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

FOR  WOUND  CARE  SUPPLIES

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J  $ 
JUNE  GIBBS  BROWN 
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OCTOBER  1995 
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03-94-00790  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 four  OIG  operating  components:  the  Office of Audit  Services,  the 
Office of Investigations,  the  Office of Civil Fraud  and Adminsitrative  Adjudicationand  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  INSPECTIONS 
The  OIGS  Office of Evaluation  and Inspections  (OEI)  conducts  short-term  management  and 
program  evaluations  (called inspections)  that  focus on issues of concern  to the  Department, 
the  Congress,  and the  public.  The  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.  This report  was prepared  in the  Philadelphia 
Regional  Office under  the direction  of Robert  A. Vito,  Regional  Inspector  General. 
PHILADELPHIA REGIONAL  STAFF  HEADQUARTERS  STAFF 
Robert  A. Baiocco,  Program Analyst  Stuart  R. Wright,  Program Specialist

Linda  M. Ragone,  Program Analyst  Brian  P. Ritchie,  Technical Support Staff

Cynthia  Hansford,  Program Assistant  Barbara  Tedesco,  Technical Suppoti  Staff

Neil Montovani,  Intern

Won  Jong  Oh, Intern

Emily Tseng, Intern

To  obtain a copy of this repo~  please call the Philadelphia Regional  Office  at (800)  531-9562.  Department  of Health  and Human  Services 
OFFICE  OF 
INSPECTOR  GENERAL 
QUESTIONABLE  MEDICARE  PAYMENTS 
FOR  WOUND  CARE  SUPPLIES  EXECUTIVE  SUMMARY 
PURPOSE 
This  report  identifies  questionable  billing practices  for wound  care  supplies  under 
Medicare  Part  B. 
BACKGROUND 
Wound  care  supplies  are  protective  covers  or fillers that  treat  openings  on the  body 
caused  by surgical  procedures,  wounds,  ulcers,  or burns.  The  Health  Care  Financing 
Administration  (HCFA)  reimburses  for wound  care  supplies  under  Medicare  Part  A 
through  its payments  to nursing  homes  and  home  health  agencies  and  Medicare  Part 
B through  its payments  to suppliers.  The  HCFA  broadened  its coverage  policy on 
March  30, 1994, allowing  payment  for secondary  as well as primary  dressings  and 
including  wound  treatments  by non-physicians. 
The  HCFA  contracted  four  DME  Regional  Carriers  (DMERCS)  starting  October  1993 
to process  wound  care  supply  claims.  In June  1994, reimbursements  for these  supplies 
were  based  on a fee  schedule  and  the  number  of wound  care  supply  codes  increased 
from  less than  20 to over  60.  The  DMERCS  revised  their  guidelines  and  requested 
comments  in January  1995.  These  guidelines  clarify utilization  and  medical  necessity 
issues.  The  effective  date  for implementing  the  revised  guidelines  is October  1, 1995. 
This inspection  was conducted  as part  of Operation  Restore  Trust,  a pilot  program 
that  coordinates  Federal,  State,  and  local  anti-fraud  activity in California,  Florida,  New 
York,  Illinois,  and  Texas.  The  program  will target  abuses  in home  health  agencies, 
nursing  facilities,  and  durable  medical  equipment,  including  wound  care  supplies. 
We  selected  claims  for a  1 percent  sample  of beneficiaries  who received  wound  care 
supplies  between  June  1994, the  start  of fee  schedule  reimbursements,  and  February 
1995.  We  applied  the  proposed  DMERC  draft  guidelines  to these  claims  to identify 
questionable  billing practices.  Lastly, we quantified  the  potential  impact  of 
questionable  billing  practices  and  identified  potentially  abusive  suppliers. 
FINDINGS 
Questionable  paymentsof woundcaresuppliesmayaccountfor asmuchastwo-thirds 
of the $98 miUion in Medicare  allowances from June 1994 through February 1995. 
Four  supplies,  hydrogel  wound  filler,  tape,  a hydrogel  dressing  wound  cover,  and  a 
foam  dressing  wound  cover,  account  for almost  half  of the  excessive  utilization.  We 
found  excessive  utilization  in all groups  of wound  care  products.  The  DMERC  D 
found  similar  abuses  in its detailed  review  of wound  care  claims. 
i  Activity is concentrated  in States, suppliers, place of service, and one carrier. 
Almost  two-thirds  of excessive wound  care  payments  was found  in eight  States.  These 
States  are  Puerto  Rico,  Indiana,  New York,  California,  Illinois, Tennessee,  Florida, 
and  Louisiana.  The  five Operation  Restore  Trust  States  account  for over  one-third  of 
the  questioned  amounts.  Three-quarters  of excessive  payments  in our  sample  were 
made  to  48 suppliers  which  represent  7 percent  of the  suppliers  in our  sample.  Less 
than  40 percent  of beneficiaries  resided  in skilled  nursing  or nursing  facilities  but  these 
beneficiaries  received  over  70 percent  of wound  care  benefits.  The  DMERC  C 
allowed  almost  twice the  national  average  per  beneficiary  and  was responsible  for  over 
40 percent  of questionable  wound  care  payments. 
The HCFA  and DMERCS have taken corrective  actions to address wound care abuses 
and continue  to explore  others. 
The  DMERCS,  working  with the  HCF~  published  a draft  policy to clarify wound  care 
coverage  to take  effect  October  1, 1995.  They  have  also identified  suppliers 
responsible  for questionable  billing practices,  some  of which  use  multiple  identification 
numbers.  This has resulted  in both  sanctions  and  continuing  education  for  suppliers. 
However,  DMERC  officials believe  there  are  insufficient  resources  to conduct  the 
necessary  program  integrity  activities.  They  also expressed  frustration  in National 
Supplier  Clearinghouses  inability  to prevent  abusive  suppliers  from  obtaining  provider 
identification  numbers.  The  HCFA  is also considering  bundling ancillary  products 
such  as wound  care  supplies  into  the  reimbursement  for nursing  homes. 
RECOMMENDATION 
A long  term  solution  would  require  HCFA  to bundle  services  in their  Medicare  or 
Medicaid  payments  to nursing  homes.  For  example,  the  nursing  home  patients  that 
received  wound  care  supplies  would  not be  separately  reimbursed  for these  supplies 
but  have  them  included  in the  per  diem  rate  paid  by Medicare  or Medicaid.  We 
continue  to  support  HCFAS efforts  to pursue  a bundling  policy.  To  address  the 
immediate  problems  with wound  care  supplies  identified  in this report,  we recommend 
that: 
(cid:1) HCFA  should  target  their  limited  program  integrity  resources  to those  areas 
identified  as most  vulnerable  to abuse.  This  could  include  edit  screens  at each 
DMERCS  to track  such wound  care  products  as tape  and  hydrogel. 
(cid:1) HCFA  should  continue  to monitor  wound  care  activity  through  1996 to 
determine  if the  level  of questionable  payments  continues.  If questioned 
payments  continue  unabated,  HCFA  may need  to reconsider  the  current  wound 
care  benefit. 
ii 
  COMMENTS 
We  solicited  and  received  comments  on our  draft  reports  from  HCFA  and  other 
concerned  organizations.  The  organizations  that  provided  us with responses  were  the 
Health  Industry  Distributors  Association  (HIDA),  the  Health  Industry  Manufacturers 
Association  (HIMA),  and  the  National  Association  for the  Support  of Long  Term 
Care  (NASL).  The  full text  of their  comments  is provided  in Appendix  C. 
The  HCFA  agreed  with the  recommendations.  In addition,  HCFA  responded  that 
they  have  developed  a legislative  proposal  to require  bundling  of services,  including 
wound  care  supplies,  in Medicare  and  Medicaid  payments  to nursing  homes.  They 
believe  that  this may selve  as an incentive  for nursing  homes  to more  closely monitor 
the  use  of wound  care  supplies. 
The  outside  organizations  commented  that  they  strongly  support  HCFAS expansion  of 
the  national  coverage  policy for wound  care  supplies  and  that  no reduction  in the 
current  scope  of the  benefit  should  be  considered,  They  believe  that  the  DMERCS 
delay  in implementing  wound  care  policies  and  utilization  standards  after  HCFAS 
expansion  of the  policy was the  primary  factor  in creating  an environment  ripe  for 
potential  abusive  practices. 
The  outside  groups  believe  there  are  significant  flaws in the  methodology  we used  to 
determine  the  magnitude  of questionable  billing  of wound  care  supplies.  The  primary 
weakness,  they  believe,  is the  unfair application  of DMERC  guidelines  to  claims  that 
were  not  affected  by these  guidelines. 
While  we believe  the  initial  lack of DMERC  policies  without  utilization  standards  for 
wound  care  supplies  played  a part  in allowing  abuses  to occur,  we do not  believe  it to 
be  the  entire  cause  of abusive  supplier  practices.  Even  without  specific  utilization 
standards,  suppliers  are  supposed  to be  able  to support  the  medical  necessity  of the 
wound  care  products  they  deliver.  Some  of the  examples  of questionable  billings  that 
we encountered  were  not  mere  misunderstandings  of medical  policies  for wound  care. 
For  example,  when  suppliers  are  billing amounts  large  enough  to purchase  12.5 miles 
of tape  or 5 gallons  of hydrogel  wound  filler in a 6-month  period  this would  fall out  of 
even  the  most  generous  clinical  guidelines. 
We  believe  our  methodology  was sound  and  consistent  with prior  OIG  efforts  to 
identify  claims  that  appear  questionable.  In response  to the  organizations  concern 
that  we used  the  DMERCS  proposed  guidelines  for our  review,  we used  these  policies 
because  we felt the  utilization  standards  they  contained  would  provide  us with 
information  on the  scope  and  nature  of the  problems  with wound  care  supply  claims. 
The  supply  industry  had  participated  in the  development  of these  guidelines  and  were 
generally  supportive  of them.  Furthermore,  there  were  no other  non-trade  association 
guidelines  available  for wound  care  supply  utilization  that  were  as extensive  as the 
... 
111  proposed  DMERC  policies.  Finally, we thought  this information  would  be  useful  to 
HCFA  and  the  DMERCS  in preparing  for the  implementation  of the  policy guidelines. 
iv  TABLE  OF  CONTENTS 
PAGE 
SUMMARY  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..i

INTRODI.KHON  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...1

FINDINGS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...7


Excessive  utilization  ofsupplies  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...7

 
Concentration  of Medicare  allowances  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  9

 
HCFA/DMERCcorrective  actions  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...12

RECOMMENDATIONS  . . . . . . . . . . . . . .,  . . . . . . . . . . . . . . . . . . . . . . . . . ...14

APPENDICES

A  Wound Care  Guidelines  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..A-l

B:  Confidence  Intewals  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..B-l

C:  Agency  and  Outside  Organizations  Comments  . . . . . . . . . . . . . . . . . . . . . . .  C-1
 INTRODUCTION 
PURPOSE 
This report identifies  questionable  billing practices  for wound  care  supplies  under 
Medicare  Part B. 
BACKGROUND 
Wound care supplies are  fillers or protective  covers  that  treat  openings  on the  body 
caused  by surgical  procedures,  wounds,  ulcers,  or burns.  Wound  covers  are  flat 
dressing  pads.  Wound  fillers are  dressings  placed  into  open  wounds  to eliminate  dead 
space,  absorb  exudate,  or maintain  a moist  wound  surface.  The  Health  Care 
Financing  Administration  (HCFA)  reimburses  for wound  care  supplies  under  the 
Medicare  Part  B program.  Wound  care  coverage  policy is found  in section  2079 of 
the  Medicare  Carriers  Manual.  The  HCFA  contracts  four  DME  regional  carriers 
(DMERCS)  to process  durable  medical  equipment  claims  including  wound  care 
supplies.  The  DMERCS  issue their  own guidelines  to clarify their  coverage  policy. 
Medicare Part B Allowances for  Wound Care Supplies:  1990-1994 
There  were  significant  changes  in wound  care  activity between  1990 and  1994. 
Medicare  Part  B allowances  were  as low as $50 million  in 1992 and  peaked  in  1993 at 
$132 million,  an increase  of 164 percent.  The  number  of beneficiaries  that  annually 
received  these  supplies  ranged  from  86,600 in 1993 to as high  as 273,300 in  1991.  As 
a result,  allowances  per  beneficiary  varied  from  $199 in 1990 to $1,526 in 1993. 
Between  1993 and  1994 the  number  of Medicare  beneficiaries  that  received  wound 
care  supplies  increased  47 percent. 
In  1994, 61 percent  of the  average  allowance  per  beneficiary  was for specialty 
dressings.  Medicare  fee  schedule  amounts  for specialty  dressings  are  as high  as $35 
for large  hydrogel  wound  covers.  Eleven  of the  specialty  wound  care  products  are 
reimbursed  by Medicare  at over  $10.  Prior  to  1992, Medicare  reimbursed  for wound 
care  supplies  primarily  in a single kit payment.  These  kits were  a compilation  of 
wound  care  supplies  and were  reimbursed  at $8 each  in 1992.  Billing for kits was 
disallowed  in 1992.  However,  component  supplies  contained  in a kit can  still be  billed 
as individual  products.  As a result,  the  number  of wound  care  supplies  has  increased 
over  six times  from  13 million  in 1991 to 81 million  in 1994.  The  table  on the 
following  page  summarizes  surgical  dressing  activity for calendar  years  1990 through 
1994. 
1
 Table  1. Wound Care Supply Activity  1990-1994 
Activity  1990  1991  1992  1993  1994 
Allowances  $53 million  $87 million  $50 million  $132 million  $98 million 
Beneficiaries  266,400  273,300  117,300  86,600  127,300 
Per  Beneficiary  $199  $317  $423  $1,526  $769 
No. of Supplies  N/A  13 million  45 million  69 million  81 million 
l%e HCFA  Broadims h  Coverage Policy for  Wound Care Supplies 
On  March  30, 1994, HCFA  expanded  its coverage  policy for wound  care  supplies.

The  new policy provides  coverage  for primary  and  secondary  dressings  required  for

the  treatment  of a wound  caused  by, or treated  by, a surgical  procedure  that  has been

performed  by a physician  or other  health  care  professional.  Primary  dressings  are

therapeutic  or protective  coverings  applied  directly  to wounds  or lesions  either  on the

skin or caused  by an opening  to the  skin.  These  include  alginate,  foam,  specialty

absorptive,  hydrogel,  hydrocolloid,  and  composite  dressings.  Transparent  film and

contact  layers  also  serve  as primary  dressings.  Secondary  dressings  serve  a therapeutic

or protective  function  and  typically  are  needed  to secure  a primary  dressing.  Items

such  as adhesive  tape,  roll gauze,  and  bandages  are  examples  of secondary  dressings.

T%eRim  Coverage Policy Was More Restnctive 
The  HCFA  national  policy and  the  DMERCS  policies  prior  to March  30, 1994 were 
more  restrictive.  Stringent  requirements  were  placed  on the  type  of dressings,  length 
of treatment,  cause  of wound,  type  of provider,  and  medical  documentation.  The 
DMERCS  policy before  the  expansion  of the  national  policy  covered  only prima~ 
dressings  resulting  from  a surgical  procedure  for usually  no more  than  2 weeks.  This 
policy  stated  that  surgical dressings  for closed  incisions  without  drainage  would  rarely 
be  medically  necessary  for more  than  1 week  and  when an ulcer,  traumatic  wound, 
or burn  has  had  sharp  debridement,  it will be  considered  a surgical  wound  for no 
more  than  2 weeks  from  the  date  of debridement. 
Prior  to March  30, 1994, the  HCFA  national  policy would  allow dressings  to be 
covered  for treatment  of wounds  that  resulted  from  sharp  debridement  (e.g., scalpel, 
laser)  performed  only by physician.  The  DMERC  local  policies  stated  that  dressings 
for other  types  of debridement  (e.g., mechanical,  chemical,  autolytic)  were  not 
covered.  Wound  care  suppliers  were  required  by DMERCS  to submit  a certificate  of 
medical  necessity  to document  the  need  for the  products.  After  the  policy  change  in 
March  1994, this was no longer  required.  The  table  on the  following  page  compares 
the  wound  care  supply  policy before  and  after  March  30, 1994. 
2
 Table  2.  Comparison  of Wound Care Supply Coverage  Policies 
Only primary  dressings  Primary  and  secondary  dressings 
Time  limits  on medical  necessity  As long as medically  necessary 
Dressings  for sharp  debridement  only  Any type  of debridement 
Limited  to physician  treatments  Physician  and  non-physician  treatments 
Certificate  of Medical  Necessity  Certificate  of Medical  Necessity 
required  not  required 
Camer Bomssing  of  Wound Care Supplies 
In June  1992, HCFA  issued  a final rule  designating  four  Durable  Medical  Equipment 
Regional  Carriers  (DMERCS)  to process  all claims for durable  medical  equipment, 
including  wound  care  supplies.  The  four  carriers  are  the  MetraHealth  Insurance 
Company  (DMERC  A), AdminaStar  Federal  (DMERC  B), Palmetto  Government 
Benefits  Administrators  (DMERC  C) and  Cigna  Healthcare  (DMERC  D).  Effective 
October  1, 1993, HCFA  began  the  transition  to the  DMERC  processing  of wound 
care  supply  claims.  During  1994, 56 carriers  also processed  surgical  dressing  claims 
before  the  transition  to DMERCS  was complete.  During  the  transition,  these  carriers 
did not  utilize  the  DMERC  policies;  they  carriers  used  their  own local  policies  to 
process  claims. 
l%e DMER(3  Implement a Fee Schedule and Introduce Nw  Co&s 
Starting  in June  1994, reimbursements  for wound  care  supplies  were  based  on a fee 
schedule.  The  DMERCS  introduced  over  60 codes  for wound  care  products  to 
implement  the  fee  schedule.  Prior  to June,  less than  20 codes  were  used  to identify 
and  reimburse  dressings.  The  DMERCS  granted  a grace  period  for all but  two old 
codes  submitted  through  October  1, 1994.  During  the  grace  period  the  DMERC 
would  crosswalk  the  old code  to the  appropriate  new  code. 
lhe DMERC3  Iksue a Draft Policy to ClarijJ Wound Care Coverage 
The  DMERCS,  working  with HCF~  developed  a policy to clarify the  coverage  of the 
wound  care  benefit.  In January  1995, each  DMERC  requested  comments  on these 
guidelines.  Included  in these  guidelines  are  definitive  utilization  and  medical  necessity 
parameters.  In addition,  modifiers  to the  codes  have  been  added  to identify  the 
number  of wound  sites being  treated.  The  HCFA  and  DMERCS  have  evaluated  the 
comments  and  have  issued  a revised  policy to be  effective  October  1, 1995.  See 
Appendix  A for  a summary  of the  utilization  guidelines. 
3
 This  change  was initiated  in part  as a response  to organizations  in the  wound  care 
community  that  expressed  the  need  for clarification.  For  example,  the  Health  Industry 
Distributors  Association  in cooperation  with the  National  Coalition  for Wound  Care, 
the  National  Association  of Retail  Druggists,  and  the  National  Association  for the 
Support  of Long  Term  Care  developed  consensus  recommendations  for improving  the 
Medicare  wound  care  policy.  These  changes  were  recommended  prior  to the  release 
of the  proposed  changes  in January  1995. 
The General Accounting  OfJice Discloses SimilarAbuses 
The  General  Accounting  Office  (GAO)  issued  a final report,  Medicare:  Excessive 
Payments  for  Medical  Supplies  Continue  Despite  Improvements  (HEHS-95-1  71),  in 
August  1995 concerning  payment  controls  for Medicare  expenditures  of durable 
medical  equipment  with  an emphasis  on wound  care  supplies.  The  GAO  found  a 
lack of system wide  controls  which  led to abuse  in both  Part  A and  Part  B.  For 
example,  the  number  of dressings  billed  per  beneficiary  was nearly  three  times  higher 
under  29 new wound  care  codes.  They  attribute  this to the  absence  of a clearly 
defined  policy. 
Opation  Restore llust  TargetsHealth Care Abuse  in Five States 
Operation  Restore  Trust  is a health  care  anti-fraud  demonstration  project  developed 
within  the  U.S. Department  of Health  and  Human  Services  by the  Office  of Inspector 
General,  the  Health  Care  Financing  Administration,  and  the  Administration  on Aging. 
Its aim  is to coordinate  Federal  and  State  resources  to attack  fraud  and  abuse  in 
home  health  agencies,  nursing  facilities,  and  durable  medical  equipment,  including 
wound  care  supplies.  The  projects  initial  focus will be  in California,  Florida,  New 
York,  Illinois,  and  Texas. 
METHODOLOGY 
To  asses  the  nature  of questionable  billing practices,  we interviewed  DMERC  officials 
including  medical  directors  and  fraud  control  personnel.  Each  DMERC  responded  to 
a questionnaire  concerning  wound  care  supply  processing  guidelines,  the  nature  of 
questionable  billing  practices,  and  corrective  actions  taken. 
To  determine  the  extent  of questionable  billing practices,  we analyzed  a  1 percent 
sample  of wound  care  beneficiaries.  These  beneficiaries  received  supplies  under  one 
of 87 wound  care  supply  codes  in use between  June  1994, the  start  of fee  schedule 
reimbursements,  through  February  1995.  These  claims  are  maintained  in HCFAS 
National  Claims  History  100 percent  Physician/Supplier  database.  Medicare  Part  B 
allowed  $980,270 in wound  care  supplies  for our  sample  of 1,205 beneficiaries  for this 
9-month  period.  Allowed  payments  include  the  80 percent  Medicare  payment  and  the 
20 percent  coinsurance  fee billed  to the  beneficiary. 
4
 We  applied  the  proposed  DMERC  draft  guidelines  to these  claims  to identi~ 
questionable  billing practices.  Although  these  guidelines  were  not  in force  during  the 
review  period,  they  represent  a consensus  concerning  wound  care  policy that  could  be 
systematically  applied  and  measured.  We assumed  the  maximum  allowable  usage  each 
month  for the  month  in which the  supply was billed.  We defined  a questionable 
billing practice  as that  amount  in excess of the  utilization  guideline.  We  assumed  each 
type  of wound  cover  billed  represented  a wound  site.  We reported  Medicare 
allowances  above  the  tolerance  levels by type  of supply,  DMERC,  number  of 
beneficiaries  receiving  supplies,  and  supplier.  To  determine  if a link exits among 
suppliers  suspected  of abusive  billing practices,  we reviewed  data  from  the  National 
Supplier  Clearinghouse  (NSC).  Under  each  provider  identification  number,  the  NSC 
database  includes  the  name  of corporate  officials, addresses,  and  provider  aliases. 
Claims  for tape  supplies  (HCPCS  A4454  and  K0265) were  analyzed  differently.  We 
selected  101 beneficiaries  from  two groups  of a stratified  sample  of 349 beneficiaries 
that  received  tape.  The  first strata  contained  31 beneficiaries  that  received  $1,000 or 
more  in tape.  The  second,  318 beneficiaries  that  received  between  $25 and  $999 in 
tape.  We  selected  all 31 from  the  first strata  and  randomly  selected  70 beneficiaries 
from  the  second.  This  sample  of 101 beneficiaries  represent  $73,848.13  or 52 percent 
of total  allowed  dollars  in tape  claims.  For  each  tape  claim, we assumed  that  the 
beneficiary  used  the  maximum  monthly  allowable  usage  for each  primary  and 
secondary  dressing  billed  during  that  month  according  to the  proposed  DMERC  draft 
guidelines.  The  secondary  dressing  was allocated  the  same  amount  of tape  as the 
primary  dressing.  Dressings  with an adhesive  border  were  not  allocated  tape. 
We  assumed  dressings  less than  or equal  to  16 square  inches  to be  4 inch by 4 inch. 
We assumed  a 6 inch by 8 inch size for dressing  between  16 and  48 square  inches  and 
8 inches  by 8 inches  for  dressings  greater  than  or equal  to 48 square  inches.  We 
allocated  two inches  extra  of tape  for each  side.  Therefore,  a 4 inch by 4 inch 
dressing  was allocated  24 inches  of 1 inch tape.  A 6 inch by 8 inch dressing  was 
allocated  36 inches  and  a 8 inch by 8 inch  dressing,  40 inches.  We  applied  the  current 
fee  schedule  price  of $0.12 per  18 square  inches  to the  tape  allocated.  Each  4 inch by 
4 inch  dressing  used  $0.16 in tape.  A 6 inch by 8 inch dressing  used  $0.24 in tape, 
$0.27 for a 8 inch by 8 inch  dressing.  To  quanti~  the  impact  of questionable  billing 
practices,  we projected  our  findings, by multiplying  Medicare  allowances  above  the 
proposed  DMERC  guidelines  by 100.  Confidence  intervals  for our  projections  are 
presented  in Appendix  B. 
We  compared  the  results  of this analysis with data  supplied  by DMERC  D.  In 
January  1995, DMERC  D required  30 suppliers  that  had  been  placed  on prepayment 
review  to submit  documentation  to support  future  claims.  The  DMERC  D, with 
assistance  from  nurses  in the  Wound,  Ostomy  and  Continence  Nurses  Society, 
reviewed  687 claims  for 525 beneficiaries  from  14 suppliers  that  continued  to submit 
wound  care  claims.  The  687 claims averaged  $433, $302 of which was for hydrogel 
and  foam  dressings.  Almost  60 percent  of the wound  care  supplies  billed  were  for 
gauze.  However,  the  allowances  for these  gauze  products  represent  only 7 percent  of 
5  all wound  care  allowances  reviewed.  The  nurses  reviewed  these  documents  to 
determine  the  actual  type  and  number  of wound  care  supplies  needed  for effective 
treatment.  We  applied  the  DMERC  D fee  schedule  prices  to the  units  billed  and  the 
units  allowed  to quanti&  the  effect  of their  adjustments.  We  used  June  1994 through 
February  1995 data  to provide  unit  costs when  prices  were  unavailable  in the  DMERC 
D fee  schedule. 
Report l%xntadon 
This  report  is one  of three  reports  concerning  Medicare  payments  for wound  care 
supplies.  The  second  report,  Marketing  of Wound  Care  Supplies  (OEI-03-94-00791) 
describes  supplier  and  nursing  home  practices  that  can  lead  to  questionable  payments 
and  examines  issues  concerning  Medicare  beneficiaries  use  of wound  care  supplies. 
The  third  report,  Wound  Care  Supplies:  operation  Restore  Trust Data  (OEI-03-94-
00792),  consolidates  information  presented  in the  other  two wound  care  reports  as it 
pertain  to the  five Operation  Restore  Trust  States. 
This  inspection  was conducted  in accordance  with the  Quality  Standards  for  Inspections 
issued  by the  Presidents  Council  on Integrity  and  Efficiency  and  is part  of Operation 
Restore  Trust. 
6
 FINDINGS

QUESTIONABLE  PAYMENTS  FOR  WOUND  CARE  SUPPLIES  MAY 
ACCOUNT  FOR  AS MUCH  AS TWO-THIRDS  OF THE  $98 MILLION  IN 
MEDICARE  ALLOWANCES  FROM  JUNE  1994 THROUGH  FEBRUARY  1995. 
Medicare  Part  B allowed  $65 million  from  June  1994 through  February  1995 for 46 
million  wound  care  supplies  that  exceed  the  proposed  DMERC  guidelines.  This 
represents  66 percent  of $98 million  in Medicare  Part  B allowances  and  57 percent  of 
the  81 million  wound  care  supplies  provided  to beneficiaries. 
Excessive utilization evidknt in aU wound care p&k3. 
Each  group  of wound  care  products  showed  a significant  degree  of questionable  billing 
Transparent  film led with  80 percent  of its activity that  exceeded  utilization  guidelines. 
The  group  with the  smallest  level,  alginate  dressings,  had  40 percent  of the  Medicare 
allowance  and  50 percent  of the  units  that  exceed  utilization  guidelines.  The  table 
below  summarizes  the  excessive  allowances  and  units  for each  group  of wound  care 
product.  The  total  figures  are  the  amounts  that  exceeded  utilization  guidelines,  The 
percentages  represent  the  portion  of the  total  billings for that  group  over  the  standard. 
Table  3.  Excessive  Allowances  and Units by Wound Care Produet 
Hydrogel  Dressings  $24.8 million  77%  2.4 million  7470 
Tape  $9.8 million  68%  5.1 million  68%0 
Gauze  $7.8 million  49%  33.0 million  53% 
Foam  Dressings  $7.4 million  70%  0.9 million  68% 
Specialty  Absorptive  Dressings  $4.0 million  62%  1.8 million  63% 
Alginate  Dressings  $2.9 million  40%  0.5 million  50% 
1 
Other  Supplies  $2.8 million  7770  0.7 million  82% 
Transparent  Film  $2.3 million  80%  0.8 million  80% 
Hydrocolloid  Dressings  $2.0 million  54%  0.6 million  65% 
Composite  Dressings  $0.7 million  7170  0.2 million  69% 
Contact  Layer  $0.0 million  N/A  0.0 million  N/A 
7
 Four supplies account for almost half of the questionable Mdicare  allowances. 
Medicare  allowances  for hydrogel  wound  filler, tape,  a hydrogel  dressing  wound  cover, 
and  a foam  dressing  wound  cover  that  exceeded  utilization  guidelines  totaled  $31 
million.  These  supplies  represent  48 percent  of excess allowances  but  only  15 percent 
of the  46 million  units  that  were  overbilled.  The  wide  range  of prices  for wound  care 
supplies  cause  this  concentration.  Medicare  allowed  an average  of $10 for  each 
hydrogel  dressing  supply, while  gauze  products  averaged  26 cents  each. 
A further  analysis  of tape  and  hydrogel  wound  filler illustrates  the  magnitude  of these 
questionable  billings.  From  June  1994 through  February  1995, $10 million  of 
Medicares  $14 million  allowance  for tape  appears  questionable.  For  95 percent  of 
beneficiaries  in the  sample,  some  portion  of their  tape  expenditures  was questioned. 
one-quarter  of these  beneficiaries  had  at least  $1,000 in tape  questioned.  Applying 
tape  to  90 4 x 4 pads  per  month,  it would  take  5 years  to consume  $1,000. 
one  beneficiary  was charged  with $5,290 in tape  over  a 6-month  period,  almost  $5,000 
of which  appears  excessive.  Medicare  paid  for, but  probably  did not  receive,  66,000 
feet  or  12.5 miles  of one-inch  tape.  This beneficiary  needed  only $324 or 2,700 feet  in 
tape  if all the  dressings  purchased  were  used  to the  maximum  allowed.  This 
beneficiary  would  need  to use  over  33,000 4 x 4 gauze  pads  to use  this much  tape,  a 
30 year  supply  at 90 pads  per  month. 
Another  beneficiary  was charged  with $11,880 in hydrogel  wound  filler,  $11,533  of 
which  may be  unnecessary.  This beneficiarys  record  showed  payments  for  120 units  of 
one-ounce  hydrogel  wound  filler  each  month  for 6 consecutive  months,  over  5 gallons. 
The  proposed  guidelines  call for three  per  month  or three  ounces  per  wound  site, 
which  should  have  cost Medicare  $347.  The  guidelines  state  that  hydrogel  filler  used 
for  each  wound  should  not  exceed  the  amount  needed  to line the  surface  of the 
wound,  not  fill the  wound  cavity. 
T%eDMERC  D find  similar abuses in its review of wound care clizizm. 
The  findings  from  the  DMERC  D review  of 687 wound  care  claims  submitted  by

suppliers  on pre-payment  review  mirrors  the  abuses  nationwide.  The  DMERC  D

disallowed  61 percent  of the  112,000 wound  care  supplies  in its review.  As a result,  54

percent  of the  almost  $300,000 in wound  care  claims were  questioned.  Tape

accounted  for  only 5 percent  of the  charges  reviewed  by the  DMERC  as opposed  to

15 percent  nationally.  However,  the  DMERC  also questioned  almost  two-thirds  of all

tape.  The  table  on the  following  page  presents  the  percentage  of the  charges  and

units  submitted  for each  group  of wound  care  products  that  were  not  allowed  by

DMERC  D.

8
 Table 4.  Summary of DMERC  D Review  of Wound Care Claims 
Alginate  Dressings
 37%  42% 
Composite  Dressings
 56%  56% 
Foam  Dressings
 52%  49% 
Gauze
 65Y0  67% 
Hydrocolloid  Dressings
 46V0  46% 
Hydrogel  Dressings
 54%  52% 
Specialty  Absorptive  Dressings
 3070  32% 
Tape
 63%  63% 
Transparent  Film
 52%  51% 
Other  Supplies
 69V0  64% 
ACTIVITY  IS CONCENTRATED  IN STATES,  SUPPLIERS,  PLACE  OF 
SERVICE,  AND  ONE  CARRIER. 
Almost  two-think  of excessive wound care payments was found  in eight States. 
Eight  States  account  for $42 million  or 65 percent  of the  Medicare  allowances  that 
exceeded  the  DMERC  guidelines.  Two States  with relatively  small  Medicare 
populations,  Puerto  Rico  and  Indiana  were  included  in this group.  The  other  six 
States  are  New  York,  California,  Illinois, Tennessee,  Florida,  and  Louisiana.  These 
eight  States  were  also responsible  for $62 million  or 63 percent  of the  total  Medicare 
allowances. 
l%e fie  Opration  Restore  Dust States account for over one-third pement  of the 
questioned al.bwances. 
The  five States  targeted  by Operation  Restore  Trust  accounted  for  35 percent  or $22 
million  of Medicare  allowances  for wound  care  supplies  that  exceeded  utilization 
guidelines.  Non-tape  accounted  for over  $18 million  of the  questioned  payments,  tape 
approached  $4 million.  Four  of these  States,  New York,  California,  Illinois  and 
Florida  ranked  in the  top  seven.  The  fifth State,  Texas,  received  $1.3 million  in 
excessive  payments.  These  States  had  39,200 beneficiaries  that  received  wound  care 
supplies.  Over  25,000 of these  beneficiaries  showed  some  excess utilization.  l%ree-q.umem  of excessive payrnenfi in our sample were made to 48 suppliers which 
represent 7percent  of the supplim  in our sample. 
Out  of the  $980,270 in wound  care  claims  in our  sample,  we found  $546,665  in 
questionable  non-tape  payments.  These  amounts  represent  actual  claims  before 
projections  were  applied.  Three-quarters  of these  excessive  payments  for non-tape 
wound  care  products  were  paid  to 46 suppliers.  The  excessive  Medicare  payments  to 
these  suppliers  ranged  from  $2,752 to $91,784.  Two  other  suppliers  that  received  at 
least  $2,752 in excessive  tape  payments  were  not  in this group  of 46.  This  total  of 48 
represents  7 percent  of all suppliers  in our  sample.  Fifty-seven  percent  of the 
suppliers  in our  sample  (402 of 699) received  some  payments  for supplies  that 
exceeded  utilization  guidelines.  One  supplier  received  17 percent  of all excessive 
payments  for non-tape  supplies  and  14 percent  for tape.  This  supplier  received  more 
than  four  times  the  questionable  non-tape  payments  than  the  next  supplier,  and  almost 
50 percent  more  for tape. 
From  June  1994 through  February  1995, 71 percent  of all Medicare  payments  for 
wound  care  supplies  were  made  to 48 suppliers  or 7 percent  of all suppliers  in our 
sample.  These  48 suppliers  each  received  payments  of at least  $5,000,  Conversely, 
more  than  56 percent  of suppliers  received  payments  of $100 or less and  in total  these 
account  for less than  1 percent  of all allowances.  Forty-one  of the  48 suppliers  were 
those  previously  identified  as receiving  a high concentration  of excessive  payments. 
Less than 40 pement  of beneficiaria  resided h  SkiUedNuning or Ntig  Facilities but 
these beneficituies received over 70 percent of wound care benejh. 
Almost  72 percent  of Medicare  allowed  payments  for wound  care  supplies  in our 
sample  was made  for beneficiaries  that  resided  in skilled  nursing  (SNF)  or nursing 
facilities  (NF).  This  same  percentage  also applies  for beneficiaries  in SNFS and  NFs 
that  received  non-tape  supplies  that  exceeded  utilization  guidelines.  Only 38 percent 
of the  beneficiaries  in our  sample  resided  in SNFS and  NFs.  Almost  52 percent  of the 
beneficiaries  lived at home.  However,  beneficiaries  that  received  excessive  non-tape 
supplies  was almost  equally  divided  between  residents  of SNFS and  NFs  and  homes. 
lk  DMERC  C allowed almost twice the nationul average per benejichuy  and was 
responsible for over 40 pezent  of questionable wound care payments. 
The  DMERC  C allowed  charge  per  beneficiary  for wound  care  supplies  was $1,385, or 
almost  twice  the  national  average.  The  allowed  charge  per  beneficiary  ranged  from 
$606 to $832 at the  other  DMERCS.  The  DMERC  C made  over  $41 million  or 40 
percent  of all payments  for wound  care  from  June  1994 through  February  1995.  This 
was almost  twice what  was paid  by DMERC  A and  DMERC  B, and  four  times  that  of 
DMERC  D. 
The  pattern  is similar  for submitted  charges.  The  $81 million  submitted  to DMERC  C 
was 36 percent  higher  than  DMERC  A and  almost  five times  of what  was submitted 
10  to DMERCD.  Foreach  beneficia~,  suppliers  submitted  charges  of$2,l92to 
DMERCC,  twice the  national  average.  Thetable  below  summarizes  wound  care 
payments  by carrier  from  our  sample.  The  first group  contains  the  total  dollars, 
number  of beneficiaries,  and  charge  per  beneficiary  submitted  to each  carrier  in our 
sample.  The  second  group  contains  the  allowed  amounts  for  each  carrier.  Some 
beneficiaries  received  supplies  through  more  than  one  carrier. 
Table  5. Total Wound Care Supply Payments Per Carrier 
DMERC A  $59,317,300  43,800  $1,354  $21,385,200  35,300  $606 
DMERC  B  $48,766,300  33,400  $1,460  $21,983,500  26,400  $832 
DMERC  C  $80,658,200  36,800  $2,192  $41,420,600  29,900  $1,385 
DMERC  D  $16,415,700  23,800  $689  $10,493,400  16,700  $628 
Other  $29.876,600  86,600  $345  $2.744.400  15.000  $183 
The  DMERC  C made  44 percent  of the  non-tape  payments  and  49 percent  of tape 
payments  that  exceeded  utilization  guidelines.  The  DMERC  C paid  for  29 percent  of 
the  beneficiaries  that  received  excessive  non-tape  supplies,  43 percent  for  tape,  The 
table  below  summarizes  the  non-tape  and  tape  payments  that  exceeded  utilization 
guidelines  by each  carrier. 
Table  6. Excessive  Wound Care Supply Payments Per Carrier 
DMERC  A  $9,933,753  18%  $1,960,304  20%  $11,894,057  18% 
DMERC  B  $13,228,005  24%  $2,402,453  25?Z0  $15,630,458  24% 
DMERC  C  $24,242,717  44%  $4,618,661  4770  $28,861,378  45% 
DMERC  D  $5,554,847  1070  $713,710  7910  $6,268,557  10% 
Other  $1,707,097  3%  $97,072  170  $1.804.169  3% 
11 These  payments  almost  double  what  was paid  by DMERC  B which was responsible 
forapproximately  one-quarter  ofexcessive  payments.  The  DMERC  A made  18 
percent  onnon-tape  and20percent  oftapepapents  that  were  questioned.  0nly2 
percent  of non-tape  and  5 percent  of tape  payments  that  exceeded  DMERC 
guidelines  were  made  by DMERC  D. 
THE  HCFA  AND  DMERCS HAVE  TAKEN  CORRIKTNE  ACTIONS  TO 
ADDRESS  WOUND  CARE ABUSES  AND  CONTINUE  TO EXPLORE  OTHERS. 
Reviked wound care policy to ckzrijj coverage guidelines 
The  most  significant  action  taken  by the  HCFA  to address  abuses  in wound  care  was 
the  publication  of revised  a coverage  policy.  This policy developed  along  with  the 
DMERCS,  provides  specific  utilization  and  medical  necessity  standards  that  should 
clarify acceptable  clinical  practices. 
%  DMERG3 idkntijied 54 abusive suppliem, some  of which are the same companies 
using thfikrentprovider identification numbem 
Through  pre- and  postpayment  reviews,  the  DMERCS  have  identified  54 suppliers 
suspected  of questionable  billing  practices.  The  DMERC  D identified  30 of these 
suppliers;  DMERC  C, 17, DMERC  B, 10, and  DMERC  ~  7.  Seven  suppliers  were 
identified  by more  than  one  DMERC.  The  54 suppliers  include  21 identified  in this 
report.  The  DMERCS  require  these  suppliers  to document  future  claims.  The 
DMERCS  also  referred  suppliers  to the  Office  of Inspector  General  for investigation 
or suspended  their  payments.  The  DMERC  A has  even  dedicated  a portion  of the 
medical  review  staff to wound  care.  However,  DMERC  officials believe  they  do not 
have  the  resources  necessary  to perform  the  proper  level  of review  needed  to  assure 
sufficient  control.  In certain  situations,  questionable  billing was attributed  to  a 
misunderstanding  of wound  care  policy.  In these  cases, DMERCS  provide  the 
necessa~  education  to clari~  the  acceptable  guidelines. 
In total,  81 suppliers  were  identified  as being  suspected  of questionable  billing 
practices.  Of the  these  suppliers,  33 were  identified  by DMERCS,  21 by both  the 
DMERCS  and  the  Office  of Inspector  General  (OIG),  and  27 solely by the  OIG, 
These  27 suppliers  were  part  of the  48 suppliers  identified  as receiving  three  quarters 
of the  excessive  payments  in our  sample.  Some  of the  suppliers  had  common 
identifying  information  linking  them  together.  One  group  of three  suppliers  shared  a 
common  official.  Another  group  of two suppliers  also shared  common  officials.  One 
group  of four  suppliers  shared  a common  address.  Another  two suppliers  shared  a 
common  address.  The  DMERCS  expressed  frustration  in National  Supply 
Clearinghouses  inability  to prevent  this abuse. 
12
 i%e HCFA  k pumuing altemathxx  to the cuwent cost reirnbumement rnecharukn. 
The  HCFA  continues  to pursue  a systematic  solution  to the  abuses  presented  in this 
and  other  reports  through  a requirement  for bundling of services  in nursing  home 
settings.  Under  such  an approach,  the  nursing  home  would  be  responsible  for 
providing  commonly  needed  services  to residents  of that  facility, rather  than  allowing 
for  separate  billing by suppliers.  Such  a solution  would  eliminate  the  incentives 
suppliers  now have  to  aggressively  seek  out patients  in nursing  homes  and  market 
their  products  inappropriately  in those  settings.  It would  also ensure  that  nursing 
homes  take  on  appropriate  responsibilities  for services  and  supplies  delivered  to 
residents  in their  facilities. 
13
 RECOMMENDATIONS

Mter  Medicare's  e~ansion  of thewound  care  benefit  in March  1994, it is not 
surprising  that  recent  activity  shows an increase  in the  number  of beneficiaries.  This 
coupled  with  the  use  of costlier  specialty  products  have  resulted  in an increase  in 
Medicare  expenditures.  In both  January  and  February  1995 wound  care  activity was 
higher  than  in any month  in 1994.  With  an increase  in wound  care  activity  and  the 
level  of abuse  identified  in this report,  the  need  for stricter  controls  is evident.  We 
believe  the  new guidelines  should  provide  the  framework  for those  controls.  We  also 
support  ongoing  activity in HCFA  and  the  DMERCS  to educate  providers  and 
suppliers  about  proper  billing for such supplies.  We  hope  the  information  contained 
in this  report  is helpful  in their  efforts. 
A long  term  solution  to wound  care  supply  abuses  would  require  HCFA  to bundle 
services  in their  Medicare  or Medicaid  payments  to nursing  homes.  For  example,  the 
nursing  home  patients  that  received  wound  care  supplies  would  not  be  separately 
reimbursed  for these  supplies  but  have  them  included  in the  per  diem  rate  paid  by 
Medicare  or Medicaid.  We  continue  to support  HCFAS efforts  to pursue  a bundling 
policy.  We  believe  the  level  of abuse  we found  in skilled  nursing  and  nursing  facilities 
under  Medicare  Part  B enhances  this position. 
To  address  the  immediate  problems  with wound  care  supplies  identified  in this report, 
we recommend  that: 
	 HCFA  should  target  their  limited  program  integrity  resources  to those  areas 
identified  as most  vulnerable  to abuse.  This  could  include  edit  screens  at each 
DMERCS  to track  such wound  care  products  as tape  and  hydrogel. 
	 HCFA  should  continue  to monitor  wound  care  activity  through  1996 to 
determine  if the  level  of questionable  payments  continues.  If questioned 
payments  continue  unabated,  HCFA  may need  to reconsider  the  current  wound 
care  benefit. 
AGENCY  AND  OUTSIDE  ORGANIZATIONS  COMMENTS 
We  solicited  and  received  comments  on our  draft  reports  from  HCFA  and  other 
concerned  organizations.  The  organizations  that  provided  us with responses  were  the 
Health  Industry  Distributors  Association  (HIDA),  the  Health  Industry  Manufacturers 
Association  (HIMA),  and  the  National  Association  for the  Support  of Long  Term 
Care  (NASL).  The  complete  text  of their  responses  is included  in Appendix  C.  A 
summary  of the  comments  and  our response  follows. 
14
 HCFA  CommenB 
The  HCFA  agreed  with the  recommendations.  In addition,  HCFA  responded  that 
they  have  developed  a legislative  proposal  to require  bundling  of services,  including 
wound  care  supplies,  in Medicare  and  Medicaid  payments  to nursing  homes.  They 
believe  that  this may serve  as an incentive  for nursing  homes  to more  closely monitor 
the  use  of wound  care  supplies.  The  HCFA  also provided  us with  a technical 
comment  concerning  the  need  to emphasize  the  difference  between  national  and 
regional  coverage  policies  on wound  care  supplies. 
0u13ide Oganizalions  Comments 
The  organizations  commented  that  they  strongly  support  HCFAS expansion  of the

national  coverage  policy for wound  care  supplies  and  that  no reduction  in the  current

scope  of the  benefit  should  be  considered.  They  believe  that  the  DMERCS  delay  in

implementing  wound  care  policies  and  utilization  standards  after  HCFAS expansion  of

the  policy was the  primary  factor  in creating  an environment  ripe  for potential  abusive

practices.  While  the  organizations  support  the  need  for implementing  DMERC

medical  policies  for wound  care  supplies  that  reflect  current  clinical  practice,  they  also

believe  that  some  of the  utilization  standards  in the  DMERC  policy to be

implemented  on October  1, 1995 are  incorrect  and  need  to be  resolved  before

implementation  occurs.  The  NASL  and  HIMA  also stated  that  the  DMERC  policy

prior  to March  30, 1994 that  we discuss in the  background  section  of our  report  was

never  fully implemented.

All these  groups  believe  there  are  significant  flaws in the  methodology  we used  to

determine  the  magnitude  of questionable  billing  of wound  care  supplies.  The  primary

weakness,  they  believe,  is the  unfair application  of DMERC  guidelines  to  claims  that

were  not  affected  by these  guidelines.  Secondly,  the  outside  organizations  feel  the

OIGS failure  to determine  the  appropriateness  of wound  treatment  on an individual

basis  does  not  allow for  an effective  analysis.  For  example,  the  number  of wound

covers  applied  to  a patient  with multiple  wounds  may exceed  the  DMERC  guideline

for  a single wound  cover.  In addition,  NASL  cited  that  the  OIG  did not  account  for

the  nature  of the  dressing,  i.e., primary  or secondary,  which  also  affects  the  frequency

of changes.  The  NASL  also believes  that  only the  largest  claims were  targeted  for

review  which  skewed  the  findings.

The  HIDA  and  HIMA  believe  that  the  new DMERC  guidelines  will have  a positive

effect  in addressing  any abuses  in wound  supplies  that  may exist.  The  HIDA  wanted

the  OIG  to highlight  that  most  suppliers  do not  engage  in questionable  billing  practice.

The  NASL  and  HIMA  recommend  a future  review  of wound  supply  activity  to  ensure

the  proper  integrity  of the  benefit.  The  HIDA  recommends  (1) the  use  of

Certificates  of Medical  Necessity  for  abusive  suppliers  and  overutilized  items,  (2) the

establishment  of a technical  review  committee  representing  suppliers,  patients,  and

clinicians  to work  with HCFA  and  the  DMERCS  in analyzing  claim  activity,  and  (3)

bundling  most  medical  supplies  into  the  nursing  facilities  Part  A claim  only for the  first

15  100 days.  Finally,  HIM  believes  HCFAand  OIGshould  give themedicalpoliq 
guidelines  a chance  to take  effect  before  they reach  any conclusion  on the 
recommendation  regarding  bundling  of wound  care  products. 
OIG  RESPONSE 
While  we believe  the  initial  lack of DMERC  policies  without  utilization  standards  for 
wound  care  supplies  played  a part  in allowing abuses  to occur, we do not  believe  it to 
be  the  entire  cause  of abusive  supplier  practices.  Even  without  specific  utilization 
standards,  suppliers  are  supposed  to be  able  to support  the  medical  necessity  of the 
wound  care  products  they  deliver.  Some  of the  examples  of questionable  billings that 
we encountered  were  not  mere  misunderstandings  of medical  policies  for wound  care. 
For  example,  when  suppliers  are  billing for amounts  large  enough  to purchase  12.5 
miles  of tape  or 5 gallons  of hydrogel  wound  filler in a 6-month  period  this would  fall 
out  of even  the  most  generous  clinical guidelines. 
We  have  made  changes  in the  report  to reflect  the  comments  that  HCFA  made  about 
clari~ing  the  difference  between  national  and local  policies.  We  have  also added 
additional  language  in the  report  to emphasize  that  during  the  phase-in  of the 
DMERCS,  the  previous  carriers  were  still processing  claims using their  own policies. 
However,  we believe  our  methodology  was sound  and  consistent  with prior  OIG 
efforts  to identi&  claims  that  appear  questionable.  We did not  target  only the  largest 
claims  for our  review,  we selected  a statistically  valid random  sample  of all wound  care 
claims.  In response  to the  organizations  concern  that  we used  the  DMERCS 
proposed  guidelines  for our  review, we used  these  policies  because  we felt the 
utilization  standards  they  contained  would  provide  us with information  on the  scope 
and  nature  of the  problems  with wound  care  supply  claims.  The  supply  industry  had 
participated  in the  development  of these  guidelines  and were  generally  supportive  of 
them.  Furthermore,  there  were  no other  non-trade  association  guidelines  available  for 
wound  care  supply  utilization  that  were  as extensive  as the  proposed  DMERC  policies. 
Finally,  we thought  this information  would  be useful  to HCFA  and  the  DMERCS  in 
preparing  for the  implementation  of the  policy guidelines. 
For  individual  claims, we assumed  each  type of wound  supply  used  on a patient  was 
medically  necessary.  It was the  utilization  of each  type  of wound  supply  that  we 
reviewed.  It is possible,  as suggested  by outside  organizations,  that  what  appears  to be 
excessive  utilization  could  be  explained  by the  same  type  of dressing  being  used  on 
more  than  one  wound.  However,  the  opposite  is also the  case.  Various  kinds  of 
dressings  could  have  been  used  on only one wound. 
As we noted  in this report,  DMERC  D reviewed  a sample  of billings for wound  care 
supplies.  They  did determine  the  actual  number  and  type  of wound  care  supplies 
needed  for effective  treatment.  Based  on the findings  of the  medical  review,  they 
16
 disallowed  61 percent  of the  claims.  In addition,  the  General  Accounting  Office  found 
extensive  overbilling  in its review  of wound  supplies, 
Our  data  was intended  as an early warning  to HCFA  about  the  scope  of potential 
abuse  concerning  wound  care  supplies. 
17
 APPENDIX  A

WOUND  CARE  SUPPLY  UTILIZATION  GUIDELINES 
OCTOBER  1, 1995 
HCPCS  WOUND  CARE  PRODU(X  STANDARD

K0196  Alginatedressingwoundcover, without  adhesive,  16 sq. in. or less  llday

K0197  Alginate  dressing wound  cover, without  adhesive,  > =  16 sq. in. e = 48 sq. in.  Vday

K0198  Alginate  dressing wound  cover, without  adhesive, more  than 48 sq. in.  I/day

K0199  Alginate  dressing wound  filler, per 6 inches  I/day

K0203  Composite  dressing wound  cover, with adhesive,  16 sq. in. or less  3/weelr

K0204  Composite  dressing wound  cover, with adhesive,  > =  16 sq. in. < = 48 sq. in.  3iweek

K0205  Composite  dressing wound  cover, with adhesive, more  than 48 sq. in.  3fweek

K0206  Contact  layer, 16 sq. in. or less  I/week

K0207  Contact  layer, > =  16 sq. in. <=  48 sq. in.  Vweek

K0208  Contact  layer, more  than 48 sq. in.  liweek

K0209  Foam  dressing wound  cover, without  adhesive,  16 sq. in. or less  3/week

KO21O  Foam  dressing wound  cover, without  adhesive,  > =  16 sq. in. < = 48 sq. in.  31week

K0211  Foam  dressing wound  cover, without  adhesive, more  than 48 sq. in.  3Jweek

K0212  Foam  dressing wound  cover, with adhesive,  16 sq. in. or less  3/week

K0213  Foam  dressing wound  cover, with adhesive,  > =  16 sq. in. e = 48 sq.in  3~eek

K0214  Foam  dressing wound  cover, with adhesive,  more than 48 sq. in.  3~eek

K0215  Foam  dressing wound  filler, per gram  I/day

K0216  Gauze  non-impregnated,  without  adhesive,  16 sq. in. or less  31day

K0217  Gauze  non-impregnated,  without  adhesive,  > =  16 sq. in. < = 48 sq. in.  3/day

K0218  Gauze  non-impregnated,  without  adhesive, more  than 48 sq. in.  3/day

K0219  Gauze  non-impregnated,  with adhesive,  16 sq. in. or less  I/day

K0220  Gauze  non-impregnated,  with adhesive,  > =  16 sq. in. < = 48 sq.in.  llday

K0221  Gauze  non-impregnated,  with adhesive, more  than 48 sq. in.  I/day

K0222  Gauze  impregnated,  without  adhesive,  16 sq. in. or less  llday

K0223  Gauze  impregnated,  without  adhesive,  > =  16 sq. in. c = 48 sq. in.  I/day

K0224  Gauze  impregnated,  without  adhesive, more  than 48 sq. in.  Vday

K0228  Gauze  impregnated,  without  adhesive,  16 sq. in. or less  I/day

K0229  Gauze  impregnated,  without  adhesive,  > =  16 sq. in. <=  48 Sq.in.  Vday

K0230  Gauze  impregnated,  without  adhesive, more  than 48 sq. in.  I/day

K0263  Gauze  elastic, all types, per linear yard  same  as primary

K0264  Gauze  nonelastic,  per linear yard  same as primary

K0266  Gauze  impregnated,  any width, per linear yard  same as prima~

K0234  Hydrocolloid  dressing wound  cover, without  adhesive,  16 sq. in. or less  3~eek

K0235  Hydrocolloid  dressing wound  cover, without  adhesive,  > = 16 sq. in. < = 48 sq. in.  3jweek

K0236  Hydrocolloid  dressing wound  cover, without  adhesive, more  than 48 sq. in.  3/week

K0237  Hydrocolloid  dressing wound  cover, with adhesive,  16 sq. in. or less  3~eek

K0238  Hydrocolloid  dressing wound  cover, with adhesive,  > =  16 sq. in. < = 48 sq. in.  3/week

K0239  Hydrocolloid  dressing wound  cover, with adhesive, more  than  48 sq. in.  3/week

K0240  Hydrocolloid  dressing wound  filler, paste, per fluid ounce  3/week

K0241  Hydrocolloid  dressing wound  filler, dry form, per gram  3/week

A-1
 HCPC?3  WOUND  CARE  PRODUCT
 STANDARD 
K0242  Hydrogel  dressing wound  cover, without  adhesive,  16 sq. in. or less
 Vday 
K0243  Hydrogel  dressing wound  cover, without  adhesive,  > =  16 sq. in. < = 48 sq. in.
 I/day 
K0244  Hydrogel  dressing wound  cover, without  adhesive, more  than 48 sq. in.
 llday 
K0245  Hydrogel  dressing wound  cover, with adhesive,  16 sq. in. or less
 3/week 
K0246  Hydrogel  dressing wound  cover, with adhesive,  > =  16 sq. in. c=  48 sq. in.
 3&+eek 
K0247  Hydrogel  dressing wound  cover, with adhesive, more  than 48 sq. in.
 3/week 
K0248  Hydrogel  dressing wound  tiller, gel, per fluid ounce
 3/month 
K0249  Hydrogel  dressing wound  filler, dry form, per gram

K0251  Specialty absorptive  dressing wound  cover, 
without  adhesive,  16 sq. in. or Iess  I/day 
K0252  Specialty absorptive  dressing wound  cover, 
without  adhesive,  > =  16 sq. in < = 48 sq. in.  Vday 
K0253  Specialty absorptive  dressing wound  cover, 
without  adhesive,  more  than 48 sq. in.  I/day 
K0254  Specialty absorptive  dressing wound  cover, 
with adhesive,  16 sq. in. or less  llevery  other  day 
K0255  Specialty absorptive  dressing wound  cover, 
with adhesive,  > =  16 sq. in c = 48 sq. in.  l/every  other  day 
K0256  Specialty absorptive  dressing wound  cover, 
with adhesive,  more  than 48 sq. in.  l/every  other  day 
K0257  Transparent  film, 16 sq. in. or less, each dressing
 3fweek 
K0258  Transparent  film, > =  16 sq. in. < = 48 sq. in.
 3iweek 
K0259  Transparent  film, more  than 48 sq. in.
 3/week 
K0154  Wound  pouch,  each
 3/week 
K0261  Wound  filler, not elsewhere  classified, gel/paste, per fluid ounce
 I/day 
K0262  Wound  filler, not elsewhere  classified, dry form, per gram

A4460  Elastic bandage,  per roll
 ljweek 
K0265  Tape,  all types, per  18 sq. in.
 per wound  cover 
A4454  Tape,  all types, all sizes
 per wound  cover 
A-2
 APPENDIX  B

CONFIDENCE  INTERVALS 
We reported  our  projected  totals  by multiplying  100 by the  point  estimates  in our 
samples.  The  point  estimates  represent  the  total  allowance,  number  of supplies,  or 
number  of beneficiaries.  The  tables  below  include  confidence  interval  columns.  The 
number  provided  in this column  is the  semi-width  of the  confidence  interval  for each 
of the  projected  totals.  The  semi-width  is the  standard  error  of the  projection 
multiplied  by 1.96 when  computing  confidence  intervals  at the  95 percent  level.  The 
semi-width  added  to or subtracted  from  the  estimated  mean  or total  (projection) 
provides  a 95 percent  confidence  interval.  The  table  title  numbers  below  correspond 
with  the  table  numbers  in the  report. 
Table 1. Wound  Cam Supply Activily  1990-1994 
B-1
 Table 3. Exeesak Alhmanees and Units by Wound Care Pmduel 
II  I Total  I  +/- $1,812,399  I  $6,249,390  I  +/- 718,681  I  2,849,300  II

Specialty Absorptive 
Questionable  +/- $1,432,297  $3,963,916  +1- 559,430  1,768,200
Dressings 
Percentage  +/- 6%  62%  +1-6%  63% 
Total  +/- $1,322,270  $3,613,564  +/- 289,025  909,000 
Other Supplies 
Questionable  +/- $1,110,985  $2,792,247  +/- 261,352  748,600 
Percentage  +/- 18%  77%  +/- 8%  82% 
1!  Total  +/- $18,109,615  $98,026,991  +/- 9,200,087  80,928,100 
JI
II  I Tape  I  +/- $1,494,300  I  $9,026,991  ]  Cannot Project  II

II  Questioned
 I  I I
 I

Non-Tape  +/- $12,696,195  $54,666,420  +1- 5,468,348  40,982,000 
B-2
 Top Four Wound  (hre .SUppka That Exceded  UtilimtionGuidelines 
Hydrogel filler - K0248/KO148KE 
Hydrogel cover -K0244/KO148KD  +/- $6,988,253  $21,149,221 
Foam dressing cover -K0209/KO151KB 
Tape -A44541K0265  +/- $1,494,300  $9,792,200 
Wound Care Mivity  -Eight Stak 
IINon-Tape  -8  States  +1-$17,514,890  $61,703,540  +/- $12,418,648  $37,017,607  +/- 3,012  31,900 
I 
Tape -8  states  included  +/- $705,562  $5,142,581  +/- 3,788  17,600 
Wound CareActivity-Fm  (lpemtionRestcueTrustStates 
Non-Tape  -5  Statea  +/- $9,930,713  $35,640,150  +/- $5,686,759  $18,552,330 
Tape -5  States  included  +/- $1,151,600  $3,698,300 
m 
Table 5- Total Wound Care SupplyPaymentsper Carrier 
Submitted  +/- $5,205,336  $80,658,330  +/- $532  $2,192 
DMERC  C 
Aflowed  +1-$3.034.259  $41.420.600  +/- $272  $1.385 
B-3
 Table 6- EmxasiveWound Care SupplyPaymentsPer Canier 
B-4  APPENDIX  C 
AGENCY  AND  OUTSIDE  ORGANIZATIONS  COMMENTS 
c-1  *a@+c om%a 
+.  DEPARTMENT  OF HEALTH&  HUMAN  SERVICES  tiealt~ Care F;mncing Adminitiration 
: 
i?.  #
%,+ 
+-Q2,.	 The  Administrator 
Washington,  D.C,  20201 
~Am  =F27KMi 
w
w 
FROM  Bruce C. Vk&ck 
v
Administrator 
SUBJECT  CMfLceof I.uspectm (kmeml  (CIIG) Draft Reports  onQuestkmablMeedicare 
Payments for Wound Care Supplies (OEI-03-94-00790) 
TO	 JuneGibbsIkown 
liwpector(3em2ral 
We reviewed the subject report which contains information on mcme  pqmen~  for 
woundcaresupplies. 
Our detailedcmumentosn the report findings  md recommendations are attached for your 
consideration, Thankyou for the opportunity  m review and comment on this report. 
Pkase  m-n.tact us ifyouwould like to discussOUmI mments. 
Attachment  Health Care l?i.uanciwAtistration  (H@A) Co~~@ts  on 
@fke  of InspectorGexIera(0l10) DraftReuort 
46 
Questionable Medicare Paments  for Wound Care Surmlies 
@EI-04-944X1790) 
OIG Recommendation 
A 
HCFA shouldtarget %nitedprogramintegityresourcestothoseareasidentifkdaSmost 
w.dnembktoabuse.ThiscouldincludeeditscreensateaohDurableMedicalIlquipment 
RegionalCarrier  (DMERC) to track suchwoundcareproductsastapeandI@ogel. 
HCI?A Response 
We Gcmmr. FICFAhas taken a number of speeific actions to target pro=  iu*f@Y 
resources to thoseareasmost vulnerablteoabuse.For example, HCFA reqpires  that d 
Medicarecarriersmaximkepm- lxotetim by focusingand identi  medical 
feview efforts on areaswhere services being billedhavesignificanptotentiatlobe 
md.icdly urmect?sstuanyd excessive.  The DMERCS direct their rudieal  review efforts 
to monitortheutilizationof  woundcaresupplies.TheDhlt311Chsa vedevelqed M
HCFA has reviewedarevigedRegional Medical  Review Policy (R.MPR) fix surgkd 
dressingswhich is scheduled to & implementeidnoetober 1995.  With this policy,we 
believetheKMERCS will be &t@r able to control @e appropriate  utilization  and 
coverage of surgical  dressings.  In dditio~  I-ICFAhas developed  a Legislative ppowd  to 
require bundlingof skillednursingfacilitiesandnursingfacilitiesservicestht b _ 
wouldrequire thebundlinogf p ayment forwouncdm  q@.ks  ~  M@GIMC fUId 
MedimidpaymentstoINJ.Hinhgomes, T&  mays- =  ~  i=five  for nMS@  homes 
to mom. closely monitor  the usc of woundcaresupplies. 
CXGReeommendatiq 
HCFA should eontinu.eto monitor wound care activity through 19% to d~  ifti 
level of questionable paymenis eontinnes.  If questionable payments umtkkue*ate& 
HCFAmayneedto reconsiderthecurrentwoundcarebenefit.  Page 2 
HCFA Rcsuonsq 
We concur.  HCFA andtheDMERCS will continue  tomonitorwoundcamactivity 
throu@ 1996, Mhough  we do not believe it would beappropriatteoc~c  ournational 
surgicaldressingpolicy, wedoagreethatwe should reevaluate mu medical review 
claims processing eflbrts if questionable payments continue unabated  The 
implementation of the revised 1?;!R  will assist the 13Ml?RCsin ensuring appropriate 
coverage and utilization of surg.ml dressings, 
Technical  C cmlments 
It k impm-tant to Wk  tie  di.flmmce  between the national cov~ge  and regional coverage 
of policies  cmsurgicsl dressings. HCl?ASnational pcdky for surgical dressings was 
more restrictive prim to the Mu&  1994 revision, *  ~mt  appears to WxdhSe 
I-ICFASnational @Yeragepoliw  with de  ~&.fERCRMPR  Prior to March 30, 1994, 
section 2079 of Medicare Gwriers Manual did limit surgicai dressk.g coverage ti  ~~ 
dressings required as the result of a surgicaplrocedure pm-formed byaphysician. 
However,themedicalnecessity time limits as well as the CertMcate of Medical 
Necessitys@.missionmqaent  wereimposedby theDMERCS  throughtheir RMHG.  +i!:!l!iil

HE4L  TFi INDUSTRY  DISTRIBUTORS  ASSOCIATION 
Serving  Med!cal  Products  Distributors&  Home Care  Com,oanies  Since  1902 
September  19, 1995 
June Gibbs Brown

inspector  General

7>epartrnent of Health and Human  Semites

330  Independence  Avenue, SW

Washington  DC 20201

Dear Ms. Brown: 
I.  INTRODUCTION 
	 The Health Industxy Distributors  Association (HIDA) is pleased to comment  on the draft 
reports  on wound care supplies, entitled  Que~onaZdeMedicare Payments  for  Wwnd 
Care  Supplies,  Miw2eting  of Wwnd  Care Supplies,  and Wound Care  Supplies: 
Operation  Resiore  Tmst  Data,  issued by the Office of the Inspector  General (OIG). 
HIDA is the national trade association  of home care companies and health and medical 
product  distribution firms. Created  in 1902, HIDA now represents  over 900 home care 
companies and wholesale  and retail medical product distributors with nearly 2000 
locations.  Pursuant  to a physician prescriptio~  HIDA members provide durable medical 
equipment  prosthetics,  orthotics,  and mppiies (DMEPOS)  seMces  to Medicare 
beneficiaries who are being treated  in their homes and to beneficiaries residing in nursing 
homes. 
II. STATEMENTS  IN RESPONSE  TO DRAFT  REPORTS 
The following are statements  we have in response to your three&  wound care reports. 
More detailed discussion of these points follow: 
Q	 ~  DMERCS  DELAY IN DEVELOPING  SURGICAL DRESSINGS MEDICAL POLICIES 
WITH APPROPRIATE UTILIZATION  AND MEDICAL NECESPJIYPARAMETERS WAS 
THE PRIMARY FA~OR  IN CREATING AN ENWRONMXNT  RJPEFOR  POTENTIALLY 
ABUSIVE ACHVllTES. 
  ~  REVISION OF SECXION 2079 OF~  MEDICAREC ARRIERlSw #UnJAL
EXPANDINGTH  ESURGICfi XIRESSTNGB~S  WASBASEDONSOUNDCLXNXCAL 
DECISIONM AKINGp. ATIENTSSHOULDN OTBEINJEOPARDYOF LOSING A BENEFIT 
DUE TO THE  FAILURE OF THE GOVHWMENT  TO IMPLEMENT TIMELY  UTILIZATION 
AND MEDICAL NECESSARY PARAMETERS 
 
66 Canal  Center  Plaza,  Suite  520,  Alexandria,  VA 22314.1538  .  703-549-4432  .  FAX  703-549-6495  THE OIG UNFAIRLY APPLKESDMERC DRAFT GUIDELINES WHICH WILL  NOT BE IN 
EFFECI UNTIL OCTOBER 1, 1995 TO  IDENITFY  QUESTIONABLE BILLING PRAC1ICES. 
IMPLEMENTATION  OF NEW MEDICAL POLICY GUIDELINES MUST BE GIVEN A 
CHANCETO TAKE EFFECXBEFORE CONCLUSIONS PERTAINING  TO APPROPRIATE 
BILLING CAN BE REACHED. 
o~-s~~ 
THE OIG  SURVEY  PRESENTEDWLEA.D~G  ~  Q~s~oNs  To 
NURSING  HOMES AND BENEFICIARIES. 
THE  OIG  SHOULD SURVEY SUPPLIERSTO OIWAIN A FAIR DEPICTION OF THE 
MARKETPLACE  BEFORE ISSUING THE FINAL REPORTS 
~  OIG  INCORRECTLY  IMPLIES THAT LEGITIMATE MARKET-DRIVEN  SUPPLIER 
SERVICES ARE INAPPROPRIATE. 
THE  OIG  SHOULD GIVE GREATER EMPHASIS TO ITS FINDING THAT THE 
A
PROBLEMS  ARE LIMITED  TO  SMALL MINORITY OF SUPPLIERS AND NURSING 
FACIIXITES. 
III.  ANALYSIS  OF CONCERNS 
A.  Survey Process  And  Ouestions 
At the onset,  HIDA would like to express its disappointment in the manner in which these 
reports were developed  and presented.  The OIG  wound care surveys which were mailed 
to nursing facilities and beneficiaries  were one sided and misleading. Many of the 
questions directed  at the nursing homes and the beneficiaries are phrased  has a supplier 
[or supplier representative]  evef  or have you ever. These questions  are leading and 
ambiguous and if answered yes, would result in an unfavorable  portrait  of the supplier 
even though the practice  may have occurred once in the course  of ten years. 
Despite these misleading and one-sided questions, the OIG still found that the problems 
identified were limited to a very few suppliers, concentrated  in a few states,  and involved a 
limited number of nursing kilities.  The OIG concluded that almost two-thirds  of 
excessive wound care payments were found in eight states and that three-quarters  of 
excessive payments were made to 48 suppliers, 7 percent  of the sample.  The surveys 
clearly reflect that the vast majority of suppliers are operating their businesses in a 
responsible manner. This point must be emphasized in the final reports. 
B. Sudier  Services 
We are concerned  that many of the questions seem to be critical of the valuable services 
which suppliers provide in the normal course of business. Supplier provide  critical 
&nctions which hold down or eliminate costs the nursing tkility  would incur including the 
following:  .	 BiIIing\coIIection ~tities  requked  togenerate  patient spdcprodu~u@tion 
iniiormation for payment of a product ilom payers for Medicare Part &  Pti  B and 
private 
.	 EDI,ar  Co&  Technology  to support order processing  product hand@k  pacmfk 
billing and collectio% and labor efficiency through time and motion study 
.	 Delive@Transpor@tiondmento~  A&nagement  activities  related to the movement  of 
a product to the facility, within a facility ;%arcode, inventory managemen~  storage) 
and activities required to send and receive product order information for the facility 
and for individual residents 
.	 Value-A&d  Services  including providing classes to nurses and clinicians for CEU 
credits on product availability and appropriateness  for clinical objective 
These services are essential benefits that customers receive, and nursing fidities  expect to 
receive, from suppliers in the marketplace  and should be recognized and acknowledged  by 
~  the OIG. 
In this report,  there are numerous  examples where the OIG has failed to acknowledge  the 
~es  of necessary services which suppliers provide. For example, question #l 5 of the 
nursing home .swvey asks the following: Have supplier  represen~ves  ever helped  you 
aktennine  which patients  in your facility  qualfy  for  Me&care  reimbursement  of wound 
care supplies?  Roughly 32 percent of nursing facilities responded yes.  What is not 
stated is the fact that ifthe supplier is billing Medicare for the supplies, the supplier has the 
responsibility to know Medicares  billing requirements.  The nursing facility frequently asks 
the supplier if a particular patients  condition meets the Medicare coverage  requirements. 
In this instance the supplier has helped the nursing facility determine if the patient qualifies 
for Medicare reimbursement.  This help is a positive semice, not a negative one, and should 
be cited in your reports accordingly. 
Another exampleoccurswhen the OIG implies in the report(s) that supplier access to 
patient charts is inappropriate.  Page seven of the M2.rketing  of Wound  Care  Sup@ef 
report states the following: 
Woundcaresuppliershaverequestedtoreview medicalrecordsin 17percentofnursinghomes. 
Mhm6~tititie  -nm~tim*for  tim  *kti~  .  the 
eligibilityofpadents,viewthephysiciano- nxordmeabmntprogreudomandtogather 
supportingdwumenm.oonforbillingpurpmes.
Medicare frequently reminds suppliers that they are ultimately responsible for insuring that 
the suppliers claims are accurate  and medically necessary. A responsible supplier would 
thus ask for verification that supplies bfled to Medicare are indeed medically necessary 
and used by the patient  via access to nursing facility patient charts. It should also be noted 
that the new DMERC surgical dressing medical policy will require suppliers to have a 
mechanismfordeterminingthe quantityof dressingsthatthepatientis actuallyusing and 
to adjusttheir provision of dressings accordingly.  C.  i%e DMERC  Process

The OIG should emphasize in the reports that the new DMERC process is critical to a

successful Medicare program.  It is easy to lose sight of the fact that the DMERCS have

been iidly in place only since October  1, 1993.  Wh.hMl time Medical Directors

developing very strict physician practice  guidelines defining medical necessity for medical

supplies, including the development  and publication of specific limits on how many units

of medical supply a particular  Medicare  beneficiary can receive, inappropriate  over-

utilization  has and wilJ be curbed. This controlled DMERC  environment is the best model

for Medicare control of the progra~  particularly in comparison to nursing home cQst

reports.

The problem that has occurred  with surgical dressings was that the DMERCS failed to act 
in a timely manner to implement DMERC  medical policies with definitive utilization and 
medical necessity parameters.  The !ack of  these definitive guidelines was the prime factor 
causing abusive billing practices. 
,,	 The OIG correctly acknowledges  in their reports that the DMERCS have developed  a 
policy to ciari@ the coverage  of the wound care benefit. This policy is expected to be 
effve  October  1, 1995. While HIDA has requested delay in implementation  of the 
policy until cefiain details are resolved,  HIDA has long advocated that the development  of 
consensus DMERC surgical dressings medical policies is a necessary  solution to 
addressing potential fraud and abuse. 
D.  Ihe  OIG  Unfairlv  AudiedDA4ERC  Drafi  Guiaklines  Which Are Not In Effect 
W  is perplexing is the fact the OIG in its Wmnd  Care  Supplies:  Operation  Restore 
That  and Quetionable  Medicai  Paymentifor  Wnmd  Care  Supplies  reports applied the 
proposed  DMERC dratl guidelines to these claims [claims analyzed for purposes of the 
reports]  to ident@  questionable  billing practices. The OIG is thus developing conclusions 
on what products exceeded  utilization  guidelines  based on a policy that wasnt in effkct 
during the time period studied (June  1994 through Febrwuy  1995). Further, we question 
the OIGS assumption that one type of wound cover equals one wound site. A patient with 
multiple wounds coul~  and many times does, use the same type of wound cover for 
treating  more than one wound.  This assumption by the OIG led to an overstatement  of 
how many wound care products  were unnecessary since it didnt account for the fact the 
product  could be used for more than one wound. 
HIDA uges the OIG to allow the new DMERC surgical dressing guidelines to be given a 
chance to take effkct before reaching  any definitive conclusions. The product utdization 
guidelines combined with the billing modifiers, which identi& the number of wounds on 
which a particular product  is being use~  should create fiture  data which can be 
meaningtidly analyzed. The draft OIG reports do not provide accurate  data because they 
were based on a policy not implemented.  W.  HIDA  RECOMMENDATIONS 
H.IDA is interested  in working with the DMERCS, HCF&  the OIG, nursing homes, 
beneficiaries and others to ensure that the surgical dressigs  benefit provides necessary 
care to beneficiaries without any Medicare tiudulent  abusive practices.  In addition to 
revising its fln.aireport to address the concerns raised in this statemen~  HIDA offers the 
following recommendations.  We are interested in meeting with you to discuss how best to 
implement them. 
A. CMNS For Abusive  Sutmliers  And Overutiiized?tems 
First, we agree with the OIGS  recommendation to HCFA that they target their limited 
program  integrity resources to those areas identified as most vulnerable to abuse. This is 
precisely why HIDA has strongly recommended that those suppliers placed on a list by the 
Secretary  of Health  and Human  Services (Secretary) in accordance  with Section 
1834(a)(l S)(B)(i) and (ii) of the Social Security Act (amended  by the Social Security Act 
	 Amendments  of 1994) be subject to the certificate of medical necessity (CMN) physician 
completion  requirement  in Sections  1834(j)(2)(A) and 1834a(16).  Section 1834(a)(15)@) 
states that the Secretary  may develop and periodically update  a list of suppliers of items 
for which payment may be made under this subsection with respect  to whom (i) the 
Secretary has found that a substantial number of claims for payment under this part for 
items fhrnished by the supplier have been denied on the basis of the application of section 
1862(a)(l)  ~iterns  and services. ..are not reasonable and necessary  for the diagnosis or 
treatment  of illness or inju@];  or (ii) the Secretary has identified a pattern of 
overutilization  resulting from the business practice of the supplier. 
It is imperative that HCFA and the DMERCS develop and make available to suppliers the 
criteria under which a supplier would be placed on this prepayment  list, and the 
procedures  suppliers would follow to appeal any such determination.  Suppliers must  be 
afforded appropriate  due process before being placed on such a list. 
Further,  suppliers should be subject to the CMN physician completion  requirement for 
those, if any, items which are placed on a list by the Secretary  in accordance  with Section 
1834(a)(l 5)(A) of the Social Security Act. Section 1834(a)(15)(A)  states that the 
Secretary  may develop and periodically update a list of items for which payment maybe 
made under this subsection that the Secretary determines, on the basis of prior payment 
~erience,  are frequently subject to unnecessary utilization throughout  a carriers entire 
semice area or a portion of such area. ~  for example, it is deemed that surgical dressings 
have been overutilized  then a medical necessity form should be required. Once aga@ it is 
imperative that HCFA and the DMERCS establish a fair process,  with appropriate due 
process  considerations,  to ensure that overutilized items are determined  in a fhir manner.  B. Technical  Review  Committee  To Review  D&a 
Secon& HIDA believes the OIGS  recommendation  to the DMERCS to edit screens...to 
track such wound  care products  as tape and hydrogel is an important  step in ehhmting 
any potential Iiaudulent  and abusive activity. However, the DMERCS ad  HCFA can and 
sh~~d  do more in this area.  As we have stated on numerous occasions,  HID-Ais eager to 
work with the durable medical equipment regional carriers (DMERCS) and Health Care 
Fiicing  Administration  (HCFA) in tracking and analyzing claims processing utilizdon 
data in order to ensure the appropriate  administration and interpretation  of the DMERCS 
surgical dressings medical re~ew- policies (as well as all other medical polices). This could 
be accomplished  if the DiM!ZRCs an&or  HCFA  e~blisheda  technical  review  committee 
whose pn:mary respombility wouki be to rewewand andjrze W  resulting>om  the 
surgcal &essings  Mealcare  beneJt.  The committee  should consist of a wide range of 
representatives  of organizations  and patients, including suppliers, clinicians, claims 
processors,  and patientdconsumers.  The committee would suggest specific prepayment 
screens and refinements to the medical review policies based on post payment audits and 
otherrelevanitnformation. The committee co~d  generate regul& reports  which would be 
the basis for positive changes to the surgical dressings policy. 
For example, it would be particularly  helpfid to analyze the number of  exceptions to the 
utilization parameters.  For example, if  80 percent of chirns require additional 
documentation  in order to appropriately  exceed the utilization  parameters  set forth in a 
particular provision  of the policy, it would then be legitimate to question whether that 
parameter is appropriate. 
Consoli&ted  Billin~  ProDosal 
Thir& HIDA supports efforts to consolidate  all billing for medical supplies into a nursing 
iicilitys Medicare  Part A cost report for billing which occurs during the Medicare 
covered nursing hcility  stay. Therefore,  only the nursing fmility muld  bill for these 
services and supplies during the Medicare covered stay through  its Part A cost report. To 
avoid any disruption  of medically necessary supplies for the beneficiary, certain technical 
changes to Part A rules also need to be made. AUenteral and parented  nutrition products 
should be recognized  as part of a nursing facilitys ancilkuy cat%  not routine costs. HIDA 
strongly opposes  any changes to a suppliers ability to bfl Part B for medical supplies 
fi.unished to Medicare  beneficiaries  after the first 100 day Part A stay.  V.  CONCLUSION   
HIDA appreciatesthe opportunityto commentontheOIGS draflwound carereports. 
Please contact myself or Stephen M. ~  Ass&ant Director of &mrnrnent  Relations, 
Regulatory MWrs at (703) 549-4432 if you have any questions or comments. 
...  . 
shcw/  .

Cara C. Bachenheimer,  Director 
Government Relations-
cc:	 George Grob, OIG 
4 
Penny Thompsoq  OIG 
Rob Vko, OIG 
Judy Bere~  HCFA 
S. Wayne Kay, HIDA 
Craig Jefies,  HIDA  IHMA

.,. AI Tli  \Du  STRY  MANuFACTURERS  ASSOC  #, old 
September 20, 1995

The Honorable  June Gibbs Brown

Inspector  General

Department  of Health&  Human Services

330 Independence  Avenue, S.W.

Room 5246

Washington,  D.C. 20201

Dear Ms. Brown:

The Health Industry Manufacturers  Association (HIMA) is pleased to be asked by your office to

respond to the three draft reports concerning wound care supplies.  We will be limiting our

comments to the two reports, Questionable  Medicare Payments for Wound Care Supplies and

Wound Care Supplies: Operation Restore  Trust Data.  The Health Industry Manufacturers

Association (HIMA) is a Washington, D.C.-based national trade association representing more

than 700 manufacturers  of medical devices, diagnostic products, and health information systems.

HIMAs members manufacture more than 90 percent  of the nearly $50 billion of health care

technology  products purchased annually in the United States.

First and foremost, HIMA firmly believes that the decision of HCFA to expand the wound care

benefit was the medically correct decision and no reduction in the current scope of the benefit

should be entertained.  The previous limitations applied to wound care coverage were not in the

best interests  of Medicare beneficiaries.  At the same time, we have been on record both verbally

and in written  correspondence  with HCF~  the DMERC medical directors and the OIG that

appropriate  management controls needed to be integrated  in the implementation  of the wound

care benefit to avoid inappropriate  or fraudulent practices.  HIMA has repeatedly expressed

concern that the filure  to implement these controls contemporaneously  with the expansion of

the wound  care benefit would lead to problems with abusive or possibly fraudulent activities.

Chronology  of HIk?4s  Role in the Expansion  of the Wound Care Benejit 
Since 1992, IIIA@  in collaboration  with  the National  Pressure  Ulcer  Advisory  Committee 
(NPUAP) and the Wound Ostomy Continence Nurses  Society (WOCN), has worked with both 
HCFA and the DMERC medical directors to present proposals for updating HCPCS codes and 
medical coverage policies that would reflect current clinical practice and wound care technology. 
In fact, in March 1993, HCFA asked HIN@  NPUAP and WOCN to present a consensus 
World  Leaders  in i4ea/fh  Care  /nnovaf/on  The Honorable June Gibbs  Brown

September  20,  1995

Page  2

proposal and educational seminar for the DMERC medical directors to define surgical dressing 
products  and their clinically appropriate  usage from a mu[ti-disciplinary health care pro.tider 
perspective.  Even at that time, our proposal  included recommendations  that addressed potential 
fraud and abuse.1 
In  1993, the DMERC  medi -al directors  released  their  draft coverage  policy  on surgical

dressings.  m  along  with dozens  of other  clinical and provider  associations  commented  on

the restrictiveness  of the policies.2  The  comments  included  the two-week  coverage  limitation  of

surgical  dressings  was unretilistic  and unsupported;  the debridement  criteria  significantly  deny

appropriate  and necessa~  treatments,  the definition  of surgical  wounds  was narrow  and

inappropriate  and that  classification  and use specifications  of dressings  were  inappropriate  and

limit the proper  treatment  of wounds.

The DMERC  medical  directors  noted  that  they were  prevented  from making  any substantive

changes  in the draft policies  due to the  restrictive  nature  of Section  2079  of the Medicare

Carriers  Manual,  which  they consider  to be national  policy.  Over 30 beneficiary,  clinician and

industry  groups  met with  HCFA  Coverage  Director  Bob Wren  in September  1993 to present  a

draft  of a proposed  revision  to this policy.  After  a meeting  with HCFA  Administrator  Bruce

Vladeck  and Dr. Helen  Smits in December  1993,  agreement  was reached  on a rewrite  of section

2079.

Since that time, m  in tandem with clinical and supplier associations, has worked with 
HCFA and the DMERC medical directors  on the rewriting of section 2079, and the current final 
medicrd policy on surgical dressings.  Furthermore,  the National Coalhion for Wound Care (of 
which HIMA is a member) gave recommendations  on utiliition  parameters for surgical 
dressings to help curb fraud and abuse.3  These controls were not implemented. 
In February  1995, HIMA  met with  HCFA  and OIG  staff and representatives  of clinical and 
supplier  associations  to address  the DMERCS  allegations  of fraud  and abuse  in the wound  care 
benefit.4  HCFA  and OIG  staff were  reminded  that,  due to the delayed  implementation  of the 
final DMERC  coverage  policy,  utilization  and quality  assurance  standards  were  not in place. 
This lack of controls  were  a factor  in the allegations  of abuse in the industry. 
Specifzc Comments 
Any review  of claims  data must  acknowledge  the fact that  the revisions  of section  2079  policy 
created  a new wound  care benefit.  Comparisons  of data before  and after the date of 
implementation are inherently suspect because the benefits  are not comparable. 
In reviewing  the draft  report  Questionable  Medicare  Payments  for Wound  Care  Supplies, 
HIMA  has concerns  over the methodology  used  to chronicle  the excessive  utilization  evident  in  The Honorable  June  Gibbs Brown 
September  20,  1995 
Page  3 
all wound  care products.  We believe  that  the OIG has taken  inappropriate  clinical utilization 
parameters  to review  clinical practice  retrospectively.  We submit  that  to take  utilization 
parameters  fioin  a final coverage  policy  that  is not yet in force  and apply tliem  to those  claims  is 
totally  inappropriate  and can only lead to erroneous  conclusions  about  utilization.  This situation, 
coupled  with the fact that HIN@  along  with  many of the clinical  and supplier  associations, 
believes  that  sf:me of the utilization  parameters  in the final Dh&RC  cover ~.gepolicy (e.g., 
hydrogel)  are incorrect  makes  for a dramatic  overstatement  by the OIG  concerning  the utilization 
of wound  care products. 
Along  these lines, in reviewing Appendix C of the draft report,  Wound Care Supplies: 
Operation Restore Trust Data, we would like to offer the following specific points: 
  In the hydrogel  category,  the alleged  excessive  overutilization  was based  on the

new utilization  parameter  of three  ounces  in 30 days,  whereas  the old utilization

parameter  was  at least  once  a dy.  This is one of the utilization  parameters  in the

October  1995 final policy  that we are in disagreement  with the DMERC  medical

directors  and have  sent them  comments  to this  effect.

  In the gauze  category,  we question  what  products  were  used  in the

K02 18/A4200KD  category,  because  to our knowledge  no products  exist in retail

catalogs  (i.e., Briggs,  Suburban  Ostomy)  that  fit this categoxy.

  In the A4323 category,  there was $14,684 paid for saline solutio~  which is a non-
covered item.  We question why the DMERCS paid this since it was a non-
covered item. 
Furthermore,  in regard  to tape,  we wish to make the following  points: 
  Previous medical policy, including transitional policy, reimbursed for tape, any 
type, any size on a per roll basis, without regard to utilization on wounds.  In 
effect, a small length roll of tape, e.g., 1 x 18 inches was reimbursed at the same 
rate as a standard length roll of  e.g., 1.5 or 2 x 10 yards.  The old and 
transitional policies encouraged  overpayment for small rolls, but underpayment 
for the longer rolls and overutilization of tape.  The new medical policy, with 
reimbursement by the 18 square inches, will greatly reduce incentives for 
overutilition  and overpayment.  This change just went into effect in June, 1995, 
afier the OIG audit, and so none of the OIGs  sample includes this important 
change.  Our expectation  is that  a similar sample  audit  conducted  in 1996 will 
show  significant  improvement  in the area of excessive  payment  for tape. 
It is our suspicion  that  a large amount  of excessive  payment  for tape  came about 
in conjunction  with  the use of kits, where  supplies,  including  tape,  have been  The Honorable  June  Gibbs Brown

September  20,  1995

Page  4

billed separately.  Since the draft  language  of the new medical  policy  has become 
available  this summer,  with its denial  of coverage  and payment  for wound  care 
kits,  it is our feeling  that  kit suppliers  and the biller/supplisrs  which  they have 
semiced,  are changing  their  practices.  We feel that  this will result  in fewer 
situations  of excessive  allowances  and utilization  of tape for surgical  dressing 
applications. 
Finally,  we would  like to clari~  some  of the statements  made  in the first few pages  of the report 
entitled,  Questionable  Medicare  Payments  for Wound  Care  Supplies.  On page 1, it states that 
In 1994, 61?40of the average allowance per beneficiary was for specialty dressings, up from 
40%in 1992.  We believe that this statement is misleading to the reader, since in 1992, these 
specialty dressings were not covered in the Medicare program.  The next line states, These 
specialty dressings are priced as high as $35 for large hydrogel wound covers.  Again, we take 
exception to this since the appropriate  verb should be reimbursed by the HCFA fee schedule 
and not priced.  Furthermore,  in rechecking HCFAs calculations for various codes, such as 
this one, we determined that the fee schedules were in many cases incorrect,  due to arithmetic 
errors.  This particular one, we estimated to be $25.65 compared to HCFAs  calculation of 
$35.00. 
On page  2, the draft  states,  the  former  HCFA  policy  covered  only primary  dressings  resulting 
from a surgical  procedure  for usually  no more  than  two  weeks.  In reality,  this DMERC  policy 
was never  in effect,  and as I indicated  earlier in our chronology  of HIMA  involvement  in 
surgical  dressing  policy,  there  was  such an outcry  fi-om the beneficiary  and clinical community 
concerning  the lack of patient  care in the proposed  policy,  that  the policy was  changed. 
Furthermore,  before  DMERC  consolidation  occurred,  local medical  coverage  policy  determined 
coverage  to be anywhere  Iiom  two  weeks  to unlimited,  depending  on medical  necessity.  In fact, 
clinical associations  (WOCN  and NPUAP)  have always  recommended  that  the duration  of 
coverage  should  be governed  by indkidual  medical  necessity  rather  than predetermined  limits. 1 
Conclusion 
As we stated  in our introduction,  we applaud  HCFA  for its decision  to expand  the wound  care 
benefit.  The benefit  is medically  sound  and reflects  the latest  knowledge  of wound  care practice 
and technology.  We do agree  with the OIG  and HCFA  that  the new guidelines  set forth  in the 
final DMERC  coverage  policy  should  provide  the ilamework  for the controls.  We believe  that 
HCFA  and the OIG  should  give the medical  policy  guidelines  a chance to take  effect before  they 
reach any conclusions  regarding  the fate of wound  care coverage.  This includes  any 
recommendations  regarding  the bundling  of wound  care products.  Agaiq  since the reports  are 
based upon  a flawed  analysis  of da~  the reports  are not meaningful  and should  not be released. 
The product  utilization  guidelines  combkd  with the billing  modtiers  which  identfi  the 
number  of wounds  on which  a particular  product  is being used,  and the addhional  medical  The Honorable  June Gibbs  Brown

September  20,  1995

Page  5

necessity criteria outlined in the policy should create fhture data which can be meaningfidly 
dissected.  HIMA recommends that perhaps the OIG should reexamine the database a year after 
the benefit is in place to ensure the proper integrity of the benefit. 
We appreciate  having the opportunity  to comment. 
Sincerely, 
Marcia  Nusgart,  R. Ph.

Associate Vice President, Home Care

Enclosures 
MNlbcj  Reference  List 
1.	 Recommendations  on Surgical  Dressing  Codes,  March  23,  1993, NPUAP, WOCN, 
HIMA to HCFA and the DMERC medical directors. 
2.	 June  11, 1993 letter  to DMERC  medical  directors  from over  two  dozen  provider, 
supplier,  clinical and manufacturer  associations  concerning  the DMERC  medical 
coverage  policy  on surgical  dressings. 
3.  NCWC  proposal  to DMERC  medical  directors  on surgical  dressing  proposal. 
4.	 November  21,  1994 HIMA  letter  to the Honorable  June Gibbs  Brown,  to convene  a 
meeting  concerning  alleged  fraud  and abuse in the wound  care  industry.  la
,4
4
TERMC 
NATIONAL  ASSOCLXTION  FOR  THE  SUPPORT  OF  LONG 
P. O.  Box  4857  c AUSTIN, TEXAS  c  78765    5121451-0059    4214  MEDICAL PARKWAY,SUITE 209    AUSTIN, TEXAS  
September 20, 1995 
Ms.  June  Gibbs Brown

i .~spector General

U.S.  Department  of Health  and Human  Services

330 Independence  Ave.,  SW Room  54246

Washh@on,  D.C.  20201

Dear General Brown: 
I am writing  on behalf of the members of the National Association for the Support 
of Long Term Care (NASL), an organization of companies dedicated to the improvement 
of services for the long term care patient.  NASL has been very active in the development 
of the surgical dressing benefit through its membership in the National Coalition for 
Wound Care (NCWC) and its own efforts.  We are pleased to have this opportunity to 
comment on the drafts of the three reports, Questionable Medicare Payments For Wound 
Care Supplies, Marketing of Wound Care Supplies, and Wound Care Supplies: 
Operation Restore Trust Data.  We are, however, troubled by the short time period given 
for the submission of these comments.  These reports are quite detailed and a more 
thorough response could be offered if more time were available,  This letter contains some 
general comments.  Attached to this letter is a list of bullet points identi@ing the most 
serious analytical short comings we find with the reports. 
In reviewing  these  reports,  we are forced  to conclude  that there  are serious  flaws 
in the analytical  methodology  used  to arrive at the reports  conclusions.  Several  of the 
medical  policies  used to analyze  the extent  of questionable  billing  are the subject  of 
considerable  controversy  in the wound  care community  at large.  Moreover,  it is 
consensus  within  the clinical community  and within industry  that  each wound  must be 
examined  individually  to determine  the appropriateness  of the  surgical  dressings  used to 
heal the wound.  The quantity  of dressings  necessary  to heal a wound  varies  significantly 
based  on a patients  healing  rate.  Accordingly,  we believe that  the general  conclusions 
contained  in the reports  are seriously  flawed.  Putting  aside the doubts  we have about  the methodology,  we wish to point  out 
that the reports  raise issues  concerning  the surgical dressing  benefit that  our organization 
has been working  with HCFA  and the DMERCS  to address  for some time.  Since the 
surgical  dressings  benefit  was formally  revised  to reflect  current  clinical practice,  NASL 
has been working  with the HCFA  and the DMERC  medical  directors  to develop  and issue 
medical  policies  implementing  the benefit.  We advucated  the development  of utilization 
parameters  for the various  types  of dressings  to be tised, in order  to identi~  those 
suppliers  whose  claims appeared  to exceed  the reasonable  needs  of the patient.  We also 
advocated  the restriction  of the use of khs  in the sale of surgical  dressings  in order  to limit 
the excessive  sale of products  contained  in such kit...In fact, we provided  suggested 
language  to the DMERCS  for their consideration.  As the reports  correctly  point  out,  the 
lack of clear policies  had contributed  to problems  existing  in the surgical  dressing 
program.  The overwhelmingly  majority  of these  problems  have been resolved  in the past 
two  years. 
The  reports  appear  to show that there  is sufilcient  information  available  to identify 
a small group  of suppliers  whose  practices  are questionable.  This demonstrates  the 
efilcacy  of using  utilization  guidelines  to identi~  outliers.  It  also shows  that  the problems 
identified  are limited to relatively  few suppliers  who have commanded  a significant 
percentage  of the market  geographically.  More  than adequate  enforcement  mechanisms 
exist to discipline  these  suppliers  who  are abusing the system.  We strongly  believe  in such 
an approach  to control  the abuse  of the program. 
The revised  surgical  dressings  benefit,  which took  effect March  1, 1994, was 
undertaken  because  of a clear recognition  by the HCFA  that  a more  clinically  appropriate 
surgical  dressing  benefit  was an important  benefit  of the Medicare  program.  In the 
absence  of such a program,  beneficiaries  with  serious  wounds,  such as Stage  4 decubitis 
ulcers,  would  be deprived  of the benefits  of appropriate  wound  healing  products.  Whale 
the reports  concentrate  on what  is perceived  to be a serious  abuse  of the system,  we must 
not lose sight  of the efficacy of the benefit  in relieving the  suffering  of these  patients  ad 
avoiding  the necessity  for acute  care of intractable  wounds. 
We hope that these comments are helpfil to you.  If additional time is granted, we 
will endeavor to supply more detail than contained herein.  Thank you again for thk 
opportunity. 
Sincerely, 
Tom  Kowalskl 
Executive  Director 
TK/kh 
Ghhs,  9/20/95,  respome  2  BULLET POINTS 
QUESTIONABLE  MEDICARE PAYMENTS FOR WOUND CARE  SUPPLIES: 
The prior restrictive HCFA coverage poli .y was never filly implemented by the 
various carriers.  Policy prior to 1994 as determined by the different carriers varied 
from the very restrictive policy described in this report to the policy of Pennsylvania 
Blue Shield, which allowed for coverage Gfa surgically debrided wound until it healed. 
The limit of the coverage of surgical dressings to a two week period post surgery was 
included in the proposed medical policies of the new DMERC medical directors and 
never really took effect.  The rewrite of Section 2079 was the result of thk destructive 
and overly restrictive policy. 
The dollar utilization show in Table 1 is particularly instructive when analyzed in light 
of the above.  The policies of the different carriers obviously led to higher utilization as 
shown by this table. 
Table 2 is incorrect.  The policy referred to as existing prior to March of 1994 at best 
describes a policy that was in place for a limited number of providers depending on 
their carrier prior to the DMERC.  Since this restrictive policy never applied to all 
providers, it is impossible to use it for any comparison on utilization. 
The methodology of the analysis of the surgical dressing claims is fatally flawed in 
several ways.  One serious error is the use of the DMERC guideline for amorphous 
hydrogel wound filler.  It is understood  that this guideline is based upon an average 
wound size of 1 centimeter by 1 centimeter. In order to determine the proper amount 
of hydrogel needed to treat any given wound, it is absolutely necessary to know the 
size of the wound.  Since this report dld not examine the pertinent information on each 
wound analyzed, its conclusions with regard to hydrogel are of no value whatsoever. 
The same criticism can be applied across the board to the use of the DMERC 
guidelines for this analysis.  The DMERCS themselves concede that the guidelines 
must be applied on a wound by wound basis.  It is far too simplistic to analyze 
utilization in the manner used in the report. 
Two assumptions of the analysis must also be questioned.  First, the report assumed 
each type of wound cover represented  a separate wound site.  This assumption 
appears to disregard the use of Primary and Secondary dressings.  A second 
assumption, that tape is used on both Primary and Secondmy dressings, is also in 
error. 
Gihhs, 9{20195,  response  3  .	 In choosing the claims to analyze the utilization of tape, the investigators used  a 
methodology  pre-ordained  to result  in overutilization.  They appear  to have 
deliberately  chosen  those  claims for which the highest  possible  billings were  submitted. 
	 The contention that excessive utilization is evident in all wound care products is 
clearly in error.  In using the DhlERC  guidelines, the investigators failed to recognize 
the dispute that indust~  and the clinical community have concerning the utilization 
parameters for secondary dressi~~gs.While the DMERC policies would appear to limit 
the frequency of change of some secondary dressings to a lower limit than the primary 
dressing, this limit is clinically ui.sound.  Clearly, secondary dressings must be changed 
when the primary dressings are changed.  By applying this unsound policy, a finding of 
overutilization is predetermined  for many secondary dressings and for many primary 
dressings when used as secondaries.  This is the reason for the findings on page 8 that 
foam dressings and hydrogel wound filler are heavily overutilized.  This combination 
of dressings is very popular among the clinical community and the use of a foam 
secondary is crucial in allowing the hydrogel to maximize its dwell time.  The 
guidelines promulgated by the DMERC medical directors would result in erroneous 
findings  both  as to the hydrogel  for the reasons  stated  earlier  and as to the foam 
dressings  which,  when  used  as a primary,  have a lower  change  frequency  than 
hydrogel. 
.	 The investigators should take no comfort in the findings of DMERC D, since the 
examination conducted by that DMERC was of suppliers whose conduct was already 
in question.  No general conclusions concerning the industry as a whole can be drawn 
or supported by findings related to individual suppliers that have been singled out 
because of their prior conduct.  The conclusions concerning the amount of tape used 
are probably  inaccurate. 
.	 During the period analyzed, the payment for tape was based on a per roll charge.  The 
rolls most commonly used contained only three feet of tape and not ten yards. 
Accordingly, the analysis appears to be in error as to the amount of tape provided. 
.	 The fact that the five Operation Restore Trust States account for a high proportion  of 
the wound care supplies is only logical since these are the states with the largest 
Medicare market. 
.	 Since the  SNF or NF population  is at highest  risk for decubitis  ulcers,  it is not 
surprising  that this population  uses a disproportionate  amount  of the surgical  dressing 
benefit. 
.	 Since the revision  the surgical  dressing  benefit  (~2079),  NASL  has been urging 
DMERC  medical  directors  to issue  clear medical  policies  for the surgical  dressing 
benefit.  Now  that this is finally and belatedly  coming  about,  OIG  has used these 
policies  to investigate,  in a look  back,  past practices.  This is absurd.  OIGS 
description  of its retrospective  confirmation  of this past  state  of events  using the 
Gibbs. 9i20f95,  response  collaboratively developed criteria on highly selected data as a report based on a 
random claim sampling in the executive summa~  is misleading.  OIGs 
recommendations  are infected by this error--prospective  implementation of the same 
medical review criteria, as planned and revised where appropriate,  is the right solution. 
MARKETING  OF J70UND  CARE SUPPLIES 
.	 NASL  objected  to the wording  of the questionnaire  from which  this data was taken. 
At that  time, we pointed  o,:t that the wording  of the questionnaire  seemed  to be biased 
and unlikely  to develop  mc,mingfil  data. 
.	 Overall, we feel that the results of this survey show that the majority of suppliers and 
facilities act responsibly and avoid abuses. 
WOUND CARE SUPPLIES:  OPERATION RESTORE TRUST DATA 
.	 This  report  seems to simply take the conclusions  of the Questionable  Payments 
report  and rehash  them  for the Operation  Restore  Trust  states.  All of the points  made 
above  for that report  apply to this one. 
Gibbs, 9\20/95, response