Department  of  Health  and  Human  Services 
OFFICE  OF 
INSPECTOR  GENERAL 
DURABLE  MEDICAL  EQUIPMENT

PAYMENTS  IN  NURSING  HOMES

p,+SsERVIC6$
#  ~$q 
JUNE GIBBS  BROWN 
$ 
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w Inspector  General 
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OEI-06-92-00862  OFFICE  OF  INSPECTOR  GENERAL 
The mission of the Oftlce 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 
inspectionsconductedby three OIGoperatingcomponents: the Officeof AuditServices,the 
OffIce of Investigations, and the OffIce of Evaluation and Inspections. The OIG also informs the 
Secretary of HHS of program and managementproblems and recommendscourses to correct them. 
OFFICE  OF  AUDIT  SERVICES 
The OIGSOffIceof AuditServices(OAS)providesall auditingservicesfor 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 respectiveresponsibilitiesandare intendedto provideindependentassessmentsof HHS 
programs and operations in order to reduce waste, abuse, and mismanagementand to promote 
economy and efficiency throughout the Department. 
OFFICE  OF  INVESTIGATIONS 
The OIGSOffIceof Investigations(01) conductscriminal, civil, and administrativeinvestigations 
of allegations of wrongdoing in HHS programs or to HHS beneficiaries and of unjust enrichment 
by providers.  The investigativeefforts of 01 lead to criminal convictions, administrative 
sanctions, or civil money penalties.  The 01 also oversees State Medicaid fraud control units which 
investigate and prosecute fraud and patient abuse in the Medicaid program. 
OFFICE  OF  EVALUATION  AND  INSPECTIONS 
The OIGSOffIce of Evaluation and Inspections (OEI) conducts short-term management and 
programevaluations(calledinspections)that focuson issuesof concernto the Department,the 
Congress, and the public.  The findings and recommendationscontained in these inspection reports 
generate rapid, accurate, and up-to-date information on the efficiency, vulnerability, and 
effectiveness of departmental programs. 
Dallas Staff  Central OffIce 
Leah Bostick  Jennifer Antico 
Kevin Golladay  Brian Ritchie 
Sarah Taylor  Barbara Tedesco 
Clark Thomas 
For further information  contact:  Kevin Golladay at 214/767-3310  or 1/800-848-8960.  Department  of  Health  and  Human  Services 
OFFICE  OF 
INSPECTOR  GENERAL 
DURABLE  MEDICAL  EQUIPMENT

PAYMENTS  IN  NURSING  HOMES

#  SERVICt$ 
~.+  c 
9 
JUNE GIBBS  BROWN 
.$  
< 
. Inspector  General
z 
% 
%~ $ 
+
%.j~~  MARCH  1996 
> 
OEI-06-92-00862  EXECUTIVE  SUMMARY

PURPOSE 
To identifi  Medicare Part B payments for Durable Medical Equipment (DME) services 
provided to residents in nursing homes. 
BACKGROUND 
DME is equipment which can withstand repeated use, is primarily used to serve a medical 
purpose, is generally not useful to a person in the absence of illness or injury, and is 
appropriate for use in the home.  To be covered by Medicare Part B, the lMZJ!?must be 
furnished for  use in the beneficiarys home.  Medicare defines a beneficiarys  home as his or 
her own dwelling, an apartment, a relatives home, a home for the aged, or some other type of 
institution.  However, a hospital or skilled nursing facility is specifically excluded as a 
residents home.  A skilled nursing facility is defined as a facility primarily engaged in 
providing skilled nursing care. 
We obtained information  about Part B expenditures from a 1992 nationally protectable  sample 
of nursing home residents from 10 Stites  and 150 nursing homes.  This includes residents 
receiving Medicare extended care benefits in a skilled nursing facility (SNF), residents paying 
for their stay with private insurance or personal fimds, residents on Medicaid, or a 
combination  of the above. 
This inspection was conducted as a part of Operation Restore Trust (ORT).  The initiative, 
focused in five States, involves multi-disciplinary  teams of State and Federal personnel 
seeking to reduce fraud, waste, and abuse in nursing homes and home health agencies, and by 
durable medical equipment  suppliers. 
FINDINGS 
Medicare  carriers  allowed  as much  as $35 million  in 1992 for DME  during  nursing 
home  stays.  Of this, $27 million was paid by Medicare.  The remaining $8 million was paid 
by beneficiaries. 
No effective  mechanism  currently  exists  to ensure  the appropriate  payment  of durable 
medical  equipment  under  Medicare  Part B for beneficiaries  in nursing  homes.  To ensure 
correct payments, clarification  is needed in the program policy utilized to determining which 
nursing homes are primarily  engaged in providing skilled care. 
i  RECOMMENDATIONS

In attempting  to address this problem, we originally developed a series of options regarding 
coverage policy for durable medical equipment in nursing homes.  One of those options, 
which we supported most strongly in our drafl report,  to exclude payment for any piece of 
was 
durable medical equipment provided to any resident in a nursing home.  We originally 
believed that this option should be pursued primarily because of its administrative  simplicity 
and because it reflected a policy which holds nursing homes responsible for routine items 
needed by their residents.  Afler considering both the Health Care Financing Administration 
(HCFA) and the Assistant Secretary for Planning and Evaluation (ASPE) comments on the 
draft report expressing concerns about the impact of such a policy on beneficiaries  and 
consistency with current legal authority, we have chosen to eliminate this recommendation  in 
our final report. 
Rather, we agree with both HCFA and ASPE that  issue should be considered within the 
this 
confkes  of current law.  And while we appreciate and thank ASPE for its point about the 
distinction  between routine and nonroutine items, which we agree can be important,  our 
reading of current law would prohibit any DME payment made on behalf of a resident of a 
nursing facility primarily engaged in providing skilled nursing care.  Further, if such a 
distinction could be made, it would be easier to make based on beneficiaries specific 
circumstances  and the amount, duration and scope of need, than on categories of equipment. 
We believe that to make such a distinction based on categories might invite the routine billing 
of non-routine DME in order to qualify for payment under Part B, and potentially  create an 
escalation in DME payments for residents in nursing homes. 
Thus,  we recommend  that HCFA  develop  and implement  a workable  and  fair definition 
of what  constitutes  a skilled  nursing  facility,  for the purposes  of payment  of DME  under 
Part  B.  It might be that such a definition could implement a policy such as that discussed in 
our draft repo~  in which Medicare certified facilities are designated as skilled nursing 
facilities (whether or not they are also certified by Medicaid).  However, other deftitions 
might be more appropriate. 
In any event, such a deffition  should reflect the principle that (1) skilled nursing facilities  are 
responsible  for the provision of a basic range of services to the residents under their care, and 
(2) a skilled nursing facility cannot be considered a home for the purposes of DME coverage 
under Medicare Part B. 
We have  previously  recommended  that HCFA  institute  appropriate  payment  safeguards 
to ensure  that  payments  for DME  are not made  for beneficiaries  in a Medicare  covered 
SNF  stay.  The H(2FA agreed.  We refer readers to our report, Payment for Durable Medical 
Equipment  Billed During Skilled Nursing Facility Stays, for more discussion of the options 
we presented and HCFASresponse. 
ii  Cost  Savings:  The exact amount of savings that could be obtained by the Federal 
Government  in implementing  this recommendation  depends on a number of factors, including 
the definition of skilled nursing facilities.  To illustrate, assuming a scenario where 75 percent 
of the facilities are deemed to be skilled facilities, we estimate roughly $23.5 million in 
savings (of which 80 percent is saved by the program and 20 percent by beneficiaries)  would 
accrue from implementing  both this recommendation  and our prior recommendation  regarding 
payment during Medicare covered SNF stays. 
COMMENTS 
The fill  text of the HCFA and the ASPE comments are provided in Appendix B.  Since we 
revised the recommendation  from the draft report, HCFASproposed action to revise and 
improve the Medicare criteria for identifying a skilled facility would implement the action 
which we agree is appropriate. 
... 
111  TABLE  OF  CONTENTS

EXECUTIVE  SUMMARY

INTRODUCTION  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...1

FINDINGS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...3

DMEpayments  in 1992  . . . . . .  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..3

Noeffective  mectism  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...5

RECOMMENDATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

ENDNOTES  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...9

APPENDICES

Part BClassification  ofDMESemices  . . . . . . . . . . . . . . . . . . . . . . . . . . .  A-1

AgencyComents  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..B-1
 INTRODUCTION

PURPOSE 
To identifi  Medicare Part B payments for Durable Medical Equipment (DME) services 
provided to residents in nursing homes. 1 
BACKGROUND 
DME is equipment which can withstand repeated use, is primarily used to serve a medical 
purpose, is generally not usefid to a person in the absence of illness or injury, and is 
appropriate for use in the home.  DME includes such items as wheelchairs, hospital beds, 
canes, crutches, oxygen concentrators,  and nebulizers.  In addition, reimbursement  may be 
made for necessary repairs and maintenance of the equipment under specified conditions. 
DME is reimbursed  using a fee schedule.  Five categories of DME have been established,  each 
with a different reimbursement  methodology.  These five principle DME payment categories 
include: 
1)	 inexpensive or other routinely purchased DME, defined as equipment costing less than 
$150 or which is purchased at least 75 percent of the time; 
2)  items requiring frequent and substantial servicing; 
3)	 customized  items, which are defined as equipment constructed or modified 
substantially to meet the needs of an individual patient, with fee schedule amounts 
determined by carriers without regard to average or reasonable charges; 
4)  other DME frequently referred to as capped rental; and 
5)	 oxygen and oxygen equipment, requiring frequent and substantial servicing, with 
payment calculations based on the average Medicare reasonable  charge. 
Equipment may be covered under Medicares Supplemental hxmrance Program (Part B), if it 
is fkrnished for use in the beneficiarys home.  Medicare defines a beneficiarys  home as his 
or her dwelling, an apartment, a relatives home, a home for the aged, or some other type of 
institution.  However, a hospital or skilled nursing facility is specifically excluded as a 
residents home. 
In the past, Medicaid nursing homes were classified as facilities providing skilled nursing care 
(SNF), providing intermediate  care (ICF), or as providing both.  The distinction  was 
important, as some ICFS provided care at a level that could be considered a beneficiarys 
residence for DME payment purposes. 2 This determination  was generally made by the State 
agency and communicated  to the local carrier.  However, with legislative changes to the 
certification  process prescribed in the Omnibus Budget Reconciliation  Act of 1987, the 
ICF/SNF certification  distinction was removed.  All nursing homes now meet the same 
certification  standards of a Medicare-participating  SNF. 
This inspection was conducted as a part of Operation Restore Trust (ORT).  The initiative, 
focused on five States, involves multi-disciplinary  teams of State and Federal personnel 
seeking to reduce fraud, waste, and abuse in nursing homes and home health agencies and by 
durable medical equipment  suppliers. 
1
 SCOPE 
This report is one of two reports on DME for nursing home residents.  The other report, 
Payment for  Durable  Medical  Equipment  Billed  During  Skilled Nursing  Facility  Stays,  was 
limited to DME billed for residents receiving extended care benefits in a Medicare nursing 
home providing  skilled or rehabilitative  care.  Since such a nursing home is specifically 
excluded as a beneficiarys home, all Part B payments for DME in that setting should have 
been denied.  We identified approximately  $8.9 million in 1991 and $10.8 million in 1992 of 
incorrect DME payments in nursing homes providing extended care benefits. 
This report expands our review to include not only residents receiving extended care benefits 
in a Medicare-certified  nursing home, but also any Medicare-eligible  resident in any Medicare 
or Medicaid-certified  nursing home. 
METHODOLOGY 
Data for this inspection was obtained from a nationally protectable two-stage random sample 
of 150 nursing homes from Californi~  Delaware, Florida, Indian% Kansas, Louisiana, Maine, 
Michigan, Montan~  and Wyoming (1Oper State).  Stratification was based on facility size 
(large, medium, and small). 
Each sample nursing home provided us with a list of all Medicare-eligible  residents residing 
in the nursing home during 1992, along with each residents corresponding date(s) of stay. 
After verification  of the beneficiaries health insurance claim numbers (HICN) with the 
Medicare enrollment database, all Medicare services provided during the nursing home stay 
were extracted from the Medicare National Claims History File for calendar year 1992.  The 
Supplementary  Medical Insurance (SMI) for the Aged and Disabled services (Part B 
Medicare), processed by both the carrier and the intermediary, were identified.  Data from the 
sample were projected to the total nursing home population (residents in Medicare or 
Medicaid-certified  nursing homes). 
Our review was conducted in accordance with the Quali~  Standards  for  Inspections  issued by 
the Presidents Council on Integrity and Efficiency. 
2
 FINDINGS

CarnersAllowed  $35 Million in 1992 for  DME During Nursing Home Stays. 
An estimated $35 million3 was allowed ($27 million paid) for DME billed during a 
beneficiarys  stay in a Medicare and/or Medicaid-certified  nursing home.  The remaining  $8 
million was paid by or on behalf of beneficiaries.  However, the exact amount of incorrect 
payment is dependent upon whether the nursing home qualified as the beneficiarys  residence. 
Over 80 percent of the allowed charges were for wheelchairs, beds, oxygen equipment, 
	
and related supplies. 
Most of the DME payments were for the rental or purchase of oxygen equipment,  wheelchairs, 
beds, and related items.  (See Figure 1.) 
I  Most DME Payments Were For 
Oxygen Equipment, Wheelchairs, 
Beds, and Related Items 
Other  DME 
($6.7 
Oxygen  Equipment 
and Supplies
Hospital  Beds  ($14.2 Million) 
and Accessorle 
($5.1 Million) 
Wheelchairs  and 
Acceesoriee 
($9.3  million) 
SourcmlS92 fnsslnghomessmpls 
Figure 1 
The most often rented or purchased oxygen equipment is the oxygen concentrator  which 
delivers 4 liters per minute.  The most expensive item in the wheelchair category is the 
standard wheelchair with fixed arms and detachable legs.  For beds, the semi-electric  bed is 
the largest expense. 
The items for which payments were made reflect atypical  array of medical equipment 
necessary for nursing homes to have in order to serve their residents.  Further, with the 
exception of some oxygen equipment and perhaps some wheelchairs, these are not 
sophisticated,  customized, or high technology items.  In addition to hospital beds and basic 
wheelchairs, the payments were for walkers, canes and crutches, commodes,  seat/patient  lifts, 
and pressure pads. 
3
 	 Overall, DME payments are attributable to less than 5 percent of all nursing home stays, 
with moderate differences between States and sizeable variations among nursing homes. 
During 1992,4.6  percent of all nursing home stays had DME allowed charges for Medicare 
residents in nursing homes.  Among the 10 sample States, the percentage of stays with DME 
ranged from an estimated high of 7.7 percent in Maine to an estimated low of 1.4 percent in 
Kansas.  However, among nursing homes, there are sizeable variations in the percent of stays 
with DME.  While the average percent of stays with  DME was 4.6 percent, some 38 percent 
of nursing homes exceeded this amount, and 10 percent exceeded  10 percent. 
As much as a third of these DME payments may have been made for beneficiaries  in a 
	
Medicare covered SNF stay. 
We previously estimated4 that approximately  $11 million in DME payments under Medicare 
Part B were made for beneficiaries  in Medicare covered SNF stays during 1992.  This more 
general estimate, using a different methodology,  includes these payments (as well as payments 
for beneficiaries  who have exhausted their Medicare benefits and/or whose stays are paid by 
Medicaid, private insurance, or out of pocket). 
  The certification  status of the nursing home appears to have little impact on DME billing. 
We looked at the certification  status of the nursing home and found little variation in the 
levels of DME billing.  This was regardless of whether the nursing home was  Medicare-
certified, dually certified for both Medicare and Medicaid, or Medicaid-only  certified. 
19 percent of the DME payments were made within one week of discharge or death. 
 
While DME should not be billed during a skilled nursing home stay, some of the billing 
may have been for DME intended for use at the beneficiarys residence following his or her 
discharge from the nursing home,  In reviewing payments occurring within a short time of 
discharge, we found $6.8 million (or 19 percent) billed within seven days of leaving the 
nursing home.  However, we were unable to determine if the person went home or to another 
inpatient facility.  We do know that one-half million dollars can be attributed to residents that 
died.  Figure 2 shows the allowed charges within 7 days of discharge. 
4
 19 Percent  of  DME Was  Provided 
Within  One  Week  of  Discharge 
Allowed 
Ii%%% 
251  $2.3 
2.0 
= 
1.5 
----$1,2  w2------------------------------------ --
$1.0 
1.0  m.  . ...... . 
0 
1  2	 3  4 5 6 7 
I  DAYS TO DISCHARGE  I 
I  I 
Source:  1992 nursing home sample 
Figure  2 
No effective mechanism  currently exists to ensure the appropriate payment  of durable 
medical equipment  under Medicare Part B for  beneficiaries in nursing homes. 
As indicated earlier, a skilled nursing facility is specifically excluded from consideration  as a 
beneficiarys  residence, for the purposes of payment under Part B for durable medical 
equipment. 
While policy is clear that a resident in a Medicare covered skilled nursing facility @NF) stay 
would not be eligible for coverage of durable medical equipment under Part B (even though 
some such payments were still made, as discussed earlier), Medicare currently has no 
mechanism  which otherwise determines when a beneficiary is residing in a skilled nursing 
facility. 
As indicated earlier, prior to passage of OBRA 1987, Medicare used certification  tiorrnation 
to make the distinction between skilled nursing facilities and other facilities.  The OBRA 
1987 eliminated  this distinction and the mechanism Medicare used to make payment 
decisions.  No new mechanism has been developed to replace it. 
Without a formal mechanism  for defining whether, or under what conditions, DME is covered 
in a nursing home, carriers were forced to adopt their own policies.  Resulting policies 
generally denied DME coverage if provided in a nursing home setting.  Generally, this denial 
was based on the suppliers designation of the place of service as a nursing home.  This 
5
 policy is confkned  by our finding that virtually none (0.4?40)of the payments in our sample 
were coded with place of service nursing home. 
In 99 percent of instances where DME payments were made, suppliers submitted claims with 
the place of service coded as home (91 percent) or other unlisted facility (nine percent). 
We cannot say whether suppliers coded the place of service in this way in order to avoid a 
denial of the claim, or represented the place of service as home because they in fact 
considered it a beneficiarys residence. 
6
 RECOMMENDATIONS

In attempting to address this problem, we originally developed a series of options regarding 
coverage policy for durable medical equipment in nursing homes.  One of those options, 
which we supported most strongly in our &all report, was to exclude payment for any piece of 
durable medical equipment provided to any resident in a nursing home.  We originally 
believed that this option should be pursued primarily because of its administrative  simplicity 
and because it reflected a policy which holds nursing homes responsible for routine items 
needed by their residents.  After considering both HCFA and ASPE comments on the draft 
report expressing concerns about the impact of such a policy on beneficiaries  and consistency 
with current legal authority, we have chosen to eliminate this recommendation  in our final 
report. 
Rather, we agree with both HCFA and ASPE that this issue should be considered within the 
confbes  of current law.  And while we appreciate and thank ASPE for its point about the 
distinction between routine and nonroutine items, which we agree can be important, our 
reading of current law would prohibit any DME payment made on behalf of a resident of a 
nursing facility primarily engaged in providing skilled nursing care.  Further, if such a 
distinction could be made, it would be easier to make based on beneficiaries specific 
circumstances  and the amount, duration and scope of need, than on categories of equipment. 
We believe that to make such a distinction based on categories might invite the routine billing 
of non-routine DME in order to qualifi  for payment under Part B, and potentially  create an 
escalation in DME payments for residents in nursing homes. 
Thus,  we recommend  that HCFA  develop  and implement  a workable  and  fair definition 
of what  constitutes  a skilled  nursing  facility,  for the purposes  of payment  of DME  under 
Part B.  Itmight be that such a definition could implement a policy such as that discussed in 
our draft report, in which Medicare certified facilities are designated as skilled nursing 
facilities (whether or not they are also certified by Medicaid).  However, other definitions 
might be more appropriate. 
In any event, such a definition should reflect the principle that (1) skilled nursing facilities  are 
responsible  for the provision of a basic range of services to the residents under their care, and 
(2) a skilled nursing facility cannot be considered a home for the purposes of DME coverage 
under Medicare Part B, 
We also suggest that HCFA consider a provision allowing for case-by-case, beneficiary  based 
determinations  of special circumstances;  grandfathering  in current beneficiaries  receiving 
DME under Part B while in a nursing home, to avoid disruption in their services.  We agree 
with ASPE that the policy should allow billing for DME provided in the last week of a 
residents nursing home stay, regardless of payer, to facilitate discharge planning when the 
DME is intended for use in the residents home. 
7
 We have  previously  recommended  that HCFA  institute  appropriate  payment  safeguards 
to ensure  that payments  for DME  are not made  for beneficiaries  in a Medicare  covered 
SNF  stay.  The HCFA agreed.  We refer readers to our report, Payment for Durable Medical 
Equipment  Billed During Skilled Nursing Facility Stays, for more discussion of the options 
we presented and HCFASresponse. 
Cost  Savings:  The exact amount  of savings that could be obtained by the Federal 
Government in implementing  this recommendation  depends on a number of factors, including 
the definition of skilled nursing facilities, programmatic  controls implemented  to expressly 
allow or prevent cost shifting to other parts of the Medicare program, the Medicaid program, 
or beneficiaries.  Additionally,  controls must be adequate to detect incorrect place of service 
coding by suppliers. 
A rough estimate of savings can be derived as follows.  From the total $35 million in allowed 
amounts, we subtract $6.8 million for payments made in the last week of a nursing home stay. 
Of the remaining  $28 million, roughly a third is addressed by implementing  our previous 
recommendation  regarding nonpayment  during Medicare covered SNF stays, for a savings of 
$9.3 million.  Assuming a new policy defining most nursing facilities as skilled 
(conceivable  given marketplace  conditions and law which have increased nursing facility 
capacity and staffing) would affect 75 percent of billings, savings for the remaining  $19 
million would be $14.2 million.  (These savings are shared by beneficiaries  in copayments.) 
Thus, a total of $23.5 million savings (of which 80 percent is saved by the program and 20 
percent by beneficiaries)  accrues by implementing  both this recommendation  and the prior 
recommendation  we made regarding payment during Medicare covered SNF stays in this 
scenario. 
COMMENTS 
The key points of HCFA and ASPE comments are discussed in the introduction to our revised 
recommendation.  The full text of their comments are provided in Appendix B.  Since we 
revised the recommendation,  HCFASproposed action to revise and improve the Medicare 
criteria for identifying a skilled facility would implement the action which we agree is 
appropriate. 
8
 ENDNOTES

1.	 While this report deals with DME services provided  in nursing homes,  a companion 
report,  Payment for  Durable  Medical  Equipment  Billed  During  Skilled  Nursing 
Facility  Stays  (OEI-06-92-00860)  discusses DME services solely in the Medicare 
SNF environment. 
2.	 Until the nursing home reform of OBRA 1987, the Health Care Financing 
Administration  administratively  denied coverage  of DME in nursing homes by the 
rules used to determine  primarily engaged in (PEI).  The PEI question was 
determined  by a mathematical  formula identifying the ratio of caregivers  to nursing 
home beds or residents  (e.g.,  if more than 1 caregiver  to 15 residents,  then the 
facility was deemed to be a PEI/ICF  nursing home regardless  of whether  any skilled 
or rehabilitation  patients were in the nursing home.)  As a result,  most Medicaid 
certified  nursing homes providing  (then) ICF level care could not qualify as a 
home under the administrative  rules. 
As a result of OBRA 1987, certification  is no longer based on levels of care and 
specific staffing ratios.  Instead,  facilities providing  skilled care and/or  rehabilitative 
services are categorized  along with facilities that formerly  were categorized  as ICFS. 
Any nursing home providing  any of these three types of care is now considered  a 
nursing  facility under the Federal  statute affecting the Medicaid program.  However, 
we learned that not all States have reorganized  their State programs  along these 
lines.  Specifically,  several States continue to license nursing home beds as skilled, 
intermediate,  sheltered  living,  and other categories. 
3.	 At the 95 percent  cotildence  level, we project Part B charges for DME between 
27.4 million and 43.4 million were made in 1992 on behalf of residents  during 
nursing home stays. 
4.	 Estimate  can be found in our report entitled,  Payment for Durable  Medical 
Equipment  Billed During Skilled Nursing Facility  Stays (OEI-06-92-00860). 
9
 APPENDIX  A

PART  B CLASSIFICATION  OF DME  SERVICES 
Components  of DME  and  Applicable  HCPCS  Codes 
Hospital  Beds  and  Accessories 
BedCodes: E0250,0251,0255,0260,0265,0266,0294,0296 
BedAccessoryCodes: E0272,0277,0310,0325 
Oxygen Equipment  and  Supplies 
Codes: EO41O4,30,435,457, 1400,1401,1402,1403,1404,QO036, 
0040,0042,0043,0046 
Mist Code: E1399 
OxygenSupplyCodes: E0457 
Wheelchairs  and  Accessories 
WheelchairCodes:E1031,1060,1083,1084,1085,1086,1087, 
1088,1089,1090,1092,1093,1100,1130,1140, 
1150,1160,1170,1180,1213,1220,1221,1222, 
1223,1224,1240,1250,1260,1270,1280,1285, 
1290,1295,1296,1297,1298 
WheelchairAccessoryCodes: E0950,953,959, 961,963,971,978, 
990,991,992,993,994, 996,997, 
1069 
Walkers

Codes:  E0130,0135,0141,0143,0147

Canes  and  Crutches 
codes:  Eoloo, 0105,0114 
Commodes

Codes: E0163,0164,0165,0166,0167

Seat/PatientLifts 
Codes:  )30627,0630 
Pressure  Pad  or Cushion  or Mattress 
Codes: )30176,0178,0180,0181,0182,  0184,0185,0186,0191,  0192, 
0193,0196,0199 
A-1
 APPENDIX  B

ASSISTANT  SECRETARY  FOR  PLANNING  AND  EVALUATION 
COMMENTS 
--
*.4.,, 
> ..- 4c..  

DEPARTMENT  of  HEALTH a HUMAN  SERVICES OIhmdhw Ssm-v 
.-
...
.,.%,.
~  D.c -l 
JW16~ 
w:  CIaudia Cooley 
Executive !hfxo~ 
I:ROI! .  .Uting  Assistant- tbr 
Phnirqg  ond Evalusition 
.  . 
B-1
 m a nursing home payment rate.  .4s a resuh, we are unable to identi~  which Medicare Part B 
DhlE payrncntsarcmadeforroutine nu~inghomesewims(i.e.,serviecsthatshouldbeincltid 
in a nursing home paymem rate) and which sre no~  Further, while we understand current law 
Iimi[s Part B DME to persons who are residing in [heir %ome~ it is not clear when a numing 
home residcmt(i.e., in non-PartA covered stay} is permsndy  residing in such a fidity,  and, 
thus, is at home in the fkdity,  versus a resid~t  chat is reeeiving shon-term care and intends to 
rtm.umhome.  Io e~wc  t&t  kneficizi~  ~  @  iqpmpria~iy  denied n~ed  cOV~C,  ~ 
twlicy prohibiting  Part B IX4E payments to all nursing home residents would have to ~C 
hat Part B DME piiymerm are for rourine or core mtrsing ho~  semiccs and that there are no 
.ong-terrn, p~antilt  nursioghomere~dm~ for~~  be n~ing  home ~,  in tit,  become 
their home.  We do not be{ievethat these  accuraN~~io~  Fuxther,we are concemcd 
uc 
lhdtdenying Medicare Part BDi%lEpaymen~tonursinghome~id~~  couldhaveanegat.ivc 
[f*t  on their qualityofcare. llerefo~  webdieve,atleastintheinterim  theDepartment 
shotid presumethatnursing~o~  ~iden~  ina~on.p~  A~v~  SW s~y we rcsidlng in 
their home and permit lart B Dh&  payments  behalf of such residents in need of these 
on 
supp~ies,  We recommend the OIG  study this issue and recommend a categorization of 
equipment routinely covered in nursing home payment rates and DIMEnot routinely included in 
such rates.  A review  of State Medieaklnursingfheilhypayment methods may provide some 
insight into this issue. 
Finally, we recommend  that the emclusion  of thk report clearly indicate that Part B DME 
payments made within a week of dke.barge for ~  nw~  home resident (regardkss  ofpaycr) 
who is c]igible for Part B are appropriateto faci[i~  dischargeplanning. 
I
1 
Part B Services in Nursing Homes 
I 
We rccmnmend  includtig  in the Bae@ound  seet$n  a discussion of  the circ UMSWLCH  under 
which Medkare  PartBpaymentsonbehalfofnursinghomeresidentsareappropri~,  h 
diflicuhies in idcntifyhg when such payments are~inappropriat~and the variable impaot that 
proposals to limit MediearePartBpaymentswill@veon difFerentnursing home residmna (i.e.. 
~ose  k  a Part AcoveredSl@stay, those who mpg  and those who are also e@ible  for 
Medicaid) and on State and Federal govesmmmts I 
We understand  hat the OIG intends to umkrtak  j study of Stale Medicaid nursing fm%lity 
payment rates and methods.  We agree that such a study is needed in order to undcrstartd when 
dupliae  payments have been made (i.c, Medkare  and Me&aid  both have paid) and when 
Medicaid cost sharing is inappropriate. 
B-2
 HEALTH  CARE  FINANCING  ADMINISTRATION 
COMMENTS 
,,
$twc, 
*0+  +, 
::* *  DEPARTMENT  OF HEALTH&  HUMAN  SERVICES  Health Care Financing Administration 
s 
8  -g 
% .>,, ,M
The Administrator 
Washington,  D.C.  20201 
DATE  DEc1519m 
TO  June Gibbs Brown 
FROM 
Administrator  ~U 
SUBJECT  OffIce of Inspector General Drafi Report: Durable Medical Eq.uip. ment
Paymentsin NursingHomes,(OEI-&L92-00862) 
We reviewed the above-referenced report which examines how suppliers ensure their 
durable medical equipment payments will be made by submitting claims that incorrectly 
code the place of sewice as home or othef rather than nursing home.  Attached are 
our comments on the report recommendation. 
Thank you for the opportunity to review and comment on this draft report. 
Attachment 
B-3
 Comments of the Health Care Financing Administration (HCFA) on Office of In.mector 
General (OIG) Dra.flReDortDurable Medical Euuit)ment Pavments in Nursing Homes. 
(OEI-06-92-00862j 
OIG Recommendation

OIG recommends that HCFA never pay for durable medical equipment (DME) suppIies

or equipment for any patient residing in a Medicare or Medicaid-catified  nursing home,

regardless of level of care, by implementingthe followingactions:

Clearly designate that no Medicaid-or  Medicare-certiiied  facility, 
regardless of the patients level of care, is a patients home for DME 
paymentpurposes. 
Consider developing an additional Common Working File edit to ident@  a 
possible nursing home stay (in addition to the Medicare extended care 
benefit stay alert already in plan) overlapping any DME claim. 
Require Medicaid agencies to deny Medicare crossover ckirna for DME 
(crossover refers to claims processed and paid by Medicare for dual 
eligibles, for whom Medicaid is required to pay the coinsurance and 
deductible for the beneficiary) unless the State has determked  the ikcility 
qualifies as a residence according to the previously stated criteria.  Further, 
re@re  MedicaidagenciestoreporttoHCFAalldenialsinvolvingDME for 
dually eligible nursing home residents. 
.  Direct contractorsto informnursinghomes of their status for DME 
payment purposes, and routinely communicate to suppliers that DIMEis not 
covered if provided to nursing home residents (clearly specifying that the 
DME can only be provided on or after the date of discharge to the 
beneficiarys  homefromthenursinghome). 
HCFAResnonse

TheaboverecwmrnendationwouldimposeablanketPartBexclusion of DME payment in

all Medicare skilled nursing fkilities  (SNF) and all Medicaid nursing fkilities  (NF).

However, as the law is currently wri~  we cannot do this for all Medicaid NFs (see

attached).

We do hope to sirnpl@ this process considerablyby introducinga set of rebuttable 
administrativepresumptionsunderaproposedrule(BPD-834-P) thatwe arecurrently 
developing.  The proposed rule would revise and improvethe Medicare criteria for 
identifyinga skilledfacility(i.e.,anursinghomemeetingthebasicdefinitionofa SNF 
B-4
 . . 
Medicare Pati B Coverwe Escluskn for Durabk  MedicalEauipment 
(DME} tirnkbed m a Skilled Nurahu FaciKtv(~ 
o	 l%cMc&amlaw(atsection  1861(n)oftheSocialSeaxityAct(tk  Act)providesfor 
PtiBm~ofD~~~  fm&ka_s-P=+*tit 
bmlleiaallidtutimthat  meetsthe    oft& Actat sections1861(e)(l)(fbr 
-)  ~  18f90#(l)  (tl!rSNFs).~ 
o	 Section1819(a)(l)(kncziy  aec.tionI&l(j)(l))  oftheA4  in- &&s  anSNF 
-~w~    Uutiaprimarilyeugage  dhlp-akiuednursing 
(dauae (A)) orrahabiiitatka  services (clause (33))to its rasideats. 
+	 lbia~huhaivasNFd  dinitionomitathes  peci&lnomrwtridive 
. .
emtamedrntbemnainckof  aectkm1819+@nmeds  tbatsn 
.  . .
m8&tutumustmeet rnaderto@kipate  intk  Medicampgramaaa 
Q!a#&4~. 
+  ~rnexcl&ngPartB's  DMEcovcmgeilumWNFs"aadc6mxiinaection 
18M(8)(l~C4mgmaaintemkdfbrthisadlniontoqqllymtaaiyto 
.  . . .
~sNP*butakotohmmutka  *M~ 
. .  .
pmkl@mgin~  doprolidethetype  ofcaXedmxibed rnthataectionof 
UU!lmu. 
B-6
 OPERATION  RESTORE  TRUST 
AND  NURSING  HOMES 
On May 3, 1995, President Clinton announced a new anti-fraud initiative undertaken by the

Department  of Health and Human Services.  Led by the OffIce of Inspector General in

partnership with the Health Care Financing Administration  and the Administration  on Aging,

this project utilizes the expertise of many Federal, State, and private sector

personnel.  They will direct their combined energies to crack down on Medicare and Medicaid

fraud, waste, and abuse initially associated with home health agencies, nursing homes,

hospices, and durable medical equipment suppliers.  They will work closely with the

Department of Justice and an intergovernmental  team comprised of other Federal and State

personnel.

In addition  to identi~ing  and penalizing  those  who defraud  the government,  the project  is

designed to alert the public and industry to the ilaud schemes or vulnerable areas in policy.

To aid in this endeavor, the OffIce of Evaluation and Inspections will work within the OffIce

of the Inspector General to perform its primary mission of conducting evaluations that provide

timely, usefid, and reliable information and advice to the pertinent decision makers involved

in the demonstration.  To this end, the following reports on nursing homes have been

completed:

Medicare Services Provided to Residents of Skilled Nursing Facilities (OJV-06-02-00863) 
Medicare Payments for Nonprofessional Services in Skilled Nursing Facilities (OEI-06-92-O0864) 
Payment for Durable Medical Equipment Billed During Skilled Nursing Facility Stays (OEI-06-92-
00860) 
Part B Services in Nursing Homes -An Overview (OEI-06-92-00865) 
Enteral Nutrient Payments in Nursing Homes (OEI-06-92-00861) 
Durable Medical Equ@ment Payments in Nursing Homes (OEI-06-92-00862) 
Ongoing evaluations are being conducted related to Medicare payments for residents of 
nursing homes for such services as mental health therapy, wound care, imaging,  Jwspice, 
ambulance transportation,  and nail debridement.  Also under review are duplicate payments 
between Medicare and Medicaid for nursing home services.