Department of Health and Human Services 

OFFICE OF 

INSPECTOR GENERAL 

JUNE GIBBS BROWN 

Inspector General 

MARCH 2000 

OEI-02-99-00120 

Medicare Payments for Orthotics 

Inappropriate Payments 
OFFICE OF INSPECTOR GENERAL 

The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, 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 New York Regional Office prepared this report under the direction of John I. Molnar, 

Regional Inspector General, and Renee C. Dunn, Deputy Regional Inspector General. Principal 

OEI staff included: 

REGION HEADQUARTERS 

Demetra Arapakos, Project Leader Stuart Wright, Program Specialist 

Vincent Greiber Scott Horning, Technical Support 

Barbara Tedesco, Statistician 

To obtain copies of this report, please call the New York Regional Office at (212) 264-2000. 

Reports are also available on the World Wide Web at our home page address: 

http://www.dhhs.gov/progorg/oei 
EXECUTIVE SUMMARY 

PURPOSE 

To determine the extent of inappropriate Medicare payments for orthotics. 

BACKGROUND 

This study, a follow-up to a 1997 Office of Inspector General report entitled “Medicare 

Orthotics” (02-95-00380), was conducted to determine what changes, if any, have 

occurred with Medicare orthotics. We have also prepared a companion report entitled 

“Medicare Reimbursement for Orthotics - Carrier Perspectives” (02-99-00121) which 

examines orthotic policies from the four durable medical equipment regional carriers 

(DMERCs) and obtains their perspectives on Medicare reimbursement for these devices. 

Orthotics are rigid devices, often called braces, which are applied to the outside of the 

body as a means of support. They are categorized into one of three groups of devices: 

custom fitted, which require alterations to a prefabricated product; custom fabricated, 

which are made for a specific patient from his/ her individual measurements; and molded 

to patient model, which are created from a cast of the patient’s body part. Add ons, such 

as straps and linings, are billed separately. Suppliers of orthotics include certified 

orthotists, medical equipment companies, and physicians’ offices. 

Using a stratified random sample of 500 Medicare beneficiaries who had one or more 

orthotic claims in 1998, we combined three methods for this inspection. They include a 

beneficiary medical record review, a coding review, and a supplier feedback survey. 

FINDINGS 

Inappropriate Medicare reimbursement for orthotics continues at significant 

levels 

Thirty percent of beneficiaries have one or more miscoded orthotic device. The miscoded 

orthotics represent $33,071,800 in excessive Medicare payments when projected to the 

total Medicare population. Three reasons account for nearly all of this miscoding: the 

device does not meet the specifications of the code billed; the device is not custom 

fabricated or molded, as indicated by the code billed; or the part billed is already included 

in the base code for a larger device. 

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Medicare Payments for Orthotics- Inappropriate Payments 1 OEI-02-99-00120 
Seven percent of beneficiaries have one or more medically unnecessary orthotic device. 

The medically unnecessary orthotics represent $9,935,500 in excessive Medicare payments 

when projected to the total Medicare population. Most of these beneficiaries lack a 

medical condition or diagnosis that warrants the prescription of an orthotic device; others 

could have used a less complex device to obtain the same medical benefit or are 

inappropriately using a device for preventive or palliative purposes. Another 16 percent of 

beneficiaries have orthotics that are medically questionable. The medically questionable 

orthotics represent $1,165,200 in Medicare payments when projected to the total 

Medicare population. 

In addition to the miscoded and medically unnecessary and questionable cases already 

discussed, other cases appear suspect. Of the 1404 prescribed devices in our sample, 20 

percent fall into one of the following 3 categories: we were unable to locate the 

prescribing physician, the physician reported no record of a patient, or the physician 

claimed never having ordered the device. These suspect cases represent approximately 

$28,145,200 in Medicare payments when projected to the total Medicare population. 

Lastly, inadequate medical and supplier documentation, as well as limited physician 

involvement in patient’s use of orthotics, also raise questions about the appropriateness of 

Medicare orthotic payments. 

Qualifications of orthotic suppliers vary, with non-certified suppliers in our 

sample the most likely to provide inappropriate devices 

The orthotic suppliers in our sample include a broad range of different provider groups 

and most commonly include individual certified orthotists and durable medical equipment 

companies. Our supplier survey reveals that 68 percent of the suppliers in our sample 

employ and/or contract with certified orthotists and 32 percent do neither. While there are 

fewer non-certified suppliers than certified suppliers in our sample, non-certified suppliers 

are more likely than certified suppliers to provide inappropriate devices. Forty-six percent 

of these suppliers provide inappropriate orthotics, compared to 16 percent of certified 

suppliers. Miscoding is the main reason devices they supply are inappropriate. 

RECOMMENDATIONS 

The findings of this report, as well those from the recently released OIG report “Medicare 

Payments for Orthotic Body Jackets,” reveal that Medicare is inappropriately paying for 

some orthotic devices. Both studies identify miscoding as problematic, particularly for 

devices that are individually fitted to the patient’s measurements. Furthermore, this report 

shows non-certified suppliers are the most likely to provide inappropriate devices. 

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Medicare Payments for Orthotics-Inappropriate Payments 2 OEI-02-99-00120 
C

We therefore recommend that HCFA take action to improve Medicare billing for 

orthotic devices. 

The HCFA may want to consider the following options: 

Require suppliers to maintain a description of how custom fabricated and molded 

devices are made. The OIG report on orthotic body jackets referenced above 

recommends that suppliers include detailed information on the products they 

provide on their claims. The HCFA responded that this would be burdensome to 

providers and carriers. To avoid such a burden, we suggest that a description need 

not be detailed and can be kept on file with the supplier. It could include basic 

information such as whether or not a device was individually fitted to a patient’s 

specific measurements. Such descriptions have already been developed by the 

SADMERC and are required when suppliers seek clarification on appropriate 

coding. The SADMERC descriptions could be used as models for suppliers to use 

when billing for certain orthotic devices. 

C Develop product classification lists for all major groups of orthotic devices. In its 

report on orthotic body jackets, the OIG recommended a revision of coding 

guidelines. In its response, the HCFA stated that it would develop a product 

classification list for the body jacket code L0430. We believe such lists would also 

be useful for all orthotic groups. Given the complexity and rapid technological 

changes in the orthotics industry, understanding the appropriate coding for these 

devices can be confusing. Product classification lists would help to clarify the 

appropriate codes for different types of devices. The carriers are already 

discussing ways in which coding for orthotics can be clarified and we encourage 

their efforts. 

C Educate the supplier community. We believe increased education of the supplier 

community will enhance their understanding of coding requirements and 

procedures. 

C Work with the DMERCs to strengthen the billing process for orthotics. In our 

companion report on carrier perspectives on orthotics, we discuss several carrier 

practices and suggestions for improving the way in which orthotics are paid. 

These include developing additional screens and edits, requiring suppliers to 

submit a patient diagnosis as part of their claim, and establishing more specific 

guidelines for “miscellaneous” codes. 

We also recommend that HCFA require standards for suppliers of custom molded 

and custom fabricated orthotic devices. Suppliers of these devices must be skilled in 

fitting and crafting an orthosis to the individual measurements of the patient. We believe 

that establishing standards would help to ensure that suppliers providing custom molded 

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Medicare Payments for Orthotics-Inappropriate Payments 3 OEI-02-99-00120 
and fabricated devices have such skills and that the devices they supply are appropriate. 

The HCFA may want to consider establishing their own standards for orthotic suppliers or 

using already established industry certification. 

We believe that implementing these recommendations would eliminate as much as 

$43,007,300 annually in inappropriate Medicare orthotic payments. 

Comments 

We received comments on the draft report from the Health Care Financing Administration. 

The HCFA generally concurs with our recommendations. In response to our 

recommendation that standards be required for suppliers of custom molded and fabricated 

devices, HCFA states that it is currently working on a proposed rule that will set general 

provider standards but not specific standards for custom orthotic suppliers. Given the 

specialized training and skills necessary for fitting and creating custom molded and 

fabricated devices, we continue to believe in the importance of additional standards for 

suppliers providing custom devices. The full comments are presented in Appendix D. 

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Medicare Payments for Orthotics-Inappropriate Payments 4 OEI-02-99-00120 
TABLE OF CONTENTS 

PAGE

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

INTRODUCTION ..................................................... 6

FINDINGS

Inappropriate reimbursement continues at significant levels .................... 11

Qualifications of suppliers vary, with non-certified most likely to be inappropriate .... 15

RECOMMENDATIONS ............................................... 17

APPENDICES

A: Confidence intervals for key estimates ............................... 19

B: Confidence intervals for dollar projections ............................. 20

C: Non-respondent analysis ......................................... 21

D: Comments ................................................... 26

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Medicare Payments for Orthotics-Inappropriate Payments 5 OEI-02-99-00120 
INTRODUCTION 

PURPOSE 

To determine the extent of inappropriate Medicare payments for orthotics. 

BACKGROUND 

This study, a follow-up to a 1997 Office of Inspector General report entitled “Medicare 

Orthotics” (02-95-00380), was conducted to determine what changes, if any, have 

occurred with Medicare orthotics. In that report, we found that at least 19 percent of 

orthotics provided are medically unnecessary and that durable medical equipment 

companies more likely than orthotists to supply the questionable orthotics. We have also 

prepared a companion report entitled “Medicare Reimbursement for Orthotics - Carrier 

Perspectives” (02-99-00121) which examines orthotic policies from the four durable 

medical equipment regional carriers (DMERCs) and obtains their perspectives on 

Medicare reimbursement for these devices. 

Additionally, in September, 1999, the OIG released another follow-up report entitled 

“Medicare Payments for Orthotic Body Jackets” (04-97-00390). That study reported that 

while Medicare payments for orthotic body jacket code L0430 had decreased, 42 percent 

of claims for these devices were upcoded. This upcoding was attributed in part to a lack 

of coding uniformity and standardization. 

Orthotics 

Orthotics are rigid devices, often called braces, which are applied to the outside of the 

body as a means of support. An orthotic device differs from a prosthetic in that, rather 

than replacing a body part, it supports and/ or rehabilitates existing body parts. Orthotic 

devices are usually customized for an individual’s use and are not appropriate for anyone 

else. They have evolved in recent years to also include off the shelf devices that can serve 

functions similar to custom fitted components with little or no alteration necessary. New 

computer programs are also available which can design orthotic devices based on the 

patient’s individual measurements. Examples of orthotics include spinal body jackets and 

knee braces. 

Individuals requiring orthotics range from the severely disabled, such as paraplegics or 

quadriplegics, to those who require an ankle brace for better gait or are recovering from a 

temporary back injury. An individual may need to wear the orthotic continuously for the 

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Medicare Payments for Orthotics-Inappropriate Payments 6 OEI-02-99-00120 
duration of his or her lifetime, every day until the condition improves, or for some other 

time frame as prescribed by a physician. 

There are several different ways in which an orthotic may be supplied. Typically, a 

physician prescribes the orthotic and refers the patient to an orthotist or an orthotic 

supplier. Orthotic devices may also be supplied by a clinic, hospital, or nursing home. 

Some orthosis prescriptions are very specific, while others are more general. The supplier 

uses these prescriptions, as well as their own examination of the patient, to determine the 

device needed. If a device needs to be made, the patient is likely to return to the supplier 

to have the device fitted. Ideally, the supplier also instructs the patient on how to put on, 

take off, and maintain the device, and provides follow-up care, although this is not 

required for payment. 

Medicare Orthotics: Coverage and Payments 

Orthotic devices are primarily covered under Medicare Part B. As with all Medicare Part 

B services, covered orthotics must be reasonable and necessary for the diagnosis or 

treatment of an illness or injury. In order to meet Health Care Financing Administration 

(HCFA) coverage requirements, an orthotic must be a rigid or semi-rigid device used 

either to support a weak or deformed member or to restrict or eliminate motion in a 

diseased or injured part of the body. Orthotic claims must have a prescription and/ or a 

certificate of medical necessity signed by a physician. 

Orthotic devices are classified into 1 of 465 different codes (L0100 through L4380) in the 

Common Procedure Coding system HCFA uses for billing. These L-Code listings give a 

brief description of the device. These listings also define the device as one of three types: 

C Custom fitted, which require substantial adjustments to a prefabricated item by a 

specially trained professional to meet the needs and/or unique shape of an 

individual patient; 

C Custom fabricated, which are made for a specific patient from his/her 

individualized measurements and/ or pattern; or 

C Molded to patient model, whereby a cast is made of the specified body part and is 

used to create an orthotic device. 

Some orthotics may also have additional components which are billed separately. For 

example, an ankle-foot orthosis may require special strap, joints, or linings that have their 

own codes and are therefore billed in addition to the basic device. 

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Medicare Payments for Orthotics-Inappropriate Payments 7 OEI-02-99-00120 
Durable Medical Equipment Regional Carriers 

Orthotic claims are processed and paid for by one of four regional carriers called 

DMERCs (Durable Medical Equipment Regional Carriers). In October 1993, HCFA 

began processing all Medicare Part B claims for medical equipment, supplies, orthotics, 

and prosthetics through these carriers. Their establishment was intended to help eliminate 

the inconsistency of coverage and reimbursement for medical equipment that had been 

problematic in the past. The DMERCs are divided into regions A, B, C, and D and cover 

the entire country. The DMERCs ensure that coverage requirements are met before 

approving payment and provide educational services to suppliers. 

Orthotic Suppliers 

Any supplier with a HCFA provider number can provide and bill for orthotics, and no

verification is done to specifically address their ability to provide orthotics. Suppliers of

orthotic devices include orthotists, medical equipment companies, pharmacies, and

doctors’ offices. Some general medical equipment suppliers may have an orthotist on

staff. Suppliers may manufacture the devices in their own workshops or obtain them from

other companies.

Of all these supplier types, only orthotists have professional certification to provide

specialist services. An orthotist provides care to patients with disabling conditions of the

musculoskeletal structure of the body. At the request of, and in conjunction with

physicians, the orthotist assists in formulating prescriptions for orthoses and examines and

evaluates the patients’ orthotic needs in relation to their functional loss. More specifically,

the orthotist:

formulates the device’s design and selects materials and components; 

makes all necessary casts, measurements, model modifications, and layouts; 

performs fittings, including static and dynamic alignments; 

evaluates the orthosis on the patient; 

instructs the patient in its use; and 

maintains patient records.

Two organizations offer orthotist certification: the American Board for Certification in

Orthotics and Prosthetics, Inc., (ABC), and the Board of Certification (BOC). The ABC

sets standards of competency and grants a Certified Orthotist (CO) credential. To qualify

for ABC certification on orthotics, an individual must have a college degree, have

completed a postgraduate orthotist certificate program from an accredited institution, and

have at least 1 year of patient management experience. The candidate must also pass two

written exams and a 3-day clinical exam that tests the ability to design, fabricate, and fit a

variety of orthoses. Certified practitioners must meet continuing education requirements

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Medicare Payments for Orthotics-Inappropriate Payments 8 OEI-02-99-00120 
every 5 years to renew their credentials. Currently, there are approximately 3,000 ABC 

certified orthotists in the United States. 

The BOC also certifies orthotists and there are currently more than 900 BOC certified 

orthotists. In order to sit for the BOC certification exam, which includes written and 

practical components, the applicant is required to have one or more of the following: a 

bachelor’s degree with a major in orthotics or prosthetics; an associate degree in a related 

field, or; one or more years of orthotics/ prosthetics education, training and/ or supervised 

work experience, including intensive study. All BOC orthotists must document a 

minimum of 2 years (3,900 hours) experience providing direct patient services. 

METHODOLOGY 

We combined three methods for this inspection: a medical record review, a coding review, 

and a supplier feedback survey. 

Sample 

We selected a stratified random sample of 500 Medicare beneficiaries from the 1 percent 

National Claims History file who had one or more orthotic claim paid in 1998. We 

excluded beneficiaries from skilled nursing facilities as well as beneficiaries with claims 

totaling less than 50 dollars. We then stratified the remaining beneficiaries into three 

groups of high, medium, and low utilization based on the dollar amount of their collective 

payments. The low stratum consisted of beneficiaries with orthotic claims totaling less 

than 500 dollars, the medium stratum consisted of those with between 500 and 1,000 

dollars of orthotic claims, and the high stratum comprised beneficiaries whose total claims 

were greater than 1,000 dollars. 

Of the 500 beneficiaries in our sample, 63 percent had 1 orthotic device billed during 

1998, 29 percent had 2 devices, and the remaining 31 percent had 3 or more devices billed 

during that time period. The 500 beneficiaries had a total of 1,404 devices. 

Medical Record Review 

The 500 beneficiaries in our sample had 521 prescribing physicians. We requested medical 

records from all 521 physicians from April to June 1999, and received a response from 

388, for a response rate of 74 percent; see Appendix C for a non-respondent analysis. We 

were unable to locate 43 physicians. 

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Medicare Payments for Orthotics-Inappropriate Payments 9 OEI-02-99-00120 
Of the 388 responding physicians: 

C 304 provided a medical record; 

C 43 indicated that they had no record of the patient; 

C 16 indicated they had not prescribed the device; and 

C 26 responded with only a letter discussing the reason why they ordered an orthotic 

for their patient. 

Once we obtained the medical records, we used a medical review contractor to review the 

records to determine if the orthotic(s) the beneficiary had a claim paid for was medically 

necessary. Using a screening instrument based on DMERC medical guidelines and input 

from one of the DMERC medical directors, an occupational therapist screened records 

and passed any records which failed the initial screening to a physician who then made a 

final determination of medical necessity. 

Coding Review 

The 500 beneficiaries in our sample had 547 orthotic suppliers. We requested 

documentation on the device(s) provided from all 547 suppliers from April to June 1999. 

We received information from 412 suppliers, for a response rate of 75 percent; see 

Appendix C for a non-respondent analysis. Most of these suppliers provided some 

combination of a brochure or pamphlet, invoice, photocopy from the AOPA orthotic 

manual, or a claim form. 

Once we obtained information from the suppliers, the HCPCS coordinator at the 

Statistical Analysis DMERC reviewed the documentation to determine if the orthotic(s) 

the beneficiary had a claim paid for was appropriately coded. The HCPCS unit at this 

carrier is responsible for resolving coding issues and provides guidance to providers on the 

appropriate codes to use. Using a structured review sheet to evaluate the materials sent to 

us by suppliers, the reviewer made a final determination of appropriate coding. 

Supplier Survey 

We also conducted a mail survey of all of the suppliers in our sample. Along with 

documentation for the devices they supplied, we asked them to fill out and return a short 

survey about their staff. We specifically asked if they employ or contract with certified 

orthotists, who molds and fits devices, or who supervises the crafting of orthotics. Of the 

547 suppliers in our sample, 412 returned our feedback survey, for a response rate of 75 

percent. While we are unable to project to the universe of all orthotic suppliers, we report 

the findings of this survey within the context of suppliers in our sample. 

We conducted this inspection in accordance with the Quality Standards for Inspections 

issued by the President’s Council on Integrity and Efficiency. 

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Medicare Payments for Orthotics-Inappropriate Payments 10 OEI-02-99-00120 
FINDINGS 

Inappropriate Medicare reimbursement for orthotics continues at 

significant levels 

One-third of Medicare beneficiaries have miscoded orthotics 

Based on the coding review, 30 percent of beneficiaries have miscoded orthotics, as 

illustrated in Chart 1 below. This represents 22 percent of the 1404 devices billed for our 

sample beneficiaries. 

Chart 1 

Medicare Beneficiaries Using Orthotics: Coding Review 

The miscoded orthotics used by these beneficiaries represent $33,071,800 in excessive 

Medicare payments when projected to the total Medicare population. This is a 

conservative estimate, however, since we assumed that all the beneficiaries for whom we 

had inadequate information had appropriately coded orthotics. 

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Medicare Payments for Orthotics-Inappropriate Payments 11 OEI-02-99-00120 
Three reasons account for nearly all of this miscoding: the device does not meet the 

specifications of the code billed; the device is not custom fabricated or molded, as 

indicated by the code billed; or the part billed is already included in the base code for a 

larger device. Examples of typical miscoding include: 

a less expensive off-the-shelf device without individualized fitting that was coded 

as an orthosis that should have been molded to a plaster model of the patient; 

a flexible device that was coded as an orthosis that should have provided rigid 

control; 

a device that was worn without a shoe but was coded as an orthosis that was 

designed to be worn with a supportive shoe; and 

devices that are not orthotics at all but some other item, such as a girdle or athletic 

sock. 

All orthotics must meet general Medicare guidelines in order to be covered. However, 

several groups of devices lack any additional coverage guidelines specific to their use. 

These include upper limb and hip devices, most of which have no requirement that they be 

individually fitted to the patient. A majority of the miscoded devices we reviewed (59 

percent) do not have additional coverage guidelines specific to their use. 

Many beneficiaries with miscoded orthotics (43 percent) have more than one device that is 

problematic. Of these, many have 3 or more miscoded devices. In some instances, it is 

the combination of devices used that is not appropriate. For example, a beneficiary may 

not have needed a particular add-on to their base orthotic or may have had more than one 

add-on device. 

Seven percent of beneficiaries have medically unnecessary orthotics 

Based on the medical necessity review, 7 percent of beneficiaries have one or more 

orthotic devices that is medically unnecessary, as illustrated in Chart 2 on the following 

page. This represents 7 percent of the 1404 devices billed for our sample beneficiaries. 

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Medicare Payments for Orthotics-Inappropriate Payments 12 OEI-02-99-00120 
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Medicare Payments for Orthotics-Inappropriate Payments 13 OEI-02-99-00120

Chart 2

Medicare Beneficiaries Using Orthotics: Medical Necessity Review

The medically unnecessary orthotics used by these beneficiaries represent $9,935,500 in

excessive Medicare payments when projected to the total Medicare population. This is a

conservative estimate, however, since we assumed that all the beneficiaries for whom we

had inadequate information had medically necessary devices. 

Most of the beneficiaries with medically unnecessary devices lack a medical condition or

diagnosis that warrants the prescription of an orthotic device. 

have used a less complex device to obtain the same medical benefit. 

lack of medical necessity include the use of an orthosis for preventive or palliative

purposes and a lack of evidence that the device is rehabilitative. 

beneficiaries using medically unnecessary devices include:

a wheelchair-dependent patient who received devices to assist with ambulation;

a patient who was prescribed an orthotic device for a foot condition that

developed only after the device was used; and

a patient who had both a shoulder brace and an ankle-foot orthotic but whose

medical records only indicate a need for the latter.

About half of beneficiaries with medically unnecessary orthotics have more than one

problematic device. 

short time frame when not all were required. 

the same ankle-foot device within 1 year. 

Some beneficiaries could

Other reasons for the

Specific examples of

For example, a beneficiary may have obtained several devices over a

In one case, one beneficiary received six of
An additional 16 percent of beneficiaries have orthotics that are medically 

questionable 

An additional 16 percent of beneficiaries have medically questionable orthotics. The 

medically questionable orthotics used by these beneficiaries represent $1,165,200 in 

Medicare payments when projected to the total Medicare population. In these cases, 

while there was often insufficient information to make a final determination on medical 

necessity, the physician reviewer noted devices that are suspect. In many of these cases, 

our physician reviewer noted a questionable medical need for the device being used and a 

lack of documentation of the specific medical condition for which a device was prescribed. 

In other cases, there was no match between the device provided and the device prescribed 

or the claim date preceded the date of the physician prescription. Another physician 

ordered the same exact devices for all of his patients, regardless of their medical condition. 

The physician reviewer also questioned the need for certain add-on devices and multiple 

billings for the same device. In several cases, beneficiaries were provided with noncorrosive finishes to braces that were made of stainless steel. 

Other cases are highly suspect 

In addition to the miscoded and medically unnecessary and questionable cases already 

discussed, other cases appear suspect. Of the 1404 prescribed devices, 20 percent fall into 

one of the following 3 categories: we were unable to locate the prescribing physician, the 

physician reported no record of a patient, or the physician claimed never having ordered 

the device. These suspect cases represent approximately $28,145,200 in Medicare 

payments when projected to the total Medicare population. 

Inadequate documentation and limited physician involvement also raise 

questions about the appropriateness of Medicare orthotic payments 

Inadequate documentation. One concern noted in our reviews is the lack of adequate 

documentation to support beneficiaries’ appropriate use of orthotics. 

Thirty-five percent of beneficiaries had suppliers who sent insufficient 

information to determine coding accuracy. Most of these were custom fabricated 

and molded devices for which the supplier sent only a picture of the device from an 

industry manual. Without an accompanying description of how the device was 

molded and fitted to the patient’s individual measurements, our coding reviewer 

was reluctant to make a final decision on coding accuracy. 

Ten percent of beneficiaries had physicians who had inadequate documentation 

to determine medical necessity. Of the cases passed to a physician for review, 10 

percent had inadequate medical information for our physician reviewer to make a 

determination on medical need. 

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Medicare Payments for Orthotics-Inappropriate Payments 14 OEI-02-99-00120 
Limited physician involvement. Our medical record review also revealed a lack of 

physician involvement in beneficiaries’ use of orthotics. Although physicians must sign the 

order for their patient’s device, there is not always an indication of their follow-up or 

other involvement. More specifically, only 63 percent of devices were selected by 

patient’s physicians, and just 10 percent of devices are being used with a plan of care. 

Also, physician’s notes are not consistently specific as to their patient’s need for an 

orthosis and do not always address how the device should be used. 

Furthermore, beneficiaries using orthotics appear to not always be receiving adequate 

care. Only one-third of devices are being used with follow-up care to assure they are 

working as intended and are benefitting patients medically. Nearly one half of the devices 

(47 percent) are not being used with physical therapy and more than half (64 percent) are 

not being used with occupational therapy, both of which could facilitate patient’s 

rehabilitation . 

The qualifications of orthotic suppliers vary, with non-certified 

suppliers in our sample the most likely to provide inappropriate 

devices 

Different groups supply orthotics 

The orthotic suppliers in our sample include a broad range of different provider groups. 

They most commonly include individual certified orthotists and prosthetists, as well as 

large durable medical equipment companies, some of whom report having certified 

orthotists on staff. Podiatrists, orthopedic surgeons, and general practice physicians are 

also providing beneficiaries with orthotic devices. Less typically, the suppliers in our 

sample include hospitals, radiologists, dermatologists, neurosurgeons, cardiologists, and 

anesthesiologists. 

Our supplier survey reveals that the qualifications of orthotic suppliers in our sample also 

differ. Sixty-eight percent are certified; of these, some employ certified orthotists, some 

contract with certified orthotists, and others do both. These differences in supplier 

qualifications are illustrated in Table 1 on the following page. 

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Medicare Payments for Orthotics-Inappropriate Payments 15 OEI-02-99-00120 
Table 1 

Orthotic Suppliers’ Staff Qualifications 

Staff Qualification % of Suppliers* 

Certified Orthotist on Staff 52 

Contract with Certified Orthotist 9 

Both 7 

Neither 32 

*25% of suppliers did not return survey Source: Supplier Feedback Survey 

Some orthotic suppliers also use technicians to mold and fit orthotic devices. According 

to our survey, when specifically asked who molds and fits orthotics, 57 percent of 

respondents said non-certified staff. However, most have a certified orthotist 

supervising the molding and fitting. 

Nearly half of non-certified suppliers provide inappropriate devices 

As shown in Table 1 above, we classify a supplier as non-certified if it has no certified 

orthotist on staff or does not contract with certified orthotists. While there are fewer 

non-certified suppliers than certified suppliers in our sample, non-certified suppliers are 

more likely than certified suppliers to provide inappropriate devices. Nearly half of 

these suppliers (46 percent) provide inappropriate orthotics, compared to 16 percent of 

certified suppliers. Miscoding appears to be the major problem with the devices 

provided by non-certified suppliers. Most of the inappropriate devices they provide are 

inappropriate because they are not accurately coded. Furthermore, some suppliers 

provided insufficient documentation to make a determination on coding accuracy. 

Certified suppliers are the most likely to provide such insufficient documentation. 

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Medicare Payments for Orthotics-Inappropriate Payments 16 OEI-02-99-00120 
C

RECOMMENDATIONS 

The findings of this report, as well those from the recently released OIG report 

“Medicare Payments for Orthotic Body Jackets,” reveal that Medicare is inappropriately 

paying for some orthotic devices. Both studies identify miscoding as problematic, 

particularly for devices that are individually fitted to the patient’s measurements. 

Furthermore, this report shows that non-certified suppliers are the most likely to provide 

inappropriate devices. 

We therefore recommend that HCFA take action to improve Medicare billing for 

orthotic devices. 

The HCFA may want to consider the following options: 

C Require suppliers to maintain a description of how custom fabricated and molded 

devices are made. The OIG report on orthotic body jackets referenced above 

recommends that suppliers include detailed information on the products they 

provide on their claims. The HCFA responded that this would be burdensome to 

providers and carriers. To avoid such a burden, we suggest that a description need 

not be detailed and can be kept on file with the supplier. It could include basic 

information such as whether or not a device was individually fitted to a patient’s 

specific measurements. Such descriptions have already been developed by the 

SADMERC and are required when suppliers seek clarification on appropriate 

coding. The SADMERC descriptions could be used as models for suppliers to use 

when billing for certain orthotic devices. 

C Develop product classification lists for all major groups of orthotic devices. In its 

report on orthotic body jackets, the OIG recommended a revision of coding 

guidelines. In its response, the HCFA stated that it would develop a product 

classification list for the body jacket code L0430. We believe such lists would also 

be useful for all orthotic groups. Given the complexity and rapid technological 

changes in the orthotics industry, understanding the appropriate coding for these 

devices can be confusing. Product classification lists would help to clarify the 

appropriate codes for different types of devices. The carriers are already 

discussing ways in which coding for orthotics can be clarified and we encourage 

their efforts. 

C Educate the supplier community. We believe increased education of the supplier 

community will enhance their understanding of coding requirements and 

procedures. 

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Medicare Payments for Orthotics-Inappropriate Payments 17 OEI-02-99-00120 
C Work with the DMERCs to strengthen the billing process for orthotics. In our 

companion report on carrier perspectives on orthotics, we discuss several carrier 

practices and suggestions for improving the way in which orthotics are paid. 

These include developing additional screens and edits, requiring suppliers to 

submit a patient diagnosis as part of their claim, and establishing more specific 

guidelines for “miscellaneous” codes. 

We also recommend that HCFA require standards for suppliers of custom molded 

and custom fabricated orthotic devices. Suppliers of these devices must be skilled in 

fitting and crafting an orthosis to the individual measurements of the patient. We believe 

that establishing standards would help to ensure that suppliers providing custom molded 

and fabricated devices have such skills and that the devices they supply are appropriate. 

The HCFA may want to consider establishing their own standards for orthotic suppliers 

or using already established industry certification. 

We believe that implementing these recommendations would eliminate as much as 

$43,007,300 annually in inappropriate Medicare orthotic payments. 

Comments 

We received comments on the draft report from the Health Care Financing 

Administration. The HCFA generally concurs with our recommendations. In response 

to our recommendation that standards be required for suppliers of custom molded and 

fabricated devices, HCFA states that it is currently working on a proposed rule that will 

set general provider standards but not specific standards for custom orthotic suppliers. 

Given the specialized training and skills necessary for fitting and creating custom molded 

and fabricated devices, we continue to believe in the importance of additional standards 

for suppliers providing custom devices. The full comments are presented in Appendix 

D. 

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Medicare Payments for Orthotics-Inappropriate Payments 18 OEI-02-99-00120 
APPENDIX A 

CONFIDENCE INTERVALS FOR KEY ESTIMATES 

We calculated confidence intervals for five key estimates. The point estimate and 95% confidence 

interval are given for each of the following: 

KEY ESTIMATE POINT ESTIMATE CONFIDENCE 

INTERVAL 

Beneficiaries with 

miscoded device(s) 

30% +/- 4% 

Beneficiaries with medically 

unnecessary device(s) 

7% +/- 4% 

Beneficiaries with medically 

questionable device(s) 

16% +/- 6% 

Suspect cases (devices that 

physician did not prescribe, 

physician had no record of patient 

for, or for which we were unable 

to locate the physician) 

20% +/- 3% 

Certified suppliers in sample 68% +/- 7% 

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Medicare Payments for Orthotics-Inappropriate Payments 19 OEI-02-99-00120 
APPENDIX B 

CONFIDENCE INTERVALS FOR DOLLAR PROJECTIONS 

We calculated confidence intervals for our dollar projections. The projected total and 95% 

confidence interval are given for each of the following: 

CATEGORY PROJECTED 

TOTAL 

CONFIDENCE 

INTERVAL 

Miscoded devices $33,071,800 +/- $6,341,00 

Medically unnecessary devices $ 9,935,507 +/- $4,440,683 

Medically questionable devices $ 1,165,224 +/- $1,017,577 

Suspect cases $28,145,200 +/- $ 6,617,352 

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Medicare Payments for Orthotics-Inappropriate Payments 20 OEI-02-99-00120 
APPENDIX C 

NON-RESPONDENT ANALYSIS 

We tested for the presence of any non-response bias in our coding and medical necessity reviews. 

For this inspection, a beneficiary for whom we did not obtain supplier documentation is a nonrespondent for our coding review; a beneficiary for whom we did not obtain medical records is a 

non-respondent for our medical necessity review. 

CODING REVIEW 

To test for non-response bias in our coding review, we obtained information from HCFA’s 

National Claims History 1 percent file for all 500 beneficiaries for whom we requested supplier 

documentation. We obtained such documentation for 390 beneficiaries. The following table 

illustrates the number of supplier responses obtained and the response rate by strata 

STRATA NUMBER RESPONSE RATE 

1 ($50 - $100) 112 22% 

2 ($501- $1,000) 118 24% 

3 (> $1,000) 160 32% 

We analyzed three variables for the 500 beneficiaries in our sample - gender, total orthotic claims, 

and number of devices used. These categorical variables were tested using Chi-square with the 

appropriate degrees of freedom. In order for the results to be statistically significant at the 95 

percent confidence level, the Chi-square value must be higher than 3.84 with 1 degree of freedom. 

The results of this analysis are presented in Tables A, B, and C. The Chi-square values given in 

the tables provide a test of the difference between the distribution of respondents and that of the 

non-respondents for the variable of interest. Also provided in the tables are the response rates by 

the different values of the variables. 

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Medicare Payments for Orthotics-Inappropriate Payments 21 OEI-02-99-00120 
Table A 

GENDER 

Respondents Non-respondents Total Response rate 

Male 147 38% 38 35% 185 79% 

Female 243 62% 72 65% 315 77% 

Total 390 110 500 78% 

Chi-square = .365 Degree of freedom = 1 

Table B 

CLAIM 

TOTALS 

Respondents Non-respondents Total Response rate 

< $1,000 229 58% 71 64% 300 76% 

> $1,000 161 41% 39 35% 200 80% 

Total 390 110 500 78% 

Chi-square = 1.214 Degree of freedom = 1 

Table C 

# OF DEVICES 

Respondents Non-respondents Total Response rate 

1 device 146 37% 55 50% 201 73% 

> 1 device 244 62% 55 50% 299 82% 

Total 390 110 500 78% 

Chi-square = 5.634 Degree of freedom = 1 

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Medicare Payments for Orthotics-Inappropriate Payments 22 OEI-02-99-00120 
Tables A and B show no statistically significant differences between coding review respondents 

and non-respondents for gender and total orthotic claims. 

However, Table C shows a statistically significant difference between respondents and nonrespondents with respect to number of devices. In order to test whether this difference 

introduced any bias, we analyzed the miscoding rate for differences between beneficiaries with 1 

device and those with more than 1 device. The miscoding rate differed by 9 percentage points 

between beneficiaries with 1 device and those with more than 1 device, so further analysis was 

required. Assuming that non-respondents and respondents from the same group of beneficiaries 

had the same miscoding rate, we calculated a hypothetical miscoding rate for all 500 beneficiaries 

in the sample. This calculation gave only a slightly higher miscoding rate of 32 percent (compared 

to 30 percent for respondents). This difference is not statistically significant. 

Given the results of this analysis, we believe that the inspection findings fairly represent the 

experience of Medicare beneficiaries in our sample. 

MEDICAL NECESSITY REVIEW 

To test for non-response bias in our medical necessity review, we obtained information from 

HCFA’s National Claims History 1 percent file for all 500 beneficiaries for whom we requested 

medical records. We obtained such records for 314 beneficiaries. The following table illustrates 

the number of medical records obtained and the response rate by strata 

STRATA NUMBER RESPONSE RATE 

1 ($50 - $100) 90 29% 

2 ($501- $1,000) 95 30% 

3 (> $1,000) 129 41% 

We analyzed three variables for the 500 beneficiaries in our sample - gender, total orthotic claims, 

and number of devices used. These categorical variables were tested using Chi-square with the 

appropriate degrees of freedom. In order for the results to be statistically significant at the 95 

percent confidence level, the Chi-square value must be higher than 3.84 with 1 degree of freedom. 

The results of this analysis are presented in Tables D, E, and F. The Chi-square values given in 

the tables provide a test of the difference between the distribution of respondents and that of the 

non-respondents for the variable of interest. Also provided in the tables are the response rates by 

the different values of the variables. 

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Medicare Payments for Orthotics-Inappropriate Payments 23 OEI-02-99-00120 
Table D 

GENDER 

Respondents Non-respondents Total Response rate 

Male 114 36% 71 38% 185 62% 

Female 200 64% 115 62% 315 63% 

Total 314 186 500 63% 

Chi-square = .175 Degree of freedom = 1 

Table E 

CLAIM 

TOTALS 

Respondents Non-respondents Total Response rate 

< $1,000 185 59% 115 62% 300 62% 

> $1,000 129 41% 71 38% 200 64% 

Total 314 186 500 63% 

Chi-square = .412 Degree of freedom = 1 

Table F 

# OF DEVICES 

Respondents Non-respondents Total Response rate 

1 device 126 40% 75 40% 201 63% 

> 1 device 188 60% 111 60% 299 63% 

Total 314 186 500 63% 

Chi-square = .002 Degree of freedom = 1 

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Medicare Payments for Orthotics-Inappropriate Payments 24 OEI-02-99-00120 
Tables D, E, and F show no statistically significant differences between medical review 

respondents and non-respondents for gender, total orthotic claims, and number of devices. 

Given the results of this analysis, we believe that the inspection findings fairly represent the 

experience of Medicare beneficiaries in our sample. 

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Medicare Payments for Orthotics-Inappropriate Payments 25 OEI-02-99-00120 
APPENDIX D 

In this appendix, we present in full the comments from the Health Care Financing Administration. 

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