Department of Health and Human Services 
OFFICE OF 
INSPECTOR GENERAL 
Medicare Payments for 
Orthotic Body Jackets 
JUNE GIBBS BROWN 
Inspector General 
SEPTEMBER 1999 
OEI-04-97-00390  OFFICE OF INSPECTOR GENERAL 
The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, as 
amended by Public Law 100-504, is to protect the integrity of the Department of Health and 
Human Services programs as well as the health and welfare of beneficiaries served by them.  This 
statutory mission is carried out through a nationwide program of audits, investigations, 
inspections, sanctions, and fraud alerts.  The Inspector General informs the Secretary of program 
and management problems and recommends legislative, regulatory, and operational approaches to 
correct them. 
Office of Evaluation and Inspections 
The Office of Evaluation and Inspections (OEI) is one of several components of the Office of 
Inspector General.  It conducts short-term management and program evaluations (called 
inspections) that focus on issues of concern to the Department, the Congress, and the public.  The 
inspection reports provide findings and recommendations on the efficiency, vulnerability, and 
effectiveness of departmental programs. 
OEI's Atlanta Regional Office prepared this report under the direction of Jesse J. Flowers, 
Regional Inspector General, and Christopher H. Koehler, Deputy Regional Inspector General. 
Principal OEI staff included: 
REGION  HEADQUARTERS 
Greg Jones, Project Leader
 Stuart Wright, Program Specialist

Betty Apt, Team Leader
 Barbara Tedesco, Statistician

Jacqueline Watkins, Program Analyst
 Brian Ritchie, Program Analyst

Peggy Daniel, Program Analyst
 Wynethea Walker, Program Specialist

To obtain copies of this report, please call the Atlanta Regional Office at 404-562-7723.  Reports 
are also available on the World Wide Web at our home page address: 
http://www.dhhs.gov/progorg/oei  T A B L E  O F  C O N T E N T S  
EXECUTIVE SUMMARY  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  1

INTRODUCTION  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  4

FINDINGS

Claims and Payments Decreased Since 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  8

Devices Qualified for Medicare Reimbursement  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Forty-Two Percent of L0430 Claims Upcoded . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Upcoding Attributed to Lack of Uniformity and Standardization  . . . . . . . . . . . . . . . . .  10

Almost 3.5 Percent of Claims Were Duplicate  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

RECOMMENDATIONS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  16

AGENCY COMMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  17

APPENDICES

A: Survey Response Rates  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  18

B: Coding Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  19

C: Projectable Costs  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  21

D: Duplicate Billings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  22

E: Agency Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  23

HCFA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  24

AOPA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  26

ENDNOTES  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  33
 E X E C U T I V E  S U M M A R Y  
PURPOSE 
To determine whether or not Medicare inappropriately pays for orthotic body jackets 
under code L0430. 
BACKGROUND 
A code L0430 body jacket is a spinal orthotic device that is covered by Medicare when 
prescribed by a physician.  It is defined as a custom fitted one-piece molded plastic body 
jacket with interface material and an anterior or posterior opening.  In 1994, the Office of 
Inspector General reported that 95 percent of claims submitted in 1991 were for non-
legitimate orthotic body jackets and should not have been paid. 
The Health Care Financing Administration (HCFA) established Durable Medical 
Equipment Regional Carriers (DMERCs) to process claims for durable medical 
equipment, prosthetics and orthotics supplies beginning in October 1993.  HCFA also 
established the Statistical Analysis Durable Medical Equipment Regional Carrier 
(SADMERC) to analyze claims for durable medical equipment, prosthetic and orthotic 
devices and supplies (DMEPOS) and identify trends and aberrancies.  Also, in 1993, 
HCFA and the durable medical equipment regional carriers revised their coverage 
guidelines for body jackets to make them more descriptive. 
To determine if suppliers are continuing to bill inappropriately for code L0430 body 
jackets, we conducted this follow-up inspection of claims filed and paid in 1996. 
METHODOLOGY 
We used expert opinion from the SADMERC and the American Orthotic and Prosthetic 
Association (AOPA) to determine the propriety of claims billed under orthotic body jacket 
code L0430. 
FINDINGS 
Medicare Claims and Payments for Orthotic Body Jackets Have Decreased 
Significantly Since 1994 
Claims for orthotic body jackets under Medicare code L0430 decreased 50.1 percent in 
the 5 year period between 1994 and 1998, from 7,214 to 3,602.  Likewise, Medicare 
allowed charges for orthotic body jacket code L0430 decreased 45.8 percent from 
$7,086,939 to $3,844,364. 
Medicare Payments for Orthotic Body Jackets  1  OEI-04-97-00390  All Orthotic Devices Claimed as L0430 Body Jackets Were Eligible for Medicare 
Reimbursement 
In our 1994 study, the devices allowed for Medicare payment under code L0430 were 
typically not orthotic body jackets, but rather seat cushions for wheelchair patients. 
Therefore, they were not legitimate Medicare reimbursable products.  Conversely, in our 
current inspection, the SADMERC expert said all 153 devices in our sample claimed as a 
body jacket qualified for Medicare reimbursement. 
Suppliers Upcoded 42 Percent of 1996 L0430 Orthotic Body Jacket Claims 
As a result of the upcoding, the Medicare program made excessive payments of $41,405 
to orthotic body jacket suppliers in our sample.  Projected to the universe of the total 
Medicare population, the excessive payments from the practice of upcoding totaled 
$828,100.  The inappropriate payments for orthotic body jackets under code L0430 
accounted for 32 percent of the total cost of L0430 body jackets that we examined for 
1996. 
Lack of Uniformity and Standardization May Account for Some Upcoding 
The industry offers different types of spinal orthotic products which may be reimbursed by 
Medicare.  In many instances the differences between orthotic products are subtle, 
requiring an expert to match them to the proper Medicare code. 
The Medicare guidance for coding devices is vague and outdated.  For coding orthoses, 
most individuals in the orthotics industry and HCFA use The Illustrated Guide to 
Orthotics and Prosthetics published by the American Orthotic and Prosthetic Association. 
However, the guide provides simplistic hand drawn pictures that provide little help for 
coding many of the more sophisticated orthotic devices currently in use. 
3.5 Percent of Claims May Have Been for Unnecessary Duplicate Body Jackets 
Nine suppliers billed Medicare for duplicate L0430 body jackets for 10 of our sampled 
289 beneficiaries in 1996.  In each instance the second (duplicate) body jacket seemed 
unnecessary.  Therefore, Medicare paid $8,400 for L0430 body jackets that may not have 
been needed by beneficiaries.  Projected to the total Medicare population, the potential 
loss to the Medicare program is estimated to be about $168,000. 
RECOMMENDATIONS 
<  HCFA should review and revise the Medicare coding guidelines. 
<<	 HCFA should require suppliers to include more information on their 
Medicare claims for the products they provide to beneficiaries. 
Medicare Payments for Orthotic Body Jackets  2  OEI-04-97-00390  <	 HCFA should encourage the DMERCs to continue, or initiate system 
edits that detect multiple billings of orthotic body jackets to the 
same Medicare beneficiary in a calendar year. 
AGENCY COMMENTS 
The HCFA and the American Orthotic and Prosthetic Association (AOPA) both 
commented on our draft report. 
HCFA agrees that a product classification list is an effective tool to define exactly which 
products should be billed under code L0430, but they do not agree with our 
recommendation that they revise Medicare coding guidelines.  Further, HCFA did not 
agree with our suggestion to work with AOPA because it would not be feasible for HCFA 
to work with a national trade organization whose interests may not necessarily coincide 
with that of the Medicare program.  We continue to believe that HCFA should use AOPA 
as a resource, at least informally, to clarify Medicare coding guidelines and improve 
coding accuracy.  Such consultation is important to help reduce inappropriate Medicare 
payments, since AOPAs Illustrated Guide is widely used in the orthotics and prosthetics 
community for Medicare billing. 
HCFA did not concur with our second recommendation that they require suppliers to 
provide detailed information of Medicare claims for products they provide to beneficiaries. 
HCFA, instead, believes that random telephone reviews with beneficiaries would be a 
better solution.  We agree that telephone reviews are an effective measure for detecting 
improper payments.  However, we believe that assuring the propriety of payments before 
claims are paid is preferable to trying to collect improper payments.  Therefore, we hope 
HCFA will still reconsider our recommendation. 
Lastly, HCFA concurs with our recommendation that the DMERCs should continue, or 
initiate, system edits that detect multiple billings for orthotic body jackets to the same 
Medicare beneficiary in a calendar year. 
Overall, AOPA feels the report was well done and accurate. 
We made technical changes suggested by HCFA and AOPA.  The full text of their 
comments can be found in appendix E. 
Medicare Payments for Orthotic Body Jackets  3  OEI-04-97-00390  I N T R O D U C T I O N  
PURPOSE 
To determine whether or not Medicare inappropriately pays for orthotic body jackets 
under code L0430. 
BACKGROUND 
A L0430 orthotic body jacket is defined as a custom fitted one-piece molded plastic body 
jacket with interface material and an anterior or posterior opening.  It is designed to 
provide control of all motion of the Thoracic-Lumbar-Sacral (TLS) region and is often 
prescribed for patients after surgery.1 
Medicare allows payment for eight types of spinal orthoses: Cervical, Cervical-Thoracic-
Lumbar-Sacral Orthoses (CTLSO), Thoracic-Lumbar Sacral Orthoses (TLSO),  Lumbar-
Sacral Orthoses (LSO), Sacroiliac, Halo Procedures, Torso Supports, and Thoracic-Hip-
Knee-Ankle Orthoses (THKAO).  These are represented by over 60 Medicare codes.2  All 
orthotic devices discussed in this report are TLSO and LSO types.  An orthotic body 
jacket claimed under Medicare code L0430 is a TLSO. 
The Health Care Financing Administrations (HCFA) Durable Medical Equipment 
Prosthetics, Orthotics, and Supplies (DMEPOS) Supplier Manual describes 26 TLSO and 
LSO spinal orthotic codes under which suppliers can obtain Medicare reimbursement.  Of 
those 26 codes, L0430 is one of 10 that is specifically designated as an orthotic body 
jacket.3 
Orthotic Fitting Methods 
According to the Supplier Manual, there are three types of orthotic fitting methods: 
custom fitted, custom fabricated, and molded to patient model. 
Custom fitted orthoses are assembled from prefabricated components.  They are trimmed, 
bent, molded (with or without heat), or otherwise modified for use by a specific patient. 
The L0430 body jacket is a custom fitted orthotic. 
A custom fabricated orthotic is individually made for a specific patient, starting with basic 
materials which include but are not limited to plastic, metal, leather, and cloth.  Custom 
fabrication involves substantial work like cutting, bending, molding and sewing.  It may 
also incorporate some prefabricated components. 
Medicare Payments for Orthotic Body Jackets  4  OEI-04-97-00390  Molding to a patient model is the most complex fitting method, and it is usually the most 
expensive.  An impression of a body part is made by using a positive plaster model of the 
patient.  The orthotic is then custom fabricated by molding it onto the positive model. 
Medicare Coverage of Orthotic Body Jackets 
Spinal orthoses are covered by Medicare--the Federal health insurance program for 
individuals age 65 or older and certain categories of disabled people.  Medicare is 
administered by HCFA, Department of Health and Human Services. 
Medicare covers spinal orthoses only when specific conditions are met.  They must be 
ordered by a physician to reduce pain by restricting mobility of the trunk, to facilitate 
healing following an injury or surgical procedure on the spine, or to support weak spinal 
muscles or a deformed spine. 
Previous Office of Inspector General Studies on Orthoses 
Between 1990 and 1992, Medicare allowances for orthotic body jackets coded L0430 
rose  sharply from $217 thousand to $18 million.  In 1994, the Office of Inspector General 
(OIG) reported that 95 percent of claims submitted in 1991 were for non-legitimate 
orthotic body jackets and should not have been paid.4  The devices supplied were usually 
nothing more than a seat cushion for a wheelchair patient. 
Suppliers had marketed the devices to nursing homes as an alternative to restraints which 
were prohibited by the Omnibus Budget Reconciliation Act of 1990.  Suppliers used 
loopholes in HCFA guidance and monitoring to claim non-legitimate devices such as 
wheelchair cushions as body jackets.  A companion report5 described suppliers marketing 
practices for orthotic body jackets. 
Finally, in 1997, the OIG reported that at least 19 percent of orthoses claimed for 
Medicare reimbursement were medically unnecessary.6 
HCFA Actions 
HCFA established Durable Medical Equipment Regional Carriers (DMERCs) and the 
Statistical Analysis Durable Medical Equipment Regional Carrier (SADMERC) in October 
1993.  Also, in 1993 HCFA and the DMERCs revised their coverage guidelines for 
TLSOs (codes L0300-L0440) and LSOs (codes L0500-L0565) to make them more 
descriptive.  The guidelines also describe appropriate uses for the products. 
METHODOLOGY 
We reviewed a 5 percent sample of claims for code L0430 contained in HCFAs 1996 
Common Working File.  This sample consisted of 302 L0430 claims which had been filed 
in 1996.  We dropped 3 of the 302 claims because we could not locate the address for the 
Medicare Payments for Orthotic Body Jackets  5  OEI-04-97-00390  supplier.  This left us with a sample of 299 paid claims which represented 126 suppliers 
and 289 beneficiaries.  Ten beneficiaries in our sample received two body jackets each. 
Data Collection 
We surveyed the 126 suppliers by mail questionnaire to determine services provided to the 
289 Medicare beneficiaries in our sample.  We obtained descriptions of orthotic devices 
supplied, how they were custom fitted, who did the custom fitting, and what material was 
used in constructing the devices. We also obtained pictures and brochures showing and 
describing devices they claimed under code L0430. 
Overall, 85 of the 126 suppliers responded to our survey--a response rate of 67.5 percent. 
The respondents represented 184 of the sampled 299 claims--61.5 percent.  See appendix 
A for more detailed information. 
Of the 85 suppliers who responded to our survey, 62 (72.9 percent) provided requested 
pictures, brochures, and other descriptive data for orthotic devices provided to 
beneficiaries.  The descriptive data was used to ascertain whether or not devices provided 
to beneficiaries were legitimate and properly coded.  The 62 supplier responses represent 
153 claims.  These 153 claims account for $2,588,688 in total projectable program costs 
of L0430 body jackets that we examined from 1996.  See appendix C for more detailed 
information. 
We also reviewed HCFA and DMERC policy guidelines to understand the definition and 
characteristics of orthotic body jackets, Medicare coverage and payment rules, and coding 
guidelines for spinal orthoses. 
We interviewed HCFA officials who are responsible for oversight of orthoses and 
prostheses, pricing representatives from the Region C DMERC, coding staff from the 
SADMERC, and officials from the American Orthotic and Prosthetic Association 
(AOPA)--the trade organization which represents the industry. 
Finally, we examined expenditure data for 1994 through 1997 for spinal orthoses codes 
(L0300-L0565) from the Medicare Part B Extract and Summary System (BESS). 
Data Analysis 
We integrated and compared documentary, testimonial, and analytical evidence on 299 
Medicare claims for orthotic body jackets by 126 suppliers for 289 beneficiaries.  Our 
focus was to determine the extent that suppliers appropriately bill Medicare for orthotic 
body jackets under code L0430.  In instances where suppliers did not answer every 
question, or provide needed data, we based our analysis on the number who actually 
responded. 
Medicare Payments for Orthotic Body Jackets  6  OEI-04-97-00390  To determine if suppliers billed appropriately for orthotic body jackets, we compared the 
devices individual suppliers said they provided to Medicare beneficiaries to HCFA 
standards.  To make our comparison, we obtained expert opinions from the AOPA and 
from the SADMERC. 
We provided the AOPA and SADMERC experts all pictures, brochures, and other 
descriptions of specific orthotic devices suppliers sent us.  They compared the descriptions 
of the devices to HCFA guidelines and standards.  In some instances, AOPA and 
SADMERC experts said the quality of the pictures was inadequate for determining 
propriety of coding.  In such instances, we excluded the orthotic device and pictures from 
our analysis. 
Where inappropriate claims were paid by Medicare, we calculated the excessive cost to 
Medicare.  We then projected the cost to the Medicare population.  See appendix B for 
calculations.  To determine cost savings to the Medicare program, we used the opinion of 
the SADMERC expert because the SADMERC is charged with coding durable medical 
equipment, orthotics, prosthetics and supplies for Medicare payment. 
_  _  _  _  _  _  _  _  _  _  _  _  _ 
We did our inspection between September 1997 and January 1999.  We conducted the 
inspection in accordance with the Quality Standards for Inspections issued by the 
President's Council on Integrity and Efficiency. 
Medicare Payments for Orthotic Body Jackets  7  OEI-04-97-00390  F I N D I N G S  
Medicare claims and payments for orthotic body jackets 
have decreased significantly since 1994 
Medicare claims for orthotic body jackets under Medicare code L0430 decreased 50.1 
percent in the 5 year period between 1994 and 1998.  In 1994, suppliers submitted 
Medicare claims for 7,214 body jackets.  By the end of 1998, the number of claims per 
year had decreased to 3,602.  Figure 1 illustrates this decline. 
Figure 1 
Total # of Claims, 1994-1998 
Orthotic Body Jacket - L0430 
8,000 
7,000 
6,000 
ms 5,000 
Clai4,000 
of 3,000 
# 
2,000 
1,000 
0 

1994  1995  1996  1997  1998 

Year 
Likewise, Medicare allowed charges for orthotic body jackets under code L0430 
decreased about 45.8 percent between 1994 and 1998.  The allowed charges decreased 
from $7,086,939 in 1994 to $3,844,364 at the end of 1998.  Figure 2 illustrates this 
decrease. 
Figure 2 
Total Allowed Charges, 1994-1998 
Orthotic Body Jacket - L0430 
7 
6 
ount ons 54  
$ AmMilli3 
2 
1 
0 
1994  1995  1996  1997  1998 
Year 
Medicare Payments for Orthotic Body Jackets  8  OEI-04-97-00390  Overall, Medicare allowed charges for spinal orthoses devices (including L0430) 
decreased, but the extent of this decrease was less than that of orthotic body jacket L0430 
devices.  Orthoses devices reimbursed by Medicare under codes L0300 through L05657 
decreased 14.9 percent from $34,595,344 in 1994 to $29,449,254 by the end of 1998. 
We illustrate the decrease in Figure 3. 
Figure 3 
Total Allowed Charges, 1994-1998 
Orthoses Codes L0300-L0565 
35 
30 
25 
unt ns 20 
oo
$ AmMilli15 
10 
5 
0 

1994  1995  1996  1997  1998 

Year 
All orthotic devices claimed as L0430 body jackets were 
eligible for Medicare reimbursement 
In our 1994 study, the devices allowed for Medicare payment under code L0430 were 
typically not orthotic body jackets, but rather seat cushions for wheelchair patients. 
Therefore, the devices were not legitimate Medicare reimbursable products. 
Conversely, in our current inspection, the SADMERC expert said all 153 of the body 
jacket claims in our sample qualified for Medicare reimbursement.  In other words, the 
devices were legitimate Medicare reimbursable orthotic devices.  However, they did not 
always meet requirements to be billed under code L0430. 
Suppliers upcoded 42 percent of L0430 orthotic body jacket 
claims in 1996 
Suppliers upcoded 42 percent (65 of 153)8 of orthotic body jacket claims submitted under 
code L0430 in 1996.  As a result of the upcoding, the Medicare program made excessive 
payments of $41,405 to orthotic body jacket suppliers for the 65 body jackets in our 
sample.  Projected to the universe of Medicare beneficiaries, the excessive payments from 
the practice of upcoding totaled $828,100.  Appendix B shows our calculation of 
excessive cost resulting from the upcoding of orthotic devices sold to Medicare 
beneficiaries under code L0430.  The excessive cost for orthotic body jackets under code 
Medicare Payments for Orthotic Body Jackets  9  OEI-04-97-00390  L0430 accounted for 32 percent of the total cost of L0430 body jackets claims that we 
examined from 1996.  See appendix C for our calculation. 
We identified improper coding by obtaining expert opinion from SADMERC and AOPA 
representatives.  We provided them with photographs, brochures, and detailed 
descriptions of 153 body jackets furnished to Medicare beneficiaries by 62 of the 126 
suppliers we sampled.  The SADMERC and AOPA experts compared the descriptions and 
photographs to HCFA standards shown for an L0430 body jacket found in DMERC 
guidelines. 
The SADMERC expert9 advised us that 42.5 percent (65 of 153) of claims should have 
been coded as orthotic devices that were less expensive than an L0430 body jacket.  To 
illustrate, suppliers coded 20 L0300 orthotic devices10 as L0430 orthotic body jackets. 
The average Medicare allowed charge for an L0300 in 1996 was $111 as compared to an 
average allowable rate of $1,050 for items coded L0430. 
AOPA experts11 advised us that 16.3 percent (25 of 153) of claims should have been 
coded as orthotic devices that were less expensive than an L0430 body jacket.  Therefore, 
the AOPA experts agreed with SADMERC experts that at least 16.3 percent of the 153 
body jackets we reviewed were upcoded. 
SADMERC and AOPA experts disagreed on appropriateness of coding for 40 claims. 
Their disagreement was based largely on the type of strapping used, or construction of the 
particular orthotic device sold to Medicare as an L0430 body jacket.  In other words, they 
defined an L0430 body jacket differently. 
Lack of uniformity and standardization may account for 
some upcoding 
Representatives from the orthotic industry, and from HCFA, its contractors, and 
SADMERC all generally agreed that coding orthotics is complex and difficult to do with 
consistent results.  Most coding representatives for HCFA and for the orthotics industry 
claim that the complex Medicare coding system combined with vague, outdated guidance 
has created a lack of uniformity and standardization in coding. 
The coding process 
The SADMERC is responsible for assisting manufacturers and suppliers in the proper use 
of the HCFA Common Procedure Coding System (HCPCS).  The HCPCS is the means by 
which DMEPOS services and products are identified for billing Medicare.  The 
SADMERC in conjunction with the DMERC conducts Coding Verification Reviews to 
determine proper codes for paying suppliers for durable medical equipment, prosthetics, 
and orthotics and supplies provided to Medicare beneficiaries. 
Medicare Payments for Orthotic Body Jackets  10  OEI-04-97-00390  Vague coding guidance 
The Medicare guidance for coding spinal orthotic devices is vague and outdated.  Most 
individuals in the orthotics industry and HCFA use AOPAs Illustrated Guide to Orthotics 
and Prosthetics in coding orthotics.  However, many individuals in the industry we spoke 
to agree the guide provides simplistic hand drawn pictures of orthotic devices that provide 
little help for coding many of the more sophisticated devices currently in use.  In the 
guide, AOPA states that the illustrations only provide a generic representation of what a 
device that meets the code criteria might look like.  AOPA has noted that it is difficult to 
provide an illustration that would represent every billable device for a particular code; 
however, they are continually trying to improve the guides usefulness. 
In some cases, the pictures make orthotic devices appear identical, but the Medicare codes 
and funding differs significantly.  Figure 4 provides an example of two different orthotic 
devices.  Both devices are included in the AOPAs Illustrated Guide.  The pictures 
illustrate the difficulty in determining the appropriate Medicare code.  The pictures of the 
two devices appear identical.  However, according to the narrative description, the device 
illustrated by picture A is custom fitted, and picture B illustrates an item that is molded to 
model. 
From a Medicare cost perspective, proper coding of these two orthotic devices is 
important.  To illustrate, the average cost for the orthotic device shown in picture A is 
$743.  However, the average cost of the device depicted by picture B is $1,093. 
Figure 4 
Orthotic Devices L0350 and L0360 
A B 
Medicare Payments for Orthotic Body Jackets  11  OEI-04-97-00390  The difficulty of coding orthoses 
At a meeting between the SADMERC coding staff and the AOPA, SADMERC 
representatives noted they often have a difficult time trying to determine the appropriate 
code when suppliers and manufacturers ask for advice.  They base their advice on product 
descriptions that suppliers give them over the phone.  The SADMERC representatives 
noted that it would be useful if they had a list of product names, model numbers and the 
specific function of a product to help determine the appropriate code to use. 
In many instances the differences between orthotic products are subtle, requiring an expert 
to match them to the proper Medicare code.  In such instances, even the experts may 
disagree on the appropriate Medicare code.  To illustrate, SADMERC and AOPA experts 
disagreed on the appropriateness of coding for 40 of our sample of 153 orthotic devices 
billed under code L0430 in 1996.  Their disagreement was based largely on the rigidity of 
the material used, or construction of the particular orthotic device sold to Medicare as an 
L0430 body jacket.  In other words, they defined an L0430 body jacket differently. 
Two such body jackets are depicted by Figure 5 below.  The SADMERC and the AOPA 
disagreed on whether or not these body jackets should be coded L0430.  In both cases, the 
SADMERC said the jackets did not meet requirements to be coded as a L0430, while the 
AOPA said they did.  The SADMERC said both of these jackets should be coded as a 
L1499, which is the code used for devices that do not match the description of any 
existing code.  In addition, the SADMERC informed us that most orthotic devices are 
coded as L1499s.  Payment for such devices are decided by the DMERCs on a case by 
case basis. 
Figure 5 
Orthotic Body Jackets the SADMERC and the AOPA did not Agree Upon 
5a  5b 
AOPA experts agreed with SADMERC experts that at least 16.3 percent (25 of 153) body 
jackets we reviewed were upcoded.  One body jacket that both groups determined was 
upcoded looked similar to an L0430 body jacket, but was not made of a rigid material. 
Medicare Payments for Orthotic Body Jackets  12  OEI-04-97-00390  Therefore, it would not likely provide the rigid support of the spine required of a L0430 
body jacket.  However, the DMERC reimbursed this device at the L0430 rate.  The 
Medicare allowable charge of the orthotic device in question is about $136, as compared 
to a cost of about $1,004 for a legitimate L0430 body jacket. 
In some cases code determination is clear and undisputable 
In some instances, the differences among orthotic devices are readily apparent for coding 
purposes.  For example, the difference between a custom fabricated device and an off the 
shelf device.  Figure 6 illustrates an orthotic device that both SADMERC and AOPA 
experts agreed meets the requirements for an orthotic body jacket under code L0430. 
This body jacket represented 80.6 percent (71 of 88) of the orthotic body jacket claims 
that were properly coded, and 46 percent (71 of 153) of all orthotic devices in our sample 
that were claimed under code L0430. 
Figure 6

A Properly Coded L0430 Body Jacket

3.5 percent of claims may have been for unnecessary 
duplicate body jackets 
Nine suppliers billed Medicare for duplicate L0430 body jackets for 10 of the 289 
beneficiaries in 1996.  In each instance the second (duplicate) body jacket seemed 
unnecessary.  Therefore, Medicare paid $8,400 for L0430 body jackets that may have not 
been needed by beneficiaries.  Projected to the universe of the total Medicare population, 
the potential loss to the Medicare program is estimated to be about $168,000.  Appendix 
D shows our calculation. 
An orthotist with a major supplier said it is not unusual for a beneficiary to obtain two 
body jackets in a 12 month time period.  Possible legitimate reasons for such include body 
changes due to surgery and weight gain or loss.  Also, a patient could be dissatisfied with 
the first jacket.  However, the circumstances in which the 10 duplicate jackets were 
Medicare Payments for Orthotic Body Jackets  13  OEI-04-97-00390  provided to the 10 Medicare beneficiaries raised serious questions about the legitimacy of 
the second jacket. 
C	 First, an orthotist with a major supplier said that when a beneficiary had a 
legitimate reason for a second body jacket in a 12 month time period, the normal 
expectation is for the same supplier to furnish it.  This expectation occurred in only 
one instance.  Only one supplier furnished two jackets (one duplicate jacket) to the 
same beneficiary. 
One supplier furnished five of the duplicate body jackets to five beneficiaries. 
Likewise, one other supplier furnished four duplicate body jackets to four 
beneficiaries.  Neither of the two suppliers had furnished both body jackets to 
either of the beneficiaries. 
C	 Second, seven of the nine suppliers involved in furnishing duplicate jackets to 
Medicare beneficiaries in our sample were located in or near Los Angeles, 
California.  One of the remaining two suppliers was located in Las Vegas, Nevada, 
and one was located in Hialeah, Florida. 
C	 Third, all 10 beneficiaries received the second (duplicate) body jackets in a very 
short time period after receiving the first body jacket.  To illustrate, two different 
suppliers each billed Medicare for an L0430 body jacket for the same beneficiary. 
One of the two suppliers billed Medicare for the second body jacket nine days after 
the other supplier had billed Medicare. 
Likewise, 5 different suppliers billed Medicare for a second body jacket for 5 
beneficiaries within 30 to 33 days after Medicare had been billed for the first body 
jacket for the beneficiaries.  Further, 3 different suppliers billed Medicare for a 
second body jacket for 3 beneficiaries within 131 to 135 days after Medicare had 
been billed for the first body jacket for the beneficiaries. 
Finally, one supplier billed Medicare for a second body jacket for one beneficiary 
52 days after this same supplier had billed Medicare for a first body jacket for this 
same beneficiary. 
Because of our concerns, we questioned the carrier about the propriety of the 20 body 
jackets furnished to the 10 Medicare beneficiaries in our sample.  The short time period 
involved suggested that either the second body jacket was not needed or not provided. 
The close proximity of most of the suppliers to one another suggested that suppliers could 
be swapping beneficiary Health Insurance Claim Numbers (HICN) to bill for the second 
orthotic body jacket to avoid detection. 
Responding to our questions, the fraud units of the respective carriers advised us that all 
of the suppliers involved have either been suspended or placed in a medical or prepayment 
review status.  Further, all of them are under investigation.  One of the suppliers has been 
Medicare Payments for Orthotic Body Jackets  14  OEI-04-97-00390  referred to the Office of Inspector Generals Office of Investigations.  However, two of 
the suppliers continue to bill Medicare.  Lastly, one was investigated in 1996 and as a 
result had to return $150,000 to HCFA. 
At the time of our review in 1996, only one of four DMERCs had system edits to review 
second orthotic body jacket claims for a Medicare beneficiary in the same calendar year. 
Since 1996, two more have implemented such system edits.  The DMERCs noted that a 
second orthotic body jacket claim is denied unless there is a medical necessity determined 
by a physician.  As of March 1999, one DMERC still did not have a system edit in place to 
detect duplicate billings. 
Medicare Payments for Orthotic Body Jackets  15  OEI-04-97-00390  R E C O M M E N D A T I O N S  
Although claims for orthotic body jackets submitted under code L0430 have decreased, 
almost half are upcoded.  This resulted in an excessive cost of $828,100 in 1996 to the 
Medicare Trust Fund.  Orthotic coding problems continue to exist because coding 
guidelines are not specific enough, and have not kept up with product changes.  If not 
corrected, we project the upcoding problem could unnecessarily cost the Medicare Trust 
Fund over $4 million between 1996 and 2002. 
Likewise, Medicare paid for duplicate orthotic body jacket claims resulting in unnecessary 
costs of $168,000 in 1996.  If not corrected by system edits we project this problem could 
cost Medicare over $800,000 over the 5-year period between 1996 and 2002.  Therefore, 
we submit the following recommendations for HCFA consideration. 
<	 HCFA should review and revise the Medicare coding guidelines. 
In doing so, HCFA should work with the SADMERC and AOPA to develop 
Medicare guidelines that more accurately describe the characteristics of the 
devices.  Further, HCFA should work with the SADMERC and AOPA to develop 
a new illustrated guide which is more reflective of the orthotic products currently 
in use.  Lastly, HCFA should develop a product listing of brand names and model 
numbers that meet the criteria to be billed under each code. 
<<	 HCFA should require suppliers to include more information on their 
Medicare claims for the products they provide to beneficiaries. 
Any of the following kinds of information could be useful for this purpose: a 
description of the body jacket that encompasses its features, a description of the 
spinal problem that requires a body jacket, or a brand name, model number, or 
picture of the body jacket. 
<	 HCFA should encourage the DMERCs to continue, or initiate, system 
edits that detect multiple billings of orthotic body jackets to the 
same Medicare beneficiary in a calendar year. 
Medicare Payments for Orthotic Body Jackets  16  OEI-04-97-00390  A G E N C Y  C O M M E N T S  
The HCFA and the AOPA both commented on our draft report. 
HCFA agrees that a product classification list is an effective tool to define exactly which 
products should be billed under code L0430.  They plan to ask the SADMERC to compile 
such a list after responding to Year 2000 and 1997 Balanced Budget Act priorities. 
HCFA did not agree with our recommendation to revise Medicare coding guidelines. 
Instead, they believe a product classification list is a more effective tool than revising the 
coding guidelines.  HCFA expressed concern about entering into a formal joint effort with 
AOPA to develop Medicare guidelines.  We agree with HCFA that AOPA, as a national 
trade organization, represents the interests of orthotists and prosthetists whose interests 
may not coincide with those of the HCFA.  However, we continue to believe HCFA 
should use AOPA as a resource, at least informally, to clarify Medicare coding guidelines 
and improve coding accuracy.  Such consultation is important to help reduce inappropriate 
Medicare payments, since AOPAs Illustrated Guide is widely used by orthotists and 
prosthetists for Medicare billing.  Further, AOPA developed a definition of orthotic body 
jacket code L0430 that HCFA may be able to use in the Medicare Carriers Manual. 
HCFA does not concur with our recommendation that they require suppliers to provide 
detailed information on Medicare claims for products they provide to beneficiaries. 
HCFA, instead, believes that random telephone reviews with beneficiaries would be a 
better solution.  We agree that telephone reviews are an effective measure for detecting 
improper payments.  However, we believe that assuring the propriety of payments before 
claims are paid is preferable to trying to collect improper payments.  Therefore, we hope 
HCFA will still reconsider our recommendation.  Orthotic body jackets, while 
complicated, are relatively few in number, and additional information about the product 
would be useful to help ensure proper coding and payments.  We modified the wording of 
our recommendation to reflect the fact that we did not intend to prescribe a burdensome 
process for providers and HCFA contractors. 
Lastly, HCFA concurs with our recommendation that the DMERCs should continue, or 
initiate, system edits that detect multiple billings for orthotic body jackets to the same 
Medicare beneficiary in a calendar year. 
Overall, AOPA believes the report was well done and accurate. They did raise an issue 
concerning the quality of the pictures we gave them and the SADMERC to analyze.  We 
clarified our methodology for this report to show that we excluded the poor quality 
pictures from our analysis. 
We made technical changes suggested by HCFA and AOPA.  The full text of their 
comments can be found in appendix E. 
Medicare Payments for Orthotic Body Jackets  17  OEI-04-97-00390  APPENDIX A 
Survey Response Rates

Overall Sample 
Suppliers  Claims  Beneficiaries 
#  %  #  %  #  % 
Sampled  126  100  299  100  289  100 
Undeliverable  18  14.3  41  13.7  38  13.1 
Non-Respondents  23  18.3  74  24.7  74  25.6 
Final Response  85  67.5  184  61.5  177  61.2 
Rate 
Coding Issue 
Suppliers  Claims  Beneficiaries 
#  %  #  %  #  % 
Sampled  85  100  184  100  177  100 
Non-Respondents  23  27.1  31  16.8  31  17.5 
Response  62  72.9  153  83.2  146  82.5 
Rate 
Medicare Payments for Orthotic Body Jackets  18  OEI-04-97-00390  AAPPPPEENNDDIIXX  BB 
cont
Overpayments from Upcoding
Potential Excess Cost Resulting from Upcoding
AOPA SADMERC According to SADMERC: Excessive
Survey/ # of  Claims Claims Med Avg Amt Medicare Cost Per Total Excess Cost
Supplier # Claims improper coding improper coding Allwd Chg should have Allwd Claim To Medicare
2 1 0 1 $1,004 $371 $633 $633
3 1 1 0 $998 $998 $0 $0
4 1 0 0 $1,004 $1,004 $0 $0
5 1 0 0 $990 $990 $0 $0
6 1 0 0 $1,004 $1,004 $0 $0
7 2 0 2 $1,081 $161 $920 $1,840
8 10 0 0 $1,081 $1,081 $0 $0
9 1 0 0 $1,081 $1,081 $0 $0
10 1 1 1 $1,004 $136 $868 $868
11 1 1 1 $1,004 $136 $868 $868
11.1 1 1 1 $1,100 $136 $964 $964
13 1 1 1 $1,004 $136 $868 $868
14 2 2 2 $1,004 $136 $868 $1,737
15 1 0 1 $1,004 $339 $665 $665
17 1 0 0 $966 $966 $0 $0
18 1 1 1 $966 $136 $830 $830
19 1 0 1 $1,094 $339 $755 $755
21 1 0 0 $1,096 $1,096 $0 $0
21.1 1 0 0 $1,096 $1,096 $0 $0
22 1 0 1 $938 $373 $565 $565
23 1 0 0 $1,004 $1,004 $0 $0
24 1 0 0 $1,081 $1,081 $0 $0
26 24 0 0 $1,081 $1,081 $0 $0
27 2 0 0 $1,004 $1,004 $0 $0
30 1 0 0 $1,081 $1,081 $0 $0
31 2 0 0 $1,081 $1,081 $0 $0
32 4 0 0 $1,081 $1,081 $0 $0
36 14 0 0 $1,081 $1,081 $0 $0
37 1 0 0 $900 $900 $0 $0
38 2 2 2 $937 $131 $806 $1,611
38.1 2 2 2 $1,050 $131 $919 $1,837
39 3 3 3 $1,050 $131 $919 $2,756
41 2 0 2 $1,096 $339 $757 $1,514
43 1 0 0 $945 $945 $0 $0
44 1 0 1 $1,004 $339 $665 $665
45 1 0 0 $900 $900 $0 $0
47 3 3 3 $1,081 $144 $937 $2,812
48 15 0 15 $1,081 $339 $742 $11,127
49 1 0 1 $1,081 $161 $920 $920
50 1 0 1 $1,081 $373 $708 $708
51 7 0 0 $1,081 $1,081 $0 $0
52 2 0 0 $1,167 $1,167 $0 $0
53 1 0 0 $1,081 $1,081 $0 $0
55 1 0 1 $937 $339 $598 $598
56 1 0 0 $1,004 $1,004 $0 $0
59 1 0 0 $1,094 $1,094 $0 $0
60 2 0 0 $998 $998 $0 $0
61 1 0 1 $1,004 $363 $641 $641
62 1 0 1 $1,167 $430 $737 $737
64 1 0 1 $1,167 $143 $1,024 $1,024
67 1 0 1 $1,081 $339 $742 $742
68 1 0 1 $998 $411 $587 $587
72 1 0 1 $998 $339 $659 $659
72.1 1 0 1 $969 $339 $630 $630
73 1 0 0 $899 $899 $0 $0
79 1 0 1 $945 $371 $574 $574
80 1 0 0 $937 $937 $0 $0
80.1 1 0 0 $1,096 $1,096 $0 $0
82 1 0 0 $1,004 $1,004 $0 $0
83 1 0 1 $1,004 $123 $881 $881
84 5 0 5 $1,081 $339 $742 $3,709
85 7 7 7 $1,050 $131 $919 $6,431
Totals: 153 25 65 $51,756
Medicare Payments for Orthotic Body Jackets 19 OEI-04-97-00390 Summary Statistics for Overpayments from Upcoding

1.  $51,756  (Total Overpayment for Sample) 
2. 	 Multiply the overpayment by .80, since Medicare pays 80% of the allowed charge. 
$51,756  x .80 = $41,405 (Loss to the Medicare program) 
3.	 Multiply the loss to the Medicare program by 20, since these figures are on a 5 percent 
sample. 
$41,405 x 20 = $828,100 
4.	 Projected savings over 5 years: 
$828,100 x 5 = $4,140,500 
Confidence Intervals 
Sample Size  % of Upcoded  Lower 95%  Upper 95% 
Orthotic Body  Confidence  Confidence 
Jackets  Interval  Interval 
153  42%  34.2%  49.8% 
Sample Size  Estimated  Lower 95%  Upper 95% 
Overpayment  Confidence  Confidence 
Interval  Interval 
153  $828,100  $672,882  $983,318 
Medicare Payments for Orthotic Body Jackets  20  OEI-04-97-00390  APPENDIX C 
Total Projectable Costs of Code L0430 in Sample

1.  $161,793  (Total Cost of 153 Orthotics Body Jackets in Sample) 
2. 	 $161,793 
x  20  (Multiply by 20 since it is a 5 Percent Sample) 
------------
$3,235,860  (Total Projectable Costs in Sample) 
3. 	 $3,235,860 
x  .80  (Medicare Pays 80%) 
-------------
$2,588,688  (Total Projectable Costs in Sample of L0430 Orthotic Body Jackets) 
4.  $828,100/$2,588,688 = 32% (Total Percentage of the dollar amount that was upcoded) 
Medicare Payments for Orthotic Body Jackets  21  OEI-04-97-00390  APPENDIX D 
Duplicate Billings

1.  $1,050  (Average allowed cost of an orthotic body jacket in 1996) 
x  10  (Total # of beneficiaries who received two orthotic body jackets)
---------
$10,500  (Potential overpayment for double billing) 
2.	 $10,500 
x  .80  (Percent Medicare pays of the allowable charge) 
----------
$8,400  (Potential loss to the Medicare program) 
3.	 Multiply the potential loss to the Medicare program by 20, since these figures are based on 
a 5 percent sample. 
$8,400 x 20 = $168,000 (Potential loss to the Medicare program) 
4.	 Potential Savings over 5 years: 
$168,000 x 5 = $840,000 
Confidence Interval 
Sample Size  Potential  Lower 95%  Upper 95% 
Overpayment  Confidence  Confidence 
Interval  Interval 
153  $168,000  $65,609  $270,391 
Medicare Payments for Orthotic Body Jackets  22  OEI-04-97-00390  APPENDIX E 
Agency Comments

Health Care Financing Administration (HCFA) 
American Orthotic and Prosthetic Association (AOPA) 
Medicare Payments for Orthotic Body Jackets  23  OEI-04-97-00390           ENDNOTES 
1.  Source: American Orthotic and Prosthetic Associations Illustrated Guide to Orthotics 
and Prosthetics. 
2.  Source: American Orthotic and Prosthetic Association. 
3.	 The 26 codes are: L0300, L0310, L0315, L0317, L0320, L0330, L0340, L0350, L0360, 
L0370, L0380, L0500, L0510, L0515, L0520, L0530; orthotic body jacket codes, L0390, 
L0400, L0410, L0420, L0430, L0440, L0540, L0550, L0560, L0565. 
4.  Medicare Payments for Orthotic Body Jackets (OEI-04-92-01080). 
5.  Marketing of Orthotic Body Jackets (OEI-04-92-01081). 
6.  Medicare Payments for Orthotics (OEI-02-95-00380). 
7.	 The codes used in this analysis: L0300, L0310, L0315, L0317, L0320, L0330, L0340, 
L0350, L0360, L0370, L0380, L0390, L0400, L0410, L0420, L0430, L0440, L0510, 
L0515, L0520, L0530, L0540, L0550, L0560, L0565; (L0500 was not a part of this 
analysis because the code is no longer used). 
8.	 We selected 299 claims contained in HCFAs 1996 Common Working File which is a five 
percent random sample of all Medicare claims.  Of the providers, 62 furnished descriptive 
information such as photographs and brochures for 153 of the jackets claimed under 
Medicare code L0430. 
9.	 The expert is the Coordinator of the HCPCS unit of the SADMERC which has 
responsibility for coding reimbursable durable medical equipment for the Medicare 
program. 
10.	 A L0300 is less expensive and more flexible than a L0430 and it does not provide the rigid 
support that is required of an L0430.  It also lacks the interface material required by 
L0430.  Source: AOPAs, Illustrated Guide to Orthotics and Prosthetics and a 
representative from the SADMERC. 
11.	 Experts are members of the AOPA Coding Committee and AOPA members who train the 
SADMERC on HCPCS coding for orthoses and prostheses.  AOPA noted that in cases 
when the coding committee could not agree if a product was appropriately billed as an 
L0430 the majority opinion of the group was used. 
Medicare Payments for Orthotic Body Jackets  33  OEI-04-97-00390