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

FOR  INCONTINENCE  SUPPLIES

JUNE  GIBBS BROWN 
Inspector  General 
DECEMBER  1994 
OEI-03-94-00772  OFFICE  OF INSPEHOR  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 Semites (HHS) 
programs as well as the health and welfare of beneficiaries served by those programs.  This 
statutory mission is carried out through a nationwide network of audits, investigations, and 
inspections conducted by three OIG operating components:  the O&e  of Audit Services, the 
Office of Investigations, and the Office of Evaluation and Inspections.  The OIG also informs 
the Secretary of HHS of program and management problems and recommends courses to 
correct them. 
OFFICE  OF AUDIT  SERVICES 
The 010s  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 othens. 
Audits examine the performance of HHS programs and/or its grantees and contractors in 
carrying out their respective responsibilities and are intended to provide independent 
assessments of HHS programs and operations in order to reduce waste, abuse, and 
mismanagement and to promote economy and efficiency throughout  the Department. 
OFFICE  OF INVESTIGATIONS 
The OIGS Office of Investigations (01) conducts criminal, civil, and administrative 
investigations of allegations of wrongdoing in HHS programs or to HHS beneficiaries and of 
unjust enrichment by providers.  The investigative efforts of 01 lead to criminal convictions, 
administrative sanctions, or civil money penalties.  The 01 also oversees State Medicaid fraud 
control units which investigate and prosecute fraud and patient abuse in the Medicaid program. 
OFFICE  OF EVALUATION  AND INSPECHONS 
The 010s  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 Joy Quill, Regional Inspector General and Robert A. 
Vito, Deputy Regional Inspector General.  Project staff included: 
PHILADELPHIA  REGION  HEADQuARTERs 
Robert A. Katz, Project Leader  Thomas A. Noplock, Ft-ogramSpecialist 
Robert A. Baiocco, Bogam  Analyst  Brian P. Ritchie, Technical Suppoti  Staf 
Linda M. Ragone, Rogram  AnaZyst  Barbara Tedesco, Technical Support Staf 
Cynthia Hansford, Administrative  Staff 
To obtain a copy of this repo~  pleasecallthe Philadelphia Regional Office at (S(K))531-9562  EXECUTIVE  SUMMARY

PURPOSE 
This  report  examines  trends  in allowances  and  questionable  billing practices  for 
incontinence  supplies  under  Medicare  Part  B between  1990 and  1993. 
BACKGROUND 
Incontinence  is the  inability  of the  body  to control  urinary  and  bowel  functions. 
Under  the  Medicare  Part  B program,  the  Health  Care  Financing  Administration 
(HCFA)  will reimburse  suppliers  that  provide  incontinence  supplies  to aid individuals 
whose  incontinence  condition  ...is of long and  indefinite  duration.  Such 
reimbursement  is provided  only as part  of Medicares  coverage  for prosthetic  devices 
such as catheters  and  external  urinary  collection  devices.  The  HCFA  will also 
reimburse  for  accessories,  such as irrigation  syringes  and  sterile  saline  solution,  that  aid 
in the  effective  and  therapeutic  use  of these  devices.  Currently,  claims  are  processed 
by four  Durable  Medical  Equipment  Regional  Carriers  (DMERCS). 
We  selected  claims  for a 1 percent  sample  of beneficiaries  who received  one  of 43 
types of supplies  for incontinence  care.  We arrayed  the  data  by type  of supplies, 
carrier,  and  major  suppliers.  We  then  analyzed  the  statistical  information  to develop 
trends.  We  also applied  current  and  proposed  HCFA  guidelines  for these 
incontinence  supplies  in  1993.  We focused  on two facets  of billing:  accessories  that 
can  only be billed  with prosthetic  devices;  and  frequency  limitations  on prosthetic 
devices. 
FINDINGS 
M&iicare  albwancesfor tionthence  suppliesmorethandimbledinthreeyeats&spitea 
dropinthenumberof benejiciariaurihgtheresupplies. 
Incontinence  allowances  rose  from  $S8 million  in  1990 to $230 million  in 1993, an 
increase  of $142 million.  During  the  same  period,  the  number  of beneficiaries 
receiving  incontinence  supplies  fell from  312,200 to 292,700.  Allowances  per 
beneficiary  increased  from  $282 to $786. 
Fourtypesof incontinencesuppliesaccountfor abnostailtheincreaseinM&are 
allowanc~. 
Between  1990 and  1993, Medicare  allowances  for irrigation  syringes,  sterile  saline 
irrigation  solution,  lubricant,  and  female  external  urinary  collection  pouches  increased 
$129 million.  This  accounts  for 91 percent  of the  $142 million  total  increase. 
i  Questionablebifli.ngpractimnxu  ryaccountfor abnosthalfof intontm encealhwancesin
1993. 
Medicare  allowed  $107 million  in 1993 for supplies  whose  billing is questionable. 
Almost  $88 million  was paid  for incontinence  accessories  that  were  not  billed  in 
conjunction  with a prosthetic  device.  An additional  $19 million  was paid  for 
beneficiaries  whose  utilization  of certain  prosthetic  devices  appears  excessive.  The 
allowances  were  concentrated  in one  carrier  and  a small  number  of suppliers  and 
beneficiaries. 
A proposedchangeh HCFA policywillprobab~add-as qudonable  billingpractices. 
Inconsistencies  and  lack  of clear  utilization  guidelines  in carrier  policies  contributed  to 
the  large  number  of questionable  incontinence  claims  paid  by Medicare  in  1993.  A 
proposed  draft  policy  (to be  issued  by the  four  Durable  Medical  Equipment  Regional 
Carriers)  will clari&  covered  services  and  provide  a mechanism  to link incontinence 
accessory  supplies  to prosthetic  devices. 
NEXT  STEPs 
IncontinenceSupplies 
In response  to the  information  presented  in this report  and  a companion  report,  the 
Office  of Inspector  General  (OIG)  plans  to: 
o	 initiate  an audit  review  to examine  in more  detail  payments  made  for 
incontinence  supplies  in order  to determine  if any overpayments  are 
involved  in this arerq  and 
o	 launch  a national  investigation  in this area,  examining  potentially 
fraudulent  practices  by specific  suppliers  of incontinence  supplies. 
We  also  support  ongoing  activity in HCFA  and  the  DMERCs  to develop  more  specific 
coverage  guidelines  and  educate  providers  and  suppliers  about  proper  billing  for such 
supplies.  We  hope  the  information  contained  in this report  is helpful  as they  complete 
this activity. 
OIG Studiesof OtherNumiizgHome Suppl%s 
The  OIG  will continue  studies  and  audits  related  to its major  initiative  examining 
services  and  supplies  provided  to Medicare  beneficiaries  residing  in nursing  facilities. 
As this report  and  other  OIG  work  has reflected,  the  fragmentation  of billing  for 
services  and  supplies  provided  to residents  of nursing  homes  has  created  a host  of 
improper  incentives  for billers  to the  Medicare  program. 
ii  BundlingOfServices 
We  continue  to support  HCFAS efforts  to pursue  a systematic  solution  to these  kinds 
of problems  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. 
.,. 
111  TABLE  OF  CONTENTS

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

FINDINGS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...4

Increased  spending  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...4

Four  specific  supplies  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...4

Questionable  billing practices  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...7

Draft  DMERC  policy  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...9

NEXT  STEPS  O. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...12

APPENDIX

k  Confidence  Intervals  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..A-l
 INTRODUCTION

PURPOSE 
This  report  examines  trends  in allowances  and  questionable  billing practices  for 
incontinence  supplies  under  Medicare  Part  B between  1990 and  1993. 
BACKGROUND 
MedicareCoverageof IncontinenceSupplies 
Incontinence  is the  inability  of the  body  to control  urinary  and  bowel  functions. 
Reimbursement  for incontinence  supplies  is included  as part  of Medicares  coverage 
for prosthetic  devices.  According  to Medicare  Carriers  Manual  section  2130, 
prosthetic  devices  (other  than  dental)  which  replace  all or part  of an internal  body 
organ  (including  contiguous  tissue),  or replace  all or part  of the  function  of a 
permanently  inoperative  or malfunctioning  internal  body  organ  are  covered  when 
furnished  on a physicians  order. 
Under  the  Medicare  Part  B program,  the  Health  Care  Financing  Administration 
(HCFA)  will reimburse  suppliers  that  provide  incontinence  supplies  to aid individuals 
whose  incontinence  condition  ...is of long  and  indefinite  duration.  Certain  items, 
such  as absorbent  undergarments  or diapers,  are  specifically  excluded  from  coverage. 
Incontinence  supplies  include  prosthetic  devices  such as catheters  and  external  urinary 
collection  devices  such as pouches  or cups.  Catheters  are  flexible,  tubular  instruments 
used  to control  urinary  flow.  The  HCFA  will also reimburse  accessories  that  aid in 
the  effective  and  therapeutic  use  of these  devices.  These  accessories  include  items 
such  as drainage  bags,  irrigation  syringes,  sterile  saline  solutions,  and  lubricants. 
However,  accessories  are  not  covered  in the  absence  of a prosthetic  device. 
Canierl-%xessingof IncontinenceSupply(lkirns 
In June  1992, HCFA  issued  a final rule  designating  four  Durable  Medical  Equipment 
regional  carriers  (DMERCS)  to process  all claims  for durable  medical  equipment, 
prosthetics,  orthotics,  and  supplies.  Effective  October  1, 1993, the  DMERCS  replaced 
more  than  50 area  carriers  which had  previously  processed  DME  claims.  The 
geographical  areas  formerly  serviced  by the  carriers  were  phased  in under  the 
DMERCS  on a staggered  basis.  Each  DMERC  issued  its own coverage  and 
reimbursement  policies  that  implement  Medicare  guidelines. 
However,  for urological  supplies,  the  DMERCS  issued  a draft  of a single national 
policy in October  1994.  In addition  to redefining  and  clari&ing  some  of the  definitions 
used  in claims  for incontinence  and  urological  supplies,  the  policy establishes 
documentation  requirements  for higher  than  usual  quantities  of supplies.  The  non-
1  coverage  of diapers  and  similar  absorptive  pads  is emphasized.  The  policy also 
reinforces  the  condition  of permanence  for coverage  purposes  and  stresses  that 
accessories  not  used  in conjunction  with covered  catheters  or external  urinary 
collection  devices  are  not  covered. 
Mdicare FraudAlert 
One  DMERC  issued  a Medicare  Fraud  Alert  in June  1994 describing  a supplier 
scheme  involving  the  marketing  of incontinence  kits to nursing  homes.  In this case, 
the  supplier  advised  nursing  home  officials that  Medicare  was paying  for the  kits under 
a pilot program.  According  to the  alert,  supplier  representatives  provide  kits 
containing  accessories  such as syringes, saline  solution,  and  lubricants,  to the  nursing 
home  in exchange  for beneficiary  names  and  Medicare  health  insurance  claim 
numbers.  The  marketing  representative  then  orders  bulk  quantities  of supplies  billed 
under  the  beneficiaries  claim  numbers. 
The  alert  also indicated  that  the  supplier  marketing  program  stated  that  the 
beneficiary  should  be  treated  three  times  per  day with the  contents  of the  kit.  This 
resulted  in a supplier  billing Medicare  $1,800 per  month  per  beneficiary  in one  carrier 
jurisdiction. 
METHODODGY 
To  determine  the  trends  in incontinence  allowances,  we arrayed  payment  and 
utilization  data  for each  incontinence  supply.  We  also  analyzed  the  utilization  data  for 
possible  questionable  billing practices. 
We  first reviewed  each  DMERCS  coding  and  coverage  guidelines  and  interviewed 
DMERC  officials  to identify  43 codes  used  to reimburse  incontinence  supplies.  These 
did not  include  any local codes  used  by individual  carriers.  Supplies  were  segregated 
into  three  groups:  catheters,  external  urinary  collection  devices,  and  accessories.  The 
HCFA  and  DMERC  officials provided  the  designation  for each  billing  code. 
We  selected  all services  for 43 codes  for a 1 percent  sample  of beneficiaries  from  the 
Part  B Medicare  Annual  Data  Procedure  File  for calendar  year  1990 and  the  National 
Claims  History  100% Physician/Supplier  Data  for calendar  years  1991 through  1993. 
From  the  1993 sample  of 2,927 beneficiaries,  we obtained  an additional  file for 
231 beneficiaries  who  accounted  for 51 percent  of all incontinence  allowances, 
beginning  with  the  beneficiary  with the  highest  amount  billed.  This  file contained  all 
Part  B services,  in addition  to incontinence. 
From  the  sample  of incontinence  services,  we calculated  Part  B Medicare  allowed 
payments,  supply  frequency,  and  number  of beneficiaries.  Allowed  payments  include 
both  the  80 percent  Medicare  payment  and  the  20 percent  coinsurance  fee  paid  by 
beneficiaries.  We  arrayed  the  data  by billing code,  carrier,  and  major  suppliers.  We 
then  analyzed  the  statistical  information  to determine  trends  in incontinence 
2  expenditures.  Welimited  our  analysis  for frequency  utilization  to the  period  1991 
through  1993 because  frequency  reported  in 1990 was not  comparable  to later  years. 
According  to DMERC  coding  policies,  11 of the  23 billing  codes  that  cover  accessories 
are  also used  to reimburse  ostomy  care.  We  did not  include  any semices  for the  11 
codes  associated  with beneficiaries  who received  only ostomy  care.  We  also  did not 
include  services  billed  under  code  A4323,  sterile  saline  irrigation  solution,  when  it 
was not  biIled  in conjunction  with  other  incontinence  supplies.  According  to DMERC 
officials,  code  A4323  may be  used  in conjunction  with  other  non-incontinence  supplies 
such as enteral  nutrition  products. 
To  determine  the  nature  and  extent  of questionable  billing  practices,  we interviewed 
DMERC  officials including  medical  directors  and  fraud  control  unit  personnel.  We 
reviewed  coverage  and  utilization  standards  for  1) the  three  Medicare  carriers  that 
were  among  the  highest  in allowances  in 1993, 2) the  current  DMERCS,  and  3) the 
proposed  DMERC  national  urological  standards. 
We  projected  our  findings  by multiplying  sample  results  by 100.  Confidence  intervals 
for our  findings  are  presented  in Appendix  A. 
We  applied  current  and  proposed  DMERC  guidelines  to the  selvices  billed  for  the  43 
incontinence  supplies  in 1993.  We  focused  on two facets  of billing:  1) accessories  that 
can  only be  billed  with prosthetic  dewces, such as catheters  and  external  urinary 
collection  devices;  and  2) frequency  limitations  on prosthetic  devices.  For  each 
practice,  we reported  Medicare  allowances  and  frequencies  above  the  tolerance 
guidelines  by type  of supply,  carrier,  supplier,  and  number  of beneficiaries  receiving 
supplies. 
This  report  is one  of a series  of reports  concerning  Medicare  payments  for 
incontinence  supplies.  Markehng of Incontinence  Supplies  (OEI-03-94-00770),  describes 
supplier  and  nursing  home  practices  that  can  lead  to questionable  payments  and 
examines  issues  concerning  Medicare  beneficiaries  use of incontinence  supplies.  The 
third  report,  Medicaid  Payments  for  Incontinence  Supplies  (OEI-03-94-00771),  will 
examine  how the  Medicaid  program  processes  claims for incontinence  supplies  in 14 
States. 
This inspection  was conducted  in accordance  with the  Qualify  Standards  for  Iizspections 
issued  by the  Presidents  Council  on Integrity  and  Efficiency. 
3
 FINDINGS

MEDICARE  ALLOWANCES  FOR  INCONTINENT CE  SUPPLIES  MORE  THAN 
DOUBLED  IN THREE  YEARS  DESPITE  A DROP  IN THE  NUMBER  OF 
BENEFICL4RIESUSING  THESE  SUPPLIES. 
Medicare  Part  B allowances  for incontinence  supplies  rose  from  $88 million  in 1990 to 
$230 million  in 1993, an increase  of $142 million.  The  most  significant  portion  of that 
increase  came  in 1993 when  allowances  increased  $111 million,  almost  doubling  horn 
the  previous  year.  Over  the  same  time  period,  the  number  of beneficiaries  receiving 
incontinence  supplies  has  actually  decreased.  In  1990, 312,200 beneficiaries  received 
incontinence  supplies.  In  1993, this figure  fell to 292,700.  Allowances  per  beneficiary 
more  than  doubled  from  $282 in 1990 to $786 in 1993. 
Between  1991 and  1993, the  number  of incontinence  supplies  paid  for by Medicare 
more  than  tripled.  In  1991, Medicare  Part  B reimbursed  suppliers  for  19 million 
incontinence  supplies.  In  1992, reimbursed  supplies  increased  to 25 million.  In 1993, 
supplies  more  than  doubled  from  the  previous  year  to 60 million.  The  table  below 
provides  a summary  of incontinence  activity between  1990 and  1993. 
Table  1. Incontinence  Activity  1990-1993 
Allowances  $88 million  $108 million  $119 million  $230 million 
No. of Beneficiaries  312,200  334,300  281,400  292,700 
Allowances  per  $282  $322  $423  $786 
Beneficiary 
No.  of Supplies  N/A  18.8 million  24.7 million  59.5 million 
FOUR  TYPES  OF  INCONTINENCESUPPLIES  ACCOUNT  FOR  ALMOST  ALL 
THE  INCREASE  IN MEDICARE  ALLOWANCES. 
Between  1990 and  1993, Medicare  allowances  for irrigation  syringes  (billing  code 
A4322),  sterile  saline  irrigation  solutions  (A4323),  lubricants  (A4402),  and  female 
external  urinary  collection  pouches  (A4328)  increased  $129 million.  This  accounts  for 
91 percent  of the  $142 million  increase  for all supplies.  The  table  on the  next  page 
shows increases  in allowances  for the  four  supplies  according  to their  billing  code. 
4
 Table  2  Increase  in Four  Supply  Codes 
Although  the  total  number  of incontinence  beneficiaries  decreased  6 percent  between 
1990 and  1993, the  number  of beneficiaries  receiving  these  four  supplies  showed 
significant  increases.  The  table  below  displays  the  number  of beneficiaries  served  for 
each  of the  four  supply  codes. 
Table  3.  Number  of Beneficiaries  Served  for Four  Supply  ClxJes 
Allowancesfor accesroriaandcolktion  devicesrosesi@@icant&between1990 and 
1993 whikallowaruxxfor cathetm ilwreaxdonlyrnoikrtly. 
Allowances  for accessories  rose  from  $61 million  to $183 million,  an increase  of 
200 percent.  In  1990, only $198,900 was spent  on all external  urinary  collection 
devices.  By 1993, expenditures  skyrocketed  to $16 million,  an 8,051 percent  increase. 
In contrast,  allowances  for catheters  grew  15 percent  from  $27 million  to $31 million 
between  1990 and  1993, an annual  increase  of 5 percent. 
The  nature  of supply  allowances  has  also changed.  In  1990, indwelling  catheters 
(A4338),  bedside  drainage  bags  (A4357),  and  irrigation  trays  (A4320)  accounted  for 
almost  half  of all allowances.  By 1993, 53 percent  of all allowances  were  made  for 
irrigation  syringes,  sterile  saline  solution,  and  lubricants. 
The  rise in supply  utilization  mirrors  the  change  in allowances.  In  1991, Medicare 
paid  for  19 million  incontinent  supplies.  By 1993, this figure  had  tripled  to 60 million. 
Suppliers  were  reimbursed  for 63,200 external  urinary  collection  devices  in  1991 and 
5  2 million  in 1993, anincrease  of3,410  percent.  Female  pouches  account  forahnost 
95 percent  of the  external  urinary  collection  devices  supplied  in 1993.  The  number  of 
catheters  rose  from  6 million  in 1991 to 7 million  in 1993.  Intermittent  urinary 
catheters  increased  1.5 million  but  was offset  by a decrease  in the  number  of insertion 
trays,  external  catheters,  and  indwelling  catheters. 
Allbwamxrareconcentratedinone catir  andasmallnumberof supplkisand 
benejichti. 
One  carrier  and  a small  number  of suppliers  and  beneficiaries  account  for a significant 
portion  of allowances.  Florida  Blue  Shield  accounted  for  55 percent  of all 
incontinence  allowances  in 1993, while  carriers  made  50 percent  of the  allowances 
six 
in 1990.  Of the  1 percent  sample  claims  reviewed  in 1993, less than  1 percent  of all 
suppliers  received  total  annual  payments  of $50,000 or more,  accounting  for  over  one-
quarter  of all payments.  In contrast,  no supplier  received  total  payments  that 
exceeded  $50,000  in 1990.  While  60 percent  of the  suppliers  received  total  payments 
of $100 or less in 1990, the  number  dropped  to  40 percent  in 1993.  The  following 
table  details  incontinence  payments  by supplier  between  1990 and  1993. 
Table  4. Incontinence  Payments  Per  Supplier 
, :,, ;:,,:::::,::, 
Tdtat   199p,  :    ii$s:::~:;: i:ii!::::.
j :  ~:p.QJ~::,.:.,.  ,.:,,  ,:,:  ,,:;::  ,  ,.,  ,:  ,,;..,...:: :..:.::.,,.2:.  ..,:;;:: ,::::,:::.,.::;.:,:::::;:;:;,;::::;:.
, :, ,;~ow$q:.:,::: ;:::, 
,::!l&;Q$:,; ,:;:::::.: ;.:.,:; :g..$$::.:;:::;, ,$,:;;  .:...::,:;g:j::,::$:.$;::;;:;~~uf:::::;j; 
,,., .  ?:.,:,:.:....::; .:?,  :!;;:is~p~q$rs:::....:.: :.N...l..~..* a~$,i*;;.$: :::,,:$qpp]i$f#$<:  :;i::;~b$~$~$;;:;$
Under  $100  60.0  3.3  39.3  0.8 
$100-$199  9.0  2.5  10.9  1.0 
$200-$499  12.9  8.2  16.9  3.5 
$500-$999  7.4  10.2  12.2  5.4 
$1,000-$4,999  8.9  37.0  15.4  19.1 
$5,000-$9,999  1.1  14.5  2.7  11.7 
$10,000-$49,000  0.8  24.4  2.2  30.9 
$50,000+  0.0  0.0  0.5  27.5 
In  1993, 10.3 percent  of beneficiaries  received  services  over  $2,000 and  accounted  for 
57 percent  of allowances.  In  1990, payments  were  less concentrated  in such large 
payments.  only  21 percent  of allowances  were  made  to beneficiaries  who received 
$2,000 or more  in semices.  In  1990, 53 percent  of beneficiaries  received  $100 or less 
in incontinence  supplies,  while  33 percent  received  comparable  payments  in 1993. 
The  table  on the  next  page  details  allowances  by beneficiary. 
6
 Table  5. Incontinence  Allowances  Per  Beneficiary 
Under  $100  I  52.5  I  5.7  I  32.6  I  1.7  II 
$100-$199  I  12.2  I  6.2  I  12.7  I  2.3  II 
I 
$200-$499  18.9  21.8  19.4  8.2 
I 
$500-$999  10.5  26.4  15.0  13.3 
I 
$1,000-$1,999  4.0  18.7  9.9  17.8 
$2,000-$2,999  1.2  10.9  3.9  12.1 
1 
I 
$3,000-$3,999  0.5  5.7  1.9  8.5 
$4,000+  0.2  4.6  4.5  36.0 
QUESTIONABLE  BILLING  PRACTICES  MAY  ACCOUNT  FOR  ALMOST 
ONE-HALF  OF ALL  INCONTINEN  CE ALLOWANCES  IN  1993 
Medicare  allowed  $107 million  in 1993 for supplies  related  to questionable  billing 
practices.  This  represents  47 percent  of the  $230 million  in allowances.  About 
$88 million  was paid  for incontinence  accessories  for beneficiaries  who  did not  receive 
a prosthetic  device.  Additional  payments  of $19 million  were  made  for certain 
prosthetic  devices  that  appear  to have  excessive  utilization.  These  billing  practices  are 
concentrated  in one  carrier,  few suppliers,  and  few beneficiaries. 
Accessoti  bilkd wMou.tprostheticdevicesh  not meet Medicareguidelines. 
In order  for Medicare  to pay for incontinence  accessories  the  beneficiary  must  have  a 
prosthetic  device  such  as a catheter  or a urinary  collection  device.  However, 
$88 million  was allowed  for accessories  that  were  not  billed  with  a prosthetic  device. 
As shown  in the  table  on the  next  page,  virtually  all allowances  that  did not  meet 
Medicare  guidelines  were  for just  three  supplies.  The  supplies  were  sterile  saline 
solutions,  irrigation  syringes,  and  lubricants.  In total,  these  three  supplies  account  for 
94 percent  of the  $88 million  in questionable  billings.  As a further  check,  we reviewed 
Part  B services  provided  to 96 beneficiaries  with large  Medicare  allowances  and  found 
that  very few beneficiaries  received  other  durable  medical  equipment  for which  these 
supplies  would  have  been  appropriate. 
7

.  Table  6. Accessories  Billed  Without  Catheter  or Collection  Device 
Saline  Solution  6,467,500  $29 million 
Syringe  10,268,200  $31 million 
Lubricant  11,312,800  $22 million 
Utii?zationfor certaihprostheticdevicesap~am ercemive. 
As much  as $19 million  in allowances  may have  been  overpaid  if the  proposed 
DMERC  utilization  standards  had  applied  to certain  prosthetic  devices  in 1993.  Over 
$11 million  in  1993 was allowed  for female  external  urinary  collection  pouches 
(A4328)  that  exceed  the  proposed  DMERC  guidelines  of one  per  day.  We  are  aware 
that  at least  one  supplier  was paid  for  186 per  month,  or 6 per  day.  Another  $8 
million  was allowed  for beneficiaries  who received  more  than  one  indwelling  catheter 
per  month.  The  proposed  DMERC  policy calls for no more  than  one  indwelling 
catheter  per  month  for routine  maintenance.  Additional  catheter  changes  are  covered 
only if documentation  substantiates  medical  necessity. 
FloridaBik  ShieLiaccountedfor mostof thequationablealihwanctx 
Florida  Blue  Shield  accounted  for $78 million  (89 percent)  of $88 million  in Medicare 
allowances  for  accessories  not  billed  in conjunction  with  a catheter  or external  urinary 
collection  device.  Over  90 percent  of the  allowances  were  for just  three  supplies: 
irrigation  syringes,  sterile  saline  solutions,  and  lubricants.  Almost  70 percent  of the 
allowances  for female  external  urinary  collection  pouches  was also through  Florida 
Blue  Shield. 
The  allowances  for the  indwelling  catheters  that  exceeded  one  per  month  involved 
numerous  carriers.  Four  carriers  accounted  for over  40 percent  of allowances.  The 
carriers  were  Pennsylvania  Blue  Shield  (15 percent),  Illinois  Blue  Shield  (10 percent), 
Blue  Shield  of Greater  New York  (9 percent),  and  Nationwide  of Ohio  (7 percent). 
The  remaining  60 percent  was paid  by 44 other  carriers. 
Allowamxzrwereconcentmtedinfew suppliem 
Approximately  5 percent  of suppliers  (19 in the  sample  of 471) accounted  for  over 
three-quarters  of the  accessories  billed  without  catheters  or external  urinary  collection 
devices.  All but  one  of these  suppliers  were  paid  by Florida  Blue  Shield. 
8
 Ten  suppliers  in our  sample  accounted  for all payments  for female  external  urinary 
collection  pouches.  All but  three  of the  suppliers  were  paid  by Florida  Blue  Shield. 
only  3 of the  11 codes  used  to reimburse  indwelling  catheters  showed  any 
concentration  of allowances  for suppliers.  For  each  of these  codes,  A4311,  A4313, 
and  A43 15, one  supplier  received  at least  two-thirds  of all allowances  in our  sample. 
The  remaining  allowances  was shared  by several  suppliers. 
F&v beneficiariesreceivemost of the allowances. 
A total  of 821 beneficiaries  (28 percent  from  the  sample  of 2,927) received  accessories 
without  a prosthetic  device.  At least  360 of these  beneficiaries  were  billed  for 
irrigation  syringes,  sterile  saline  solutions,  and  lubricants. 
All the  excessive  allowances  for female  collection  pouches  were  made  to 3 percent  of 
beneficiaries  sampled.  For  each  of the  indwelling  catheter  codes  except  A4338,  all 
excessive  payments  were  made  to  1 percent  to 6 percent  of the  beneficiaries  sampled. 
However,  almost  one-third  of the  beneficiaries  in our  sample  received  more  than  one 
catheter  per  month  of those  billed  under  A4338. 
A PROPOSED  CHANGE  IN DMERC  POIJCIES  WILL  PROBABLY  ADDRESS 
QUESTIONABLE  BILLING  PRACTICES. 
Inconsistencies  and  the  lack  of clear  utilization  guidelines  and  controls  among  carriers 
contributed  to the  large  number  of questionable  incontinence  claims  paid  by Medicare 
in  1993.  Current  DMERC  policies,  while  more  consistent,  still do not  contain  clear 
coverage  definitions.  A proposed  draft  DMERC  policy further  clarifies  covered 
services  and  provides  a mechanism  to link incontinence  accessory  supplies  to 
prosthetic  devices. 
l%wious canierpolicia did not containclearguidanceon coverageand approptite 
util&atim. 
We  reviewed  policies  of three  carriers  which were  among  the  highest  in incontinence 
allowances  for  1993 and  found  that  their  guidelines  differed  for the  same  types  of 
supplies.  For  example,  for one  indwelling  catheter  code,  one  carrier  allowed  two per 
month  while  another  allowed  eight.  For  one  supply  code,  one  carrier  allowed  4 per 
day, the  second  allowed  1 per  week,  and  the  third  allowed  30 per  month.  For  the 
female  urinary  collection  device  (A4328),  an item  with  a large  number  of questionable 
allowances,  two carriers  had  no utilization  guidelines  and  the  third  allowed  four  per 
month. 
The  carrier  with the  highest  questionable  allowances  for  1993 had  no frequency  or 
utilization  controls  for  any incontinence  supplies  except  for two intermittent  catheter 
codes.  Neither  this carrier  nor  the  two other  carriers  had  controls  to prevent 
allowances  for incontinence  supplies  when  billed  without  a prosthetic  device. 
9
 Cumntpolicks,  whik strongm,do not go far enough 
Current  DMERC  policies  categorize  the  incontinence  supplies  benefit  under  coverage 
of prosthetic  devices.  For  a prosthetic  device  to be  covered,  the physician  must 
certify  that  the  condition  resulting  in the  need  for the  device  is of long  and  indefinite 
duration  (at  least  3 months). 
All four  DMERCS  have  utilization  controls  for indwelling  catheters,  limiting  the 
number  of catheters  to two per  month  for routine  maintenance.  Three  DMERCS 
have  strengthened  coverage  policies  for lubricant,  stating  that  it can  no longer  be 
reimbursed  as a separate  supply  since it is included  in catheter  insertion  trays. 
The  DMERCS  have  also adopted  a uniform  certificate  of medical  necessity  form.  This 
certificate  must  be  filled  out,  signed,  and  dated  by the  ordering  physician  and  kept  on 
file by the  supplier. 
Not  all DMERCS  have  computer  edits  or controls  in place  to ensure  that  supplier 
claims  conform  with DMERC  policies.  While  all four  DMERCS  have  a utilization 
standard  for indwelling  catheters,  only two have  computer  edits.  Only  one  DMERC 
has  an on-line  edit  to check  claims  for particular  supplies  to ensure  that  the  certificate 
of medical  necessity  adequately  supports  the  use  of these  supplies. 
Even  though  the  DMERC  manuals  limit payment  for supplies  to those  that  are  for the 
effective  use  of a prosthetic  device,  DMERCS  do not  have  controls  to prevent 
payment  for incontinence  supplies  when  the  beneficiary  has  neither  a catheter  nor  an 
external  urinary  collection  device.  Without  these  controls,  Medicare  will continue  to 
pay for incontinence  supplies  that  do not  meet  Medicare  coverage  guidelines. 
ThedrafiDMERCpolicy providixunfom  coverageandutilizationstandar&thatwill 
lead to improvedprocessingof iizcontkencesupplycZaims. 
The  proposed  DMERC  national  guidelines  on urological  supplies  will prevent 
Medicare  payment  for supplies  not  used  with covered  prosthetic  devices.  As the  draft 
policy  clearly  states,  urological  supplies  that  are  not  used  with  catheters  or external 
urinary  collection  devices  will be  denied  as noncovered.  It provides  even  more 
explanation  in the  case  of sterile  saline  solution  and  irrigation  syringes by maintaining 
that  irrigation  supplies  that  are  used  for  care  of the  skin and/or  perineum  of 
incontinent  patients  are  not  covered. 
The  new policy requires  suppliers  to add  a modifier  to urological  supply  codes  when 
the  supplies  are  used  with  a catheter  or external  urinary  collection  device.  The  new 
ZX  modifier,  as it is known,  would  be  added  to the  end  of a code  submitted  on 
claims  for  catheters,  external  urinary  collection  devices,  or supplies  required  for the 
effective  use  of one  of these  items.  The  modifier  indicates  that  specified  coverage 
criteria  in the  medical  policy have  been  met  and  documentation  is available  in the 
suppliers  records. 
10  If this policy is implemented  and  claims  processing  controls  are  created  to ensure  that 
required  modifiers  are  used,  large  numbers  of questionable  allowances  such  as those 
found  in  1993 can be  avoided.  If the  policy had  been  implemented  in  1993, Medicare 
and  beneficiaries  could  have  saved  as much  $88 million  in questionable  payments. 
The  proposed  policy provides  more  explicit  definitions  of covered  items.  It clearly 
defines  female  urinary  collection  devices,  insertion  trays,  and  anchoring  devices.  It 
also lists supplies  sometimes  paid  for previously  that  will no longer  be  covered  since 
they  are  not  required  for the  effective  use  of incontinence  prosthetic  devices  (e.g. skin 
barriers  and  appliance  cleaners). 
The  policy  also contains  utilization  standards  for many  incontinence  supplies.  For 
instance,  no more  than  one  indwelling  catheter  per  month  will be  covered  for routine 
catheter  maintenance.  The  new  policy allows only one  male  external  catheter  and  one 
female  pouch  collection  device  per  day.  These  new utilization  standards  coupled  with 
computer  edits  or controls  should  significantly  decrease  the  number  of excessive 
incontinence  supplies  billed  to Medicare. 
11
 NEXT  STEPS

InconthwnceSupplkr 
In response  to the  information  presented  in this report  and  a companion  report,  the 
Office  of Inspector  General  (OIG)  plans  to: 
o	 initiate  an audit  review  to examine  in more  detail  payments  made  for 
incontinence  supplies  in order  to determine  if any overpayments  are 
involved  in this area;  and 
o	 launch  a national  investigation  in this area,  examining  potentially 
fraudulent  practices  by specific  suppliers  of incontinence  supplies. 
We  also support  ongoing  activity in HCFA  and  the  DMERCS  to develop  more  specific 
coverage  guidelines  and  educate  providers  and  suppliers  about  proper  billing  for such 
supplies.  We  hope  the  information  contained  in this report  is helpful  as they  complete 
this activity. 
OIG Studiesof OtherNumi.ngHome Suppik 
The  OIG  will continue  studies  and  audits  related  to its major  initiative  examining 
services  and  supplies  provided  to Medicare  beneficiaries  residing  in nursing  facilities. 
As this report  and  other  OIG  work  has reflected,  the  fragmentation  of billing  for 
services  and  supplies  provided  to residents  of nursing  homes  has  created  a host  of 
improper  incentives  for billers  to the  Medicare  program. 
Bundlingof Semkes 
We  continue  to support  HCFAS efforts  to pursue  a systematic  solution  to these  kinds 
of problems  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. 
12
 APPENDIX  A

CONFIDENCE  INTERVALS 
We  reported  our  findings  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  confidence  intervals  present  the  range  of possible  findings  at the  95

percent  level.  The  95 percent  confidence  level represents  approximately  two standard

deviations  from  the  sample  mean.  The  two standard  deviations,  or semi-width,  is

determined  by multiplying  1.96 by the  standard  error  of the  sample  mean.  The

variance  from  the  point  estimate  is determined  by multiplying  the  semi-width  of by the

sample  size.  The  confidence  internal  is the  plus  or minus  range  of the  variance  from

the  point  estimate.

The  95 percent  confidence  intervals  are  presented  in the  following  tables.

Table  1. Inamtinencx  Activity  1990-1993  (p.4) 
Table 2  ItIemase in Four su@iea  Bdween  1990  and 1993  (@) 
Irrigation  Syringe  1900  +/- $3s1,600  $679,700 
A4322 
1993  +/- $3,308,200  $43,271,W 
Saline  Solution  1990  +/- $1,365,700  $7,035,500 
A4323 
1993  +/- $4,sss,600  $47,020,200 
Female  Pouch  1990  +/- $25,160  $18,500 
A4328 
1993  +/- $2,643,800  $15,295,~ 
Lubricant  1990  +/- $333,100  $494,100 
A4402 
1993  +1- !S2.766.300  $31.958.300 
A-1
 Table 3. Quawo-na  Me BifIing Phctimt(p.7)
II I 
Female  Pouch  +/- $3,070,135  $11,117WJ 
1 
II Indwelling  Catheter  I  +/- $1,644,595  I  $S,156,900  II 
l\ AcceaaorieauI/o  Prosthetic  Device  I  +/-$10,7S4,752  I  $s7,570,500  II 
Table 4. saline  solu~  _  ad  IAi&ant  Billed Wkbout  Pmatktx - Dmice  (p%) 
Saline  Solution  No.  of Supplies  +/- 1,2%,309  6,467,500 
A4323 
Aflowana  +/- $.4,223,731  $2S,70S,=2 
Irrigation  Syringe  No. of Supplies  +/- 1,23s,503  10,26s,200 
A4322 
Allowance  +/- $3,6ss,280  $30,s45,900 
Lubricant  No.  of Supplies  +/- 1,562456  llwv300 
A4402 
Allowance  +/- $3,027,SSS  $21,914,501 
Tabfe 5. Florida  Blue Shield AUowmce  of &xsao&s  Wltboul%t aktic - Q@) 
A-2
 Department  of Health  and Human  Services 
OFFICE  OF 
INSPECTOR  GENERAL 
QUESTIONABLE  MEDICARE  PAYMENTS

FOR  INCONTINENCE  SUPPLIES

# sERVICES 
4+  &@ 
+  7 GIBBS BROWN
JUNE 
SW 
~  Inspector  General

s

%

%$--@ DECEMBER  1994 
4+>daa  0EI-03-94-O0772  OFFICE  OF INSPE~OR  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 (HI-IS) 
programs as well as the health and welfare of beneficiaries served by those programs.  l?hk 
statutory mission is carried out through a nationwide network of audits, investigations, and 
inspections cxmducted by three OIG operating components:  the Office of Audit *MUX,  the 
Office of Investigations, and the Office of Evaluation and Inspections.  The OIG also info~ 
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 INSPECITONS 
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 Joy Quill, Regional Inspector General and Robert A. 
Vito, Deputy Regional Inspector General.  Project staff included: 
PHILADELPHIA  REGION  HEADQUARTERS 
Robert  A  Katz, Project Leader  Thomas A. Noplock, Program Specialist 
Robert  A. Baiocco, Progam Analyst  Brian P. Ritchie, Technical Support Staff 
Linda M. Ragone, Program Analyst  Barbara Tedesco, Technical Suppoti  Stafl 
Cynthia Hansford, Administrative  Staff 
To obtain a copy of this repo~  please call the Philadelphia Regional Office at (800) 531-9562  EXECUTIVE  SUMMARY

PURPOSE 
This  report  examines  trends  in allowances  and  questionable  billing  practices  for 
incontinence  supplies  under  Medicare  Part  B between  1990 and  1993. 
BACKGROUND 
Incontinence  is the  inability  of the  body  to control  urinary  and  bowel  functions. 
Under  the  Medicare  Part  B program,  the  Health  Care  Financing  Administration 
(HCFA)  will reimburse  suppliers  that  provide  incontinence  supplies  to aid individuals 
whose  incontinence  condition  ...is of long and  indefinite  duration.  Such 
reimbursement  is provided  only as part  of Medicares  coverage  for prosthetic  devices 
such  as catheters  and  external  urinary  collection  devices.  The  HCFA  will also 
reimburse  for accessories,  such as irrigation  syringes  and  sterile  saline  solution,  that  aid 
in the  effective  and  therapeutic  use of these  devices.  Currently,  claims  are  processed 
by four  Durable  Medical  Equipment  Regional  Carriers  (DMERCS). 
We  selected  claims  for  a 1 percent  sample  of beneficiaries  who  received  one  of 43 
types  of supplies  for incontinence  care.  We  arrayed  the  data  by type  of supplies, 
carrier,  and  major  suppliers.  We  then  analyzed  the  statistical  information  to develop 
trends.  We  also  applied  current  and  proposed  HCFA  guidelines  for these 
incontinence  supplies  in 1993.  We focused  on two facets  of billing:  accessories  that 
can  only be billed  with  prosthetic  devices;  and  frequency  limitations  on prosthetic 
devices. 
FINDINGS 
Medicareallowancesfor hcontiiumce suppliesmore thandoubledin threeyearsdespitea 
dropinthenumberof bmejiciariesusingthesesupplies. 
Incontinence  allowances  rose  from  $88 million  in 1990 to $230 million  in 1993, an 
increase  of $142 million.  During  the  same  period,  the  number  of beneficiaries 
receiving  incontinence  supplies  fell from  312,200 to 292,700.  Allowances  per 
beneficiary  increased  from  $282 to $786. 
Fourtypesof incontinencewppliesaccountfor abnostailtheincreasebaMdicare 
allowances. 
Between  1990 and  1993, Medicare  allowances  for irrigation  syringes,  sterile  saline 
irrigation  solution,  lubricant,  and  female  external  urinary  collection  pouches  increased 
$129 million.  This  accounts  for 91 percent  of the  $142 million  total  increase. 
1  Questionablebillingpmcticesmay accountfor almosthalfof ikcontihenec albwancesin
1993. 
Medicare  allowed  $107 million  in 1993 for supplies  whose  billing is questionable. 
Almost  $88 million  was paid  for incontinence  accessories  that  were  not  billedin 
conjunction  with  a prosthetic  device.  An  additional  $19 million  was paid  for 
beneficiaries  whose  utilization  of certain  prosthetic  devices  appears  excessive.  The 
allowances  were  concentrated  in one  carrier  and  a small number  of suppliers  and 
beneficiaries. 
A proposedchangeinHCFA policywillprobablyaddressquationablebilbgpmctictx 
Inconsistencies  and  lack  of clear  utilization  guidelines  in carrier  policies  contributed  to 
the  large  number  of questionable  incontinence  claims  paid  by Medicare  in 1993.  A 
proposed  draft  policy  (to be  issued  by the  four  Durable  Medical  Equipment  Regional 
Carriers)  will clari@ covered  services  and  provide  a mechanism  to link incontinence 
accesso~  supplies  to prosthetic  devices. 
NEXT  STEPS 
Iiontinence  Supplies 
In response  to the  information  presented  in this report  and  a companion  report,  the 
Office  of Inspector  General  (OIG)  plans  to: 
o	 initiate  an audit  review  to examine  in more  detail  payments  made  for 
incontinence  supplies  in order  to determine  if any overpayments  are 
involved  in this area;  and 
o	 launch  a national  investigation  in this area,  examining  potentially 
fraudulent  practices  by specific  suppliers  of incontinence  supplies. 
We  also support  ongoing  activity in HCFA  and  the  DMERCS  to develop  more  specific 
coverage  guidelines  and  educate  providers  and  suppliers  about  proper  billing  for such 
supplies.  We  hope  the  information  contained  in this report  is helpful  as they  complete 
this activity. 
OIG Studiesof OtherNiwsikgHome Supplies 
The  OIG  will continue  studies  and  audits  related  to its major  initiative  examining 
services  and  supplies  provided  to Medicare  beneficiaries  residing  in nursing  facilities. 
As this report  and  other  OIG  work  has reflected,  the  fragmentation  of billing for 
semices  and  supplies  provided  to residents  of nursing  homes  has  created  a host  of 
improper  incentives  for billers  to the  Medicare  program. 
11  Bundli& of Sewices 
We  continue  to support  HCFAS efforts  to pursue  a systematic  solution  to these  kinds 
of problems  through  a requirement  for %undling  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. 
... 
111  TABLE  OF  CONTENTS

PAGE 
EXECUTIVE  suMMARY 
INTRODUCTION  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  1

FINDINGS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...4

  Increased  spending  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...4

  Four  specific  supplies  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...4

  Questionable  billing practices  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...7

  DraftDMERCpolicy  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...9

NEXT  STEPS  . ..  O. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12

APPENDIX

A  Confidence  Intervals  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..A-l
 INTRODUCTION

PURPOSE 
This  report  examines  trends  in allowances  and  questionable  billing  practices  for 
incontinence  supplies  under  Medicare  Part  B between  1990 and  1993. 
BACKGROUND 
MedicareCoverageof IiacontinencSeupplies 
Incontinence  is the  inability  of the  body  to control  urinary  and  bowel  functions. 
Reimbursement  for incontinence  supplies  is included  as part  of Medicares  coverage 
for prosthetic  devices.  According  to Medicare  Carriers  Manual  section  2130, 
prosthetic  devices  (other  than  dental)  which  replace  all or part  of an internal  body 
organ  (including  contiguous  tissue),  or replace  all or part  of the  function  of a 
permanently  inoperative  or malfunctioning  internal  body  organ  are  covered  when 
furnished  on a physicians  order. 
Under  the  Medicare  Part  B program,  the  Health  Care  Financing  Administration 
(HCFA)  will reimburse  suppliers  that  provide  incontinence  supplies  to aid individuals 
whose  incontinence  condition  ...is of long and  indefinite  duration.  Certain  items, 
such as absorbent  undergarments  or diapers,  are  specifically  excluded  from  coverage. 
Incontinence  supplies  include  prosthetic  devices  such  as catheters  and  external  urinary 
collection  devices  such  as pouches  or cups.  Catheters  are  flexible,  tubular  instruments 
used  to control  urinary  flow.  The  HCFA  will also reimburse  accessories  that  aid in 
the  effective  and  therapeutic  use of these  devices.  These  accessories  include  items 
such  as drainage  bags,  irrigation  syringes,  sterile  saline  solutions,  and  lubricants. 
However,  accessories  are  not  covered  in the  absence  of a prosthetic  device.  . 
Canierl%oc&g  of IncontzkenceSupply(3iJims 
In June  1992, HCFA  issued  a final rule  designating  four  Durable  Medical  Equipment 
regional  carriers  (DMERCS)  to process  all claims  for durable  medical  equipment, 
prosthetics,  orthotics,  and  supplies.  Effective  October  1, 1993, the  DMERCS  replaced 
more  than  50 area  carriers  which had  previously  processed  DME  claims.  The 
geographical  areas  formerly  serviced  by the  carriers  were  phased  in under  the 
DMERCS  on a staggered  basis.  Each  DMERC  issued  its own coverage  and 
reimbursement  policies  that  implement  Medicare  guidelines. 
However,  for urological  supplies,  the  DMERCS  issued  a draft  of a single  national 
policy in October  1994.  In addition  to redefining  and  clarifying  some  of the  definitions 
used  in claims  for incontinence  and  urological  supplies,  the  policy establishes 
documentation  requirements  for higher  than  usual  quantities  of supplies.  The  non- coverage  of diapers  and  similar  absorptive  pads  is emphasized.  The  policy  also 
reinforces  the  condition  of permanence  for coverage  purposes  and  stresses  that 
accessories  not  used  in conjunction  with covered  catheters  or external  urinary 
collection  devices  are  not  covered. 
M&care  FraudAkrt 
One  DMERC  issued  a Medicare  Fraud  Alert  in June  1994 describing  a supplier 
scheme  involving  the  marketing  of incontinence  kits to nursing  homes.  In this case, 
the  supplier  advised  nursing  home  officials that  Medicare  was paying  for the  kits under 
a pilot program.  According  to the  alert,  supplier  representatives  provide  kits 
containing  accessories  such as syringes,  saline  solution,  and  lubricants,  to the  nursing 
home  in exchange  for beneficiary  names  and  Medicare  health  insurance  claim 
numbers.  The  marketing  representative  then  orders  bulk  quantities  of supplies  billed 
under  the  beneficiaries  claim  numbers. 
The  alert  also indicated  that  the  supplier  marketing  program  stated  that  the 
beneficiary  should  be  treated  three  times  per  day with the  contents  of the  kit.  This 
resulted  in a supplier  billing Medicare  $1,800 per  month  per  beneficiary  in one  carrier 
jurisdiction. 
METHODOIK)GY 
To  determine  the  trends  in incontinence  allowances,  we arrayed  payment  and 
utilization  data  for each  incontinence  supply.  We  also analyzed  the  utilization  data  for 
possible  questionable  billing  practices. 
We  first reviewed  each  DMERCS  coding  and  coverage  guidelines  and  interviewed 
DMERC  officials  to identify  43 codes  used  to reimburse  incontinence  supplies.  These 
did not  include  any local codes  used  by individual  carriers.  Supplies  were  segregated 
into  three  groups:  catheters,  external  urinary  collection  devices,  and  accessories.  The 
HCFA  and  DMERC  officials provided  the  designation  for each  billing  code. 
We  selected  all services  for 43 codes  for a 1 percent  sample  of beneficiaries  from  the 
Part  B Medicare  Annual  Data  Procedure  File  for calendar  year  1990 and  the  National 
Claims  History  100% Physician/Supplier  Data  for calendar  years  1991 through  1993. 
From  the  1993 sample  of 2,927 beneficiaries,  we obtained  an additional  file for 
231 beneficiaries  who  accounted  for 51 percent  of all incontinence  allowances, 
beginning  with  the  beneficiary  with the  highest  amount  billed.  This  file contained  all 
Part  B services,  in addition  to incontinence. 
From  the  sample  of incontinence  services,  we calculated  Part  B Medicare  allowed 
payments,  supply  frequency,  and  number  of beneficiaries.  Allowed  payments  include 
both  the  80 percent  Medicare  payment  and  the  20 percent  coinsurance  fee  paid  by 
beneficiaries.  We  arrayed  the  data  by billing code,  carrier,  and  major  suppliers.  We 
then  analyzed  the  statistical  information  to determine  trends  in incontinence 
L  expenditures.  Welimited  our  analysis  for frequency  utilization  to the  period  1991 
through  1993 because  frequency  reported  in 1990 was not  comparable  to later  years. 
According  to DMERC  coding  policies,  11 of the  23 billing  codes  that  cover  accessories 
are  also used  to reimburse  ostomy  care.  We  did not  include  any services  for the  11 
codes  associated  with beneficiaries  who received  only ostomy  care.  We  also did not 
include  services  billed  under  code  A4323,  sterile  saline  irrigation  solution,  when  it 
was not  billed  in conjunction  with  other  incontinence  supplies.  According  to DMERC 
officials,  code  A4323  may be  used  in conjunction  with  other  non-incontinence  supplies 
such  as enteral  nutrition  products. 
To  determine  the  nature  and  extent  of questionable  billing practices,  we interviewed 
DMERC  officials  including  medical  directors  and  fraud  control  unit  personnel.  We 
reviewed  coverage  and  utilization  standards  for  1) the  three  Medicare  carriers  that 
were  among  the  highest  in allowances  in  1993, 2) the  current  DMERCS,  and  3) the 
proposed  DMERC  national  urological  standards. 
We  projected  our  findings  by multiplying  sample  results  by 100.  Confidence  intervals 
for our  findings  are  presented  in Appendix  A. 
We  applied  current  and  proposed  DMERC  guidelines  to the  services  billed  for the  43 
incontinence  supplies  in 1993.  We focused  on two facets  of billing:  1) accessories  that 
can  only be  billed  with prosthetic  devices,  such as catheters  and  external  urinary 
collection  devices;  and  2) frequency  limitations  on prosthetic  devices.  For  each 
practice,  we reported  Medicare  allowances  and  frequencies  above  the  tolerance 
guidelines  by type  of supply,  carrier,  supplier,  and  number  of beneficiaries  receiving 
supplies. 
This  report  is one  of a series  of reports  concerning  Medicare  payments  for 
incontinence  supplies.  Marketing  of Incontinence  Supplies  (OEI-03-94-00770),  describes 
supplier  and  nursing  home  practices  that  can lead  to questionable  payments  and 
examines  issues  concerning  Medicare  beneficiaries  use  of incontinence  supplies.  The 
third  report,  Medicaid  Payments  for  Incontinence  Supplies  (OEI-03-94-00771),  will 
examine  how the  Medicaid  program  processes  claims  for incontinence  supplies  in 14 
States. 
This  inspection  was conducted  in accordance  with the  Quality  Standards  for  Inspections 
issued  by the  Presidents  Council  on Integrity  and  Efficiency. 
3
 FINDINGS

MEDICARE  ALLOWANCES  FOR  INCONTINENTCE  SUPPLIES  MORE  THAN 
DOUBLED  IN THREE  YEARS  DESPITE  A DROP  IN THE  NUMBER  OF 
BENEFICIARIES  USING  THESE  SUPPLIES. 
Medicare  Part  B allowances  for incontinence  supplies  rose  from  $88 million  in 1990 to 
$230 million  in 1993, an increase  of $142 million.- The  most  significant  portion  of that 
increase  came  in  1993 when  allowances  increased  $111 million,  almost  doubling  from 
the  previous  year.  Over  the  same  time  period,  the  number  of beneficiaries  receiving 
incontinence  supplies  has actually  decreased.  In  1990, 312,200 beneficiaries  received 
incontinence  supplies.  In  1993, this figure  fell to 292,700.  Allowances  per  beneficiary 
more  than  doubled  from  $282 in 1990 to $786 in 1993. 
Between  1991 and  1993, the  number  of incontinence  supplies  paid  for by Medicare 
more  than  tripled.  In  1991, Medicare  Part  B reimbursed  suppliers  for  19 million 
incontinence  supplies.  In  1992, reimbursed  supplies  increased  to 25 million.  In  1993, 
supplies  more  than  doubled  from  the  previous  year  to 60 million.  The  table  below 
provides  a summary  of incontinence  activity between  1990 and  1993. 
Table  1. Incontinence  Activity  1990-1993 
No. of Beneficiaries  312,200  334,300  281,400  292,700
I  I 
r  r 
Allowances  per  $282  $322  $423  $786 
Beneficiary 
No.  of Supplies  N/A  18.8 million  24.7 million  59.5 million 
FOUR  TYPES  OF  INCONTINENCE  SUPPLIES  ACCOUNT  FOR  ALMOST  ALL 
THE  INCREASE  IN MEDICARE  ALLOWANCES. 
Between  1990 and  1993, Medicare  allowances  for irrigation  syringes  (billing  code 
A4322),  sterile  saline  irrigation  solutions  (A4323),  lubricants  (A4402),  and  female 
external  urinary  collection  pouches  (A4328)  increased  $129 million.  This  accounts  for 
91 percent  of the  $142 million  increase  for all supplies.  The  table  on the  next  page 
shows increases  in allowances  for the  four  supplies  according  to their  billing  code. 
4
 Table  2  Increase  in Four  Supply  Codes 
T:;;: 
,,:,Pp.&,:  $990?.~lo@l$i  ::,:;: ji!193 Mloianci::i:  j~@jas*;~~~~#! ;;:~jig;:; 
Syringe  $0.7  million  $43.3 million  $42.6 million 
Saline  Solution  $7.0  million  $47.0 million  $40.0 million 
Female  Pouch  $0.02 million  $15.3 million  $15.3 million 
Lubricant  $0.5  million  $32.0 million  $31.5 million 
Although  the  total  number  of incontinence  beneficiaries  decreased  6 percent  between 
1990 and  1993, the  number  of beneficiaries  receiving  these  four  supplies  showed 
significant  increases.  The  table  below  displays  the  number  of beneficiaries  served  for 
each  of the  four  supply  codes. 
Table  3.  Number  of Beneficiaries  Served  for Four  Supply  Codes 
I  I  I 
Syringe  7,400  62,700  747 percent 
Saline  Solution  I  45.300  I  95.900  I  112 Percent 
Female  Pouch  I  600  I  9,400  I  1,467 percent 
Lubricant  5,700  59,900  951 percent 
Allbwaruzrfor accessorialandcollectiondevicesrosesiijicantly between1990 and 
1993 whik alibwancesfor cathetenikreased on$ modestly. 
Allowances  for accessories  rose  from  $61 million  to $183 million,  an increase  of 
200 percent.  In  1990, only $198,900 was spent  on all external  urinary  collection 
devices.  By 1993, expenditures  skyrocketed  to $16 million,  an 8,051 percent  increase. 
In contrast,  allowances  for catheters  grew  15 percent  from  $27 million  to $31 million 
between  1990 and  1993, an annual  increase  of 5 percent. 
The  nature  of supply  allowances  has  also changed.  In  1990, indwelling  catheters 
(A4338),  bedside  drainage  bags  (A4357),  and  irrigation  trays  (A4320)  accounted  for 
almost  half  of all allowances.  By 1993, 53 percent  of all allowances  were  made  for 
irrigation  syringes,  sterile  saline  solution,  and  lubricants. 
The  rise  in supply  utilization  mirrors  the  change  in allowances.  In  1991, Medicare 
paid  for  19 million  incontinent  supplies.  By 1993, this figure  had  tripled  to 60 million. 
Suppliers  were  reimbursed  for 63,200 external  urinary  collection  devices  in 1991 and  2 million  in 1993, anincrease  of3,410  percent.  Female  pouches  account  for almost 
95 percent  of the  external  urinary  collection  devices  supplied  in  1993.  The  number  of 
catheters  rose  from  6 million  in 1991 to 7 million  in 1993.  Intermittent  urinary 
catheters  increased  1.5 million  but  was offset  by a decrease  in the  number  of insertion 
trays,  external  catheters,  and  indwelling  catheters. 
Allowanmnareconcentratedm one cam>randasmullnumberof supplierxand 
bemfkiark 
one  carrier  and  a small  number  of suppliers  and  beneficiaries  account  for a significant 
portion  of allowances.  Florida  Blue  Shield  accounted  for 55 percent  of all 
incontinence  allowances  in 1993, while  six carriers  made  50 percent  of the  allowances 
in 1990.  Of the  1 percent  sample  claims  reviewed  in 1993, less than  1 percent  of all 
suppliers  received  total  annual  payments  of $50,000 or more,  accounting  for  over  one-
quarter  of all payments.  In contrast,  no supplier  received  total  payments  that 
exceeded  $50,000 in  1990.  While  60 percent  of the  suppliers  received  total  payments 
of $100 or less in 1990, the  number  dropped  to 40 percent  in 1993.  The  following 
table  details  incontinence  payments  by supplier  between  1990 and  1993. 
Table  4. Incontinence  Payments  Per  Supplier 
Under  $100  60.0  3.3  39.3  0.8 
$100-$199  9.0  2.5  10.9  1.0 
$200-$499  12.9  8.2  16.9  3.5 
$500-$999  7.4  10.2  12.2  5.4 
$1,000-$4,999  8.9  37.0  15.4  19.1 
$5,000-$9,999  1.1  14.5  2.7  11.7 
$10,000-$49,000  0.8  24.4  2.2  30.9 
$50,000+  0.0  0.0  0.5  27.5 
In  1993, 10.3 percent  of beneficiaries  received  services  over  $2,000 and  accounted  for 
57 percent  of allowances.  In  1990, payments  were  less concentrated  in such large 
payments.  only  21 percent  of allowances  were  made  to beneficiaries  who  received 
$2,000 or more  in services.  In  1990, 53 percent  of beneficiaries  received  $100 or less 
in incontinence  supplies,  while  33 percent  received  comparable  payments  in 1993. 
The  table  on the  next  page  details  allowances  by beneficiary. 
6
 Table  5. Incontinence  Allowances  Per  Beneficiary 
QUESTIONABLE  BILLING  PRACTICES  MAY  ACCOUNT  FOR  ALMOST 
ONE-HALF  OF  ALL  INCONTINENCE  ALLOWANCES  IN  1993 
Medicare  allowed  $107 million  in 1993 for supplies  related  to questionable  billing 
practices.  This  represents  47 percent  of the  $230 million  in allowances.  About 
$88 million  was paid  for incontinence  accessories  for beneficiaries  who  did not  receive 
a prosthetic  device.  Additional  payments  of $19 million  were  made  for certain 
prosthetic  devices  that  appear  to have  excessive  utilization.  These  billing  practices  are 
concentrated  in one  carrier,  few suppliers,  and  few beneficiaries. 
Accessoti  bilkd withoutprostheticdevicesdo not meet Medicareguidelines. 
In order  for Medicare  to pay for incontinence  accessories  the  beneficiary  must  have  a 
prosthetic  device  such as a catheter  or a urinary  collection  device.  However, 
$88 million  was allowed  for accessories  that  were  not  billed  with  a prosthetic  device. 
As shown  in the  table  on the  next  page,  virtually  all allowances  that  did not  meet 
Medicare  guidelines  were  for just  three  supplies.  The  supplies  were  sterile  saline 
solutions,  irrigation  syringes,  and  lubricants.  In total,  these  three  supplies  account  for 
94 percent  of the  $88 million  in questionable  billings.  As a further  check,  we reviewed 
Part  B services  provided  to 96 beneficiaries  with large  Medicare  allowances  and  found 
that  very few beneficiaries  received  other  durable  medical  equipment  for which  these 
supplies  would  have  been  appropriate. 
7
 Table  6. Accessories  Billed  Without  Catheter  or Collection  Device 
Saline  Solution  I  6,467,500  I  $29 million 
Syringe  10,268,200  $31 million  I 
Utikztiknfor certaihprostheticdevicesappeanexcessive. 
As much  as $19 million  in allowances  may have  been  overpaid  if the  proposed 
DMERC  utilization  standards  had  applied  to certain  prosthetic  devices  in 1993.  Over 
$11 million  in 1993 was allowed  for female  external  urinary  collection  pouches 
(A4328)  that  exceed  the  proposed  DMERC  guidelines  of one  per  day.  We  are  aware 
that  at least  one  supplier  was paid  for  186 per  month,  or 6 per  day.  Another  $8 
million  was allowed  for beneficiaries  who received  more  than  one  indwelling  catheter 
per  month.  The  proposed  DMERC  policy calls for no more  than  one  indwelling 
catheter  per  month  for routine  maintenance.  Additional  catheter  changes  are  covered 
only if documentation  substantiates  medical  necessity. 
FloridaBlue Shiekiaccountedfor most of the questionableallowancm. 
Florida  Blue  Shield  accounted  for $78 million  (89 percent)  of $88 million  in Medicare 
allowances  for accessories  not  billed  in conjunction  with a catheter  or external  urinary 
collection  device.  Over  90 percent  of the  allowances  were  for just  three  supplies: 
irrigation  syringes,  sterile  saline  solutions,  and  lubricants.  Almost  70 percent  of the 
allowances  for female  external  urinary  collection  pouches  was also through  Florida 
Blue  Shield. 
The  allowances  for the  indwelling  catheters  that  exceeded  one  per  month  involved 
numerous  carriers.  Four  carriers  accounted  for over  40 percent  of allowances.  The 
carriers  were  Pennsylvania  Blue  Shield  (15 percent),  Illinois  Blue  Shield  (10 percent), 
Blue  Shield  of Greater  New York  (9 percent),  and  Nationwide  of Ohio  (7 percent). 
The  remaining  60 percent  was paid  by 44 other  carriers. 
Allowanceswereconcentratedinfm  suppliem 
Approximately  5 percent  of suppliers  (19 in the  sample  of 471) accounted  for over 
three-quarters  of the  accessories  billed  without  catheters  or external  urinary  collection 
devices.  All but  one  of these  suppliers  were  paid  by Florida  Blue  Shield. 
8
 Ten  suppliers  in our  sample  accounted  for all payments  for female  external  urinary 
collection  pouches.  All but  three  of the  suppliers  were  paid  by Florida  Blue  Shield. 
Only 3 of the  11 codes  used  to reimburse  indwelling  catheters  showed  any 
concentration  of allowances  for suppliers.  For  each  of these  codes,  A4311,  A4313, 
and  A43 15, one  supplier  received  at least  two-thirds  of all allowances  in our  sample. 
The  remaining  allowances  was shared  by several  suppliers. 
Few benejkiariesreceivemost of the allowarum. 
A total  of 821 beneficiaries  (28 percent  from  the  sample  of 2,927) received  accessories 
without  a prosthetic  device.  At least  360 of these  beneficiaries  were  billed  for 
irrigation  syringes,  sterile  saline  solutions,  and  lubricants. 
All the  excessive  allowances  for female  collection  pouches  were  made  to 3 percent  of 
beneficiaries  sampled.  For  each  of the  indwelling  catheter  codes  except  A4338,  all 
excessive  payments  were  made  to  1 percent  to 6 percent  of the  beneficiaries  sampled. 
However,  almost  one-third  of the  beneficiaries  in our  sample  received  more  than  one 
catheter  per  month  of those  billed  under  A4338. 
A PROPOSED  CHANGE  IN DMERC  POLICIES  WILL  PROBABLY  ADDRESS 
QUESTIONABLE  BILLING  PRAC17K!ES. 
Inconsistencies  and  the  lack  of clear  utilization  guidelines  and  controls  among  carriers 
contributed  to the  large  number  of questionable  incontinence  claims  paid  by Medicare 
in 1993.  Current  DMERC  policies,  while  more  consistent,  still do not  contain  clear 
coverage  definitions.  A proposed  draft  DMERC  policy further  clarifies  covered 
services  and  provides  a mechanism  to link incontinence  accessory  supplies  to 
prosthetic  devices. 
l%vicmr camerpolicierdid not containckar guidknceon coverageand appropriate 
utilization 
We  reviewed  policies  of three  carriers  which were  among  the  highest  in incontinence 
allowances  for  1993 and  found  that  their  guidelines  differed  for the  same  types  of 
supplies.  For  example,  for one  indwelling  catheter  code,  one  carrier  allowed  two per 
month  while  another  allowed  eight.  For  one  supply  code,  one  carrier  allowed  4 per 
day, the  second  allowed  1 per  week,  and  the  third  allowed  30 per  month.  For  the 
female  urinary  collection  device  (A4328),  an item  with  a large  number  of questionable 
allowances,  two carriers  had  no utilization  guidelines  and  the  third  allowed  four  per 
month. 
The  carrier  with the  highest  questionable  allowances  for  1993 had  no frequency  or 
utilization  controls  for any incontinence  supplies  except  for two intermittent  catheter 
codes.  Neither  this carrier  nor  the  two other  carriers  had  controls  to prevent 
allowances  for incontinence  supplies  when  billed  without  a prosthetic  device. 
9
 Currentpolicieq whik strongm,do not go far enough. 
Current  DMERC  policies  categorize  the  incontinence  supplies  benefit  under  coverage 
of prosthetic  devices.  For  a prosthetic  device  to be  covered,  the physician  must 
certify  that  the  condition  resulting  in the  need  for the  device  is of long  and  indefinite 
duration  (at  least  3 months). 
All four  DMERCS  have  utilization  controls  for indwelling  catheters,  limiting  the 
number  of catheters  to two per  month  for routine  maintenance.  Three  DMERCs 
have  strengthened  coverage  policies  for lubricant,  stating  that  it can no longer  be 
reimbursed  as a separate  supply  since it is included  in catheter  insertion  trays. 
The  DMERCS  have  also adopted  a uniform  certificate  of medical  necessity  form.  This 
certificate  must  be  filled  out,  signed,  and  dated  by the  ordering  physician  and  kept  on 
file by the  supplier. 
Not  all DMERCS  have  computer  edits  or controls  in place  to ensure  that  supplier 
claims  conform  with DMERC  policies.  While  all four  DMERCS  have  a utilization 
standard  for indwelling  catheters,  only two have  computer  edits.  Only one  DMERC 
has  an on-line  edit  to check  claims  for particular  supplies  to ensure  that  the  certificate 
of medical  necessity  adequately  supports  the  use of these  supplies. 
Even  though  the  DMERC  manuals  limit payment  for supplies  to those  that  are  for the 
effective  use  of a prosthetic  device,  DMERCS  do not  have  controls  to prevent 
payment  for incontinence  supplies  when  the  beneficiary  has neither  a catheter  nor  an 
external  urinary  collection  device.  Without  these  controls,  Medicare  will continue  to 
pay for incontinence  supplies  that  do not  meet  Medicare  coverage  guidelines. 
l%  draftDMERCpolicy providesunform coverageand utilizationstkmdardtrhutwill 
ikadto improvedprocessingof incontinencesupp~ cliziins. 
The  proposed  DMERC  national  guidelines  on urological  supplies  will prevent 
Medicare  payment  for supplies  not  used  with covered  prosthetic  devices.  As the  draft 
policy  clearly  states,  urological  supplies  that  are  not  used  with catheters  or external 
urinary  collection  devices  will be  denied  as noncovered.  It provides  even  more 
explanation  in the  case  of sterile  saline  solution  and  irrigation  syringes by maintaining 
that  irrigation  supplies  that  are  used  for  care  of the  skin and/or  perineum  of 
incontinent  patients  are  not  covered. 
The  new policy requires  suppliers  to add  a modifier  to urological  supply  codes  when 
the  supplies  are  used  with  a catheter  or external  urinary  collection  device.  The  new 
ZX  modifier,  as it is known,  would  be  added  to the  end  of a code  submitted  on 
claims  for  catheters,  external  urinary  collection  devices,  or supplies  required  for the 
effective  use  of one  of these  items.  The  modifier  indicates  that  specified  coverage 
criteria  in the  medical  policy have  been  met  and  documentation  is available  in the 
suppliers  records. 
10  If this policy is implemented  and  claims  processing  controls  are  created  to ensure  that 
required  modifiers  are  used,  large  numbers  of questionable  allowances  such  as those 
found  in 1993 can be  avoided.  If the  policy had  been  implemented  in 1993, Medicare 
and  beneficiaries  could  have  saved  as much  $88 million  in questionable  payments. 
The  proposed  policy provides  more  explicit  definitions  of covered  items.  It clearly 
defines  female  urinary  collection  devices,  insertion  trays,  and  anchoring  devices.  It 
also lists supplies  sometimes  paid  for previously  that  will no longer  be  covered  since 
they  are  not  required  for the  effective  use  of incontinence  prosthetic  devices  (e.g. skin 
barriers  and  appliance  cleaners). 
The  policy also  contains  utilization  standards  for many  incontinence  supplies.  For 
instance,  no more  than  one  indwelling  catheter  per  month  will be  covered  for routine 
catheter  maintenance.  The  new policy allows only one  male  external  catheter  and  one 
female  pouch  collection  device  per  day.  These  new utilization  standards  coupled  with 
computer  edits  or controls  should  significantly  decrease  the  number  of excessive 
incontinence  supplies  billed  to Medicare. 
11
 NEXT  STEPS 
IiacontinencSeupplies 
In response  to the  information  presented  in this report  and  a companion  report,  the 
Office  of Inspector  General  (OIG)  plans  to: 
o	 initiate  an audit  review  to examine  in more  detail  payments  made  for 
incontinence  supplies  in order  to determine  if any overpayments  are 
involved  in this area;  and 
o	 launch  a national  investigation  in this area,  examining  potentially 
fraudulent  practices  by specific  suppliers  of incontinence  supplies. 
We  also  support  ongoing  activity in HCFA  and  the  DMERCS  to develop  more  specific 
coverage  guidelines  and  educate  providers  and  suppliers  about  proper  billing  for such 
supplies.  We  hope  the  information  contained  in this report  is helpful  as they  complete 
this  activity. 
OIG Studia of OtherNumihgHome Supplies 
The  OIG  will continue  studies  and  audits  related  to its major  initiative  examining 
services  and  supplies  provided  to Medicare  beneficiaries  residing  in nursing  facilities. 
As this report  and  other  OIG  work  has  reflected,  the  fragmentation  of billing  for 
services  and  supplies  provided  to residents  of nursing  homes  has  created  a host  of 
improper  incentives  for billers  to the  Medicare  program. 
Bundli@  of Services 
We  continue  to support  HCFAS efforts  to pursue  a systematic  solution  to these  kinds 
of problems  through  a requirement  for bundling of sewices  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. 
12
 APPENDIX  A

CONFIDENCE  INTERVALS 
We  reported  our findings  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  confidence  intervals  present  the  range  of possible  findings  at the  95

percent  level.  The  95 percent  confidence  level represents  approximately  two standard

deviations  from  the  sample  mean.  The  two standard  deviations,  or semi-width,  is

determined  by multiplying  1.96 by the  standard  error  of the  sample  mean.  The

variance  from  the  point  estimate  is determined  by multiplying  the  semi-width  of by the

sample  size.  The  confidence  interval  is the  plus or minus  range  of the  variance  from

the  point  estimate.

The  95 percent  confidence  intervals  are  presented  in the  following  tables.

Table  1. IIKXNItinenceAclivily  19W  -1993  (p.4) 
Table 2  Inuease  in Four Supplies Between  1990  and 1993  (@) 
Irrigation  Syringe  +/- S.38L600  $679,700 
A4322 
1993  +/- $3,308,200  $43,271,800 
Saline  Solution  1990  +/- $1,365,700  $7,035,500 
A4323 
1993  +/- $4,888,600  $47,020,200 
Female  Pouch  1990  +/- $25,160  $18,500 
A4328 
1993  +/- $2,643,800  $15.295.200 
Lubricant  1990  +/- $333,100  $494,100 
A4402 
1993  $31,958,300 
... >-
x 
Ill
~00

4r.-

11180= 
Won 
}X  woz 
Iwioz  APPENDIX  A

CONFIDENCE  INTERVALS 
We  reported  our  findings  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  confidence  intervals  present  the  range  of possible  findings  at the  9S

percent  level.  The  95 percent  confidence  level represents  approximately  two standard

deviations  from  the  sample  mean.  The  two standard  deviations,  or semi-width,  is

determined  by multiplying  1.96 by the  standard  error  of the  sample  mean.  The

variance  from  the  point  estimate  is determined  by multiplying  the  semi-width  of by the

sample  size.  The  confidence  interval  is the  plus or minus  range  of the  variance  from

the  point  estimate.

The  95 percent  confidence  intervals  are  presented  in the  following  tables.

Table  1. l.amntinemce Activity  1990-1993  (p.4) 
-14990   +/- $5,839,100  $87,%9,900  +/- 10,OOO  312,200  +/- $19  $282
I 
1991  II +/- $7,544,939  I $107,504,300  +/- 10,OOO  I  334,300  II  +/- $23  I  $322 
-1-99-2 1 +/- $.8,%3,442  $118,970,400  +/- 10,OOO  281,400  +/- $32  $423 
I  ,1  , 
1993  II +/- $15,579,562  I $229,949,200  +/- 10,OOO  292,700  +/- $53  $786 
Table 2  Increase  in Four Sup$iiea  Between  1990  and 1993  (p~ 
Irrigation  Syringe  1900  +/- $381,600  $679,700 
A4322 
1993  +/- $3,308,200  $43,271,800 
Saline  Solution  1990  +/- $1,365,700  $7,035,500 
A4323 
1993  +/- $4,888,600  $47,020,200 
Female  Pouch  1990  +/- $25,160  $18,500 
A4328  I  I 
1993  +/- $2,643,800  $15,295,200 
Lubricant  1990  +/- $333,100  $494,100 
A4402 
1993  +1- $2,766,300  $31,958,300 
A-1
 II Female  Pouch  I  +/- $3.070,135  I  $11,117300

II Indwelling  Catheter  I  +/- $1,644,595  I  $S,156,900  II

II Acxeaaonea  w/o Prosthetic  Deviee  I  +/-$10,7S4,752  I  $87,570300  II

Table 4. Wine  Solutioq  _  ad  Ldxicant  Bfled  WMmut  Prodebe  Device  (p.q

I 
Irrigation  Syringe  No.  of Supplies  +/- 1,23s,503  10,26s,200 
A4322  I  I 
Aflowance  +/- $3,6ss,280  $30,s45,900 
1  I  I  I 
Lubricant  No.  of Supplies  +/- 1,562,456  11,312,S00 
A4402 
Allowance  +/- $3,027,SSS  $21,914,501 
Tabfe 5. Florida  Blue  Shield  AUowamx  of Acasamk  WltbouPtrosthetic  Device  (#3) 
A-2