Department of Health and Human Services
OFFICE OF 
 
INSPECTOR GENERAL 
 
 
 
 
 
 
 
 
ABERR  ANT CLAIM PATTERNS 
 
I D
FOR  NHALATION  RUGS IN 
 
 
S F  
OUTH  LORIDA
 
 
 
 
 
 
Daniel R. Levinson  
Inspector General 
 
April 2009 
OEI-03-08-00290    
 
 
Office of Inspector General 
http://oig.hhs.gov 
 
The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, as 
amended, is to protect the integrity of the Department of Health and Human Services 
(HHS) programs, as well as the health and welfare of beneficiaries served by those 
programs.  This statutory mission is carried out through a nationwide network of audits, 
investigations, and inspections conducted by the following operating components: 
Office of Audit Services 
The Office of Audit Services (OAS) provides auditing services for HHS, either by conducting 
audits with its own audit resources or by overseeing audit work done by others.  Audits 
examine the performance of HHS programs and/or its grantees and contractors in carrying 
out their respective responsibilities and are intended to provide independent assessments of 
HHS programs and operations.  These assessments help reduce waste, abuse, and 
mismanagement and promote economy and efficiency throughout HHS. 
Office of Evaluation and Inspections 
The Office of Evaluation and Inspections (OEI) conducts national evaluations to provide 
HHS, Congress, and the public with timely, useful, and reliable information on significant 
issues.  These evaluations focus on preventing fraud, waste, or abuse and promoting 
economy, efficiency, and effectiveness of departmental programs.  To promote impact, OEI 
reports also present practical recommendations for improving program operations.  
Office of Investigations 
The Office of Investigations (OI) conducts criminal, civil, and administrative investigations 
of fraud and misconduct related to HHS programs, operations, and beneficiaries.  With 
investigators working in all 50 States and the District of Columbia, OI utilizes its resources 
by actively coordinating with the Department of Justice and other Federal, State, and local 
law enforcement authorities.  The investigative efforts of OI often lead to criminal 
convictions, administrative sanctions, and/or civil monetary penalties. 
Office of Counsel to the Inspector General 
The Office of Counsel to the Inspector General (OCIG) provides general legal services to 
OIG, rendering advice and opinions on HHS programs and operations and providing all 
legal support for OIGs internal operations.  OCIG represents OIG in all civil and 
administrative fraud and abuse cases involving HHS programs, including False Claims Act, 
program exclusion, and civil monetary penalty cases.  In connection with these cases, OCIG 
also negotiates and monitors corporate integrity agreements.  OCIG renders advisory 
opinions, issues compliance program guidance, publishes fraud alerts, and provides other 
guidance to the health care industry concerning the anti-kickback statute and other OIG 
enforcement authorities.    
   
 E X E C U T I V E   S U M M A R Y  
OBJECTIVES
 
1.  To compare Medicare utilization and spending for inhalation 
drugs among beneficiaries in South Florida to utilization and 
spending among beneficiaries in the rest of the country.  
2.  To compare Medicare supplier billings for inhalation drugs in 
South Florida to Medicare supplier billings in the rest of the 
country.  
3.  To compare beneficiary utilization of inhalation drugs (in South 
Florida and the rest of the country) to utilization guidelines set by 
the Medicare program.  
4.  To examine relationships between inhalation drug suppliers, 
prescribing physicians, and Medicare beneficiaries in South 
Florida. 
BACKGROUND 
Medicare Part B covers inhalation drugs when they are used in 
conjunction with durable medical equipment (DME).  Beneficiaries 
typically obtain DME items, including inhalation drugs, through 
suppliers, which then submit claims to Medicare on behalf of the 
beneficiaries.  The Centers for Medicare & Medicaid Services (CMS) 
contracts with four geographically defined DME Medicare 
Administrative Contractors to process and pay for DME claims.  CMS 
also contracts with Program Safeguard Contractors (PSC) to administer 
benefit integrity functions and conduct medical review.   
CMS may establish national coverage determinations for DME items.  
National coverage determinations specify whether certain medical 
items, services, treatment procedures, or technologies are eligible for 
Medicare payment.  When a national coverage determination does not 
exist or when there is need for further definition, a local coverage 
determination (LCD) may be established by a CMS contractor.  An LCD 
for inhalation drugs (L5007), originally effective on April 1, 1997, and 
revised on July 1, 2007, establishes coverage limitations such as the 
maximum milligrams per month that may reasonably be billed for a 
beneficiary.     
We used the Medicare National Claims History file to identify all 
inhalation drug claims in 2007.  We compared the average number of 
paid claims and the dollar amount paid for inhalation drug claims for 
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E X E C U T I V E   S U M M A R Y  
beneficiaries in South Florida (Miami-Dade, Broward, and Palm Beach 
Counties) to beneficiaries in the rest of the country.  We compared the 
average amount submitted and paid per supplier for beneficiaries in 
South Florida to the average amount submitted and paid per supplier 
for beneficiaries in the rest of the country.  We also compared the 
average Medicare spending per beneficiary for inhalation drugs in 
South Florida and the rest of the country to the amounts associated 
with the maximum milligrams listed in the LCD.  Finally, we 
determined the percentage of paid South Florida inhalation drug claims 
in 2007 for which the beneficiary did not have any Medicare Part B 
service claims (e.g., a Medicare-billed office visit) occurring in 2005, 
2006, or 2007 with the physician who reportedly prescribed the drug.   
FINDINGS 
Although only 2 percent of Medicare beneficiaries live in South 
Florida, this area accounted for 17 percent of Medicare spending on 
inhalation drugs in 2007.  Medicare paid almost $143 million for 
inhalation drugs in Miami-Dade County alonean amount 20 times 
greater than the amount paid in Cook County, Illinois, the county 
(outside South Florida) with the next highest total payments.  However, 
according to Medicare enrollment data, Cook County is home to almost 
twice as many Medicare beneficiaries as Miami-Dade County. 
In 2007, Medicares average per-beneficiary spending on inhalation 
drugs was five times higher in South Florida than in the rest of the 
country.  Among beneficiaries with paid inhalation drug claims, 
Medicare spent approximately $4,400 per South Florida beneficiary on 
inhalation drugs, compared to just $815 per beneficiary on inhalation 
drugs in the rest of the country.     
For individual inhalation drugs, Medicare per-beneficiary spending on 
brand name products (budesonide and levalbuterol) was much greater 
in South Florida than in the rest of the country, while spending on 
generic products (albuterol and ipratropium bromide) was similar to the 
rest of the country.  Among beneficiaries with paid budesonide claims in 
2007, the average Medicare spending on the drug in South Florida was 
$4,429 per beneficiary compared to $1,567 per beneficiary in the rest of 
the country.  In the first half of 2007 (before a coding change took effect 
on July 1), Medicares spending on levalbuterol per beneficiary in South 
Florida was $2,312 as compared to $1,035 per beneficiary in the rest of 
the country.  In 2007, 56 percent of South Florida beneficiaries who 
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EE XX EE CC UU TT II VV EE    SS UU MM MM AA RR YY   
received inhalation drugs had claims paid for budesonide, compared to 
14 percent of beneficiaries in the rest of the country. 
Supplier billing patterns for inhalation drugs differed substantially 
between South Florida and the rest of the country.  Beneficiaries in 
South Florida were more likely to have multiple suppliers.  Thirty-one 
percent of South Florida beneficiaries had more than one supplier 
providing inhalation drugs during 2007, as compared to 12 percent of 
beneficiaries in the rest of the country.  Beneficiaries with claims for 
budesonide were particularly likely to have more than one supplier of 
the drug.  In 2007, an average of 27 percent of beneficiaries with 
budesonide claims in South Florida had multiple suppliers in the first 
half of the year, as compared to 9 percent of beneficiaries in the rest of 
the country.   
Overall, suppliers billed Medicare an average of $1,176 in inhalation 
drug claims for each of their South Florida beneficiaries in 2007; on 
average, they were paid $585 for each beneficiary that year.  In the rest 
of the country, suppliers billed Medicare an average of $661 per 
beneficiary for inhalation drugs in 2007 and were paid $307.     
Medicare paid for inhalation drug claims that did not comply with 
LCD guidelines.  The average Medicare payment for a 90-day supply of 
budesonide in South Florida was more than double the payment amount 
for the maximum milligrams listed in the LCD.  Seventy-five percent of 
South Florida beneficiaries who received budesonide had            
Medicare-reimbursed budesonide claims that exceeded the utilization 
guidelines, compared to 14 percent in the rest of the country.  Although 
the average payment for the other inhalation drugs fell within the 
guidelines set by the LCD, several individual South Florida 
beneficiaries still exceeded the maximum payment amount for a 90-day 
supply of the other drugs. 
For 62 percent of inhalation drug claims in South Florida, the 
beneficiary did not have a Part B service visit during the last 3 years 
with the physician who reportedly prescribed the drug.  According to 
Medicare data, for 62 percent of South Florida inhalation drug claims, 
the beneficiaries on these claims did not have a Medicare-billed office 
visit or other service in 2005, 2006, or 2007 with the physician who 
reportedly prescribed the drug.  Medicare paid $114 million (71 percent 
of total South Florida payments) for these inhalation drug claims in 
2007.  For 16 percent of suppliers, not a single South Florida beneficiary 
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E X E C U T I V E   S U M M A R Y  
to whom they provided inhalation drugs had a billed claim with the 
physician listed on the claim form. 
Certain ordering physicians in South Florida were associated with 
a large volume of inhalation drug claims.  In 2007, 10 South Florida 
physicians were each listed as the ordering physician on more than    
$3.3 million in submitted inhalation drug claims.  Each of the           
10 physicians reportedly ordered inhalation drugs for an average of 
745 South Florida beneficiaries in 2007.  These physicians had 
Medicare-paid office visits in 2005 through 2007 with between            
1 percent and 53 percent of the beneficiaries for whom they reportedly 
ordered inhalation drugs for in 2007.  Medicare paid a total of         
$28 million for inhalation drugs reportedly ordered by these                    
10 physicians during the year.   
RECOMMENDATIONS 
South Florida has been identified by the Office of Inspector General 
(OIG), CMS, and other agencies as a high-risk area for fraudulent 
billings to Medicare by DME suppliers.  Fraudulent billings jeopardize 
the financial integrity of Medicare and may endanger Medicare 
beneficiaries when the drugs are overprescribed.   
Our findings demonstrate that even though CMS has made efforts to 
reduce DME fraud in South Florida, a problem may persist among DME 
suppliers billing for inhalation drugs.  Medicare spent substantially 
more on inhalation drugs per beneficiary in South Florida during 2007 
than it did among beneficiaries in the rest of the country.  The greatest 
spending discrepancies occurred among the brand name drugs 
budesonide and levalbuterol.  In particular, spending and utilization for 
budesonide were much higher not only in comparison to averages in the 
rest of the country but also in relation to coverage guidelines.  
Furthermore, many of the South Florida beneficiaries did not have a 
Medicare service claim during the last 3 years with the physician who 
reportedly prescribed the inhalation drugs.  Therefore, we recommend 
that CMS: 
Ensure That All PSCs, Particularly the PSC Covering Florida, Are 
Enforcing the Guidelines for Maximum Milligrams per Month for All 
Inhalation Drugs, Especially Budesonide. 
Eliminate Medicares Vulnerability to Potentially Fraudulent or 
Excessive Claims for Beneficiaries Prescribed Inhalation Drugs in 
South Florida. 
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E X E C U T I V E   S U M M A R Y  
Review Cases in Which the DME Supplier Appears To Be Fraudulently 
Billing Medicare for Inhalation Drugs and Take Appropriate Action 
Based on the Reviews Results.  
AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 
RESPONSE  
CMS concurred with all three of our recommendations.  CMS stated 
that through its Program Integrity Miami field office and the DME Stop 
Gap Plan, it has already identified and begun to address many of the 
same issues cited in our report.  In addition, CMS noted that OIGs 
findings reinforce the validity of the agencys efforts.   
In response to our recommendations, CMS stated that, as of September 
2008, the DME PSC for South Florida and the DME MAC had 
implemented a medically unlikely edit for budesonide.  According to 
CMS, there was an immediate and significant 50-percent decrease in 
both allowed and billed amounts for the drug in Miami-Dade and 
Broward counties.  In addition, CMS described the efforts by its Miami 
and Los Angeles field offices to identify suppliers whose beneficiaries 
had no clinical relationship with the physicians listed on DME claims, 
and revoke the Medicare billing numbers for suppliers not meeting 
supplier standards.  Finally, CMS expressed its commitment to 
continually reviewing and refining the process to improve the Medicare 
program and will review any additional information provided by OIG.  
We did not make any changes to the final report based on CMSs 
comments.  
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 T A B L E   O F   C O N T E N T S  
EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i
 
 
I N T RO DUC T IO N . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 
 
 
F I N D IN G S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 
  Spending on South Florida beneficiaries was disproportionate . . 11 
  Supplier billing patterns differed. . . . . . . . . . . . . . . . . . . . . . . . . . 13 
  Medicare paid for claims that did not comply with the LCD. . . . . 14 
  Beneficiaries did not have Part B service claims. . . . . . . . . . . . . . 16 
  Certain physicians were associated with large volumes of  
         inhalation drug claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 
  
R E C O MMEN D A T ION S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 
         Agency Comments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 
 
 
APPENDIXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 
  A:  Calculation for Local Coverage Determination Guideline 
        Comparison. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 
 
  B:  Agency Comments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 
     
 
A C K NO WL E D G M E N T S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 
 
    
   
 I N T R O D U C T I O N  
OBJECTIVES 
1.  To compare Medicare utilization and spending for inhalation 
drugs among beneficiaries in South Florida to utilization and 
spending among beneficiaries in the rest of the country.  
2.  To compare Medicare supplier billings for inhalation drugs in 
South Florida to Medicare supplier billings in the rest of the 
country.  
3.  To compare beneficiary utilization of inhalation drugs (in South 
Florida and the rest of the country) to utilization guidelines set by 
the Medicare program.  
4.  To examine relationships between inhalation drug suppliers, 
prescribing physicians, and Medicare beneficiaries in South 
Florida. 
BACKGROUND 
Medicare Part B Coverage of Inhalation Drugs  
Although Medicare Part D covers most outpatient prescription drugs, 
the Centers for Medicare & Medicaid Services (CMS) continues to cover 
a limited number of prescription drugs and biologicals (hereinafter 
referred to as drugs) under its Part B benefit.  These drugs generally 
fall into three categories:  drugs furnished incident to a physicians 
service, drugs explicitly covered by statute, and drugs administered 
through durable medical equipment (DME).1   
Inhalation drugs administered via a nebulizer, a class of DME drug, are 
provided to Medicare beneficiaries by DME suppliers.  Physicians 
typically prescribe these drugs to treat and prevent symptoms 
associated with lung diseases, such as asthma and chronic obstructive 
pulmonary disorder.  Long term use is usually required because 
inhalation drugs are often used to treat incurable and lifelong diseases.  
In 2007, four products (albuterol, levalbuterol, budesonide, and 
ipratropium bromide) accounted for 72 percent of the $946 million 
Medicare spent on inhalation drugs nationally and 95 percent of the 
$160 million spent in South Florida. 
 
1 68 Fed. Reg. 50428, 50429 (Aug. 20, 2003). 
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I N T R O D U C T I O N  
CMS contracts with four geographically defined DME Medicare 
Administrative Contractors (MAC) to process and pay for DME claims, 
including those for inhalation drugs.2  For an inhalation drug claim to 
be eligible for Medicare reimbursement, the DME supplier must have a 
signed prescription from the treating physician and the physicians 
identification number must be listed on the submitted claim form.  
Generally, Medicare will pay 80 percent of the authorized 
reimbursement amount to the DME supplier providing the inhalation 
drug; the beneficiary is responsible for the remaining 20 percent in the 
form of coinsurance. 
CMS contracts with Program Safeguard Contractors (PSC)3 to perform 
benefit integrity and medical review functions for each of the four DME 
MAC jurisdictions.4  Benefit integrity functions include fraud 
investigations; data analysis; and prepay and postpay medical reviews 
of claims involving potential fraud, waste, and abuse.  Before         
March 1, 2008, the PSCs also conducted medical reviews for purposes 
other than benefit integrity, such as performing comprehensive error 
rate testing, educating suppliers, and making coverage determinations.  
However, effective March 1, 2008, CMS transferred the responsibility 
for these types of medical reviews from the PSCs to the DME MACs.    
DME Coverage Determinations 
CMS may establish national coverage determinations for DME items 
(including inhalation drugs) and has typically based those 
determinations on statutory guidelines found in section 1862(a)(1) of the 
Social Security Act.  National coverage determinations specify whether 
certain medical items, services, treatment procedures, or technologies 
are eligible for Medicare payment.  The DME MACs and PSCs are 
required to follow national coverage determinations when they exist.  
 
2 The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 requires 
CMS to implement competitive procedures to replace DME regional carriers with DME 
MACs.  In 2006, CMS competitively selected four DME MACs and began to transition 
claims administration activities from DME regional carriers to DME MACs.  As of         
June 1, 2007, the four DME MACs awarded contracts were the National Heritage Insurance 
Company for Jurisdiction A; AdminaStar Federal, Inc., for Jurisdiction B; CIGNA 
Government Service, LLC, for Jurisdiction C (Florida is 1 of 15 States and 2 U.S. territories 
included in Jurisdiction C); and Noridian Administrative Services for Jurisdiction D.  
3 Social Security Act  1893(a), 42 U.S.C.  1395ddd. 
4 Each DME MAC is responsible for coordinating with the PSC that conducts program 
integrity reviews in the DME MACs jurisdiction.  The PSC for Jurisdictions A and B is 
TriCenturion; the PSC for Jurisdiction C is TrustSolutions, LLC; and the PSC for 
Jurisdiction D is Electronic Data Systems. 
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However, when a national coverage determination does not exist or 
when there is a need for further definition, Medicare contactors may 
establish a local coverage determination (LCD).  An LCD defines 
coverage criteria, payment rules, and documentation requirements that 
will be applied to claims processed by the individual Medicare 
contractors.  Because many DME suppliers operate nationally, CMS 
requires that LCDs involving DME items (including inhalation drugs) 
be identical among all four DME MACs.   
Effective March 1, 2008, DME MACs have full responsibility for 
developing and revising LCDs.  Before that date, the PSCs developed 
the LCDs and submitted them to the DME MACs (or their predecessors, 
the DME regional carriers) for approval.  The DME MACs reviewed the 
recommended LCDs and determined whether they would be adopted or 
rejected.   
One PSC established an LCD (L5007), effective April 1997, that set 
guidelines for the maximum milligrams per month that may reasonably 
be billed for certain inhalation drugs.  The LCD states that a claim will 
be denied if it does not follow these guidelines unless there is 
documentation in the patients medical records to support medical 
necessity.  As required by CMS, the LCD is effective nationally, 
meaning that it applies to inhalation drug claims in all four DME MAC 
jurisdictions.  Numerous revisions have been made to the LCD since its 
establishment.  For example, as part of the July 1, 2007, revision, a 
maximum milligrams guideline for budesonide was included in the 
LCD.5   
The maximum milligrams listed in this LCD are typically much higher 
than the normally prescribed dose.  For example, the LCD lists the 
maximum milligrams for levalbuterol as up to 232.5 milligrams per 
month.  However, the package insert for levalbuterol states that 
patients receiving the highest dosage (112.5 milligrams per month) 
should be monitored closely for adverse side effects (e.g., seizures, 
tachycardia, cardiac arrest).6 
 
5 The maximum milligrams per month listed in the LCD for the four inhalation drugs 
that account for the majority of Medicare inhalation drug payments are:  up to                   
465 milligrams for albuterol, up to 232.5 milligrams for levalbuterol, up to 93 milligrams for 
ipratropium bromide, and up to 31 milligrams for budesonide (effective July 1, 2007).  
6 Levalbuterol package insert.  Available online at http://www.xopenex.com.  Accessed on 
September 2, 2008. 
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I N T R O D U C T I O N  
 
According to staff at the DME MAC that includes Florida, automated 
edits have been implemented for most of the inhalation drugs covered 
by the LCD.  These edits detect whether the beneficiarys utilization of 
an 83-day supply of the drug exceeds the LCDs maximum milligrams 
parameters for a 3-month period and, if so, suspends payment until the 
claim can be reviewed manually.7  Although budesonide was included in 
the LCD as of July 1, 2007, as of August 18, 2008, the PSC for 
Jurisdiction C (the region including Florida) has yet to establish edits 
that will enable the DME MAC to monitor this drugs utilization.   
Medicare Enrollment of DME Suppliers 
Before a DME supplier may bill Medicare, it must obtain a National 
Provider Identifier (NPI), which is a unique identifier for health care 
providers that is assigned by the National Plan and Provider 
Enumeration System.  After obtaining the NPI, the DME applicant 
must submit a completed application form (Form CMS-855S) and 
supporting documents to CMS.  The forms contain information about 
the applicant (e.g., adverse legal actions and convictions); the suppliers 
practice location; the names of organizations or individuals having 
ownership or managing control of the business; and the billing agent for 
the supplier, if one exists.  By signing and submitting the application 
forms, the DME applicant agrees to follow all Medicare laws, 
regulations, and program instructions.  Additionally, the DME 
applicant must meet certain Medicare supplier standards.8   
CMS contracts with the National Supplier Clearinghouse (NSC), 
operated by Palmetto Government Benefit Administrators, to manage 
the enrollment of suppliers.  To ensure that an applicant is meeting the 
Medicare supplier standards, NSC must conduct an unannounced site 
visit while the application is being processed.  Generally, if the supplier 
is not in compliance, NSC will deny the application.        
DME suppliers are required to reenroll in the Medicare program every  
3 years to continue receiving Medicare payment.9  The reenrollment 
process requires a resubmission of the CMS-855S application form and 
the required documentation.  NSC conducts an unannounced 
 
7 The edit is based on an 83-day period (7-day grace period for delivery) because a 
supplier may bill for up to a 90-day supply of the drug.   
8 42 CFR  424.57(c).    
9 42 CFR  424.57(e). 
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I N T R O D U C T I O N  
reenrollment site visit to ensure that the supplier continues to meet 
Medicare standards.   
Medicare DME Fraud in South Florida 
On March 1, 2007, a multiagency task force of Federal, State, and local 
investigators began operating in South Florida to detect, prosecute, and 
prevent Medicare fraud by area DME suppliers.  Medicare beneficiaries 
and physicians often play a key role in the suppliers efforts to bill 
Medicare for unnecessary items.  The task force found that one method 
used to defraud Medicare involved DME suppliers paying physicians for 
writing fraudulent inhalation drug prescriptions and paying Medicare 
beneficiaries for accepting the unnecessary medication.  In these cases, 
beneficiaries typically received around $100 to $150 per month for use 
of their Medicare cards.  In multiple cases, beneficiaries testified that 
they did not use, but instead threw away, the inhalation drugs they 
received.10  DME suppliers have testified that the medication billed to 
Medicare was illegally manufactured in shell pharmacies that did not 
stock real medications and did not have customers.11   
However, beneficiaries and physicians are not always aware that the 
DME suppliers are using their identification numbers for fraudulent 
activities.  Sometimes, DME suppliers fraudulently obtain beneficiary 
identification information to submit DME claims for Medicare 
beneficiaries who did not see the ordering physician and never received 
the item submitted on the claim.12  DME suppliers have also used a 
physicians identification number without the physicians consent or 
 
10 Department of Justice Press Release.  Medicare Fraud Strike Force Convicts Owner 
of Miami Durable Medical Equipment Company of Defrauding Medicare.  Available online 
at http://www.usdoj.gov/opa/pr/2007/June/07_crm_472.html.  Accessed on                
December 18, 2007.  Department of Justice Press Release.  Miami Jury Convicts Physician 
and Three Business Owners of Medicare Fraud.  Available online at 
http://miami.fbi.gov/dojpressrel/pressrel08/medfraud030708.htm.  Accessed on               
April 15, 2008. 
11 Ibid.  Illegally manufactured drugs included inhalation drugs compounded by 
untrained individuals without pharmacy licenses.  Compounding is the process in which a 
pharmacist mixes medications such as albuterol and ipratropium bromide in the pharmacy, 
instead of purchasing the premixed form directly from a manufacturer or wholesaler.  
12 Department of Justice Press Release.  Miami-Dade DME and Clinic Owners Indicted 
for Using Stolen Patient Information in Multi-million Dollar Medicare Fraud Scheme.  
Available online at http://miami.fbi.gov/dojpressrel/pressrel08/mm20080401.htm.  Accessed 
on October 1, 2008.  
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I N T R O D U C T I O N  
knowledge.13  According to CMS staff, a project began in November 
2006 to minimize the improper use of physician identification numbers 
on claims for all DME items.  This project identifies potentially 
compromised physician identification numbers and allows physicians to 
request that claims for either specific DME items or a category of DME 
be denied.   
Medicare Demonstration Project in South Florida 
Section 402(a)(1)(J) of the Social Security Amendments of 1967 permits 
the Secretary of the Department of Health and Human Services to 
develop or demonstrate improved methods for the investigation and 
prosecution of fraud in the provision of care or services under the health 
programs established by the Social Security Act.14  Pursuant to this 
authority, on November 1, 2007, CMS implemented a 2-year 
demonstration project, targeting the South Florida and Los Angeles 
metropolitan areas, to improve its ability to detect potentially 
fraudulent behavior among DME suppliers at both the preenrollment 
and postenrollment stages.  This demonstration project consists of three 
components:  (1) suppliers submit a CMS-855S Medicare enrollment 
application; (2) CMS revokes billing privileges if the supplier meets 
certain criteria (e.g., if the DME supplier fails to submit a CMS-855S 
within 30 days); and (3) CMS performs enhanced reviews of DME 
suppliers that were not revoked based on components one or two.   
Related Work 
A January 2007 Government Accountability Office (GAO) report     
examined the PSCs efforts to prevent and minimize improper DME 
payments, as well as CMSs oversight of the PSCs program integrity 
activities.15  GAO found that PSCs did not have automated prepayment 
controls to identify claims associated with atypical billing patterns and 
claims that were medically improbable.  GAO recommended that CMS 
require PSCs to develop thresholds for unexplained increases in billing 
and use them to develop automated prepayment controls and to share 
these with other PSCs.  CMS agreed with the reports findings and 
 
13 Department of Justice Press Release.  DME Operators Charged in Health Care Fraud 
and Identity Theft Conspiracy.  Available online at 
http://www.usdoj.gov/usao/fls/PressReleases/071205-01.html.  Accessed on October 2, 2008. 
14 42 U.S.C.  1395b-1(a)(1)(J). 
15 GAO Report.  Medicare:  Improvements Needed to Address Improper Payments for 
Medical Equipment and Supplies, GAO-07-59 (January 31, 2007).  
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responded that it had begun further automating its claims payment 
systems to prevent improper payments.    
In March 2007, the Office of Inspector General (OIG) issued the report 
South Florida Suppliers Compliance With Medicare Standards:  
Results From Unannounced Visits (OEI-03-07-00150).  OIG made   
1,581 unannounced site visits in late 2006 to DME suppliers in South 
Florida.  We found that 491 suppliers (31 percent) did not maintain 
physical facilities or were not open and staffed during business hours.  
At the time we conducted the visits, these 491 suppliers had billed 
Medicare for almost $237 million in 2006.  We recommended that CMS 
strengthen the supplier enrollment process and ensure that suppliers 
meet Medicare supplier standards.  In response, CMS stated that it 
would take several steps to strengthen supplier standards.   
In September 2007, OIG issued a report entitled Aberrant Billing in 
South Florida for Beneficiaries With HIV/AIDS (OEI-09-07-00030).  
This study analyzed claim patterns associated with HIV/AIDS infusion 
therapy providers in South Florida and the oversight mechanisms CMS 
has in place to control inappropriate payments to these providers.  In 
the last half of 2006, South Florida accounted for 79 percent of the 
amount of drugs billed nationally for Medicare beneficiaries with 
HIV/AIDS, even though only about 10 percent of Medicare beneficiaries 
with HIV/AIDS lived there.  Based on our review of CMS materials and 
claims data, we found that CMS and its contractors have used multiple 
approaches in South Florida to control aberrant billing for beneficiaries 
with HIV/AIDS, but none has proven effective thus far. 
In February 2008, OIG issued a report entitled Los Angeles County 
Suppliers Compliance With Medicare Standards:  Results From 
Unannounced Visits (OEI-09-07-00550).  OIG conducted unannounced 
site visits to 905 DME suppliers in the Los Angeles metropolitan area to 
determine their compliance with certain Medicare standards and to 
identify atypical billing characteristics.  Thirteen percent of the 
suppliers did not maintain physical facilities or were not open during 
the time of the site visits.  Fourteen percent of suppliers met a Medicare 
standard but had atypical billing patterns, such as billing for a 
beneficiary that did not receive other Medicare services (e.g., office 
visits) from the ordering physician within a 6-month period preceding 
the DME claim.  We recommended that CMS strengthen the DME 
supplier enrollment process and ensure that these suppliers meet the 
Medicare standards.  In response, CMS stated that it has already 
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I N T R O D U C T I O N  
addressed the majority of our recommendations but would consider 
increasing prepayment reviews of suppliers claims and may establish 
more frequent enrollment requirements for suppliers.   
METHODOLOGY 
Scope and Data Source 
We used the Medicare National Claims History File (NCH) to identify 
all inhalation drug claims in 2007.  Using county codes, we separated 
the claims into two groups:  one with beneficiaries in South Florida 
(defined as Miami-Dade, Broward, and Palm Beach Counties) and one 
with beneficiaries in the rest of the country.  We also used the NCH to 
identify all claims for Part B physician services provided between 
January 1, 2005, and December 31, 2007, for South Florida 
beneficiaries who received inhalation drugs under Medicare.  
Data Analysis 
Beneficiary comparison.  We calculated the average number of paid 
claims and amounts allowed16 for all inhalation drugs per beneficiary 
in South Florida in 2007 and compared these to average values for the 
rest of the country.  We also performed this comparison for the four 
individual products (albuterol, levalbuterol, ipratropium bromide, and 
budesonide) that accounted for most (95 percent) of Medicare 
spending on inhalation drugs in South Florida.17  Among these four 
products, budesonide and levalbuterol are brand name products 
marketed by a single manufacturer; albuterol and ipratropium 
bromide have generic versions available from numerous 
manufacturers.   
Supplier comparison.  We compared the average amount submitted and 
paid per supplier for beneficiaries in South Florida to the average 
amount submitted and paid per supplier for beneficiaries in the rest 
of the country.  Additionally, we determined the percentage of 
 
16 In the remainder of this report, calculations involving the amount allowed (total 
amount Medicare spent, including the beneficiary copayment) are referred to as either the 
amount Medicare spent or paid. 
17 The four inhalation drugs under review were actually represented by five Healthcare 
Common Procedures Coding System (HCPCS) codes on Medicare claims during 2007.  In 
the first half of 2007, albuterol and levalbuterol had separate HCPCS codes.  However, in 
the second half of 2007 these drugs were combined into one new HCPCS code.  We focused 
the analysis involving these two drugs on the first half of 2007, when the drugs had 
separate HCPCS codes. 
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beneficiaries in South Florida and in the rest of the country who had 
more than one supplier providing inhalation drugs in 2007.   
LCD guideline comparison.  An LCD (L5007) provides guidelines for the 
maximum milligrams per month that may reasonably be billed 
(without additional documentation) for the majority of the inhalation 
drugs covered by Medicare.  We compared actual beneficiary 
utilization to guidelines in the LCD for the four drug products 
(albuterol, levalbuterol, ipratropium bromide, and budesonide) 
included in the beneficiary comparison.   
The maximum doses listed in the LCD for albuterol, levalbuterol, and 
ipratropium bromide were consistent throughout 2007.  However, 
budesonide did not have a maximum milligrams per month listed in 
the LCD before its July 1, 2007, revision.  Therefore, our analysis of 
this drug (in terms of the LCD) was limited to the second half of 2007.  
Additionally, the HCPCS codes, and subsequently the Medicare 
payment amount, for levalbuterol and albuterol were combined as of 
July 1, 2007 (although the maximum doses for each remained the 
same).  As a result, it was not possible to differentiate between 
albuterol and levalbuterol billed on claims during the second half of 
2007.  Because of this, we analyzed albuterol and levalbuterol claims 
for only the first half of 2007.  
Because beneficiaries may receive up to a 90-day supply of a drug, 
edits for the utilization guidelines were set for an 83-day period 
(excluding a 7-day grace period for delivery).  For each of the four 
drugs included in the LCD analysis, we calculated the average 
Medicare payment per beneficiary for an 83-day period.  We 
calculated these amounts for beneficiaries in South Florida and the 
rest of the country and compared them to the Medicare payment 
amount that reflected the maximum milligrams listed in the LCD for 
3 months (i.e., 90 days).  We also calculated the percentage of South 
Florida beneficiaries exceeding the utilization guidelines within the 
83-day period and compared it to the percentage exceeding it in the 
rest of the country.  Please refer to the Appendix for a more detailed 
description of this analysis.  
Relationships among suppliers, physicians, and beneficiaries.  For each 
South Florida beneficiary with a paid inhalation drug claim in 2007, 
we determined whether or not there was a Medicare Part B service 
claim (e.g., Medicare-billed office visit) occurring in 2005, 2006, or 
2007 with the physician who ordered the inhalation drug.  In 
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I N T R O D U C T I O N  
addition, for each supplier, we determined the percentage of South 
Florida beneficiaries with paid inhalation drug claims that did not 
have Part B service claims in 2005 through 2007 with the ordering 
physician listed on the inhalation drug claim. 
Using the physicians identifier, we selected the 10 prescribing 
physicians associated with the highest dollar amount of South Florida 
inhalation drug claims submitted in 2007.  We then determined 
whether there are certain suppliers operating in South Florida that 
had large volumes of claims with any of the high-dollar physicians.   
Limitations 
The Health Insurance Portability and Accountability Act of 1996 
requires issuance of a unique NPI to each physician, supplier, and other 
health care provider.  CMS began issuing NPIs on May 23, 2005; 
however, it was not until May 23, 2008, that all submitted claims were 
required to have an NPI.  In the interim, CMS allowed submitted claims 
to have either the NPI only; the Medicare legacy identifier only          
(i.e., Unique Physician Identification Number); or a combination of the 
NPI and Medicare legacy identifier on the claim.  For calculations in 
this report involving Part B service claims, we excluded claims for 
which only an NPI was present; i.e., we included only claims that listed 
a legacy identifier.  In South Florida, these NPI-only claims accounted 
for less than 1 percent of the total amount submitted to Medicare and of 
the total amount Medicare paid for inhalation drugs. 
We did not examine medical records to verify whether there was 
documentation to support claims for a drug that exceeded the maximum 
milligrams per month listed in the LCD.  
Standards 
This study was conducted in accordance with the Quality Standards 
for Inspections issued by the Presidents Council on Integrity and 
Efficiency and the Executive Council on Integrity and Efficiency.  
  OEI-03-08-00290  ABERRANT CLAIM PATTERNS FOR INHALATION DRUGS IN SOUTH FLORIDA  10    
   
 F I N D I N G S  
Although only 2 percent of Medicare  In 2007, South Florida accounted 
  beneficiaries live in South Florida, this area  for 17 percent of the total 
Medicare reimbursement for 
accounted for 17 percent of Medicare spending 
inhalation drugs ($160 million of             
on inhalation drugs in 2007 
$946 million), even though just     
2 percent of beneficiaries resided there.18  Medicare paid almost       
$143 million for inhalation drugs in Miami-Dade County alonean 
amount 20 times greater than the amount paid in Cook County, Illinois, 
the county (outside South Florida) with the next highest total 
payments.  However, according to Medicare enrollment data, Cook 
County is home to almost twice as many Medicare beneficiaries as 
Miami-Dade County.   
In 2007, Medicares average per-beneficiary spending on inhalation drugs 
was five times higher in South Florida than in the rest of the country  
Among beneficiaries with paid inhalation drug claims, Medicare spent 
approximately $4,400 per South Florida beneficiary on those drugs in 
2007.  In the rest of the country, Medicare spent $815 per beneficiary on 
inhalation drugs that year (see Table 1).  For 53 percent of the South 
Florida beneficiaries, Medicare spending for inhalation drugs was 
greater than $2,000 each in 2007.  In comparison, just 11 percent of 
beneficiaries in the rest of the country exceeded that amount.  For        
10 South Florida beneficiaries, Medicare paid an average of $44,000 for 
inhalation drugs in 2007, an amount 54 times higher than the average 
per-beneficiary payment outside South Florida.  These 10 beneficiaries 
had an average of more than $72,000 in submitted inhalation drug 
claims in 2007. 
 
 
  Table 1.  Inhalation Drug Claims in 2007 (per beneficiary)  
 
  South Florida  Rest of the Country 
 
    Average  Average Amount  Average  Average 
Number of Paid  Paid  Number of  Amount Paid 
  Claims  Paid Claims 
  Inhalation drug claims for Medicare  10.2  $4,377  6.5  $815 
  beneficiaries in 2007* 
                            * Limited to beneficiaries with paid inhalation drug claims.        
          Source:  OIG analysis of inhalation drug claims in the Medicare NCH file, 2007. 
 
18 CMS Medicare Enrollment Reports.  Available online at 
https://www.cms.hhs.gov/MedicareEnrpts/.  Accessed on October 21, 2008.  Enrollment data 
have not been updated since July 1, 2007; therefore, this estimate assumes that Medicare 
enrollment did not change significantly after July 1, 2007. 
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Medicare per-beneficiary spending on brand name inhalation drugs was 
much greater in South Florida than in the rest of the country; spending 
on generic inhalation drugs was similar 
For the four inhalation drugs that accounted for the majority of 
spending, Medicare spent substantially more per beneficiary on the 
brand name products (budesonide and levalbuterol) in South Florida 
compared to the amount spent in the rest of the country.  As Table 2 
illustrates, among those who received budesonide in 2007, Medicares 
per-beneficiary spending for the drug was much higher in South Florida 
($4,429 per beneficiary in South Florida compared to $1,567 per 
beneficiary in the rest of the country).  In addition, in the first half of 
2007 (before the HCPCS coding change), Medicares per-beneficiary 
spending on levalbuterol in South Florida was more than double its 
spending in the rest of the country ($2,312 per beneficiary in South 
Florida compared to $1,035 per beneficiary in the rest of the country).  
At the same time, per-beneficiary payments for the two generic 
inhalation drugs (albuterol and ipratropium bromide) were roughly the 
same or less in South Florida. 
 
Table 2.  Paid Inhalation Drug Claims for Individual Drug Products in 2007  
South Florida  Rest of the Country 
   
  Percentage of  Average  Average  Percentage of  Average  Average 
  Beneficiaries   Number of  Amount  Beneficiaries   Number of  Amount 
Short Description of Drugs  Receiving Drug  Paid Claims  Paid  Receiving Drug  Paid Claims  Paid 
Budesonide inhalation solution (unit  56  6.6  $4,429  14  5.1  $1,567 
dose), up to 0.5 mg 
Levalbuterol inhalation solution  (unit  71  4.1  $2,312  19  2.7  $1,035 
dose), 0.5 mg* 
Albuterol inhalation solution                    17  2.1  $37  40  2.7  $50 
(unit dose), 1 mg* 
Ipratropium bromide inhalation  29  3.3  $46  23  3.8  $43 
solution (unit dose), 1 mg 
  * The amounts listed for albuterol and levalbuterol are for the first half of 2007, when they had separate HCPCS codes.  
Calculations for individual drugs are based only on the beneficiaries who were provided those drugs.  Therefore, the figures listed in this         
table do not add up to the figures listed for all inhalation drugs per beneficiary in Table 1.  
 
Source:  OIG analysis of inhalation drug claims in the Medicare NCH file, 2007. 
 
 
 
 
 
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F I N D I N G S  
Furthermore, not only did Medicare spend more per beneficiary on brand 
name drugs in South Florida, but also substantially more South Florida 
beneficiaries had claims for brand name drugs.  In 2007, 56 percent of 
South Florida beneficiaries who received inhalation drugs had     
Medicare-paid claims for budesonide, compared to 14 percent of 
beneficiaries who received inhalation drugs in the rest of the country.  
Before the HCPCS coding change, 71 percent of these South Florida 
beneficiaries had paid claims for levalbuterol, versus just 19 percent of 
these beneficiaries elsewhere. 
As a result, Medicares total expenditures for budesonide and levalbuterol 
were disproportionately higher in South Florida.  Medicare spent          
$306 million for budesonide in 2007; 30 percent ($91 million) of this was 
attributed to budesonide payments in South Florida.  Similarly, Medicare 
spent $205 million on levalbuterol in the first half of 2007 (before the 
HCPCS coding change), with South Florida accounting for 25 percent     
($51 million) of that total. 
Because Medicare payment amounts were substantially higher for 
budesonide and levalbuterol (before the HCPCS coding change) than the 
two generic drugs, suppliers may have had a greater incentive to overbill 
for the brand name products.19  Budesonide had the highest 
reimbursement amount among the products we reviewed.  
 
Supplier billing patterns for inhalation drugs  Consistent with the substantial 
differed substantially between South Florida  differences in inhalation drug 
utilization and expenditures 
and the rest of the country  
between beneficiaries in South 
Florida and those in the rest of the country, the suppliers that provided 
drugs in South Florida exhibited different billing patterns as well.  Not 
only did suppliers bill more per beneficiary for inhalation drugs in 
South Florida when compared to amounts billed in the rest of the 
country, but also in many cases, multiple suppliers billed for inhalation 
drugs provided to the same beneficiary.   
 
 
 
19 In 2007, the average Medicare payment amount for one vial of budesonide was $4.67; 
levalbuterol was $3.66; albuterol was $0.18; and ipratropium bromide was $0.10.  After 
Medicare combined the payment amounts for levalbuterol and albuterol, one vial of either 
drug was reimbursed at $1.18. 
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Beneficiaries in South Florida were more likely to have multiple suppliers 
Thirty-one percent of South Florida beneficiaries had more than one 
supplier providing inhalation drugs during 2007.  Thirty-five percent          
of the multiple-supplier beneficiaries received drugs from three or 
more suppliers, often for the same drug in the same month.  For 
example, one beneficiary received levalbuterol and budesonide from 
12 different suppliers in 2007, with as many as 6 suppliers each 
providing both drugs in a single month.  In comparison, only             
12 percent of beneficiaries in the rest of the country had claims 
submitted from more than one supplier, with almost all of these       
(91 percent) receiving drugs from just two.   
Beneficiaries with claims for budesonide were particularly likely to have 
more than one supplier of the drug.  In the first half of 2007, an average 
of 27 percent of beneficiaries with budesonide claims in South Florida 
had multiple suppliers providing budesonide compared to 9 percent of 
beneficiaries in the rest of the country (budesonides average payment 
amount per vial was $4.67 in 2007).  In contrast, in the first half of 
2007, 4 percent of South Florida beneficiaries and 7 percent of 
beneficiaries in the rest of the country had more than one supplier of 
albuterol (albuterols average payment amount was $0.18 per vial).    
Inhalation drug suppliers billed more for beneficiaries in South Florida    
than in the rest of the country 
Overall, suppliers billed Medicare an average of $1,176 in inhalation 
drug claims for each of their South Florida beneficiaries in 2007; on 
average, they were paid $585 for each beneficiary that year.  In the rest 
of the country, suppliers billed Medicare an average of $661 per 
beneficiary for inhalation drugs in 2007 and were paid $307.  One 
supplier in South Florida was paid an average of $14,000 per 
beneficiary for inhalation drugs in 2007an amount 46 times the 
average for the rest of the country. 
 
Medicare paid for inhalation drug claims that  Effective July 1, 2007, 
did not comply with LCD guidelines  utilization guidelines for 
budesonide were included on 
LCD L5007.  However, as of September 2008, the PSC covering 
Florida had not implemented edits to deny budesonide claims in 
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F I N D I N G S  
excess of the LCD amount.20  As Table 3 shows, the average Medicare 
payment for a 90-day supply21 of budesonide in South Florida    
($1,874 per beneficiary) was more than double the payment amount 
for the maximum milligrams listed in the LCD ($888 per beneficiary) 
during the second half of 2007; in the rest of the country, the average 
payment for budesonide was lower than the LCD guideline          
($746 per beneficiary).  Seventy-five percent of South Florida 
beneficiaries who received budesonide had paid claims that exceeded 
the utilization guidelines, compared to 14 percent of beneficiaries in 
the rest of the country.  In the case of one South Florida beneficiary, 
Medicare paid for a 90-day supply of budesonide that was 15 times 
greater than the maximum listed in the LCD (and was provided by 
four different suppliers during the period).   
 
 
Table 3.  Ninety-Day Supply of Drugs Covered Under the LCD (per beneficiary)  
Maximum  South Florida  Rest of the Country 
Payment Amount  Percentage of  Percentage of 
  in LCD for 90-Day  Average  Beneficiaries  Average  Beneficiaries 
 Short Description of Drug  Drug Supply   Payment  Exceeding LCD  Payment  Exceeding LCD 
Budesonide inhalation solution  $888  $1,874  74.5%  $746  14.3% 
(unit dose), up to 0.5 mg 
Levalbuterol inhalation solution  $2,041  $1,619  24.0%  $736  0.7% 
(unit dose), 0.5 mg 
  Albuterol inhalation solution          $102  $30  0.3%  $35  0.6% 
 (unit dose), 1 mg 
  Ipratropium bromide inhalation      $53  $33  19.7%  $24  3.4% 
  solution (unit dose), 1 mg 
The average payment amounts listed are for only an 83-day period in 2007.  Not all beneficiaries receiving each drug had a claim during the 
sampled time.  Therefore, these monthly averages will not add up to the average spending per drug for the entire year.  
    Source:  OIG analysis of inhalation drug claims in the Medicare NCH file, 2007. 
 
Although the average payment for the other inhalation drugs fell 
below the guidelines set by the LCD, several individual South Florida 
beneficiaries still exceeded the maximum payment amount for a      
90-day supply of those drugs.  For example, nearly a quarter of South 
Florida beneficiaries exceeded the maximum amount for levalbuterol, 
 
20 We discussed the implementation of the budesonide edit only with staff from 
Jurisdiction C (the region including Florida) on August 18, 2008.  We did not determine 
whether other PSCs had this edit in place.   
21 As discussed in the methodology and appendix, this 90-day supply was actually 
calculated based on claims from an 83-day period to allow for a 7-day delivery window. 
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and 20 percent exceeded it for ipratropium bromide.  In contrast, only 
1 percent and 3 percent of beneficiaries in the rest of the country 
exceeded the limits for these drugs, respectively.  For the remaining 
drug (albuterol), less than 1 percent of the beneficiaries in South 
Florida and in the rest of the country exceeded the limits.   
 
According to Medicare data,         
For 62 percent of inhalation drug claims in South 
for 62 percent of South Florida 
Florida, the beneficiary did not have a Part B 
inhalation drug claims, the 
service visit during the last 3 years with the 
beneficiaries on these claims did 
physician who reportedly prescribed the drug 
not have a Medicare-billed office 
visit or other service in the past 3 years with the physician who 
reportedly prescribed the drug.  Medicare paid $114 million             
(71 percent of total South Florida payments) for these inhalation drug 
claims in 2007.  For example, one beneficiary had almost $45,000 in 
Medicare-paid claims for inhalation drugs in 2007 even though the 
beneficiary did not have a single billed service visit with any of the six 
physicians who reportedly prescribed the drugs. 
For 16 percent of suppliers, not a single South Florida beneficiary to 
whom they provided inhalation drugs had a billed service with the 
physician listed on the claim form 
In other words, every one of these suppliers inhalation drug claims 
listed a beneficiary that did not have a Medicare-paid office visit or 
other service in 2005, 2006, or 2007 with the physician who reportedly 
prescribed the drugs.  For an additional 27 percent of suppliers, more 
than half of their inhalation drug claims were for beneficiaries who 
had no Part B service claims with the physician listed on the claim.   
 
Furthermore, among the 10 suppliers with the highest dollar amount 
of inhalation drug reimbursement in 2007, between 66 percent and  
97 percent of claims were for beneficiaries without any associated 
Part B services.  These 10 suppliers accounted for almost a quarter of 
the total amount billed to Medicare for inhalation drugs in South 
Florida. 
 
 
 
 
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In 2007, 10 South Florida 
Certain ordering physicians in South Florida 
physicians were each listed as 
were associated with a large volume of 
the ordering physician on more 
inhalation drug claims 
than $3.3 million in submitted 
inhalation drug claims, or an average of $12,000 per day.  In 
comparison, only one of the nearly 200,000 physicians ordering 
inhalation drugs for beneficiaries in the rest of the country had claims 
submitted totaling more than this amount.   
Among the 10 South Florida physicians, all but one had significant 
increases in the total amount billed with their identifiers as compared 
to the amount billed in the previous year.  For example, one physician 
was listed as the ordering physician on $4.7 million in submitted 
inhalation drug claims in 2007, a 56-fold increase from the $84,000 
submitted for inhalation drugs claims billed with that identifier in 
2006.   
Each of the 10 physicians reportedly ordered inhalation drugs for an 
average of 745 South Florida beneficiaries in 2007.  These physicians 
had Medicare-paid office visits or other Part B-related services in 
2005 through 2007 with between 1 percent and 53 percent of the 
beneficiaries for whom they reportedly ordered inhalation drugs in 
2007. 
Medicare paid a total of $28 million for inhalation drugs reportedly 
ordered by these 10 physicians during the year.  Based on claims 
data, 148 different suppliers provided inhalation drugs to the South 
Florida beneficiaries associated with these physicians.  However,              
33 suppliers accounted for the majority (79 percent) of the amount 
paid by Medicare.   
 
 
 
 
 
 
 
 
 
  OEI-03-08-00290  ABERRANT CLAIM PATTERNS FOR INHALATION DRUGS IN SOUTH FLORIDA  17    
   
 R E C O M M E N D A T I O N S  
 
South Florida has been identified by OIG, CMS, and other agencies as a 
high-risk area for fraudulent billings to Medicare by DME suppliers.  
Fraudulent billings jeopardize the financial integrity of Medicare and 
may endanger Medicare beneficiaries when the drugs are 
overprescribed.   
Our findings demonstrate that even though CMS has made efforts to 
reduce DME fraud in South Florida, a problem may persist among DME 
suppliers billing for inhalation drugs.  Medicare spent substantially 
more on inhalation drugs per beneficiary in South Florida during 2007 
than on beneficiaries in the rest of the country.  The greatest spending 
discrepancies occurred among the brand name drugs budesonide and 
levalbuterol.  In particular, spending and utilization for budesonide 
were much higher not only in comparison to averages in the rest of the 
country but also in relation to coverage guidelines.  Furthermore, many 
of the South Florida beneficiaries did not have a Medicare service claim 
during the last 3 years with the physician who reportedly prescribed the 
inhalation drugs.  Therefore, we recommend that CMS: 
Ensure That All PSCs, Particularly the PSC Covering Florida, Are 
Enforcing the Guidelines for Maximum Milligrams per Month for All 
Inhalation Drugs, Especially Budesonide 
LCD L5007 states that claims exceeding the maximum milligrams per 
month for certain inhalation drugs should be denied as not medically 
necessary unless there is documentation to justify larger amounts.  
However, 75 percent of Medicare beneficiaries in South Florida 
exceeded the utilization guideline for budesonide.  Although we did not 
determine whether documents supporting this use were provided to the 
PSCs, it seems improbable that three-quarters of the South Florida 
beneficiaries would require a higher dose of budesonide.  In comparison, 
only 14 percent of beneficiaries in the rest of the country had claims for 
budesonide exceeding the utilization guideline.  
Furthermore, although the average monthly reimbursement for other 
inhalation drugs fell below the guidelines set by the LCD, several    
individual South Florida beneficiaries still exceeded the maximum 
milligrams per month.  For example, almost a quarter of South Florida 
beneficiaries exceeded the LCD guidelines for levalbuterol.     
Based on our conversations with DME MAC staff from the jurisdiction 
that includes Florida, claim edits have been put in place to detect when 
beneficiaries exceed the maximum milligrams per month for most 
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R E C O M M E N D A T I O N S  
inhalation drugs covered by the LCD.  However, as of August 18, 2008, 
there are currently no such edits for budesonide, even though the 
utilization guideline has been in effect for over a year.  Adding an edit to 
detect overutilization of budesonide and ensuring that payments for 
other inhalation drugs comply with LCD utilization guidelines will help 
minimize payments for unnecessary medications.   
Eliminate Medicares Vulnerability to Potentially Fraudulent or 
Excessive Claims for Beneficiaries Prescribed Inhalation Drugs in 
South Florida 
Medicare spending per beneficiary on inhalation drugs, especially 
budesonide, was much greater in South Florida than in the rest of the 
country.  The increased spending in this region, along with that fact 
that the beneficiaries listed on more than 60 percent of South Florida 
inhalation drug claims did not have a Medicare-billed office visit during 
the last 3 years with the physician who reportedly prescribed the drug, 
suggests improper billing for inhalation drugs by DME suppliers 
operating in South Florida.  One method CMS could use to better detect 
aberrancies and further reduce Medicares vulnerability is working with 
the DME MACs and PSCs to establish additional claims edits.  
Review Cases in Which the DME Supplier Appears To Be Fraudulently 
Billing Medicare for Inhalation Drugs and Take Appropriate Action 
Based on the Reviews Results  
DME suppliers billed almost twice as much for inhalation drugs 
provided to beneficiaries in South Florida compared to beneficiaries in 
the rest of the country.  In addition, multiple suppliers often submitted 
claims for the same drug for the same beneficiary in a single month.  
Because South Florida has been a notoriously high-risk area for 
supplier DME fraud, CMS should take action to ensure that claims 
submitted by these suppliers, particularly the top-billing DME 
suppliers, are legitimate.  We will provide CMS with information on the 
suppliers and physicians associated with a large quantity of 
questionable inhalation drug claims for its review.  Where appropriate, 
CMS should take steps to revoke the Medicare billing numbers of 
suppliers with fraudulent claims.   Additionally, we will refer to our 
Office of Investigations information on the DME suppliers with 
aberrant billing patterns.   
      
 
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R E C O M M E N D A T I O N S  
AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 
RESPONSE 
CMS concurred with all three of our recommendations.  CMS stated 
that through its Program Integrity Miami field office and the DME Stop 
Gap Plan, it has already identified and begun to address many of the 
same issues cited in our report.  In addition, CMS noted that OIGs 
findings reinforce the validity of the agencys efforts.   
In response to our recommendations, CMS stated that, as of September 
2008, the DME PSC for South Florida and the DME MAC had 
implemented a medically unlikely edit for budesonide.  According to 
CMS, there was an immediate and significant 50-percent decrease in 
both allowed and billed amounts for the drug in Miami-Dade and 
Broward counties.  In addition, CMS described the efforts by its Miami 
and Los Angeles field offices to identify physicians who ordered high 
volumes of DME items, including inhalation drugs, for beneficiaries 
with no clinical relationship to the physician.  Following the interviews 
with these physicians, the field office revoked billing privileges of 
suppliers not meeting supplier standards and established granular 
prepay edits at the beneficiary, supplier, physician, and procedure code 
level to deny payment to suppliers for DME never ordered by these 
physicians.  Finally, CMS expressed its commitment to continually 
reviewing and refining the process to improve the Medicare program 
and will review any additional information provided by OIG.   
We did not make any changes to the final report based on CMSs 
comments.  For the full text of CMSs comments, see Appendix B.  We 
have provided CMS with information on the suppliers and physicians 
that we identified as having potentially fraudulent activities in this 
report. 
 
 
 
 
 
 
 
 
 
 
 
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 A P P E N D I X   ~   A  
 
 
Calculation for Local Coverage Determination Guideline Comparison 
A local coverage determination (LCD L5007) provides guidelines for the 
maximum milligrams per month that may reasonably be billed (without 
additional documentation) for the majority of the inhalation drugs 
covered by Medicare.  Because beneficiaries may receive up to a 90-day 
supply of a drug, edits for the utilization guideline are set for an 83-day 
period (excluding a 7-day grace period for delivery).  Because of this, we 
used an 83-day period for our LCD comparison analysis. 
For albuterol, levalbuterol, and ipratropium bromide, we identified each 
beneficiarys initial drug claim in the first quarter of 2007 and selected 
the claims submitted in the 83 days following.  Because budesonide did 
not have an LCD guideline until July 1, 2007, we selected the initial 
claim in the third quarter of 2007.  For each selected beneficiarys       
83-day period, we calculated the total Medicare payment amount for 
each drug.   
Because we selected beneficiaries with their initial claim in the first or 
third quarter, not all beneficiaries prescribed that drug were included in 
the analysis.  For example, 25 percent of beneficiaries taking 
levalbuterol in 2007 did not have a claim in the first quarter and 
therefore were not included in this drugs analysis.     
Additionally, we determined the average Medicare payment amount 
that would be reflective of the maximum milligrams listed in the LCD 
for 3 months.  Because beneficiaries could have their 83-day period 
extend into the following quarter (e.g., a beneficiary could have had the 
initial claim on the last day of the first quarter, meaning the majority of 
the 83 days falls into the second quarter), we calculated the average 
maximum amount per month based on the first and second quarter for 
albuterol, levalbuterol, and ipratropium bromide, and based on the third 
and fourth quarter for budesonide.  We calculated the average based on 
two quarters because Medicare payment amounts for each drug may 
fluctuate from quarter to quarter.  To make it representative of the     
83-day period, we multiplied the average maximum amount per month 
by three (approximately 90 days).   
 
 
 
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A P P E N D I X   ~   A  
 
Using the beneficiarys total Medicare payment amount in the 83 days, 
we determined the percentage of beneficiaries who exceeded the 
payment amount associated with the maximum milligrams listed in the 
LCD for 3 months.  We also calculated the average Medicare payment 
amount per each drug for South Florida beneficiaries and compared it to 
the average amount for beneficiaries in the rest of the country.  We then 
compared both amounts to the 90-day maximum amount in the LCD 
guidelines.   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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  OEI-03-08-00290  ABERRANT CLAIM PATTERNS FOR INHALATION DRUGS IN SOUTH FLORIDA  23    
   
 A P P E N D I X   ~   B  
 
Agency Comments 
  OEI-03-08-00290  ABERRANT CLAIM PATTERNS FOR INHALATION DRUGS IN SOUTH FLORIDA  24    
   
AA PP PP EE NN DD II XX    ~~    BB   
 
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 A C K N O W L E D G M E N T S  
 
This report was prepared under the direction of Robert A. Vito, Regional 
Inspector General for Evaluation and Inspections in the Philadelphia 
regional office, and David E. Tawes, Director of the Medicare and 
Medicaid Prescription Drug Unit.   
Stephanie Yeager served as the lead analyst for this study.  Other 
regional and central office staff who contributed include Scott Manley 
and Dave Graf.  
 
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