Department  of  Health  and  Human  Services 
OFFICE  OF 
INSPECTOR  GENERAL 
PAYMENT  FOR  DURABLE  MEDICAL 
EQUIPMENT  BILLED  DURING  SKILLED 
NURSING  FACILITY  STAYS 
JUNE  GIBBS  BROWN 
Inspector  General 
OCTOBER  1994 
OEI  06-92-00860  EXECUTIVE  SUMMARY 
PURPOSE 
To determine  if incorrect  Medicare  payments  are being made for durable  medical 
equipment  services billed to Medicare  Part B during a skilled nursing facility  stay. 
BACKGROUND 
Federal  law states that durable  medical equipment  (DME)  may only be billed to Part B of 
the Medicare  program  if the equipment  is provided  in the beneficiarys  residence. 
However,  the law specifies that a skilled nursing facility cannot be considered  a residence. 
For this reason,  equipment  billed to Part B during a beneficiary  stay in such a facility is 
incorrectly  paid. 
Four regional  carriers,  called Durable  Medical  Equipment  Regional  Carriers,  now process 
claims for durable  medical  equipment  and other items covered  under Part B of Medicare. 
Establishing  these carriers  provides  an opportunity  to develop guidelines  that address 
equipment  abuses or program  weaknesses.  Examining  equipment  billed during a skilled 
nursing facility  stay, at this time,  provides  an opportunity  to develop  a baseline  for future 
comparison  of these carriers  effectiveness. 
For this evaluation,  data were obtained  from a one-percent  sample from the Common 
Working  File database.  All part B durable  medical equipment  services,  for all 
beneficiaries  identified  as having a skilkd  nursing facility  stay during  1991, were  included 
in the sample.  An analysis  of information  on the  1022 items of equipment  contained  in 
the sample,  and obtained  from the carrier,  was completed.  Similar  information  was 
obtained  from the  1992 data base,  although  the major focus  of this report is  1991. 
FINDINGS 
Approximately  $8.9  million  in  1991  and  $10.8  million  in  1992  was  incorrectly  allowed 
for  durable  medical  equipment  billed  during  skilled  stays. 
The  inability  of the  suppliers  and  carriers  to accurately  determine  the  beneficiarys 
location  during  a skilled  stay,  leads  to  incorrectly  paid  equipment  claims. 
l  Ninety-nine  percent  of durable medical  equipment  bills,  submitted  by suppliers for 
patients  in skilled  nursing facilities,  represen~ ~he location as  home or  other.  
l  l%ere is some evidence  that dl~erences  exist in screening  activities  used by  high 
charge and other carnersto detect incorrect DA4E billing. 
i  Most  incorrect  equipment  billings  during  a skilled  stay  represent  items  prescribed  for 
use  prior  to,  or after,  a skilled  stay.  A review of certificates  of medical  necessity was 
undertaken.  This review indicated 77 percent  of the items billed represented  continued 
billings for previously  prescribed  items or new prescriptions  for use after discharge. 
Approximately  half  of the  patients  in our  sample  were  not  discharged  to their  homes, 
meaning  incorrect  payments  for  equipment  might  continue.  Incorrect billing  for 
equipment  may continue  for some time after the skilled  stay.  This  may occur due to the 
patients  receiving  care in a non-residential  setting after discharge. 
RECOMMENDATIONS 
We  recommend  that  HCFA  take  action  in the  following  areas  to minimize  the 
opportunity  for  incorrect  Durable  Medkal  Equipment  payments. 
Improve  the place  of service  coding system.  The HCFA  could: 
l  Utilize  data from the Statistical  Analysis DME regional carrier  to identify 
and review  suppliers  who consistently  use the  other place of service 
category,  and take appropriate  actions based on the reviews. 
l  Disseminate  materials  which indicate the limited circumstances  under which 
other may be appropriately  used to bill DME. 
l  Educate  the four new Durable  Medical  Equipment  Regional  Carriers 
(DMERCS)  on the accurate  use of place of service codes. 
l  Require  the new carriers  to provide  on-going education to the suppliers on 
the accurate  use of place of service codes. 
l  Suggest that the new carriers  develop an item for inclusion in their 
database,  that is transmitted  to the Common Working  File,  to provide  a 
continuing  history of the patients  location. 
Improve the supplier knowledge  of beneficiary  loc~on.  The HCFA  could: 
l  Ensure  that the four new carriers  instruct  suppliers of their  responsibility 
for determining  the beneficiary  location,  before billing Part B equipment. 
l  Ensure that the DMERCS undertake  sample reviews of suppliers claims and 
exchange  their findings with the other DMERCS,  so that all can take 
appropriate  action on the suppliers  claims. 
Review  the Durable  Medical  Equipment  Re@ona.1Carnersprocesses.  The HCFA  could: 
l  Assess the effectiveness  of the new Common Working  File edit of Part B 
equipment  and skilled nursing facility charges,  and evaluate  whether 
additional  edits should be developed  to review all skilled stay bills,  upon 
submission,  for overlap  with durable  medical equipment  billing. 
l  Encourage  the DMERCS to examine  this problem.  The OIG,  in 
collabomtion  with HCFA,  may also review this area in the future to 
examine  the impact of implementing  the new DMERC  processes. 
ii  AGENCY  COMMENTS 
We solicited and received  comments  from the Health  Care Financing  Administration 
(HCFA) on our draft report. 
The HCFA  concurred  with the intent of our three  recommendations.  In addition,  they 
suggested alternative  steps that could also be taken to achieve the intent of our 
recommendations.  We have incorporated  the suggestions proposed  by HCFA  in the listing 
of options presented  in our recommendations. 
See Appendix  B for the full text of the HCFA  comments. 
... 
111  TABLE  OF  CONTENTS 
EXECUTIVE  SUMMARY  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  1 
INTRODUCTION  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  1 
FINDINGS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . . . . . . . . . . . 4 
.  Incorrectly  Allowed  DME  During  1991  And  1992  . . . . . . . . .  . . . . . . . . . .  4 
.  Supplier  And  cafiel-Knowledge  Of Beneficiary  Location  . . . . . . . . . . . . . . . .  5 
.  Billings  Dufing  StiyS  For  Items  T_Jsed  Before Or After Stays  . . . . . . . . . . . . . .  8 
l 
Continuation  Of Incorrect  Payments  . . . . . . . . . . . . . . . . . . . . . . . . . . . .  10 
RECOMMENDATIONS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  11 
ENDNOTES  . . . . . . .  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  12 
APPENDICES  . . . . . .  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0Al 
A:  1991 Carrier  Information  For One-Percent  Sample  . . . . . . . . . . . . . . . . . . .  Al 
B:  Agency Comments  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..B1  INTRODUCTION 
PURPOSE 
To determine  if incorrect  Medicare  payments are being made for durable  medical 
equipment  (DME)  services billed to Medicare  Part B during a skilled nursing facility  stay. 
BACKGROUND 
Federal  law states that DME  may only be billed to Part B1 of the Medicare  program  if 
the equipment  is provided  in the beneficiarys  residence.  However,  the law specifies that 
a Willed  Nursing  Facility  cannot be considered  a residence. 2 For this reason,  DME 
billed to Part B during a beneficiary  stay in a SNF is incorrectly  paid. 
While DME billed during a nursing home stay is not payable,  carrier  rules may allow 
some DME to be paid  during a portion  of an individuals  SNF stay.  First,  DME  USd  in 
a beneficiarys  residence  for a portion  of a month,  prior  to a SNF stay, may be billed and 
paid;  however,  the DME  may not be re-billed  during a Part A SNF stay.3  Secondly,  an 
item of DME  may be billed on the day of discharge  from a SNF to a residence. 
Four  regional  carriers  now process  claims for DME,  prosthetics,  orthotics,  and certain 
other items covered  under Part B of Medicare.  The establishment  of DME carriers 
provides  an opportunity  to develop  guidelines  to address DME abuses or program 
weaknesses.4  An examination  of DME billed during a SNF stay, at this time,  provides 
an opportunity  to develop  a baseline  for future comparison  of Durable  Medical  Equipment 
Regional  Carriers  (DMERCS) effectiveness.  Corrective  systems are also identified  to 
limit vulnerabilities  found in this inspection. 
SCOPE 
This inspection  is the frost of a series examining  payment  for services  in nursing  homes. 
Subsequent  reports  will address other topics and include nursing home services provided 
under both the Medicare  and Medicaid  program. 
METHODOLOGY 
Data for this inspection  were obtained  from a one-percent  sample from the Common 
Working  File database  (See Table  1).  All sample beneficiaries  identified  as having a Part 
A SNF stay during  1991 were included  in the sample.  All Part B DME  services 
commencing  from the first through  the last covered  day of the SNF stay, which 
represented  1022 items,  were included for analysis.  Projections  can be made to the 
1  TABLE  1 
Part  B DME  Allowed  During  A SNF  Stay 
From  The  1991One  Percent  Common  Working  File  Sample 
HCPC  Codes  Items Of  100% 
Total  1% 
Category  of DME  In Category  DME  From  Projected 
Charges 
For  1991  1991 CWF  Charges 
Wheel  Chairs  23  265  $16,046  $1,604,600 
Wheel  Chair Accessories  8  20  $929  $92,900 
Rollabout  Chair  1  13  $709  $70,900 
Hospital  Beds  10  154  $18,446  $1,844,600 
Bed Side Rails  1  2  $21  $2,100 
Walkers  6  148  $9,816  $981,600 
Walker  Attachments  2  15  $563  $56,300 
Canes  2  9  !$231  $23,100 
Crutches  2  2  $77  $7,700 
Commode  Chairs/Pans  5  83  $5,714  $571,400 
Oxygen  Concentrators  9  82  $21,809  $2,180,900 
Portable  Gas/Oxygen  Systems  2  39  $1,861  $186,100 
Nebulizers  and IPPB Machines  4  46  $2,351  $235,100 
Oxygen  Contents  1  1  $215  $21,500 
Pressure  Pads/Mattresses  9  48  $2,841  $284,100 
Heating  Pads  1  1  $69  $6,900 
Traction  and Bar Devices  5  47  $2,260  $226,000 
Patient Lifts  2  14  $1,117  $111,700 
Suction  Pump/Home  1  7  $550  $55,000 
Continuous  Airway  Pressure  Device  1  2  $211  $21,100 
Neuromuscular  Stimulator  1  2  $191  $19,100 
IV Poles  1  11  $263  $26,300 
AmbulatoW  Infusion  Pump  1  2  $332  $33,200 
Home  Blood  Glucose  Monitor  1  3  $438  $43,800 
Repair,  Non-routine  Service,  DME 
2  6  $1,607  $160,700 
Miscellaneous 
TOTAL  101  1022  $88,667  $8,866,700 
2  universe  of Medicare  beneficiaries,  since all DME billed during a SNF stay were included 
in the sampling frame.  Similar information  was obtained from the  1992 Common 
Working  File,  although the major focus of this report  is 1991.5 
The information  obtained  from the database  i.:~.uded relevant patient  identifying 
information,  coded place of service,  carrier  identification,  nursing home identification,  the 
location by State, and the patient  discharge  disposition  at the end of the SNF stay.  Part B 
claims information  was also collected. 
Information  concerning  Part B claims processing  for DME claims,  as well as measures 
taken to avoid incorrect  payment  of DME,  was also obtained from the carriers.  A copy of 
the claim,  certificate  of medical necessity,  and payment  information  for each piece of 
billed DME  contained  in the  1991 database  were requested  from the carriers.  Of the  1022 
items requested,  information  was returned  for 964 items.  However,  only 637 items had 
useable information  on certificates  of medical necessity and 712 on payment  disposition. 
This inspection  was conducted  in accordance  with the Quality Standards for  Inspections 
issued by the Presidents  Council on Integrity  and Efficiency. 
3  FINDINGS 
Approximately  $8.9  Million  In  1991  And  $10.8  Million  In  1992  Was  Incorrectly 
Allowed  For  DNIE  Billed  During  SNF  Stays. 
Total  incorrect  payments  for DME billed 
DME  Items  Incorrectly  Billed 
during a SNF stay in 1991 were $88,667. 
During  A  SNF  STA~ 
Projected  to the entire  SNF population, 
these figures represent  $8.867  million in 
140,000 
incorrect  payments  and  102,200 DME  102,200 
120,000 
items incorrectly  billed  in 1991.  In 1992 
100,000 
the projected  amount  of DME  incorrectly 
80,000 
paid during  a SNF stay represented 
60,000 
117,700 items at a cost of $10.790 
40,000 
million.  This represents  a 15 percent 
20,000 
increase  from  1991 to 1992 in the number 
n  9 
of DME  items incorrectly  billed and  1991  1992 
allowed  during a SNF stay. 
Twenty-three percent  of the incorrectly  allowed DA4Epayments  were associated  with co 
insurance  and deductibles,  represenhngan unnecessary  burden for  benejicianes. 
We reviewed  the payment  history for 712 of the 1022 claims from  1991, to examine  the 
Medicare  and beneficiary  financial  responsibility  for the incorrectly  allowed DME.  Based 
on this review,  23 percent,  or $2.04  million of the incorrectly  allowed DME charges, 
represented  deductibles  and co-insurance  paid by the beneficiary,  other insurance 
programs,  or the State (in the case of some Medicaid  recipients)  in 1991.6  This 
represents  inappropriate  deductible  or co-insurance  payments  made by each beneficiary  for 
equipment  billed during their  SNF stay. 
Carriers who processed  claims for  the larger industrial  States allowed greater  incorrect 
payments for  DME. 
The carriers  with the greatest  amounts of incorrectly  DME billed during  a SNF 
allowed 
stay, were those that processed  claims for the larger  industrial  States,  as noted in Table 2. 
These items of DME  represent  over half of all incorrectly  allowed DME  charges  and 
items.  This simple finding may indicate that the greater  volume of incorrectly  billed items 
increases  the effort  required  to determine  if each item of DME  is billed correctly.  There 
are implications  from this finding for the newly formed  DMERCs,  since each carrier  will 
be responsible  for a greater  volume of claims,  covering  a larger  geographical  area.  One 
implication  for the four DMERCs  is the need for some ongoing  system to compare  DME 
billing with SNF billing  during  a specified time frame,  as well as a system of tracking 
beneficiaries  admitted  to a SNF,  to reduce  incorrect  billings and payments. 
4  TABLE  2 
Ten  Carriers  Representing  The  Largest  Charges 
And  Number  Of DME  Items  Billed  During  A 1991  SNF  Stay 
Carner  Jurisdiction  Total  Items of 
Charges*  DME* 
Health Care  Service Corp-Med  Illinois  $7427  75 
Part B 
Pennsylvania  Blue Shield(cid:127) Pennsylvania,  Delaware,  New  $6990  72 
Jersey,  D. C. Virginia,  Maryland 
California  Physicians  Service  California  $6900  I  84 
Transamerican  Medicare  ICalifornia  I  $5433  I  71 
Nationwide  Mutual Insurance  Ohio & West Virginia  $4994  51 
Company  - Medicare 
Blue Cross Blue Shield of Texas  Texas  $4292  43 
Empire  Blue Cross and Blue  New York  $4136  41 
Shield 
Medicare  Part B -Florida  BCBS  Florida  $4012  50 
Blue Cross Blue Shield of  Michigan  $3980  I  53 
CIGNA Medicare  Admin.  lTennessee  & North  Carolina  I  $3025  I  42 
* These figures  represent  data from the  1% Common Working  File 
The  Inability  Of  The  Suppliers  And  Carriers  To  Accurately  Determine  The 
Beneficiarys  Location  During  A SNF  Stay  Leads  to Incorrectly  Paid  DME  Claims. 
Ninety-nine  percent  of DME bills,  submitted  by suppliers for patients  in Part A SNF stays, 
represent  the location as  home or  other.  
Incorrect  payments  for DME were almost evenly divided between place of service codes 
representing  home (50 %), and other  (49.2 %).  Both of these codes represent  an 
incorrect  payment,  since the services  were billed during a SNF stay.  The remaining  .8 
percent  of the incorrect  payments  were identifkd  as occurring  in a SNF,  a nursing facility 
or during End Stage Renal Disease treatment.  Finally,  the  1991 and  1992 data indicate 
that the same number  of items were coded  SNF in each year. 
Prior  to September  16, 1991, there  were  14 codes to indicate the place where the 
Medicare  service  was rendered.  Many of these codes,  including  other,  represented 
more than one possible place of service.  After September  16, 1991, HCFA  greatly 
expanded  the number  of available  codes to allow designation  of at least 27 possible places 
5  of service.  In addition,  no code represented  more than one setting.  These coding changes 
provided  the opportunity  to better  represent  the actual place of service and decrease  the 
incorrectly  paid DME during a SNF stay.  However,  the code  99,  other,  continued  to 
be listed as an option for place of service.  When examining  the  1991 and  1992 SNF 
DME data,  we found that the utilization  of the code 99 or other declined from 49.2% 
in 1991 to 22% in 1992.7  However,  as noted in the first finding,  the number of items 
incorrectly  allowed during a SNF stay increased. 
Carriers policies  regarding screening  of DA4E claims  vary. 
We surveyed the 40 current  Medicare  Part B carriers  to examine their efforts to determine 
if a person  receiving  DME  is located in a SNF.  Twenty-nine  of the 39 carriers  answering 
this question  indicated they have a process to verify if the place of service  code is 
consistent  with any other information  on the claim,  or known about the beneficiary. 
However,  if the place of service indicates home,  many carriers  do not have further  edits 
to determine  if the information  on the claim is correct.  This indicates a lack of 
knowledge  by the supplier of the beneficiary  location at the time the supplier bills,g or a 
false claim  submission,  since the DME represented  in this database  was billed during an 
individuals  SNF stay. 
To further  examine  the use of the code  99,  representing  other,  carriers  were also 
asked for specific examples  of the correct  use of other.  Six of the 40 carriers  indicated 
there  are times when 99 would be accepted  as correct;  four stated 99 is accepted 
when referring  to a pharmacy  as the point of sale or the DME  suppliers place of 
business.  Additionally,  two accepted  99 when used to describe  a retirement  home,  or 
when used to represent  the beneficiarys  home.  Thirty  of the carriers  indicated  the use of 
code  99 did not reduce the ability of a carrier  to pay accurately.  Finally,  13 of 37 
carriers  said providers  are using place of service  99 inappropriately. 
i%ere is some evidence  that dl~erences  exist in screening  activities  used by  high charge 
and other carriers to detect  incorrect DME billing. 
We also compared  the efforts to control  incorrect  DME  payments  of the ten carriers  with 
the largest DME  charges9 paid during SNF stays with the remaining  carriers  (see 
Table  3).  On questions that pertained  to knowledge  of the location of the beneficiary 
receiving  DME,  the  high charge  carriers  always indicated  fewer routine efforts to 1) 
determine  DME  recipient  location,  2) examine  the consistency  of the coded Place  Of 
Service  (POS) with other information,  and 3) examine bills with POS 99 for the 
appropriateness  of another  code.  The  high charge  carriers  were also less likely to 
believe  that providers  used POS 99 inappropriately,  or to have undertaken  any focused 
review  of incorrect  DME payments.  Additionally,  these carriers  were more likely to be 
able to provide  an example  of when a DME payment  would be made for a beneficiary  in a 
SNF.  It appears  that the carrier  efforts,  as shown in Table 3, may have an impact on 
decreasing  incorrectly  allowed DME payments. 
6  TABLE  3 
Comparison  Of Responses  By  Top  Ten  HIGH  Charge  Carriers  And  All  Other 
carriers  To Questions  Regarding  Efforts  To Control  Incorrect  DME  Payments 
Percent of Ten  Percent of All 
High  Charge  Other Carrkrs 
Carriers  Responding 
Responding  Yes  Yes 
When a bill for DME  is received  and the Place Of  40%  69% 
Service (POS)  marked on the claim  does  not indicate 
HVF, are efforts  routinely  made to determine  if the 
~erson receiving  the DME  is in a SNF? 
[s any verification  done  when  processing  a DME  66%  76% 
;laim to confii  the POS coded  is consistent  with any 
~ther information  either on the claim  or known  about 
:he beneficiary? 
[f a claim  for DME  lists the POS as  99 (other),  is  50%  66% 
the POS reviewed  to determine  if one of the HCFA 
specified POS codes should be used? 
Do you believe that providers  are using POS 99  44%  47% 
inappropriately? 
Have you undertaken  any focused review on incorrect  44%  66% 
payments made for DME  in the past three  years? 
Are there  any instances  you can think of where a  30%  17% 
payment for an item of DME would be made even 
though the beneficiary  is in a SNF? 
Can you provide  a speciilc  example(s)  of when POS  10%  18% 
99 has been used appropriately  for a DME claim? 
Joes the use of code  99 on claims reduce the  30%  15% 
:arriers  ability to pay accurately? 
>oes the use of code  99 on claims reduce the  22%  32% 
:arriers  ability to pay in a timely manner? 
The HCFA hus developed  a Common Working File Alert for  DklE  items with service dates 
overlapping  an inpatient  admission. 
In the summer of 1993, during the transition  to DMERC  claims payment  of DME,  HCFA 
developed  an edit for use by the Common Working  File.  The edits purpose  is  to  alert 
the DMERC  to the possibility  of a DME  service coinciding  with an inpatient  admission. 
While the Common Working  File activates  the alert,  the DMERC  is responsible  for 
reviewing  the Part B claim to determine  if a DME  item was billed for a patient  currently 
receiving  inpatient  care.  After review,  the DMERC  may either approve  or reject the 
claim for payment. 
7  However,  there arelimitations  tothe  alert that has been developed.  This alert dependson 
a SNF or other inpatient bill being processed  prior  to the receipt of a Part B DME claim 
by the DMERC.  If a SNF bill is not processed  before a DME claim is received,  an alert 
will not occur due to no overlapping  service date.  There  is no reverse  edit in place to 
review all SNF or inpatient claims when they are received,  to determine  if the beneficiary 
is also receiving  DME.  Thus,  the current  edit process continues to allow incorrect  DME 
payments  for SNF patients. 
A  COMMON  WORKING  FILE  EDIT  ALERTS 
DMERCS  OF DME CLAIMS  WHICH  OVERLAP 
A  NURSING  HOME  STAY 
Beneficiary  ~  Beneficiary  A Purchases 
Enters  SNF  or  Rents  a Wheelchair 
/lClt,,- o3m, l
3NF 
f)tay
INTERMEDIARY
Processing  of SNF 
Claim/Cost  Report 
Application  of  Edits 
EDIT  = DME  service  date  overlap 
with  an inpatient  admission 
causes DA02  alert  to DMERC 
i 
Mo v.$ment  i  Reject  Approve i 
of Clafm  Detail  I  Claim  Claim  d 
l  . 
Most  Incorrect  DME  Billings  During  A SNF  Stay  Represent  Items  Prescribed  For  Use 
PAor  To  Or  After  A SNF  Stay. 
The certificates  of medical  necessity that we received  were examined  to determine  whether 
services billed during a SNF stay were provided  in the SNF,  were continued  billings  for 
items in use before the stay, or were billed during the stay for items used after the stay. 
Any of these represents  an incorrect  DME payment,  but each indicates  a different  reason 
for the incorrect  payment. 
8  To determine  if any of the above mentioned  conditions  occurred,  we reviewed  the DME 
claims information  and certificates  of medical  necessity.  Of the  1022 items of DME 
billed during a SNF stay that were included in the  1991 one percent  sample,  we obtained 
certificates  of medical necessity from the carriers  for 637; or 62% of the total number of 
DME items billed.  This represents  $5.358  million,  or 60% of the total amount of 
incorrectly  paid DME. 
Certificate  Of  Medical  Necessity 
In  Relation  To  SNF  Stay 
35071  292 
300 i 
250  200 
200 
1  126 
150   
100  ~. 
50 
0 &mlllll  ~+_ 
Before  During*  Last  Six  Day  Of  After 
Days**  Discharge 
Total  N = 637 
Excludes  last  week 
l 
l * Excludes  day  of  discharge 
Certificates  of Medical  Necessity  Prior To A SNF Stay 
A review  of the certificates  of medical  necessity,  obtained  from the carriers,  showed that 
292 (46 %) of the items had dates indicating  they had been prescribed  prior  to the SNF 
stay.  Payments  made for the items certifkl  as medically  necessary  before  entering  the 
SNF,  and for which charges  continued  to be billed after entering  the SNF,  represent 
$2.614  million,  or 49 % of the incorrectly  paid DME  with certiilcates  of medical 
necessity. 
It is logical to assume these items of DME were being used in the beneficiaries  homes 
prior  to obtaining  care  in the SNF.  Although DME  used in the home may be paid if it 
was billed for use prior  to entering  a SNF,  even though the beneficiary  resided  in a SNF 
for a portion  of the billed  month,  this DME  should not be rebilled  during the beneficiarys 
SNF stay. 
9  Certificates of Medical  Necessity During a SNF Slay 
Our review of the certificate  of medical necessity data showed 333 of the billed DME 
items were certified  as medically  necessary  during the beneficiaries  SNF stay.  While 
only 7 items had certificates  on the date of discharge,  200 items had certificates  of 
medical necessity commencing  during the last six days of the beneficiaries  SNF stays 
(excluding discharge  date).  This could indicate that these 200 items were prescribed  for 
use at the beneficiaries  homes ~r  discharge  from the SNF. 
The remaining  126 items may also represent  DME that had been prescribed  prior  to 
entering  the SNF,  for which the certificates  of medical  necessity were renewed  during this 
stay; or, these items could represent  DME prescribed  and used during the SNF stay. 
Either  situation  indicates  incorrectly  paid DME.  A random  review of these  126 claims, 
indicates that many of the certificates  of medical necessity  do not stipulate whether they 
are a renewal  or a new prescription.  However,  on the claims that provided  a space to 
stipulate whether this was a new or renewed  certificate  of medical  necessity,  all indicated 
that this was a new certificate  for the item of DME. 
Approximately  Half  Of  The  Patients  In Our  Sample  Were  Not  Discharged  To  Their 
Homes,  Meaning  Incorrect  Payments  For  DME  Might  Continue. 
Patient  Discharge  Disposition 
Upon Leaving Part  A SNF Stay 
70%  56%.  ~ 
60% 
50% 
40% 
30% 
20% 
1o% 
o% L  0  4.&   
Home  Short  SNF  ICF  Other  Died  Still 
Term Hospital  Institution  Patient 
We examined  the patient  disposition  status to determine  whether  incorrect  DME  billings 
may continue  after the patient  is discharged  from the SNF setting.  Our examination 
indicated that 44 percent  of the beneficiaries  either died or did not return  to their home 
upon discharge  from the SNF.  Thus DME  billings may not be appropriate  for some time, 
due to the patients  receiving  care in a setting which is not a residence.  Furthermore,  five 
percent  of the sample represented  DME  items billed for beneficiaries  who died. 
10 RECOMMENDATIONS 
Action is needed to minimize the opportunity  for incorrect  DME payments.  The action 
should address the need to reduce  initial incorrect  billing,  as well as detect any incorrect 
billing after it occurs. 10 The responsibility  fo:- :.~eaction,  while generally  falling within 
the purview  of HCFA,  must also include the involvement  of the DMERCS and the 
suppliers.  The recommendations  that follow pertain to  1) education  on the appropriate  use 
of other,  2) broadening  the responsibility  for supplier knowledge  of beneficiarys 
location,  3) consistent  use of a Common Working  File edit to review DME claims for 
SNF or other inpatient activity  and payment  rejection,  and 4) Review of DMERC 
processes  to reduce  incorrect  DME billing during a SNF stay. 
We  recommend  that  HCFA  take  action  in the  following  areas  to minimize  the 
opportunity  for  incorrect  DME  payments. 
Improve  the pkzce of service  coding system.  The HCFA  could: 
l  Utilize  data from the Statistical  Analysis DME  regional  Carrier  to identify 
and review  suppliers  who consistently  use the  other place of service 
category,  and take appropriate  actions based on the reviews. 
l  Disseminate  materials  which indicate the limited circumstances  under which 
other may be appropriately  used to bill DME. 
l  Educate  the DMERCS on the accurate  use of place of service codes. 
l  Require  the DMERCS to provide  on-going education  to the suppliers  on the 
accurate  use of place of service codes. 
l  Suggest that the DMERCS develop an item for inclusion  in their database, 
that is transmitted  to the Common Working  File,  to provide  a continuing 
history of the patients  location. 
Improve  the supplier knowledge  of beneficiary  locahon. The HCFA  could: 
l  Ensure that the DMERCS instruct  suppliers  of their  responsibility  for 
determining  the location  of a beneficiary,  before billing Part B DME. 
l  Ensure  that the DMERCS undertake  sample reviews of suppliers claims and 
exchange  their findings with the other DMERCS,  so that all can take 
appropriate  action on the suppliers  claims. 
Review the DMERC processes.  The HCFA  could: 
l  Assess the effectiveness  of the new Common Working  File edit of Part B 
DME and SNF charges,  and evaluate  whether additional  edits should be 
developed  to review  all SNF bills,  upon submission,  for overlap  with DME 
billing. 
l  Encourage  the DMERCS to examine  the problem  of DME billed and 
allowed during  SNF stays.  The OIG, in collaboration  with HCFA,  may 
also review this area in the future to examine  the impact of implementing 
the new DMERC  processes. 
11  OIG  RESPONSE  TO  AGENCY  COMMENTS 
We solicited and received  comments  from the Health Care Financing  Administration 
(HCFA) on our draft report. 
The HCFA  concurred  with the intent of our three recommendations.  In addition,  they 
suggested alternative  steps that could also be taken to achieve the intent of our 
recommendations.  We have incorporated  the suggestions proposed  by HCFA  in the listing 
of options presented  in our recommendations. 
See Appendix B for the full text of the HCFA  comments. 
12  ENDNOTES 
1.  Nursing  home services are divided into two parts:  1) typical inpatient  services,  such as 
room and board,  provided  by the SNF,  and 2) other  services,  provided  by outside 
suppliers and practitioners,  which are not part of routine  inpatient care.  These two types 
of services are paid for in two different  ways.  Skilled nursing facility  services can only 
be billed to Medicare  when they are considered  extended care services,  that is services 
required  as an extension  of a prior  hospital  stay.  These SNF services are covered  by the 
Hospital Insurance  Program,  or Part A.  Part A covers basic care,  as well as certain 
additional  services provided  to a patient  in a SNF for up to 100 days.  The Supplementary 
Medical Insurance  Program,  or Part B, is an optional benefit which may pay for certain 
services,  provided  by outside  suppliers,  that are not included in the Part A payment. 
2.  Title XVIII,  Section  1861(n). 
3.  Medicare  carriers  Manual  Section 4105.3  states that  no payment  may be made for 
rental for any month throughout  which the patient  is in an institution  which does not 
qualify as his or her home....  This statement,  however,  does not indicate that only the 
dates of stay in a SNF should be considered.  Consideration  of DME payment  can be 
affected  by a prior  stay in a hospital,  or other non-residence  setting,  and discharge  to a 
setting other than a residence.  Such additional  stays could result in the beneficiary  being 
in a non-residence  setting for the entire  month.  Thus,  although a SNF stay has dates 
indicating  that the stay began and/or  ended during the middle of the month,  it may still be 
inappropriate  to pay for DME,  as the beneficiary  was not in their residence  for any 
portion  of the month due to other inpatient  stays. 
4.  Federal  Register,  Vol. 57, No.  118, Thursday,  June  18, 1992, rules and regulations, 
pg. 27290,  final rule for Medicare  Program;  Criteria  and Standards  for Evaluating 
Regional  Durable  Medical  Equipment,  Prosthetics,  Orthotics  and Supplies (DMEPOS), 
5.  The database  created  for this report  originally  contained  only  1991 information. 
However,  during the course of the inspection,  the  1992 CWF one percent  random  sample 
became available.  A decision  was made to include  1992 data when possible.  However, 
claims information  for the  1991 data had been requested  and obtained prior  to the 
availability  of the  1992 database.  For this reason,  information  pertaining  to Certificates  of 
Medical  Necessity  and payments  were not obtained  for  1992. 
6.  Information  was obtained  for 712 of the  1022 items of DME in 1991, or 69.6%  of all 
incorrectly  billed DME  items.  These claims represented  $60,426.44  or 68% of all the 
incorrectly  paid DME  dollars.  If we assume that this portion  of the claims is 
representative  of the entire  sample,  we can project  to the Medicare  population  and 
determine  the cost allocation  to Medicare  and other individuals,  either beneficiaries  or 
other insurance  companies  and programs.  Based on the 712 claims reviewed,  the 
Medicare  responsibility  for the amount paid represented  77 percent  of the incorrectly  paid 
DME.  Based on the logic stated above,  this would represent  $6.827  million when 
projected  to the entire Medicare  population.  The remaining  23 percent,  or $2.04  million 
13  of the incorrectly  allowed  DME charges,  represented  deductibles  and co-insurance  paid by 
the beneficiary,  other insurance  programs,  or the State (in the case of some Medicaid 
recipients). 
7.  Although the  of other declined  1991 and  1992, the use of the code for 
use  between 
home increased  from 50 percent  in 1991 to 77 percent  in 1992.  Thus,  99 percent  of the 
items billed during a SNF stay in 1992 continue to incorrectly  represent  the patients 
location. 
8.  The Medicare  Carriers  Manual,  Section 4105.3,  in discussing  incurred  expenses for 
DME,  indicates,  The first months expense for rental is incurred  on the date of delivery 
of the equipment.  Expenses  for subsequent months are incurred  on the same date of the 
month.   This language does not indicate whether  suppliers are required  to know the 
location of the beneficiary  before billing for subsequent months use of DME. 
9.  The carriers  with the largest DME charges  were also the carriers  with the greatest 
number of items paid during  SNF stays. 
10.  The recovery  of payments  made for incorrectly  allowed DME items is not discussed 
in this reports  recommendation  section,  since the issue was examined  only in the SNF 
population.  However,  the recovery  of overpayments  will be addressed  in a subsequent 
report,  when the issue is examined  in the context of all nursing home settings. 
14  APPENDIX  A 
1991  Carrier  Information  For  One-Percent  Sample  Database 
Carrier  Jurisdiction  Total  Items of  DME Cost 
Charges  DME  Per Bed Day 
Blue Cross and Blue Shield  Alabama  $1,169  19  $1.53 
of Alabama 
Arkansas BCBS  Arkansas  & Louisiana  $3,012  39  $1.87 
AETNA Medicare  Arizona  & Nevada  $2,171  22  $1.93 
Transamerican  Medicare  California  !$5,433  71  $3.30 
California  Physicians  California  $6,900  84  $3.71 
Service 
BCBS of Colorado  Colorado  $1,166  7  $9.96 
The Travelers  Medicare-  Connecticut  $988  12  $2.22 
CT 
Medicare  Part B -Florida  Florida  $4,012  50  $2.11 
BCBS 
AETNA Medicare  Georgia  $1,116  19  $1.54 
AETNA  Life Ins,  Med.  Hawaii  $100  2  $0.92 
Claim Admin 
IASD Health  Services  Corp  Iowa  $2,059  30  $2.52 
Health  Care  Service Corp-  Illinois  $7,427  75  $2.91 
Med Part B 
AdminaStar  Federal  Indiana  $1,242  14  $2.38 
BCBS of Kansas  Kansas,  Nebraska  &  $2,150  20  $3.15 
West Missouri 
AdminStar  of Kentucky  Kentucky  $960  10  $2.13 
C & S Administrative  Massachusetts,  Maine,  $2,288  25  $2.84 
Services for Meal, Med.  New Hampshire  & 
Part B  Vermont 
BCBS of Maryland  Maryland  $419  5  $2.97 
BCBS of Michigan  Michigan  $3,980  53  $1.89 
Travelers  Medicare  Minnesota  $794  9  $1.59 
Blue Cross Blue Shield of  Minnesota  o  0  0 
Minnesota 
General  American  Life Ins  East Missouri  $2,635  34  $2.51 
co. 
A -1  1991  Carrier  Information  For  On&Percent  Sample  Database 
Carrier  Jurisdiction  Total  Items of  DME Cost 
Charges  DME  Per Bed Day 
The Travelers  Medicare  Mississippi  $1,358  16  $4.90 
BCBS of Montana  Montana  $313  2  $8.23 
BCBS of North Dakota  North Dakota,  South  $286  3  $4.40 
Dakota & Wyoming 
BCBS of Western  New  Western  New York,  $648  9  $1.37 
York,  Upstate Med.  Div.  Upstate 
Part B 
Group Health  Incorporated/  New York (Queens)  $626  7  $1.60 
Medicare 
Empire  Blue Cross and  New York  $4,136  41  $2.39 
Blue Shield 
Nationwide  Mutual Ins Co  Ohio & West Virginia  $4,994  51  $2.66 
- Medicare 
Aetna Medicare  10klahoma  & New  I  $81O I  8  I  $4.96 
Mexico 
Aetna Oregon  Oregon  $1,841  18  $4.05 
Pennsylvania  Blue Shield  Pennsylvania,  Delaware,  $6,990  72  $2.41 
New Jersey,  D. C., 
Virginia  & Maryland 
Seguro De Servicios de  Puerto  Rico  $1,184  11  $4.87 
Salud de PR 
Blue Cross and Blue Shield  Rhode Island  o  0  0 
of RI 
BCBS of South Carolina  South Carolina  $346  10  $0.98 
CIGNA Medicare  Admin.  Tennessee  & North  $3,025  42  $1.62 
ICarolina  I  I  I  II 
BCBS of Texas  Texas  $4,292  43  $4.60 
,BCBS of Utah  Utah  $1,770  17  $2.83 
Travelers  Ins Co. Medicare  Virginia  $1,086  17  $2.81 
B, Virginia 
Washington  State Medicare  Washington  $1,639  13  $3.89 
part B 
Wisconsin  Physicians  Wisconsin  $352  6  $2.14 
Service 
A -2  APPENDIX  B 
AGENCY  COMMENTS: 
HEALTH  CARE FINANCING  ADMIMSTRATION 
It should be noted that the jidl  texl of lhe HCFA comments addresses  two reports on 
skilled nursing faciliry paymen~ issues.  The comments pertaining  to this report are found 
on pages  one ~hroughfour. 
B-1