Department of Health and Human Services
 
OFFICE OF 

   
INSPECTOR GENERAL 

 
 
 
 
 
 
P   B S D  
ART    ERVICES  URING 

 
N -P A N H
ON   ART    URSING  OME 

 
S :  D M
TAYS    URABLE  EDICAL 

 
 
E  
QUIPMENT 

 
 
 
 
 
 
Daniel R. Levinson 
  
Inspector General 

 
July 2009 
 
OEI-06-07-00100 
  Office of Inspector General
http://oig.hhs.gov  
 
The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, as  
amended, is  to protect the integrity of the Department of  Health 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 the  following operating components:  
Office of Audit Services 
The Office  of  Audit Services  (OAS) provides auditing services  for HHS, either by  conducting  
audits  with its own audit resources or by  overseeing  audit work done by others.  Audits  
examine the performance of HHS programs and/or its grantees and contractors in carrying  
out their respective responsibilities and are intended  to provide independent assessments of 
HHS programs and operations.  These assessments help reduce waste, abuse, and  
mismanagement and promote economy and efficiency  throughout  HHS. 
Office of Evaluation and Inspections  
The Office  of  Evaluation and Inspections (OEI)  conducts national evaluations to  provide 
HHS, Congress, and the public with timely, useful, and reliable information on significant 
issues.  These evaluations focus on preventing fraud,  waste, or abuse  and promoting  
economy, efficiency, and effectiveness of departmental programs.  To promote impact, OEI 
reports also present practical recommendations for improving  program operations.  
Office of Investigations 
The Office of Investigations (OI) conducts criminal, civil, and administrative investigations  
of  fraud and misconduct  related to HHS programs, operations, and beneficiaries.  With 
investigators working in all 50 States and the District of Columbia, OI  utilizes its resources 
by actively  coordinating with the Department  of Justice  and other Federal, State, and local 
law enforcement authorities.  The investigative efforts of OI often lead to  criminal 
convictions, administrative sanctions,  and/or  civil monetary  penalties.  
Office of Counsel to the Inspector General 
The  Office of Counsel to the Inspector General (OCIG)  provides  general legal services  to  
OIG, rendering  advice and opinions on HHS programs  and operations and providing all 
legal support for OIGs  internal operations.  OCIG represents  OIG in all civil and 
administrative fraud and abuse cases involving HHS programs, including False Claims Act, 
program exclusion, and civil monetary penalty cases.  In  connection with these cases, OCIG 
also negotiates and monitors corporate integrity agreements.  OCIG renders advisory 
opinions, issues compliance program guidance, publishes fraud alerts, and provides other  
guidance  to  the health care industry concerning the anti-kickback statute and other  OIG  
enforcement authorities.  
.   
  E X E C U T I V E   S U M M A R Y  
OBJECTIVE 
To determine the extent of inappropriate Medicare Part B payments for 
durable medical equipment (DME) provided to nursing home residents  
during non-Part A stays in 2006. 
BACKGROUND 
Medicare Part A covers  nursing home care for a beneficiarys stay of up  
to 100 days in a skilled nursing facility (SNF).  If nursing home care is 
still needed after the 100 days or the beneficiary did not qualify for a 
Part A SNF stay, Medicare Part B may provide coverage for  certain 
medical and other health care services.  However, Part B does not pay 
for DME provided during a nursing home stay unless the nursing home 
qualifies as a beneficiarys home.  A nursing home qualifies as a 
beneficiarys home only if it does not provide primarily skilled care or 
rehabilitation. Only a small number of nursing homes that are certified 
Medicaid-only, called nursing facilities (NF), or distinct parts of nursing 
homes (hereafter referred to as distinct part nursing homes) may 
qualify as a beneficiarys home.  In contrast, no  SNFs or dually certified 
nursing homes (those  certified for both Medicare and Medicaid) qualify 
as a beneficiarys home because they  provide primarily skilled care or 
rehabilitation. To identify inappropriate payments for DME, we used 
resident assessment data from the Centers for Medicare  & Medicaid 
Services (CMS) to determine all nursing home stays nationwide during 
2006. We then analyzed related Medicare claims data for any DME 
payments during these stays.   
FINDINGS 
Medicare Part B allowed inappropriate payments of $30 million in 
2006 for DME provided during non-Part A  stays  in Medicare-certified 
SNFs. Medicare paid 77 percent ($23.4 million) of these claims, and the 
remaining 23 percent ($7.1 million) was paid by or on behalf of 
beneficiaries (i.e., by Medicaid, supplemental insurance, or private 
resources).  For 98 percent of these claims, suppliers incorrectly 
indicated that the DME was for use in the beneficiarys home.  
Wheelchairs and oxygen accounted for 72 percent ($22 million) of the 
inappropriately allowed DME payments.  Suppliers also indicated on  
claims whether the DME was purchased or rented by the beneficiary.  
We found that the inappropriately allowed DME payments were mostly 
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rentals (76 percent or $22.9 million) for which there are payment 
limitations upon a beneficiarys nursing home admission. 
Nearly all of the additional $11.9 million  Medicare allowed for DME 
provided during non-Part A stays in Medicaid NFs and distinct part 
nursing homes was inappropriate. This conclusion is based on our  
survey of a sample of 84 NFs and distinct part nursing homes to 
determine the extent to  which they provide primarily a skilled level of 
care or rehabilitation.  Survey results indicate that nearly all of these 
nursing homes provide primarily skilled care or rehabilitation.  
Consequently, we concluded that nearly all $11.9 million in DME 
payments for Medicare beneficiaries  in these nursing homes was 
inappropriately allowed. As with stays in SNFs and dually certified 
SNF/NFs, the inappropriately allowed DME was nearly always billed 
identifying the place of service as the beneficiarys home (97 percent), 
mostly for wheelchairs and oxygen (72 percent), and made up mostly of  
rentals (78 percent). 
CMS and States do not maintain a primary level of care designation 
for nursing homes that could facilitate accurate claim submission 
by suppliers and proper claim adjudication by  payment contractors. 
When suppliers prepare DME claims or claims are processed for 
payment by Medicare Administrative Contractors (MAC), it is 
important that the appropriate place of service code be utilized. If a 
beneficiary resides in a NF or distinct part nursing home that does not 
provide primarily a skilled level of care or rehabilitation, the supplier 
should identify home as the place of service. However, suppliers that 
code place of service and MACs that adjudicate claims do not have ready 
access to the primary level of care status of NFs and distinct part 
nursing homes unless this information is provided directly by these 
facilities. They lack access to this information because CMS or States 
did not make these determinations  and maintain results in an 
accessible database. However, CMS reported that it does not maintain 
information regarding primary level of care for NFs and distinct parts 
and indicated that States have the responsibility for maintaining this 
information. We contacted all State agencies in an attempt to 
determine the primary level of care  provided by NFs and distinct part 
nursing homes. State agency representatives in 21 States reported that 
nursing homes that are licensed in their States must provide primarily 
skilled care or rehabilitation. Of these 21 States, 13 have statutes that 
specifically require this level of care for State licensure. In the 
remaining 29 States, there may be nursing homes that do not provide 
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E X E C U T I V E   S U M M A R Y   
primarily skilled care or rehabilitation or include a distinct part that 
does not provide primarily skilled care or rehabilitation.   
RECOMMENDATIONS 
When setting DME payment policy, Congress recognized the 
responsibility of institutions to meet  patients medical needs, regardless 
of the primary payer for the stays (i.e., Medicare, Medicaid, or private 
resources).  Consequently, each nursing home must provide DME as an 
integral part of its basic daily rate unless it is not providing primarily 
skilled care or rehabilitation.  Yet, very few nursing homes provide care 
lower than skilled. Although payment contractors routinely deny DME 
payment for claims submitted with a nursing home place of service 
designation, an incorrect place of service designation (i.e., home) results 
in inappropriate payment.  Past OIG studies have highlighted this 
issue; however, payment controls are still insufficient to stop 
inappropriate DME payments.    
Given the extent of inappropriate DME payments, we recommend that 
CMS: 
Use electronic resident assessment data contained in the Minimum Data 
Set (MDS) to establish a routine process to periodically (e.g., annually)  
generate a list of non-Part A beneficiary stays in  nursing homes that  
provide primarily skilled care or rehabilitation.  CMS should then direct 
contractors to identify and recover inappropriate DME payments.   
Further, CMS should direct contractors to identify suppliers that 
repeatedly submit incorrect place of service on DME claims and forward 
such information to the OIG Office of Investigations.  
Implement a process or processes to identify patients entering nursing 
homes with rented DME. Nursing homes could use this information to 
alert suppliers of the beneficiarys change of address.    
Determine which NFs and distinct part nursing homes provide primarily  
skilled care, thus not qualifying as a beneficiarys home for DME payment 
purposes.  State Medicaid agencies and CMS do not evaluate and  
maintain this information. At a minimum, CMS could require State 
Medicaid agencies to make the determination using the available CMS 
administrative criteria.  This designation should then be available to 
claims processors, nursing homes, and suppliers.   
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E X E C U T I V E   S U M M A R Y   
Direct contractors to recoup the inappropriate payments identified in this 
report. We will forward claim-specific information to CMS under 
separate cover.  
AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL  
RESPONSE 
CMS concurred with our recommendations to establish a routine 
process to periodically identify non-Part A stays using MDS and to 
recover inappropriate payments identified in this study.  The draft 
report also recommended that CMS (1) expand the resident assessment 
process to identify whether the patient entered the nursing  home with 
DME and (2) use the Online Survey Certification and Reporting system 
to determine and report which NFs and distinct part nursing homes 
qualify as beneficiary homes for DME payment purposes.   Although 
agreeing with the underlying objectives of these two recommendations, 
CMS suggesed alternative approaches using claims processing edits to 
address them.  In this final report, we defer to  CMS on the appropriate 
methods to  use to address these recommendations.  However, we ask 
that CMS provide specific information on these alternative approaches 
in its final management decision. 
For the full text of CMSs comments, see Appendix D. 
 
  OEI-06-07-00100   PART  B  SERVICES DURING  NON-PART  A  NURSING HOME STAYS:   DURABLE  MEDICAL  EQUIPMENT   iv     T A B L E   O F   C O N T E N T S  
EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  i
  
 
I N T RO DUC T IO N . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  1 
  
 
F I N D IN G S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  13 
  
Medicare Part B inappropriately allowed $30 million in 2006 
            
for DME provided during non-Part A stays in Medicare-certified     

SNFs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  13 
  
Nearly all of the additional $11.9 million that Medicare allowed     
         
for DME provided during non-Part A stays in Medicaid-certified     
  
NFs and distinct part nursing homes was inappropriate. . . . . . . . .  15 
  
CMS and States do not maintain a primary level of care    
     
designation for nursing homes that could facilitate accurate claim 

submission by suppliers and proper claim adjudication by payment 

contractors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  16 
  
 
R E C O MMEN D A T ION S  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  17 
  
Agency Comments and Office of Inspector General Response. . . .  18 
  
 
APPENDIXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  19 
  
  A: Skilled Nursing Facility Definition . . . . . . . . . . . . . . . . . . . . . . .  19 
  
  B: Durable Medical Equipment Billing Codes . . . . . . . . . . . . . . . . .  23 
  
  C:  Defining Primary Level of Care . . . . . . . . . . . . . . . . . . . . . . . . . . 24 
  
  D:  Agency Comments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  26 
  
 
A C K NO WL E D G M E N T S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  29 
  
   
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  I N T R O D U C T I O N  
OBJECTIVE 
To determine the extent of inappropriate Medicare Part B payments for 
durable medical equipment (DME) provided to nursing home residents  
during non-Part A stays in 2006. 
BACKGROUND 
Medicare and Medicaid Programs 
Nursing homes offer daily living assistance to elderly and disabled 
individuals who are either physically or mentally unable to live 
independently.  Nursing home patients receive a wide array of services 
ranging from medical treatment to meals and from skilled to custodial 
care.  Of the available public programs that pay for nursing  home care,  
Medicare and Medicaid represent the largest.  
Medicare.  Medicare, a Federal health insurance program, covers most 
people 65 years or older, people under age 65 with certain disabilities, 
and people of any age diagnosed with end-stage renal disease. It 
provides a wide range of benefits from institutional care (e.g., nursing 
home stays) to medical products and supplies (e.g., wheelchairs).  
Medicare is administered by the Centers for Medicare & Medicaid 
Services (CMS), which contracts with entities called Medicare 
Administrative Contractors (MAC) to  process and pay claims for covered 
services.  Medicare-covered services  most frequently fall under Parts A  
and B. 
 	  Part A (hospital insurance) helps cover skilled or rehabilitative care 
during beneficiary stays in skilled nursing facilities (SNF); these 
stays are called Part A stays.  Medicare Part A1 was the primary 
payer for 13 percent of the nursing home residents in 2006.2   During 
a Part A stay in a SNF,  Medicare Part A pays for the beneficiarys 
services in the facility using a consolidated daily rate.  This daily 
rate covers  many routine services  provided by SNFs, including room 
 
1 Medicare Part A pays for up  to 100 days in a SNF benefit period, also known as spell of 
illness, if a beneficiary meets certain conditions, such as a prior hospitalization. The SNF 
benefit period begins the day a beneficiary enters the SNF and  ends when the beneficiary  
has not received any subsequent hospital or SNF care for 60 consecutive days.   
2 C. Harrington, H. Carrillo, and B. W. Blank, Nursing, Facilities, Staffing, Patients, and 
Facility Deficiencies, 2000 Through 2006, p. 18.  Department of Social and Behavioral 
Sciences, University of California, San Francisco.  Available online at 
http://www.nccnhr.org/uploads/PartI-PagesfromHarringtonOSCARcomplete2006.pdf. 
Accessed in March 2008.  
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and board, skilled care, and rehabilitative care. Examples of skilled 
care include changing sterile dressings and administering prescribed 
medications; examples of rehabilitative care include physical, 
speech, or occupational therapies.   
When a beneficiary exhausts the 100 days of care allowed under the 
Part A benefit (or did not otherwise qualify for a SNF stay) and 
continues to reside in the SNF, the subsequent days then constitute 
a non-Part A stay. During a non-Part A stay, Medicare no longer 
pays for the stay; however, Part B may pay for therapy and supplies 
previously included in the daily rate paid to the SNF. 
 	  Part B (medical insurance) helps cover a wide range of medical 
services and supplies. These services include physician services and 
medical equipment and supplies, including DME. 
Durable Medical Equipment.  DME is generally defined as 
equipment that can withstand repeated use, serves primarily a 
medical purpose, is not generally useful to a person in the absence of 
an illness, and is appropriate for use in a residents home.3   
Examples of DME include oxygen and respiratory equipment and 
supplies, wheelchairs, hospital beds, walkers, commodes, and blood  
glucose monitors. In most instances, Medicare will pay for rented or 
purchased DME,4  as well as cover repairs of purchased equipment 
and necessary related supplies (e.g., glucose test strips and 
oxygen).5    
In 2006, Medicare Part B benefits totaled $166 billion for 40 million  
beneficiaries.6  Of this amount, approximately $11.7 billion was for 
DME.  
Part B Supplier Billing and Payment.   Medicare-enrolled suppliers  
provide DME to Medicare beneficiaries and then submit claims to 
one of four regional MACs, called DME MACs. Section 1842(s) of 
the Act authorizes a fee  schedule for many Part  B services, including  
 
3 CMS, Medicare Benefit Policy Manual (MBPM). Available online at Medicare Benefit 
Policy Manual,  Chapter 15,  110.1. Accessed in June 2008. 
4 Social Security Act (the Act),  1861(n). See also 42 CFR 410.38 (a). 
5 CMS, Medicare Claims Processing Manual. Available online at Medicare Claims 
Processing Manual, Chapter 20,  10.2. Accessed in June 2008.  
6 CMS, Brief Summaries of Medicare & Medicaid, November 1, 2007. Available online at 
http://www.cms.hhs.gov/MedicareProgramRatesStats/downloads/MedicareMedicaidSummar 
ies2007.pdf. Accessed in June 2008. 
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I N T R O D
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certain equipment and supplies, which Medicare contractors  use to 
reimburse claims.7  Generally, Medicare pays 80 percent of the 
allowed amount, and the beneficiary is responsible for the remaining  
20 percent.   For reimbursement purposes, suppliers must identify 
the DME item for which they are billing using a specific code fro m 
the Healthcare Common Procedure Coding System (HCPCS).    
Home Use Provision.   In addition to  medical necessity and coding 
accuracy requirements,  Medicare payment determinations for DME  
provided to residents of nursing homes are driven by whether the 
nursing home provides primarily skilled care or rehabilitation. 8   
(See Appendix A.) If the nursing home provides primarily skilled 
care or rehabilitation, DME is not covered.  This noncoverage stems  
from the legal requirement that DME be used in a beneficiarys 
home or an institution that can be considered a home.  Section 
1861(n) of the Act states that any nursing home meeting the basic  
definition of a SNF in  1819(a)(1) of the Act may not be considered  
a patients home for this purpose.   Thus, only when a nursing home  
provides primarily a nonskilled level of care and few rehabilitat ion 
services can  it be considered a beneficiarys home and qualify for 
DME payment. 
Exceptions to Home Use Provision.   Under two exceptions, Medicar e 
pays for DME provided in nursing homes that do not qualify as a 
beneficiarys home: 
(1) 	 The DME was initially provided to the beneficiary at his/her 
home prior to admittance to a nursing home.  If this occurs, the 
beneficiary may have rented the DME during the month in  
which he/she enters a nursing home.  Medicare will pay for t he 
DME rental for the remainder of the monthly rental period 
that overlaps the nursing home admission.  DME MACs will 
direct the billing supplier to submit its bill indicating home as 
the place of service.9    
 
7 Fee schedule implemented on January 1, 2002, and updated annually.  
8 CMS, Medicare Learning Network Matters Article #SE0745, October 25, 2007.  Available 
online at 
http://www.cms.hhs.gov/MLNMattersArticles/2007MMAN/itemdetail.asp?filterType=none& 
filterByDID=99&sortByDID=8&sortOrder=ascending&itemID=CMS1204646&intNumPerP 
age=10.  Accessed on May 6, 2008. 
9 CMS, MBPM, chapter 15  110.5.  Available online at 
http://www.cms.hhs.gov/manuals/Downloads/bp102c15.pdf. Accessed in June 2008. 
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(2) 	 The DME was provided to the beneficiary in anticipation of a 
discharge from a nursing home to his/her home. In this 
instance, Medicare will allow the DME payment for the 
beneficiary up to 2 days prior to a nursing home discharge 
when the DME is intended for home use. DME MACs will 
direct the billing supplier to use the discharge date for the 
service date and indicate home as the place of service.    
Medicaid. Medicaid was the primary payer for 65 percent of nursing 
home stays during 2006.10  All of these stays were non-Part A stays 
because Medicare did not pay for them.  Unlike Medicare, Medicaid is a 
joint State-Federal program administered by the States.  Within broad  
Federal guidelines, States establish their own eligibility standards 
encompassing Federal requirements  and available options; thus, every  
State operates its Medicaid program differently.  However, all State 
Medicaid programs include routine DME as a service covered under the 
facility daily rate.11  12   To ensure that Medicaid recipients with 
Medicare eligibility receive Part B benefits during their nursing facility 
(NF) stays and to facilitate payment by Part B, State Medicaid 
programs routinely pay Part B premiums for qualified beneficiaries.   
Related Payment Legislation 
Congress has recognized the responsibility of nursing homes to meet the 
medical needs of patients, regardless of the primary payer of the stay 
(i.e., Medicare, Medicaid, or private resources).  Statutes such as the 
Omnibus Budget Reconciliation Act of 1987 (OBRA 1987) laid the 
foundation for identifying needed patient care through resident 
assessments.13  The OBRA 1987 further required that nursing homes 
provide the necessary care to assist residents in attaining their highest 
practicable level of physical, mental, and psychosocial well-being.  
Congress also enacted legislation such as the Balanced Budget Act of 
1997 (BBA)14  and the Medicare, Medicaid, and SCHIP Benefits 
 
10 C. Harrington, et al., loc. cit. 

11 The Henry J. Kaiser Family Foundation, Medicaid Benefits:  Online Database.  

Available online at 

http://www.kff.org/medicaid/benefits/index.jsp?CFID=32790568&CFTOKEN=15412220. 

Accessed in June 2008. 

12 42 CFR  488.301. 

13 P.L. No. 100-203. 

14 P.L. No. 105-33. 

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Improvement and Protection Act of 2000 (BIPA)15 to further define 
Medicare payment criteria for nursing homes.    
The BBA established a prospective  payment system for Part A stays 
and required nursing homes to arrange for and consolidate into a single 
Medicare bill the Part B services that are needed by a resident during 
his or her nursing home stay.16  Prior to the BBA, suppliers and 
providers of  Part B services for nursing home residents (e.g.,  physical 
therapists) billed Medicare directly for their services. Implementation 
of consolidated billing first occurred  only for Part A stays. In 2000, 
before the BBA was implemented for non-Part A stays, Congress 
enacted the BIPA. The BIPA maintained consolidated billing for Part A 
stays and therapy services but repealed consolidated billing 
requirements for non-Part A stays. Therefore, claims for beneficiaries 
during non-Part A stays continue to  be individually submitted by 
suppliers and providers.   
Mandate for the Office of Inspector General To Monitor Part B Payments 
In repealing the BBAs consolidated billing provisions for non-Part A 
nursing home stays, Congress anticipated the need to monitor Medicare 
Part B payments during these stays. In section 313 of the BIPA, 
Congress specifically directed the Office of Inspector General (OIG) to 
perform such monitoring. This DME evaluation revisits the study 
entitled Durable Medical Equipment Payments in Nursing Homes 
(OEI-06-92-00862), in which OIG identified inappropriate payments of  
$35 million for DME provided during nursing home stays in 1992, much 
of which occurred during non-Part A stays. Several additional studies 
will address other, previously identified, vulnerable Part B payment 
areas (e.g., enteral nutrition therapy and psychotherapy). 
Primary Level of Care and Certification of Nursing Homes 
The Act established minimum health and safety standards17 that must 
be met by suppliers and providers of  services participating in the 
Medicare and Medicaid  programs.   To receive payment under either of 
these programs, nursing homes must comply with the standards set 
forth in 42 CFR pt. 483, subpart B. CMS has oversight over both 
 
15 P.L. No. 106-554. 

16 BBA,  4432. 

17 The Act,  1819 and 1919, establish requirements for nursing homes to participate in 

Medicare and Medicaid. See also 42 CFR  483 and 488. 
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programs but contracts with States to perform surveys that ensure  
nursing home compliance. 
In 2006, 3.2 million individuals received nursing home care in 
16,121 nursing homes certified for Medicare or Medicaid.18  Of these 
nursing homes, States surveyed 15,294 in 2006. Based on specific 
survey criteria, a nursing home  may be certified as a Medicare SNF, a 
Medicaid NF, a dually certified SNF/NF, or a distinct part SNF or NF.   
However, defining a nursing homes  primary level of care is not a 
specific component of certification surveys. Although the certification of 
a SNF or dually certified SNF/NF for Medicare clearly indicates that a 
nursing home provides primarily a skilled level  of care or rehabilitation, 
certification as a NF may not be used as the sole indicator of  the 
primary level of care provided. 
Medicare skilled nursing facility. Both SNF and dually certified SNF/NF 
certification criteria require sufficiently high nurse staffing levels that 
such nursing homes are clearly providing primarily skilled care or 
rehabilitation. (See Appendix A for CMS policy defining DME coverage 
in nursing homes.) Dual certification as a SNF/NF results in the same 
outcome: the facility provides primarily skilled care. Between 2002 and 
2006, the number of SNFs decreased by just over 18 percent from 1,058 
to 864, accounting for 5 percent of certified nursing homes. During the 
same time period, the number of dually certified SNF/NFs increased by 
2 percent, from 14,013 to 14,298, and accounted for nearly 89 percent of 
certified nursing homes.19    
Medicaid nursing facility.   Between 2002 and 2006, the number of NFs  
decreased by nearly 50 percent, from 1,913 to only 959 (5 percent of 
certified nursing homes).20  Medicaid certification requirements for NFs 
are virtually the same as those for Medicare certification of SNFs. For 
payment purposes, DME MAC policies state that billing for DME for a 
patient in a SNF or a NF will be denied, in effect taking the stand that 
both SNFs and NFs provide skilled care or rehabilitative services.  
However, this payment policy does not take into account that, unlike 
Medicare certification, Medicaid certification of a NF can provide for a 
nonskilled level of care. This level of care would allow a NF to be 
considered as a beneficiarys home for DME coverage purposes. Thus, 
 
18 CMS, Nursing Home Data Compendium, 2007 Edition. 

19 Ibid. 

20 Ibid. 

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as a certification class, NFs cannot be assumed to be providing 
primarily skilled care or rehabilitation for DME payment purposes.  
CMS or States would need to evaluate each NF  using specific 
administrative criteria to determine whether the NF provides primarily 
skilled care or a level of care below skilled. If the latter, the NF could be 
considered a home.21  Only for beneficiaries in these facilities should 
DME suppliers indicate  home as the place of service  on submitted 
claims.  
Distinct part nursing home. Generally, CMS and States evaluate a nursing  
homes certification as a single unit, rather than by separately 
evaluating and classifying individual areas or beds within the 
institution. However, some States allow a nursing home to designate a 
particular portion of its nursing home, known as a distinct part, 
separately from the rest of the nursing home.22  Medicare and Medicaid 
regulations define a distinct part as a separate, physically identifiable 
unit consisting of all the beds in a particular building, floor, wing, or 
ward.23  Using the CMS Online Survey Certification and Reporting 
system (OSCAR), we identified 2,725 distinct part nursing homes.24   
However, OSCAR did not identify whether the distinct part was a SNF 
or a NF, a critical designation for determining DME payment. As with 
a SNF, a distinct part SNF providing primarily skilled care or 
rehabilitation would not  have DME coverage.25  However, if the 
remainder of that nursing home provides a nonskilled level of care, it 
could have DME coverage. The opposite situation would allow DME 
coverage for a beneficiary residing in a distinct part NF not providing 
primarily a skilled level  of care, but not in the remainder of the nursing 
home providing primarily skilled or rehabilitative care.   
 
21 Administrative  criteria to identify  NFs or distinct part nursing homes that meet the 

basic SNF definition may  be used by State agencies conducting certification surveys. These 

criteria appear in CMSs State Operations Manual (SOM), chapter 2,  2166. Available 

online at http://www.cms.hhs.gov/manuals/downloads/som107c02.pdf. Accessed in June 

2008. 

22 CMS, SOM, chapter 2  2762B(4). Available online at 

http://www.cms.hhs.gov/manuals/downloads/som107c02.pdf. Accessed in June 2008. 

23 42 CFR  483.5(b). 

24 Data extracted from OSCAR by OIG on April 1, 2007. 

25 CMS, MBPM. Available online at 

http://www.cms.hhs.gov/manuals/Downloads/bp102c15.pdf. Accessed in June 2008. 

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I N T R O D U C T I O N   
Suppliers and Place of Service Coding 
Suppliers must designate the physical location of the beneficiary, called 
place of service, on submitted claims.  For billing purposes, CMS utilizes 
place of service codes ranging from 01 through 99.  A DME claim 
submitted with a place of service code for a SNF or NF will be denied.26    
An electronic claims-processing system  edit adjudicates each claim and 
generates a denial when a SNF or NF place of service has been coded.   
However, if the NF provides a level  of care below skilled or 
rehabilitative, it can be considered the beneficiarys home for billing 
purposes.  In such situations, the supplier should appropriately 
designate home, not a NF, as the place of service  on the claim.   
However, it becomes more difficult for a supplier to accurately identify 
the place of service for a beneficiary who moves from his or her home to  
a nursing home.  This is particularly problematic for payment purposes 
when the beneficiary has rented DME prior to the nursing home 
admission.  
Following the monthly rental period during which the beneficiary 
moved to a nursing home that may not be considered his or her home, 
the DME claim should show the actual place of service as a SNF or NF, 
which would result in a denial of payment by the DME MAC.  If the 
patient resides in a NF or distinct part nursing home that may be 
considered a beneficiarys home, the claim may still indicate home as 
the place of service.  Yet, CMS, DME MACs, and States do not inform  
suppliers that a beneficiary has relocated to a nursing home.  CMS 
policies require that suppliers submit accurate claims, but do not 
provide guidance on how or how frequently they  must ensure the 
accuracy of the beneficiarys place of service.  Ultimately, suppliers 
depend on the beneficiary or his/her responsible parties to tell them 
when a beneficiary moves into a nursing home.  There is no way for 
suppliers to ensure that the beneficiaries do so.  Nor do CMS or DME 
MACs have the means to notify a nursing home when a beneficiary has 
rental DME at the time of admittance; claims processing systems 
currently are inadequate for such a purpose.  Further, nursing homes 
have not been directed by CMS to obtain this information from 
beneficiaries at the time of admittance.    
 
26 Noridian, DME MAC, Supplier Manual, chapter 5.  Available online at 
https://www.noridianmedicare.com/dme/news/manual/chapter5.html#inpatient. Accessed in 
February 2008.  
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METHODOLOGY 
Scope 
This study identifies inappropriately allowed Part B payments for DME 
during non-Part A nursing home stays in 2006. A non-Part A nursing 
home stay is any Medicare beneficiarys nursing  home stay which is not 
paid for under the Medicare Part A SNF benefit. If a beneficiarys stay 
started under the Part  A SNF benefit and continued after exhausting 
this benefit, only DME delivered during the latter portion of the stay is 
considered.   
Identification of DME During a Nursing Home Stay  
We utilized several databases obtained from CMS to identify Part B 
payments for DME during non-Part  A nursing home stays.  These 
databases included the  Minimum Data Set (MDS), OSCAR, the  
Enrollment  Database (EDB), and National Claims History (NCH). 
Minimum Data Set. We used the MDS to identify the nursing home 
residents, related nursing homes, and nursing home stays. The MDS, a 
component of the resident assessment instrument, includes information  
about each residents health, physical functioning, mental status, and 
general well-being.27  However, assessments do not capture whether a 
beneficiary is renting DME at the time of nursing home admission.  
Resident assessments are reported  electronically by each certified  
nursing home for each person upon  admission and are updated at least 
quarterly.28   The MDS includes nursing home admission and discharge 
dates. States receive assessments from nursing homes and transmit the 
data to CMS. Using the MDS data, we identified all assessed residents 
and their Social Security numbers (SSN). To determine stay dates, we 
extracted all nursing home admission and discharge dates for each 
resident. 
We used assessment dates as proxies for missing admission or discharge 
dates according to the following assumptions: 
 	  If the resident was in the nursing home on January 1, 2006 
(determined from subsequent assessments that were conducted by 
the nursing  homes), we  used the date of the first assessment 
conducted in 2005 as the admission date. 
 
27 OBRA 1987. 

28 More frequent assessments are required for stays paid under the Part A SNF benefit. 

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 	  In the case  of a missing discharge date, we defined the date of the  
last assessment (received through March 2007) as the date of 
discharge. 
OSCAR. To obtain information about the nursing home (e.g., facility 
name, address, number of beds, and SNF and NF certification status), 
we linked the MDS facility identification number with the facility 
number maintained in the OSCAR. The OSCAR contains survey results 
from certification and complaint surveys.   
Enrollment Database. We used the EDB to identify Medicare 
beneficiaries. This database includes beneficiary-level data (i.e., name, 
SSN, and Medicare Health Insurance Claim Number (HICN)). Using 
this database, we crosswalked SSNs contained in the MDS file to SSNs 
in the EDB to identify Medicare beneficiaries and their associated 
HICNs. We  excluded beneficiaries having no matching SSN from 
further analysis. 
National Claims History. We identified DME claims and payments using 
the NCH.   We used the HICNs from  the EDB to crosswalk to HICNs in 
the NCH to identify all DME claims billed and allowed for Medicare 
beneficiaries during the nursing home stays previously identified using 
the MDS.  We then dropped all DME billed for beneficiaries during 
Part A paid nursing home or inpatient hospital stays.29   (See 
Appendix B for a list of the DME HCPCS codes utilized for this study.) 
Finally, we excluded DME during exception time periods. We identified 
and excluded DME claims occurring during the two allowed exception 
time periodsrental payment for the month overlapping any admission 
to a nursing home from home and DME provided within 2 days of a 
beneficiarys discharge from the nursing home. To be conservative, we 
determined  that claims with nursing home admissions between the 
from and through dates for DME met the exception period, 
regardless of claim length. Additionally, if the claim through date was 
the same as the discharge date from  the nursing  home, we determined 
that the claim met the exception period. Medicare policy stipulates that 
DME claims for items provided 2 or less days prior to a nursing home 
discharge to home are appropriate if the claim date and the discharge 
date are the same. We also took a conservative approach to possible 
 
29 OIGs Office of  Audit Services routinely conducts audits relating to the issue of  
inappropriate Part B payments occurring during  Part A stays. As such, we excluded these 
from our review. 
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discharge locations by defining all discharges as home discharges and 
excluding these claims from analysis.   
For the resulting identified 2006 DME claims allowed for Medicare 
beneficiaries during nursing home stays, we used OSCAR data to  
determine possible trends across the inappropriately allowed DME.   
Data utilized for trends included State, profit/nonprofit status, and the 
number of beds in nursing homes.  
Sampling To Verify Stay  Date Accuracy and To Identify Level of Care for 
NFs and Distinct Part Nursing Homes 
To test the validity of the identified stay dates using the MDS and to 
identify primary level of care, we randomly selected a sample of  
300 beneficiaries from the 299,851 beneficiaries identified as having 
DME during non-Part A nursing home stays. Cumulatively, these 
300 beneficiaries had 378 nursing home stays, received medical care in  
311 different nursing homes,30 and had 2,001 DME claims totaling 
approximately $280,896 allowed and $220,242 reimbursed by Medicare.  
The remaining dollars were paid by or on behalf of beneficiaries by third 
parties (i.e., Medicaid, supplemental insurance, or private resources). 
Using this sample, we surveyed the associated NFs and distinct part 
nursing homes to determine the proportion of each actually providing 
primarily a skilled level  of care. This sample allowed us to project to the 
universe of DME provided during a NF or distinct part nursing home 
stay.  
Stay date accuracy. We verified stay dates from the MDS by requesting 
admission and discharge date documentation directly from the nursing  
homes. The 378 stay dates determined from the MDS were nearly 
always accurate, with only 5 percent (21) of the reviewed stays having 
wrong or incomplete information. 
Level of care in NFs and distinct part nursing homes. A NF  or distinct part  
nursing home may qualify as a beneficiarys home if it provides a level  
of care less than skilled. CMS reported that it does not maintain 
information regarding primary level of care for NFs or distinct parts 
and indicated that States have the responsibility for maintaining this 
information. We subsequently contacted all State agencies in an 
attempt to determine the primary level of care provided by NFs. 
 
30 Of the sampled nursing homes, 216 were dually certified SNF/NFs, 9 were certified as 
SNFs, 21 as NFs, and 65 as having a distinct part. 
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To determine the degree to which NFs and distinct part nursing homes 
provide primarily skilled care, we used OSCAR to identify the nursing 
homes in the previously described sample of 311 nursing homes that 
were NFs or distinct part nursing homes. There were 86 such nursing 
homes (21 NFs and 65 distinct part nursing homes). We asked nursing 
home administrators to respond to questions directly related to the 
administrative requirements for defining a skilled level of care.31  (See  
Appendix C.) We received responses from 78 of the 86 nursing homes 
(91 percent). 
Of the 14 responding NFs, 12 (86 percent) indicated that they provide 
primarily a skilled level  of care; 63 of 64 (98 percent) responding distinct 
part nursing homes indicated that they provide primarily a skilled level  
of care. Based on this sample, NFs and distinct part nursing homes 
rarely (0.04 percent of the time) qualify as a beneficiarys home for DME  
payment purposes. Using this point estimate and sample statistics, we 
projected the dollars paid inappropriately to the universe of payments 
for DME during these stays. 
Reporting of Inappropriate DME Payments  
For the findings of this report, we calculated inappropriately allowed 
DME using all of the 2006 DME claims submitted for Medicare 
beneficiaries during non-Part A nursing home stays. Specifically, the 
report findings are not adjusted to  account for the small amount of 
errors resulting from our use of the  MDS to determine nursing home 
stay dates. As mentioned previously, the results of our verification for a 
sample of stay dates during which DME was provided indicates that 
inaccuracies in the MDS stay date determinations rarely resulted in our 
misclassification of a DME claim during a nursing home stay as 
inappropriately allowed. 
Standards 
This study was conducted in accordance with the Quality Standards for 
Inspections issued by the Presidents Council on Integrity and 
Efficiency and the Executive Council on Integrity and Efficiency (now 
Council of the Inspectors General on Integrity and Efficiency). 
 
31 CMS, SOM, chapter 2,  2166; four specific criteria must be met fully to be considered 
engaged in providing primarily skilled care. 
OEI-06-07-00100   PART  B  SERVICES DURING  NON-PART  A  NURSING HOME STAYS:   DURABLE  MEDICAL  EQUIPMENT   12    
F I N D I N G S  
  F I N D I N G S  
Medicare Part B inappropriately  allowed  Suppliers received payments 
$30 million in 2006 for DME provided  totaling $30,485,842 for the 
309,626 DME claims allowed for 
during non-Part A stays in  
Medicare beneficiaries during   
Medicare-certified SNFs 
non-Part A stays in nursing homes 
certified as SNFs or dually certified  as SNF/NFs.  These claims were  
spread across 11,702 nursing homes.  Since these nursing homes were 
providing primarily skilled care or rehabilitation, they could not be 
considered the beneficiaries homes,  a prerequisite for DME coverage.  
Medicare paid 77 percent ($23.4 million) of the allowed amount; the 
remaining 23 percent ($7.1 million) was paid by or on behalf of 
beneficiaries (i.e., Medicaid, supplemental insurance, or private 
resources).   
For 98 percent of the inappropriately  allowed claims, suppliers incorrectly  
indicated that the DME provided during nursing home stays was for use in 
beneficiaries homes   
For other claims, the places of service indicated by the suppliers were 
custodial homes (1.1 percent) or  other places (1.2 percent), such as assisted  
living (0.8 percent), facilities for mentally retarded persons (0.3 percent), 
group homes (0.02 percent), and homeless shelters (0.01 percent). 
Wheelchairs and oxygen accounted for 72 percent ($22 million) of the 
inappropriately allowed DME payments   
The category of wheelchairs and related accessories represents the highest 
expense for inappropriately allowed DME (37 percent).  (See Table 1 on 
the following page.)  The category of oxygen and respiratory equipment 
and supplies accounts for the second-highest expense (35 percent).  
Rentals accounted for 76 percent of the total inappropriately  allowed DME 
payments  
Additionally, oxygen, wheelchairs, and their related components accounted  
for $17.8 million (78 percent) of the $22.9 million inappropriately allowed 
for rentals and 191,805 of the 231,606 related claims.  Hospital beds (and  
their related accessories) and decubitus care equipment accounted for 12 
percent and 8 percent of  the inappropriately allowed rental amount, 
respectively.  In nearly all cases, an ongoing rental had been established 
prior to the nursing home stay.  The resulting inappropriately paid 
amount occurred because the supplier failed to identify on submitted 
claims that the beneficiary had relocated to a nursing home and/or failed 
to change subsequent billing using the correct place of service code. We 
did not determine whether the beneficiary had provided the supplier with 
the information about the move to a  nursing home. 
  OEI-06-07-00100   PART  B  SERVICES DURING  NON-PART  A  NURSING HOME STAYS:   DURABLE  MEDICAL  EQUIPMENT   13    
F I N D I N G S  

 
Table 1:  Inappropriately Allowed Durable Medical Equipment 
Payments by Category 
Percentage of  
Total Amount   Amount  
Category   Inappropriately    Inappropriately  
Allowed   Allowed*  
($30,485,842) 
Wheelchairs and related accessories  $11,395,901  37% 
Oxygen and respiratory  equipment and supplies  $10,562,263  35% 
Hospital beds and related accessories  $3,910,113  13% 
Decubitus care equipment  $2,122,838  7% 
Seat/patient lifts  $828,853  3% 
Other DME  $517,306  2% 
Transcutaneous and/or neuromuscular electrical  $486,851  2% 
nerve stimulators 
Walkers  $411,843  1% 
Bath/commodes  $249,875  1% 
Source:  OIG analysis of DME payments in non-Part A stays during 2006. 
*Percentages do not equal 100 percent because of rounding.  
 
Medicare allowed more than $1 million for each of seven separate 
HCPCS codes.  (See Table 2.)  Together, these items account for  
73 percent ($22.2 million) of the total inappropriately allowed amount.  
The HCPCS E1390 accounts for the single highest inappropriately paid 
code, representing nearly 26 percent of the total inappropriately allowed  
amount.  As indicated, most inappropriately allowed DME claims were 
made for routine medical equipment (e.g., oxygen, beds, and 
wheelchairs) that nursing homes could provide to their patients as part 
of their daily rate.    
 
Table 2:  HCPCS With More Than $1 Million Inappropriately Allowed 
Percentage of  
Total Amount  Amount  
HCPCS  Item Description   Inappropriately   Inappropriately  
Allowed   Allowed  
($30,485,842) 
E1390  Oxygen  concentrator  $7,816,906  26% 
E0260  Hospital bed, semielectric  $3,536,488  12% 
K0011  Standard weight-frame motorized/power  $3,184,235  10% 
wheelchair 
K0001  Standard wheelchair  $2,191,881  7% 
K0004  Lightweight high-strength wheelchair  $2,112,417  7% 
E0277  Power pressure-reducing air mattress  $1,773,773  6% 
K0003  Lightweight wheelchair  $1,542,635  5% 
Source:  OIG analysis of DME payments in non-Part A stays during 2006. 
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  SSSS  
The average inappropriate allowed amount associated with nursing homes was 
$2,605 with a median of $1,456. Of the 11,702 nursing homes associated 
with beneficiaries having inappropriate DME payments, 3,637 
(31 percent) exceeded the average.  Further, 179 of these nursing homes 
were three or more standard deviations above the average, with the two  
highest totaling $102,875 and $73,227. 
The average inappropriate allowed amount for suppliers was $2,712 with a 
median of $906. Of the 11,243 suppliers associated with inappropriate 
DME payments, 2,873 (26 percent) exceeded the average. Further, 
137 of these suppliers were three or more standard deviations above the 
average, with the two highest totaling $248,340 and $200,382. 
We analyzed the inappropriate allowed DME payments across several 
variables (e.g., geographic location, nursing home characteristics) and 
found no correlations between high payments and these variables. For 
example, 42 percent of the inappropriately allowed DME payments were  
made to suppliers in those States with a similar proportion of certified 
nursing home bedsCalifornia, Florida, New York, Ohio, Pennsylvania, 
and Texas.  
 
In 2006, suppliers received 
Nearly all of the additional $11.9 million that 
payments totaling $11.9 million 
Medicare allowed for DME provided during  
for the 107,928 DME claims 
non-Part A stays  in Medicaid-certified NFs  and  
allowed for Medicare 
distinct part nursing homes was inappropriate    beneficiaries during stays in 
3,373 nursing homes identified 
as NFs or as distinct part nursing homes. Medicare paid $9.2 million; 
the remaining $2.7 million was paid by or on behalf of beneficiaries 
(i.e., Medicaid, supplemental insurance, or private resources). Most 
DME claims (83 percent of the 107,928 claims) were made for 
beneficiaries residing in distinct part nursing homes. 
Our conclusion that nearly all of the $11.9 million was paid 
inappropriately is based on the survey of a sample of these nursing 
homes to determine the extent to  which they provide primarily skilled 
levels of care or rehabilitation services. Results indicate that nearly all 
of the sampled nursing homes provide primarily skilled care or 
rehabilitation. 
Of the 78 nursing homes responding to our survey, 96 percent do not  
qualify as beneficiaries  homes for DME payment purposes.   Specifically, 
OEI-06-07-00100   PART  B  SERVICES DURING  NON-PART  A  NURSING HOME STAYS:   DURABLE  MEDICAL  EQUIPMENT   15    
F I N D I N G S  
12 of 14 NFs and 63 of 64 distinct part nursing homes provide primarily 
skilled care or rehabilitation.  Utilizing this sample, the projected 
amount inappropriately paid was $11.2 million.  The 95-percent 
confidence interval ranged from a low of $8.0 million to a high of  
$14.3 million.    
As with non-Part A stays in SNFs  and dually certified SNF/NFs, the 
inappropriately allowed DME in NFs and distinct part nursing homes 
were typically billed identifying the places of service as the 
beneficiaries homes (97 percent), mostly for wheelchairs and oxygen  
(72 percent), and consisted mostly of rentals (78 percent). 
 
When suppliers prepare DME  
CMS and States do not maintain a primary level of  
claims or claims are processed for  
care designation for nursing homes that could  
payment by DME MACs, it is 
facilitate accurate claim submission by  suppliers 
important that the appropriate 
and proper  claim adjudication by payment  place of service codes be  utilized.  
contractors   However, suppliers that code 
place of service and MACs that 
adjudicate claims do not have ready access to the primary level of care 
status of NFs and distinct part nursing homes unless this information is  
provided directly by these facilities.  The lack of access to this 
information results from CMS or States not making these 
determinations and maintaining results in an accessible database.  
CMS reported that it does not maintain information regarding primary 
level of care  for NFs and distinct parts and indicated that States have  
the responsibility for maintaining this information.  We contacted all 
State agencies in an attempt to determine the primary level of care 
provided by NFs and distinct part nursing homes.  Twenty-one States 
require that nursing homes licensed in their States provide primarily 
skilled care or rehabilitation.  Of these 21 States, 13 have statutes that 
specifically require this level of care for State licensure.  In the 
remaining 29 States, there may be nursing homes that do not provide 
primarily skilled care or rehabilitation, or include a distinct part that 
does not provide primarily skilled care or rehabilitation.   
  OEI-06-07-00100   PART  B  SERVICES DURING  NON-PART  A  NURSING HOME STAYS:   DURABLE  MEDICAL  EQUIPMENT   16    
  R E C O M M E N D A T I O N S  
When setting DME payment policy, Congress recognized the 
responsibility of institutions to meet  patients medical needs, regardless 
of the primary payer for the stays (i.e., Medicare, Medicaid, or private 
resources).  Consequently, each nursing home must provide DME as an 
integral part of its basic daily rate unless it is not providing primarily 
skilled care or rehabilitation.  Yet, very few nursing homes provide care 
lower than skilled. Although payment contractors routinely deny DME 
payment for claims submitted with a nursing home place of service 
designation, an incorrect place of service designation (i.e., home) results 
in inappropriate payment.  Past OIG studies have highlighted this 
issue; however, payment controls are still insufficient to stop 
inappropriate DME payments.    
To address inappropriate payments, we recommend that CMS: 
Use electronic resident assessment data contained in the MDS to 
establish a routine process to periodically (e.g., annually) generate a list 
of non-Part A beneficiary  stays in nursing homes that provide primarily  
skilled care or rehabilitation.  CMS should then  direct contractors to  
identify and recover inappropriate DME payments.  Further, CMS 
should direct contractors to identify  suppliers that repeatedly submit 
incorrect place of service on DME claims and forward such information  
to the OIG Office of Investigations.  
Implement a process or processes to identify patients entering nursing 
homes with rented DME. Nursing homes could use this information to 
alert suppliers of the beneficiarys change of address.    
Determine which NFs and distinct part nursing homes provide primarily  
skilled care, thus not qualifying as a beneficiarys home for DME payment 
purposes.  State Medicaid agencies and CMS do not evaluate and  
maintain this information. At a minimum, CMS could require State 
Medicaid agencies to make the determination using the available CMS 
administrative criteria.  This designation should then be available to 
claims processors, nursing homes, and suppliers.    
Direct contractors to recoup the inappropriate payments identified in this 
report. We will forward claim-specific information to CMS under 
separate cover. 
 
 
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AGENCY COMMENTSAND OFFICE OF INSPECTOR GENERAL  
RESPONSE 
CMS concurred with our recommendations to establish a routine 
process to periodically identify non-Part A stays using MDS and to 
recover inappropriate payments identified in this study. The draft 
report also recommended that CMS (1) expand the resident 
assessment process to identify whether the patient entered the 
nursing home with DME and (2) use the Online Survey Certification 
and Reporting system (OSCAR) to determine and report which NFs  
and distinct part nursing homes qualify as beneficiary homes for 
DME payment purposes. Although agreeing with the underlying 
objectives of these two recommendations, CMS suggesed alternative 
approaches using claims processing edits to address them.  
We agree that other methods may achieve the same objectives, so we 
have made changes to the recommendations. Rather than prescribe the 
needs assessment as the tool for identifying DME, this final report 
recommends only that CMS implement a process or processes for this  
purpose.  Also, we removed reference to OSCAR as the method that 
CMS should use to determine and disseminate information  on the home  
status of NFs and distinct part nursing homes. 
We defer to  CMS on the appropriate methods to  address these 
recommendations. In the comments on the draft report, CMS suggests 
that claims processing edits could address the recommendations, but no  
details were provided on how such edits would work. We ask that CMS 
provide this information in its final management decision. 
For the full text of CMSs comments, see Appendix D. 
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  A P P E N D I X   A
MEDICARE LEARNING NETWORK MATTERS 
ARTICLE SE0745 REPRINTED*  
Skilled Nursing Facility  Definition Used To Determine Durable Medical 
Equipment Coverage and in Ending a Benefit Period or Spell of 
Illness32  
 
*Italics in document added for emphasis; abbreviations used to save space.  
Coverage of a beneficiarys skilled nursing facility (SNF) stay under 
Part A (the Original Medicare plans hospital insurance program) 
encompasses the overall package of institutional care that the SNF  
furnishes during the course of the beneficiarys Medicare-covered stay.  
This comprehensive Part A coverage includes durable medical 
equipment (DME) under the heading of . . . drugs, biologicals, supplies, 
appliances, and equipment . . . as stated in  1861(h)(5) of the Social 
Security Act (the Act).33   
When a beneficiarys SNF stay does  not qualify for Part A coverage  
(no qualifying three-day hospital stay, SNF level of care not met, etc.), 
Part B (the supplementary medical insurance program) generally can 
still provide limited coverage for certain individual medical and other 
health services described in  1861(s) of the Act.  However, as 
explained below, the scope of coverage under the Part B benefit for DME  
( 1861(s)(6) of the Act) specifically excludes items that are furnished for 
use in the SNF setting.  
 	  Section 1861(n) of the Act limits Part B coverage under the DME 
benefit to those items that are furnished for use in a beneficiarys 
home.  This provision further specifies that any institution 
meeting the basic definition of a hospital in  1861(e)(1) of the Act, 
or of an SNF in  1819(a)(1) of the Act, cannot be considered a 
patients home for this purpose.  Section 1819(a)(1) of the Act 
(formerly  1861(j)(1) of the Act), in turn, defines a SNF broadly 
as any institution that is engaged primarily in providing skilled 
 
32 Centers for Medicare & Medicaid Services (CMS), Medicare Learning  Network Matters, 
Article #SE0745, October 25, 2007.  Available online at 
http://www.cms.hhs.gov/MLNMattersArticles/2007MMAN/itemdetail.asp?filterType=none&filterByDID 
=99&sortByDID=8&sortOrder=ascending&itemID=CMS1204646&intNumPerPage=10. Accessed on 
May 6, 2008. 
33 The Act can be accessed online at http://www.ssa.gov/OP_Home/ssact/ssact-toc.htm. 
Accessed in June 2008. 
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A P P E N D I X   A  
nursing (clause (A)) or rehabilitation services (clause (B)) to its 
residents. 
 	  This expansive SNF definition omits the specific, more restrictive 
elements contained in the remainder of  1819(a)-(d) of the Act, 
which list the detailed requirements that an institution must  
meet in order to participate in the Medicare program as a certified 
SNF. Thus,  in excluding Part B coverage for DME furnished in 
SNFs as defined broadly in  1819(a)(1) of the Act, Congress 
intended for this exclusion to encompass not only all Medicare-
participating SNFs, but also any other institutions which, though 
not participating in Medicare, do provide the type of care  
described in that section of the law.34  
 	  The blanket prohibition that Congress imposed on any separate 
Part B payment for DME furnished in this setting (see  144(d) of 
the Social Security Amendments of  1967, P.L. No. 90-248) would 
appear to reflect the view that any institution whose primary 
function is to provide skilled care to  its residents would have an 
inherent responsibility to dispense DME, when needed. This 
would mean that payment for such items is already an integral 
part of the skilled facilitys basic inpatient rate.  Accordingly, any 
separate, additional DME payment under Part  B in this situation 
would be redundant. Modifying or eliminating the statutory 
prohibition on Part B payment for DME furnished in this setting 
would require legislation to amend the law itself.   
Additional Considerations for DME Furnished in Medicaid-Only Nursing 
Facilities 
Additional considerations apply in determining whether a Medicaid-
only nursing facility (NF) would meet the basic SNF definition in this 
context.  Medicaid NFs were created when the Omnibus Budget 
Reconciliation Act of 1987 (OBRA 1987) enacted nursing home reform 
legislation that combined the previously separate Medicaid categories of 
SNFs and intermediate care facilities (ICF) into a single category.  Prior 
to the OBRA 1987 changes, Medicaid SNFs were always considered to 
meet the laws basic definition of a SNF, while pursuant to a U.S. 
District Court decision in Kron v. Heckler  (E.D. La., October 17, 1983), 
 
34 This policy is also reflected in the regulations in title 42 CFR  410.38(b) and in CMSs 
Medicare Benefit Policy Manual, chapter 15,  110.1.D.  Available online at 
http://www.cms.hhs.gov/manuals/iom/list.asp. Accessed in June 2008. 
  OEI-06-07-00100   PART  B  SERVICES DURING  NON-PART  A  NURSING HOME STAYS:   DURABLE  MEDICAL  EQUIPMENT   20    
A P P E N D I X   A  
those facilities licensed or certified solely as ICFs were never considered  
to meet the basic SNF definition.  
 	  The parallel Medicare SNF and Medicaid NF definitions that 
OBRA 1987 established in  1819(a)(1) and 1919(a)(1) of the Act, 
respectively, both turn on the type of care that the facility is 
engaged primarily in furnishing.  However, while the NF 
definition in  1919(a)(1) of the Act contains a clause (A) for 
skilled nursing and a clause (B) for rehabilitation services that are 
identical to their SNF counterparts in  1819(a)(1) of the Act, it 
also contains an additional clause (C) for health-related 
institutional care above the level of room and board (comparable 
to the type of care furnished by intermediate care facilities (ICF) 
prior to OBRA 1987), which is not found in the  SNF definition.  
 	  Thus, if a Medicaid NF is engaged primarily in furnishing skilled 
care under either clauses (A) or (B) of  1919(a)(1) of the Act, it 
would meet the basic SNF definition and cannot be considered a 
home for purposes of DME coverage under Part B. 
Alternatively, if the NF is engaged primarily in furnishing 
essentially ICF-level care under clause (C) of this provision, it  
would not meet the basic SNF definition and can be considered a 
home for DME coverage purposes.  Thus, because some NFs meet 
the basic SNF definition while others do not, NFs cannot, as a  
class, automatically be regarded as either qualifying or not 
qualifying as a home for DME coverage purposes and, therefore,  
must be evaluated individually under the administrative criteria 
discussed below. 
Administrative Criteria 
Administrative criteria to identify those institutions that meet the  
basic SNF definition are used by each of the State agencies that 
survey the individual institutions within their jurisdictions.35   These 
criteria also were published in the Federal Register as Health Care 
Financing Administration Rulings 83-2 (47 FR 54551, December 3, 
1982) and 83-3 (49 FR 10710, March 22, 1984).  Historically, it has 
been the State survey agencys responsibility to evaluate an 
institution in terms of these criteria.  This evaluation reflects the type  
of care that the institution provides  to its residents generally (rather 
 
35 CMS, State Operations Manual (SOM), chapter 2,  2166.  Available online at 
http://www.cms.hhs.gov/manuals/downloads/som107c02.pdf. Accessed in June 2008. 
  OEI-06-07-00100   PART  B  SERVICES DURING  NON-PART  A  NURSING HOME STAYS:   DURABLE  MEDICAL  EQUIPMENT   21    
A P P E N D I X   A  
than the type of care that an individual resident may be receiving at a 
given point in time), because the requirements of the law relate to the 
type of care that an institution is engaged primarily in providing to its 
overall resident population.  
 	  Further, States can choose to incorporate the requirements of  
 1819(a)(1) of the Act directly into their own facility licensure 
standards as seen in CMSs SOM, chapter 2,  2164.  In a State 
that elects to adopt this approach, simply ascertaining that a 
particular nursing home is licensed under the applicable facility 
category of State law can also serve to confirm that the facility 
meets the basic SNF definition in  1819(a)(1) of the Act.  
Applying the Criteria in Institutions That Contain a Participating Distinct 
Part   
 	  Generally, the determination of whether an institution meets the 
basic SNF definition is made by evaluating it as a single unit 
rather than by separately evaluating and classifying individual 
areas within the institution.  In order to categorize a particular 
portion of an institution separately from the remainder of that 
institution, it is necessary for that portion to constitute a distinct 
part (e.g., a separate, physically identifiable unit consisting of all 
the beds in a particular building, floor, wing, or ward).  (See the 
regulations at 42 CFR 483.5(b).)  
 	  In this situation, if the participating distinct part of an institution 
meets the basic SNF definition and the remainder of the  
institution does not, DME payment would be available under  
Part B only in the portion of the institution that qualifies as a 
home for  DME coverage purposes  by virtue of not meeting  the 
basic SNF definition.  Part B payment would not be available for 
DME furnished in any part of the institution that is identified as 
meeting the  basic SNF definition, regardless of the type  of care 
that a particular resident may be receiving there.  
A more detailed discussion of situations in which part of an institution 
meets the basic SNF definition and part of it does not appears in 
chapter 5,  1 of the Medicare Program Integrity Manual, also 
available online at http://www.cms.hhs.gov/manuals/iom/list.asp on the  
CMS Web site.  This is the same material that originally appeared in  
 4105.1 of the Medicare Carriers Manual, Part 3 (CMS Publication 
14-3). 
  OEI-06-07-00100   PART  B  SERVICES DURING  NON-PART  A  NURSING HOME STAYS:   DURABLE  MEDICAL  EQUIPMENT   22    
  A P P E N D I X   B
DURABLE MEDICAL EQUIPMENT BILLING CODES  
INCLUDED IN THE EVALUATION 
 
HCPCS Codes*  Categories 
   
E0100E0105  Canes 
   
E0110E0118, E0153  Crutches and related accessories 
   
E0130E0159  Walkers 
   
E0160E0175, E0240E0249, E0968  Bath/commode and related accessories 
   
E0180E0199, E0277, E0370E0373  Decubitus care equipment 
   
E0200E0239, E0249  Hot/cold applications 
   
E0250E0373, E0462  Hospital beds and related accessories 
   
E0424E0601, E0605, E0618E0619,  Oxygen and respiratory  equipment and supplies 
E1353E1406, K0730K0738   
   
E0607  Blood glucose monitor 
   
E0610E0620  Pacemaker monitor and defibrillator 
   
K0606K0609  Defibrillator accessories 
   
E0621E0642  Patient lifts, standing devices/lifts 
   
E0650E0675  Pneumatic compressor and appliances 
   
E0720E0769  Transcutaneous and/or neuromuscular electrical nerve 
  stimulators 
   
E0776 (without BA modifier)E0791, K0455,  Infusion pump for medications and related supplies 
E1520, K0552, K0601K0605   
   
E0830E0900  Traction equipment 
   
E0910E0948, E0951E0952  Trapeze equipment, fracture frame, other orthopedic 
  devices 
   
E0955E1298, K codes  Wheelchairs and related accessories 
   
E1340  Repairs and replacements 
   
E1700E1702  Jaw motion rehabilitation system and accessories  
* Healthcare Common Procedure Coding System (HCPCS) codes listed within ranges are in specified  
categories, except as specified elsewhere. 
  OEI-06-07-00100   PART  B  SERVICES DURING  NON-PART  A  NURSING HOME STAYS:   DURABLE  MEDICAL  EQUIPMENT   23    
  A P P E N D I X   C
DEFINING PRIMARY  LEVEL OF  CARE 
To identify the primary level of care  provided by nursing facilities (NF) 
and nursing homes with distinct parts, we utilized our sample of  
311 nursing homes.  Of the 311 nursing homes, 65 were identified 
through CMSs Online Survey, Certification, and Reporting system as 
distinct part nursing homes and 21 were certified as NFs.  We contacted 
these 86 nursing homes to determine the primary level of care  that they 
provided, independent of their certification status; 78 responded.  We 
asked each nursing home to tell us whether it met the following four 
criteria identified in the State Operations Manual (SOM) maintained 
by the Centers for Medicare & Medicaid Services (CMS):  
 	  One or more nurses (registered nurses or licensed practical or  
vocational nurses) direct or supervise nursing services without 
regard to whether the facility has the nurse staffing requirement 
waived. (SOM  2166A.)  
 	  Nursing personnel are on duty 24 hours a day. (SOM  2166B.)    
 	  The number of full-time-equivalent nursing personnel to the number 
of beds is at least an average ratio of 1 to 15 per shift. 
(SOM  2166C.) 
 	  Other services (e.g., bed and board) are provided to inpatients in 
connection with the furnishing of nursing care, plus one or more  
medically related health services (e.g., physicians services; 
physical, occupational, or speech therapy; diagnostic and 
laboratory services; and administration of medication). 
(SOM  2166D.)    
If a nursing home indicated in all four instances that it met  the criteria, 
we determined that the facility engaged primarily in providing a skilled 
level of care.  
These four criteria are those identified as CMSs Administrative 
Criteria for Identifying Facilities That Meet 1819(a)(1).36  Section 
1819(a)(1) of the Act discusses nursing services.  This section also 
contains the statutory definition of a skilled nursing facility (SNF), 
which is the basis for Medicare certification requirements of SNFs in  
42 CFR 483, subpart B.  In many States, licensing laws for all nursing 
 
36 CMS, SOM. Available online at 
http://www.cms.hhs.gov/manuals/downloads/som107c02.pdf. Accessed in June 2008. 
  OEI-06-07-00100   PART  B  SERVICES DURING  NON-PART  A  NURSING HOME STAYS:   DURABLE  MEDICAL  EQUIPMENT   24    
A P P E N D I X   C  
homes have incorporated the requirements of  1819(a) or  1919(a) of 
the Act or the criteria contained in  2166.  When this is the case, any 
nursing home licensed in such States cannot be considered a residents 
home for purposes of spell of illness, durable medical equipment, 
ambulance, and home health benefits.  In other States, it may be 
necessary for the State agency to  make  1861(e)(1) or  1819(a)(1) 
certifications. As indicated, SNFs meet  1819(a)(1) requirements, as do 
long-term-care nursing  homes in States where licensure laws require it.   
In other situations, a facility or a part of a facility meets the standard 
set forth in  1819(a)(1) of the Act for purposes of determining skilled 
level of care  if the nursing home  meets each of the four criteria listed on 
the previous page.   
 
  OEI-06-07-00100   PART  B  SERVICES DURING  NON-PART  A  NURSING HOME STAYS:   DURABLE  MEDICAL  EQUIPMENT   25    
  A P P E N D I X   D
AGENCY COMMENTS 
 
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DEI'ARTMENTOFIIEALTH HUMANSERVICES
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APR 10 2009 '"
DATE:
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TO; DanielR.Levinson Z~
Inspector0-JJI ~~ W
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ActingAdministmlor w
c
SUIUEcr; OfficeofInspectorGeneral(OIG)Draft Report:"Purl13 ServiecsDuring
Non-PartA NursingHomcSlays: DurableMedical EquipmCnl"Om-06
07-00100
.......
Thankyoufortheopportunitytoreviewandcommentonthealxl\"e-referenccd010drall
MedicareParlACO\'CfSnursinghomecareforabeneficiary'sstayup10 100daysina
skilkdnursingfacility(SNF). Ifnursinghomecareisstillneededafterthe 100daysor
thebcncliciarydoesIIOtqualifyforPartASNFstay,Medi~Pan Bmayprovide
coverageforcertainmedicalandotherhealthsaviccs. However,PanBdoesIIOtpayfor
durablemedicalequipment(DME)providedduringanursinghomestayunlessthe
nursinghomequaliliesasabeneliciary'shome.
TheOIG found thatMedicarePart13allowedilt:l.ppropriutepaymcntsof530millionin
2006for DMEprovidedduringnon-I',lrtA stay~inMedieare-eertit1edSNFs. Medicare
Part Il inappropriatelyallowedpaymentof$23.4 millionin2006for DMEprovided
durinGnon-I'artAstaysinMcdicarecertil1edSNFsand$7.1 millionwaspaid byoron
behalfofbeneliciaries(i.e..Medicaid,supplemenlalinsurdlleeorprivateresources). For
98percentoflheclaimsintheDIGsample,suppliersillcol'Tl:X:tlyindicaledlhatDMEwas
foruseinthebeneficiary'shome. Ofthc523.4million illinappropriatepayments,S22.9
millioooftheDMEpaymentswereforrentalsforwhichtherean:paymelltlimitatioru;
uponabeneficiary'snursinghomeadmission.
TheDIGII'Ialkthefollowingreoornmmdalions:
DIG Rommendalion
UscelectronicresidentassessmentdatacontainedilltheMinimum DataSet(MDS)to
establisharoutineprocess10periodically(e.g.,annually)genemtealistofnon-PIlr1A
bencl1cillrystaysinnursinghomesthatprovideprimarilyskilledcareorrehabilitation.
  OEI-06-07-00100   PART  B  SERVICES DURING  NON-PART  A  NURSING HOME STAYS:   DURABLE  MEDICAL  EQUIPMENT   26    
A P P E N D I X   D  

Page2- Daniel R. Levinson
Weconcurwiththerooommendation. eMSwillsecktoprovideMedicareRecovery
AuditContrnetorsaccesstotheMOSdataforthepIllpOSCofperiodicallychecking
whetherbeneficiarieswhorec:civedPanBOMEserviceswereresidentsofnursing
homeslhatdo001qualifyasabeneficiary'shome.
OIG R~mmC'ndlllion
Ell:pandtheresidenlassessmC'fltprocess10idcrllify...."hC'ther!hepatientmtl:!'edthe
nursinghomewiththeDMEandwhetheritisownedorInItC'dbythebenefICiary.
eMSR~ponse
WeagrecwithIhcunderlyingobjectivcofincreasingtheavailabledataon DMEusagein
nursinghomes. llowever,wedonotconcurwilhlhisrecommendationasitiscUlTCntly
stmcture<!. Wearcconcenledthattherecommendedapproachcssenliallyproposes10
achievethisobjectivethroughaclinicalvehiclethatis1I0twcll-suitC'dtothispurposc.
TheMilSisaclinically-basedasscssmenttoolused10detcnninepatients' health,
physicalfunctioning,andmedicalconditions. Inaddition,theMDSiscompletedbyan
interdisciplinarycliniealtearnwhoseprimaryfocusiscareplanning. Asaresult,wedo
notseetheMOSasaneffectivemechanismfortheaccuratecollectkmofaninventoryof
thepalicnlS'OME.includingstatusofownership. Instead.eMSwillexplorethe
feasibilityofcreatingaclaimsprocc:ssingsystemedillhatwouldpl'C\'enlimproper
paymentsforDMEfurnishedtobenefICiariesduringanon-PanAnursinghomestay.
OIG Rerommend:ation
Drtcrmillewhichnursingfacilities(NFs)anddistinctpannursinghomesqualifylISII
beneficiary'shomefor OMEpaymentpurposesandmainlainthisdesignationinOnlinc
Survey,Cenification,andReponing(OSCAR)system.
CMSResponse
Weagrecwiththeunderlyingobjectivetoexplorewaystodeterminewhethcranursing
homeservesasaresident'shomeforthcpurposesofmakingproperOMEpayments;
however,wedonotconcurwiththisrecommendalion. OIG'srecommendationseeksto
usctheOSCARsystemlISawaytodesignateNt'sordistinctpartnursinghomesthat
qualifyasabeneficiary'shome. TheOSCARdatabase'sfundamentalpurpose:isdircctC'd
towardfacililY1Cl-'c!surveyandcertificationinformation. ThcdeterminationofwhcthcT
thenursinghomeisreallyaspecificbeneficiary'shorneisindividualized10the
beneflCiary"scoverageforpaymentpwposcs. Consequently,individualdesignationof
.....hetheragivcnnursinghomeisabeneficiary'shomemaynotbebc::stlocatedin
OSCAR, However,consi~cntwiththerationaleofferedinourI"CSpOI1SCto
Recommendation2,theremaybea1ternativcapproachesconsideredbyCMSforaclaims
processingOOiltopreventimproperD~Epayments.
  OEI-06-07-00100   PART  B  SERVICES DURING  NON-PART  A  NURSING HOME STAYS:   DURABLE  MEDICAL  EQUIPMENT   27    
A P P E N D I X   D  

 
 
 
  Page3- Daniel R. Levinson
 
 
  OIG Rttommtndalion
 
DirectcontractorstorecouptheinappropriatepaymentsidentifiedinthisrqlOrt.
 
  eMS Rt1[!On~t
  Weagreethattheinappropriatepayments(subjecltoverificationbytheMedicare
  conlrBClors)shouldberecovered. CMSplans10recovertheOveTpaymenlsidenlified
consistent.....iththeAgency'spoliciesandprocedUIl:3.
 
  TheOIGwillberequiredtofurnish. foreachoverpaymentorpotentialoverpayment,the
datanecessary(Medicarecontractornumbers,providernumbers,claimsinformation
  includingthepaiddate,WCnumbers,ctc.)10initiatcandcomplclcrecoveryaClion. In
  addition,Medicarecontractor-spedficdatashouldbewrillentoseparateCDROMsor
separotehardcopyworksheetsinorder10benerfacilitatethetransferofinformationto
  theappropriatecontractors.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  OEI-06-07-00100   PART  B  SERVICES DURING  NON-PART  A  NURSING HOME STAYS:   DURABLE  MEDICAL  EQUIPMENT   28    
AA PP PP EE NN DD II XX    ~C    D  
  A C K N O W L E D G M E N T S
 
 
This report was prepared under the direction of Kevin K. Golladay, 
Regional Inspector General for Evaluation and Inspections in the Dallas 
regional office, and A. Blaine Collins, Deputy Regional Inspector 
General. 
Leah K. Bostick served as the team leader for this study, and  
Dana McClellen served as lead analyst.  Other principal Office of 
Evaluation and Inspections staff from the Dallas regional office who 
contributed to the report included Petra Johansson, Margaret Knight, 
Sai Loganathan, and Jeremy Moore; central office staff who contributed 
include Robert L. Gibbons, Scott  Horning, Jennifer Jones, and  
Sandy Khoury. 
 
  OEI-06-07-00100   PART  B  SERVICES DURING  NON-PART  A  NURSING HOME STAYS:   DURABLE  MEDICAL  EQUIPMENT   29