opportunity  to  review  and  comment  on 
this  draft  report.  Please  advise  us if you  would  like  to  discuss  our  position  on  the 
recommendations  at  your  earliest  convenience. 
Attachment 
-.
7 
** .-,
.,
:,,
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: a 
.-
.. ., 
,-.1 I  ..
Comments  on  Office  of Inspector  General  (OIGl  Draft  Report: 
Medicare  Pawn ents  for  Orthotic  Body Jackets 
(OEI-O4-92-O1O8O) 
Recommendation  1 
The  Health  Care  Financing  Administration  (HCFA)  should  require  the  Durable 
Medical  Equipment  Regional  Carriers  (DMERC)  to  closely  monitor  claims  for  body 
jackets,  including  analysis  of payment  trends,  provision  of an  early  warning  of 
abusive  practices,  and  monitoring  of suppliers  who  have  engaged  in abusive 
practices. 
HCFA  Response 
We  concur,  and  have  instituted  several  methods  to  detect  payment  trends  and 
identi&  suppliers  who  have  exhibited  abusive  practices. 
As part  of its contract  responsibilities,  the  Statistical  Analysis  (SA)  DMERC  closely 
monitors  claims  for  body  jackets,  produces  standard  quarterly  reports,  and  provides 
analysis  of data  to  identify  trends  and  aberrances.  Additionally,  the  SADMERC 
conducts  postpayment  medical  review  for  national  suppliers  in order  to  determine  if 
future  corrective  action  is needed. 
By producing  standard  quarterly  reports  along  with  monthly  ad  hoc  reports,  the 
SADMERC  assists  the  DMERCS  in identifying  potential  abusive  practices,  and 
monitors  those  suppliers  that  appear  to  engage  in abusive  practices.  The 
SADMERC  will continue  to be  a resource  for  the  DMERCS  to detect  patterns  of 
abusive  billing  by suppliers. 
In addition  to  the  regionalization  initiative  (creation  of the  DMERCS  and  the 
SADMERC),  HCFA  has  issued  several  new  codes  to  better  distinguish  the  various 
types  of products  currently  on  the  market.  Claims  for  some  classes  of orthotic 
devices,  previously  paid  for  by the  local  carriers,  are  now  denied  by the  DMERCS. 
Claims  for  those  devices  that  are  covered  by the  DMERCS  must  be  submitted  with 
additional  medical  documentation  including,  but  not  limited  to,  the  following:  a 
description  of the  item  and  the  diagnosis;  a description  of the  spinal  problem,  the 
brand  name  and  model  number  or  photo  of the  actual  device;  and  features  of the 
orthosis  and  medical  necessity  of each.  ,*
.
Page  2 
Recommendation  2 
If inappropriate  orthotic  body jacket  claims  are  not  discontinued  in FY  1994, HCFA

should  implement  more  stringent  controls,  such  as requiring  physicians  to  obtain

prior  approval  from  DMERCS  for  body jackets,  and/or  programming  computer

systems  to  identify  and  allow  payment  for  code  L0430  claims  only when  they  match

appropriate  medical  diagnoses.

HCFA  Response

We  agree  that  there  is a need  for  stringent  controls,  and  we  feel  that  we  have  the

necessary  control  mechanisms  in place  to  detect  increased  use  of these  products.

While  the  specific  actions  recommended  were  examples  or  suggestions,  we wish  to

point  out  that  we  do  not  agree  that  we should  seek  the  legislation  necessary  to

institute  a prior  approval  program  for  body jackets  as a  means  to  impose  more

stringent  controls  for  inappropriate  claims.  We  anticipate  that  because  of the

regionalization  and  development  of regional  policy  for  orthotic  body jackets,  we will

see  decreased  utilization  of the  body jackets.  We  are  confident  that  the  regional

policies  presently  in place  are  at  least  as good  as a prior  approval  program  would

be.

Recommendation  3

HCFA  should  inform  the  medical  community  about  nonlegitimate  devices  coded

under  HCPCS  code  L0430  and  indicate  its intent  to  closely  monitor  the  use  of body

jacket  codes,  as a deterrent  to  further  abuse.

HCFA  Response

We  concur.  We  will encourage  the  DMERCS  to  use  their  monthly  bulletins  to

inform  the  medical  community  of inappropriate  use  of devices  such  as  orthotic  body

jackets.

Technical  Comments:

Page  10, first  full paragraph:  change  phase-in  claims  by March  to  June.  Decisions

have  been  made  recently  to  delay  the  transition  of several  States  to  the  new

regional  carriers.

Page  10, last  paragraph:  delete  the  first  sentence,  which  refers  to  focused  medical
 .,.
.,
Page  3 
Page  11, last  sentence  of the  second  paragraph  should  read,  Ifinappropriate 
payments  fororthotic  body jackets  continue  to  increase,  Medicare  could  standto 
lose  at  least  $7 million  annually.