Department of Health and Human Services 

OFFICE OF 

INSPECTOR GENERAL 

QUESTIONABLE MEDICARE PAYMENTS


FOR WOUND CARE SUPPLIES


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JUNE GIBBS BROWN 

Inspector General 

OCTOBER 1995 

03-94-00790 
OFFICE OF INSPECTOR GENERAL 

The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, as 

amended, is to protect the integrity of the Department of Health and Human Services’ (HHS) 

programs as well as the health and welfare of beneficiaries served by those programs. This 

statutory mission is carried out through a nationwide network of audits, investigations, and 

inspections conducted by four OIG operating components: the Office of Audit Services, the 

Office of Investigations, the Office of Civil Fraud and Adminsitrative Adjudicationand the 

Office of Evaluation and Inspections. The OIG also informs the Secretary of HHS of program 

and management problems and recommends courses to correct them. 

OFFICE OF AUDIT SERVICES 

The OIGS Office of Audit Services (OAS) provides all auditing services for HHS, either by 

conducting audits with its own audit resources or by overseeing audit work done by others. 

Audits examine the performance of HHS programs and/or its grantees and contractors in 

carrying out their respective responsibilities and are intended to provide independent 

assessments of HHS programs and operations in order to reduce waste, abuse, and 

mismanagement and to promote economy and efficiency throughout the Department. 

OFFICE OF INVESTIGATIONS 

The OIG’S Office of Investigations (01) conducts criminal, civil, and administrative 

investigations of allegations of wrongdoing in HHS programs or to HHS beneficiaries and of 

unjust enrichment by providers. The investigative efforts of 01 lead to criminal convictions, 

administrative sanctions, or civil money penalties. The 01 also oversees State Medicaid fraud 

control units which investigate and prosecute fraud and patient abuse in the Medicaid program. 

OFFICE OF EVALUATION AND INSPECTIONS 

The OIGS Office of Evaluation and Inspections (OEI) conducts short-term management and 

program evaluations (called inspections) that focus on issues of concern to the Department, 

the Congress, and the public. The findings and recommendations contained in these inspection 

reports generate rapid, accurate, and up-to-date information on the efficiency, vulnerability, 

and effectiveness of departmental programs. This report was prepared in the Philadelphia 

Regional Office under the direction of Robert A. Vito, Regional Inspector General. 

PHILADELPHIA REGIONAL STAFF HEADQUARTERS STAFF 

Robert A. Baiocco, Program Analyst Stuart R. Wright, Program Specialist


Linda M. Ragone, Program Analyst Brian P. Ritchie, Technical Support Staff


Cynthia Hansford, Program Assistant Barbara Tedesco, Technical Suppoti Staff


Neil Montovani, Intern


Won Jong Oh, Intern


Emily Tseng, Intern


To obtain a copy of this repo~ please call the Philadelphia Regional Office at (800) 531-9562. 
Department of Health and Human Services 

OFFICE OF 

INSPECTOR GENERAL 

QUESTIONABLE MEDICARE PAYMENTS 

FOR WOUND CARE SUPPLIES 
EXECUTIVE SUMMARY 

PURPOSE 

This report identifies questionable billing practices for wound care supplies under 

Medicare Part B. 

BACKGROUND 

Wound care supplies are protective covers or fillers that treat openings on the body 

caused by surgical procedures, wounds, ulcers, or burns. The Health Care Financing 

Administration (HCFA) reimburses for wound care supplies under Medicare Part A 

through its payments to nursing homes and home health agencies and Medicare Part 

B through its payments to suppliers. The HCFA broadened its coverage policy on 

March 30, 1994, allowing payment for secondary as well as primary dressings and 

including wound treatments by non-physicians. 

The HCFA contracted four DME Regional Carriers (DMERCS) starting October 1993 

to process wound care supply claims. In June 1994, reimbursements for these supplies 

were based on a fee schedule and the number of wound care supply codes increased 

from less than 20 to over 60. The DMERCS revised their guidelines and requested 

comments in January 1995. These guidelines clarify utilization and medical necessity 

issues. The effective date for implementing the revised guidelines is October 1, 1995. 

This inspection was conducted as part of Operation Restore Trust, a pilot program 

that coordinates Federal, State, and local anti-fraud activity in California, Florida, New 

York, Illinois, and Texas. The program will target abuses in home health agencies, 

nursing facilities, and durable medical equipment, including wound care supplies. 

We selected claims for a 1 percent sample of beneficiaries who received wound care 

supplies between June 1994, the start of fee schedule reimbursements, and February 

1995. We applied the proposed DMERC draft guidelines to these claims to identify 

questionable billing practices. Lastly, we quantified the potential impact of 

questionable billing practices and identified potentially abusive suppliers. 

FINDINGS 

Questionable paymentsof woundcaresuppliesmayaccountfor asmuchas two-thirds 

of the $98 miUion in Medicare allowances from June 1994 through February 1995. 

Four supplies, hydrogel wound filler, tape, a hydrogel dressing wound cover, and a 

foam dressing wound cover, account for almost half of the excessive utilization. We 

found excessive utilization in all groups of wound care products. The DMERC D 

found similar abuses in its detailed review of wound care claims. 

i 
Activity is concentrated in States, suppliers, place of service, and one carrier. 

Almost two-thirds of excessive wound care payments was found in eight States. These 

States are Puerto Rico, Indiana, New York, California, Illinois, Tennessee, Florida, 

and Louisiana. The five Operation Restore Trust States account for over one-third of 

the questioned amounts. Three-quarters of excessive payments in our sample were 

made to 48 suppliers which represent 7 percent of the suppliers in our sample. Less 

than 40 percent of beneficiaries resided in skilled nursing or nursing facilities but these 

beneficiaries received over 70 percent of wound care benefits. The DMERC C 

allowed almost twice the national average per beneficiary and was responsible for over 

40 percent of questionable wound care payments. 

The HCFA and DMERCS have taken corrective actions to address wound care abuses 

and continue to explore others. 

The DMERCS, working with the HCF~ published a draft policy to clarify wound care 

coverage to take effect October 1, 1995. They have also identified suppliers 

responsible for questionable billing practices, some of which use multiple identification 

numbers. This has resulted in both sanctions and continuing education for suppliers. 

However, DMERC officials believe there are insufficient resources to conduct the 

necessary program integrity activities. They also expressed frustration in National 

Supplier Clearinghouse’s inability to prevent abusive suppliers from obtaining provider 

identification numbers. The HCFA is also considering “bundling” ancillary products 

such as wound care supplies into the reimbursement for nursing homes. 

RECOMMENDATION 

A long term solution would require HCFA to bundle services in their Medicare or 

Medicaid payments to nursing homes. For example, the nursing home patients that 

received wound care supplies would not be separately reimbursed for these supplies 

but have them included in the per diem rate paid by Medicare or Medicaid. We 

continue to support HCFA’S efforts to pursue a bundling policy. To address the 

immediate problems with wound care supplies identified in this report, we recommend 

that: 

� HCFA should target their limited program integrity resources to those areas 

identified as most vulnerable to abuse. This could include edit screens at each 

DMERCS to track such wound care products as tape and hydrogel. 

� HCFA should continue to monitor wound care activity through 1996 to 

determine if the level of questionable payments continues. If questioned 

payments continue unabated, HCFA may need to reconsider the current wound 

care benefit. 

ii 

—— 
COMMENT’S 

We solicited and received comments on our draft reports from HCFA and other 

concerned organizations. The organizations that provided us with responses were the 

Health Industry Distributors Association (HIDA), the Health Industry Manufacturers 

Association (HIMA), and the National Association for the Support of Long Term 

Care (NASL). The full text of their comments is provided in Appendix C. 

The HCFA agreed with the recommendations. In addition, HCFA responded that 

they have developed a legislative proposal to require bundling of services, including 

wound care supplies, in Medicare and Medicaid payments to nursing homes. They 

believe that this may selve as an incentive for nursing homes to more closely monitor 

the use of wound care supplies. 

The outside organizations commented that they strongly support HCFA’S expansion of 

the national coverage policy for wound care supplies and that no reduction in the 

current scope of the benefit should be considered, They believe that the DMERCS’ 

delay in implementing wound care policies and utilization standards after HCFA’S 

expansion of the policy was the primary factor in creating an environment ripe for 

potential abusive practices. 

The outside groups believe there are significant flaws in the methodology we used to 

determine the magnitude of questionable billing of wound care supplies. The primary 

weakness, they believe, is the “unfair” application of DMERC guidelines to claims that 

were not affected by these guidelines. 

While we believe the initial lack of DMERC policies without utilization standards for 

wound care supplies played a part in allowing abuses to occur, we do not believe it to 

be the entire cause of abusive supplier practices. Even without specific utilization 

standards, suppliers are supposed to be able to support the medical necessity of the 

wound care products they deliver. Some of the examples of questionable billings that 

we encountered were not mere misunderstandings of medical policies for wound care. 

For example, when suppliers are billing amounts large enough to purchase 12.5 miles 

of tape or 5 gallons of hydrogel wound filler in a 6-month period this would fall out of 

even the most generous clinical guidelines. 

We believe our methodology was sound and consistent with prior OIG efforts to 

identify claims that appear questionable. In response to the organizations’ concern 

that we used the DMERCS’ proposed guidelines for our review, we used these policies 

because we felt the utilization standards they contained would provide us with 

information on the scope and nature of the problems with wound care supply claims. 

The supply industry had participated in the development of these guidelines and were 

generally supportive of them. Furthermore, there were no other non-trade association 

guidelines available for wound care supply utilization that were as extensive as the 

... 

111 
proposed DMERC policies. Finally, we thought this information would be useful to 

HCFA and the DMERCS in preparing for the implementation of the policy guidelines. 

iv 
TABLE OF CONTENTS 

PAGE 

SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..i


INTRODI.KHON . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...1


FINDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...7


�Excessive utilization ofsupplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...7


� Concentration of Medicare allowances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9


� HCFA/DMERCcorrective actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...12


RECOMMENDATIONS . . . . . . . . . . . . . ., . . . . . . . . . . . . . . . . . . . . . . . . . ...14


APPENDICES


A Wound Care Guidelines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..A-l


B: Confidence Intewals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..B-l


C: Agency and Outside Organizations’ Comments . . . . . . . . . . . . . . . . . . . . . . . C-1

INTRODUCTION 

PURPOSE 

This report identifies questionable billing practices for wound care supplies under 

Medicare Part B. 

BACKGROUND 

Wound care supplies are fillers or protective covers that treat openings on the body 

caused by surgical procedures, wounds, ulcers, or burns. Wound covers are flat 

dressing pads. Wound fillers are dressings placed into open wounds to eliminate dead 

space, absorb exudate, or maintain a moist wound surface. The Health Care 

Financing Administration (HCFA) reimburses for wound care supplies under the 

Medicare Part B program. Wound care coverage policy is found in section 2079 of 

the Medicare Carriers Manual. The HCFA contracts four DME regional carriers 

(DMERCS) to process durable medical equipment claims including wound care 

supplies. The DMERCS issue their own guidelines to clarify their coverage policy. 

Medicare Part B Allowances for Wound Care Supplies: 1990-1994 

There were significant changes in wound care activity between 1990 and 1994. 

Medicare Part B allowances were as low as $50 million in 1992 and peaked in 1993 at 

$132 million, an increase of 164 percent. The number of beneficiaries that annually 

received these supplies ranged from 86,600 in 1993 to as high as 273,300 in 1991. As 

a result, allowances per beneficiary varied from $199 in 1990 to $1,526 in 1993. 

Between 1993 and 1994 the number of Medicare beneficiaries that received wound 

care supplies increased 47 percent. 

In 1994, 61 percent of the average allowance per beneficiary was for specialty 

dressings. Medicare fee schedule amounts for specialty dressings are as high as $35 

for large hydrogel wound covers. Eleven of the specialty wound care products are 

reimbursed by Medicare at over $10. Prior to 1992, Medicare reimbursed for wound 

care supplies primarily in a single kit payment. These kits were a compilation of 

wound care supplies and were reimbursed at $8 each in 1992. Billing for kits was 

disallowed in 1992. However, component supplies contained in a kit can still be billed 

as individual products. As a result, the number of wound care supplies has increased 

over six times from 13 million in 1991 to 81 million in 1994. The table on the 

following page summarizes surgical dressing activity for calendar years 1990 through 

1994. 

1

Table 1. Wound Care Supply Activity 1990-1994 

Activity 1990 1991 1992 1993 1994 

Allowances $53 million $87 million $50 million $132 million $98 million 

Beneficiaries 266,400 273,300 117,300 86,600 127,300 

Per Beneficiary $199 $317 $423 $1,526 $769 

No. of Supplies N/A 13 million 45 million 69 million 81 million 

l%e HCFA Broadims h Coverage Policy for Wound Care Supplies 

On March 30, 1994, HCFA expanded its coverage policy for wound care supplies.


The new policy provides coverage for “primary and secondary dressings required for


the treatment of a wound caused by, or treated by, a surgical procedure that has been


performed by a physician or other health care professional.” Primary dressings are


therapeutic or protective coverings applied directly to wounds or lesions either on the


skin or caused by an opening to the skin. These include alginate, foam, specialty


absorptive, hydrogel, hydrocolloid, and composite dressings. Transparent film and


contact layers also serve as primary dressings. Secondary dressings serve a therapeutic


or protective function and typically are needed to secure a primary dressing. Items


such as adhesive tape, roll gauze, and bandages are examples of secondary dressings.


T%eRim Coverage Policy Was More Restn”ctive 

The HCFA national policy and the DMERCS’ policies prior to March 30, 1994 were 

more restrictive. Stringent requirements were placed on the type of dressings, length 

of treatment, cause of wound, type of provider, and medical documentation. The 

DMERCS’ policy before the expansion of the national policy covered only prima~ 

dressings resulting from a surgical procedure for usually no more than 2 weeks. This 

policy stated that “surgical dressings for closed incisions without drainage would rarely 

be medically necessary for more than 1 week” and “when an ulcer, traumatic wound, 

or burn has had sharp debridement, it will be considered a surgical wound for no 

more than 2 weeks from the date of debridement.” 

Prior to March 30, 1994, the HCFA national policy would allow dressings to be 

covered for treatment of wounds that resulted from sharp debridement (e.g., scalpel, 

laser) performed only by physician. The DMERC local policies stated that dressings 

for other types of debridement (e.g., mechanical, chemical, autolytic) were not 

covered. Wound care suppliers were required by DMERCS to submit a certificate of 

medical necessity to document the need for the products. After the policy change in 

March 1994, this was no longer required. The table on the following page compares 

the wound care supply policy before and after March 30, 1994. 

2

Table 2. Comparison of Wound Care Supply Coverage Policies 

Only primary dressings Primary and secondary dressings 

Time limits on medical necessity As long as medically necessary 

Dressings for sharp debridement only Any type of debridement 

Limited to physician treatments Physician and non-physician treatments 

Certificate of Medical Necessity Certificate of Medical Necessity 

required not required 

Cam”er Bomssing of Wound Care Supplies 

In June 1992, HCFA issued a final rule designating four Durable Medical Equipment 

Regional Carriers (DMERCS) to process all claims for durable medical equipment, 

including wound care supplies. The four carriers are the MetraHealth Insurance 

Company (DMERC A), AdminaStar Federal (DMERC B), Palmetto Government 

Benefits Administrators (DMERC C) and Cigna Healthcare (DMERC D). Effective 

October 1, 1993, HCFA began the transition to the DMERC processing of wound 

care supply claims. During 1994, 56 carriers also processed surgical dressing claims 

before the transition to DMERCS was complete. During the transition, these carriers 

did not utilize the DMERC policies; they carriers used their own local policies to 

process claims. 

l%e DMER(3 Implement a Fee Schedule and Introduce Nw Co&s 

Starting in June 1994, reimbursements for wound care supplies were based on a fee 

schedule. The DMERCS introduced over 60 codes for wound care products to 

implement the fee schedule. Prior to June, less than 20 codes were used to identify 

and reimburse dressings. The DMERCS granted a grace period for all but two old 

codes submitted through October 1, 1994. During the grace period the DMERC 

would crosswalk the old code to the appropriate new code. 

l’he DMERC3 Iksue a Draft Policy to ClarijJ Wound Care Coverage 

The DMERCS, working with HCF~ developed a policy to clarify the coverage of the 

wound care benefit. In January 1995, each DMERC requested comments on these 

guidelines. Included in these guidelines are definitive utilization and medical necessity 

parameters. In addition, modifiers to the codes have been added to identify the 

number of wound sites being treated. The HCFA and DMERCS have evaluated the 

comments and have issued a revised policy to be effective October 1, 1995. See 

Appendix A for a summary of the utilization guidelines. 

3

This change was initiated in part as a response to organizations in the wound care 

community that expressed the need for clarification. For example, the Health Industry 

Distributors Association in cooperation with the National Coalition for Wound Care, 

the National Association of Retail Druggists, and the National Association for the 

Support of Long Term Care developed consensus recommendations for improving the 

Medicare wound care policy. These changes were recommended prior to the release 

of the proposed changes in January 1995. 

The General Accounting OfJice Discloses SimilarAbuses 

The General Accounting Office (GAO) issued a final report, Medicare: Excessive 

Payments for Medical Supplies Continue Despite Improvements (HEHS-95-1 71), in 

August 1995 concerning payment controls for Medicare expenditures of durable 

medical equipment with an emphasis on wound care supplies. The GAO found a 

“lack of system wide controls” which led to abuse in both Part A and Part B. For 

example, the number of dressings billed per beneficiary was nearly three times higher 

under 29 new wound care codes. They attribute this to the absence of a clearly 

defined policy. 

Opation Restore llust TargetsHealth Care Abuse in Five States 

Operation Restore Trust is a health care anti-fraud demonstration project developed 

within the U.S. Department of Health and Human Services by the Office of Inspector 

General, the Health Care Financing Administration, and the Administration on Aging. 

Its aim is to coordinate Federal and State resources to attack fraud and abuse in 

home health agencies, nursing facilities, and durable medical equipment, including 

wound care supplies. The project’s initial focus will be in California, Florida, New 

York, Illinois, and Texas. 

METHODOLOGY 

To asses the nature of questionable billing practices, we interviewed DMERC officials 

including medical directors and fraud control personnel. Each DMERC responded to 

a questionnaire concerning wound care supply processing guidelines, the nature of 

questionable billing practices, and corrective actions taken. 

To determine the extent of questionable billing practices, we analyzed a 1 percent 

sample of wound care beneficiaries. These beneficiaries received supplies under one 

of 87 wound care supply codes in use between June 1994, the start of fee schedule 

reimbursements, through February 1995. These claims are maintained in HCFA’S 

National Claims History 100 percent Physician/Supplier database. Medicare Part B 

allowed $980,270 in wound care supplies for our sample of 1,205 beneficiaries for this 

9-month period. Allowed payments include the 80 percent Medicare payment and the 

20 percent coinsurance fee billed to the beneficiary. 

4

We applied the proposed DMERC draft guidelines to these claims to identi~ 

questionable billing practices. Although these guidelines were not in force during the 

review period, they represent a consensus concerning wound care policy that could be 

systematically applied and measured. We assumed the maximum allowable usage each 

month for the month in which the supply was billed. We defined a questionable 

billing practice as that amount in excess of the utilization guideline. We assumed each 

type of wound cover billed represented a wound site. We reported Medicare 

allowances above the tolerance levels by type of supply, DMERC, number of 

beneficiaries receiving supplies, and supplier. To determine if a link exits among 

suppliers suspected of abusive billing practices, we reviewed data from the National 

Supplier Clearinghouse (NSC). Under each provider identification number, the NSC 

database includes the name of corporate officials, addresses, and provider aliases. 

Claims for tape supplies (HCPCS A4454 and K0265) were analyzed differently. We 

selected 101 beneficiaries from two groups of a stratified sample of 349 beneficiaries 

that received tape. The first strata contained 31 beneficiaries that received $1,000 or 

more in tape. The second, 318 beneficiaries that received between $25 and $999 in 

tape. We selected all 31 from the first strata and randomly selected 70 beneficiaries 

from the second. This sample of 101 beneficiaries represent $73,848.13 or 52 percent 

of total allowed dollars in tape claims. For each tape claim, we assumed that the 

beneficiary used the maximum monthly allowable usage for each primary and 

secondary dressing billed during that month according to the proposed DMERC draft 

guidelines. The secondary dressing was allocated the same amount of tape as the 

primary dressing. Dressings with an adhesive border were not allocated tape. 

We assumed dressings less than or equal to 16 square inches to be 4 inch by 4 inch. 

We assumed a 6 inch by 8 inch size for dressing between 16 and 48 square inches and 

8 inches by 8 inches for dressings greater than or equal to 48 square inches. We 

allocated two inches extra of tape for each side. Therefore, a 4 inch by 4 inch 

dressing was allocated 24 inches of 1 inch tape. A 6 inch by 8 inch dressing was 

allocated 36 inches and a 8 inch by 8 inch dressing, 40 inches. We applied the current 

fee schedule price of $0.12 per 18 square inches to the tape allocated. Each 4 inch by 

4 inch dressing used $0.16 in tape. A 6 inch by 8 inch dressing used $0.24 in tape, 

$0.27 for a 8 inch by 8 inch dressing. To quanti~ the impact of questionable billing 

practices, we projected our findings, by multiplying Medicare allowances above the 

proposed DMERC guidelines by 100. Confidence intervals for our projections are 

presented in Appendix B. 

We compared the results of this analysis with data supplied by DMERC D. In 

January 1995, DMERC D required 30 suppliers that had been placed on prepayment 

review to submit documentation to support future claims. The DMERC D, with 

assistance from nurses in the Wound, Ostomy and Continence Nurses Society, 

reviewed 687 claims for 525 beneficiaries from 14 suppliers that continued to submit 

wound care claims. The 687 claims averaged $433, $302 of which was for hydrogel 

and foam dressings. Almost 60 percent of the wound care supplies billed were for 

gauze. However, the allowances for these gauze products represent only 7 percent of 

5 
all wound care allowances reviewed. The nurses reviewed these documents to 

determine the actual type and number of wound care supplies needed for effective 

treatment. We applied the DMERC D fee schedule prices to the units billed and the 

units allowed to quanti& the effect of their adjustments. We used June 1994 through 

February 1995 data to provide unit costs when prices were unavailable in the DMERC 

D fee schedule. 

Report l%xntadon 

This report is one of three reports concerning Medicare payments for wound care 

supplies. The second report, Marketing of Wound Care Supplies (OEI-03-94-00791) 

describes supplier and nursing home practices that can lead to questionable payments 

and examines issues concerning Medicare beneficiaries’ use of wound care supplies. 

The third report, Wound Care Supplies: operation Restore Trust Data (OEI-03-94-

00792), consolidates information presented in the other two wound care reports as it 

pertain to the five Operation Restore Trust States. 

This inspection was conducted in accordance with the Quality Standards for Inspections 

issued by the President’s Council on Integrity and Efficiency and is part of Operation 

Restore Trust. 

6

FINDINGS


QUESTIONABLE PAYMENTS FOR WOUND CARE SUPPLIES MAY 

ACCOUNT FOR AS MUCH AS TWO-THIRDS OF THE $98 MILLION IN 

MEDICARE ALLOWANCES FROM JUNE 1994 THROUGH FEBRUARY 1995. 

Medicare Part B allowed $65 million from June 1994 through February 1995 for 46 

million wound care supplies that exceed the proposed DMERC guidelines. This 

represents 66 percent of $98 million in Medicare Part B allowances and 57 percent of 

the 81 million wound care supplies provided to beneficiaries. 

Excessive utilization evidknt in aU wound care p&k3. 

Each group of wound care products showed a significant degree of questionable billing 

Transparent film led with 80 percent of its activity that exceeded utilization guidelines. 

The group with the smallest level, alginate dressings, had 40 percent of the Medicare 

allowance and 50 percent of the units that exceed utilization guidelines. The table 

below summarizes the excessive allowances and units for each group of wound care 

product. The total figures are the amounts that exceeded utilization guidelines, The 

percentages represent the portion of the total billings for that group over the standard. 

Table 3. Excessive Allowances and Units by Wound Care Produet 

Hydrogel Dressings $24.8 million 77% 2.4 million 7470 

Tape $9.8 million 68% 5.1 million 68’%0 

Gauze $7.8 million 49% 33.0 million 53% 

Foam Dressings $7.4 million 70% 0.9 million 68% 

Specialty Absorptive Dressings $4.0 million 62% 1.8 million 63% 

Alginate Dressings $2.9 million 40% 0.5 million 50% 

Other Supplies $2.8 million 7770 0.7 million 82% 

Transparent Film $2.3 million 80% 0.8 million 80% 

Hydrocolloid Dressings $2.0 million 54% 0.6 million 65% 

Composite Dressings $0.7 million 7170 0.2 million 69% 

Contact Layer $0.0 million N/A 0.0 million N/A 

7


1 
Four supplies account for almost half of the questionable Mdicare allowances. 

Medicare allowances for hydrogel wound filler, tape, a hydrogel dressing wound cover, 

and a foam dressing wound cover that exceeded utilization guidelines totaled $31 

million. These supplies represent 48 percent of excess allowances but only 15 percent 

of the 46 million units that were overbilled. The wide range of prices for wound care 

supplies cause this concentration. Medicare allowed an average of $10 for each 

hydrogel dressing supply, while gauze products averaged 26 cents each. 

A further analysis of tape and hydrogel wound filler illustrates the magnitude of these 

questionable billings. From June 1994 through February 1995, $10 million of 

Medicare’s $14 million allowance for tape appears questionable. For 95 percent of 

beneficiaries in the sample, some portion of their tape expenditures was questioned. 

one-quarter of these beneficiaries had at least $1,000 in tape questioned. Applying 

tape to 90 4“ x 4“ pads per month, it would take 5 years to consume $1,000. 

one beneficiary was charged with $5,290 in tape over a 6-month period, almost $5,000 

of which appears excessive. Medicare paid for, but probably did not receive, 66,000 

feet or 12.5 miles of one-inch tape. This beneficiary needed only $324 or 2,700 feet in 

tape if all the dressings purchased were used to the maximum allowed. This 

beneficiary would need to use over 33,000 4“ x 4“ gauze pads to use this much tape, a 

30 year supply at 90 pads per month. 

Another beneficiary was charged with $11,880 in hydrogel wound filler, $11,533 of 

which may be unnecessary. This beneficiary’s record showed payments for 120 units of 

one-ounce hydrogel wound filler each month for 6 consecutive months, over 5 gallons. 

The proposed guidelines call for three per month or three ounces per wound site, 

which should have cost Medicare $347. The guidelines state that “hydrogel filler used 

for each wound should not exceed the amount needed to line the surface of the 

wound,” not fill the wound cavity. 

T%eDMERC D find similar abuses in its review of wound care clizizm. 

The findings from the DMERC D review of 687 wound care claims submitted by


suppliers on pre-payment review mirrors the abuses nationwide. The DMERC D


disallowed 61 percent of the 112,000 wound care supplies in its review. As a result, 54


percent of the almost $300,000 in wound care claims were questioned. Tape


accounted for only 5 percent of the charges reviewed by the DMERC as opposed to


15 percent nationally. However, the DMERC also questioned almost two-thirds of all


tape. The table on the following page presents the percentage of the charges and


units submitted for each group of wound care products that were not allowed by


DMERC D.


8

Table 4. Summary of DMERC D Review of Wound Care Claims 

Alginate Dressings


Composite Dressings


Foam Dressings


Gauze


Hydrocolloid Dressings


Hydrogel Dressings


Specialty Absorptive Dressings


Tape


Transparent Film


Other Supplies


37% 42% 

56% 56% 

52% 49% 

65Y0 67% 

46V0 46% 

54% 52% 

3070 32% 

63% 63% 

52% 51% 

69V0 64% 

ACTIVITY IS CONCENTRATED IN STATES, SUPPLIERS, PLACE OF 

SERVICE, AND ONE CARRIER. 

Almost two-think of excessive wound care payments was found in eight States. 

Eight States account for $42 million or 65 percent of the Medicare allowances that 

exceeded the DMERC guidelines. Two States with relatively small Medicare 

populations, Puerto Rico and Indiana were included in this group. The other six 

States are New York, California, Illinois, Tennessee, Florida, and Louisiana. These 

eight States were also responsible for $62 million or 63 percent of the total Medicare 

allowances. 

l%e fie Opration Restore Dust States account for over one-third pement of the 

questioned al.bwances. 

The five States targeted by Operation Restore Trust accounted for 35 percent or $22 

million of Medicare allowances for wound care supplies that exceeded utilization 

guidelines. Non-tape accounted for over $18 million of the questioned payments, tape 

approached $4 million. Four of these States, New York, California, Illinois and 

Florida ranked in the top seven. The fifth State, Texas, received $1.3 million in 

excessive payments. These States had 39,200 beneficiaries that received wound care 

supplies. Over 25,000 of these beneficiaries showed some excess utilization. 
l%ree-q.umem of excessive payrnenfi in our sample were made to 48 suppliers which 

represent 7percent of the supplim in our sample. 

Out of the $980,270 in wound care claims in our sample, we found $546,665 in 

questionable non-tape payments. These amounts represent actual claims before 

projections were applied. Three-quarters of these excessive payments for non-tape 

wound care products were paid to 46 suppliers. The excessive Medicare payments to 

these suppliers ranged from $2,752 to $91,784. Two other suppliers that received at 

least $2,752 in excessive tape payments were not in this group of 46. This total of 48 

represents 7 percent of all suppliers in our sample. Fifty-seven percent of the 

suppliers in our sample (402 of 699) received some payments for supplies that 

exceeded utilization guidelines. One supplier received 17 percent of all excessive 

payments for non-tape supplies and 14 percent for tape. This supplier received more 

than four times the questionable non-tape payments than the next supplier, and almost 

50 percent more for tape. 

From June 1994 through February 1995, 71 percent of all Medicare payments for 

wound care supplies were made to 48 suppliers or 7 percent of all suppliers in our 

sample. These 48 suppliers each received payments of at least $5,000, Conversely, 

more than 56 percent of suppliers received payments of $100 or less and in total these 

account for less than 1 percent of all allowances. Forty-one of the 48 suppliers were 

those previously identified as receiving a high concentration of excessive payments. 

Less than 40 pement of beneficiaria resided h SkiUedNuning or Ntig Facilities but 

these beneficituies received over 70 percent of wound care benejh. 

Almost 72 percent of Medicare allowed payments for wound care supplies in our 

sample was made for beneficiaries that resided in skilled nursing (SNF) or nursing 

facilities (NF). This same percentage also applies for beneficiaries in SNFS and NFs 

that received non-tape supplies that exceeded utilization guidelines. Only 38 percent 

of the beneficiaries in our sample resided in SNFS and NFs. Almost 52 percent of the 

beneficiaries lived at home. However, beneficiaries that received excessive non-tape 

supplies was almost equally divided between residents of SNFS and NFs and homes. 

lk DMERC C allowed almost twice the nationul average per benejichuy and was 

responsible for over 40 pezent of questionable wound care payments. 

The DMERC C allowed charge per beneficiary for wound care supplies was $1,385, or 

almost twice the national average. The allowed charge per beneficiary ranged from 

$606 to $832 at the other DMERCS. The DMERC C made over $41 million or 40 

percent of all payments for wound care from June 1994 through February 1995. This 

was almost twice what was paid by DMERC A and DMERC B, and four times that of 

DMERC D. 

The pattern is similar for submitted charges. The $81 million submitted to DMERC C 

was 36 percent higher than DMERC A and almost five times of what was submitted 

10 
to DMERCD. Foreach beneficia~, suppliers submitted charges of$2,l92to 

DMERCC, twice the national average. Thetable below summarizes wound care 

payments by carrier from our sample. The first group contains the total dollars, 

number of beneficiaries, and charge per beneficiary submitted to each carrier in our 

sample. The second group contains the allowed amounts for each carrier. Some 

beneficiaries received supplies through more than one carrier. 

Table 5. Total Wound Care Supply Payments Per Carrier 

DMERC A $59,317,300 

DMERC B $48,766,300 

DMERC C $80,658,200 

DMERC D $16,415,700 

Other $29.876,600 

43,800 $1,354 

33,400 $1,460 

36,800 $2,192 

23,800 $689 

86,600 $345 

$21,385,200 

$21,983,500 

$41,420,600 

$10,493,400 

$2.744.400 

35,300 $606 

26,400 $832 

29,900 $1,385 

16,700 $628 

15.000 $183 

The DMERC C made 44 percent of the non-tape payments and 49 percent of tape 

payments that exceeded utilization guidelines. The DMERC C paid for 29 percent of 

the beneficiaries that received excessive non-tape supplies, 43 percent for tape, The 

table below summarizes the non-tape and tape payments that exceeded utilization 

guidelines by each carrier. 

Table 6. Excessive Wound Care Supply Payments Per Carrier 

DMERC A $9,933,753 

DMERC B $13,228,005 

DMERC C $24,242,717 

DMERC D $5,554,847 

Other $1,707,097 

18% $1,960,304 20% 

24% $2,402,453 25?Z0 

44% $4,618,661 4770 

1070 $713,710 7910 

3% $97,072 170 

$11,894,057 18% 

$15,630,458 24% 

$28,861,378 45% 

$6,268,557 10% 

$1.804.169 3% 

11�
These payments almost double what was paid by DMERC B which was responsible 

forapproximately one-quarter ofexcessive payments. The DMERC A made 18 

percent onnon-tape and20percent oftapepapents that were questioned. 0nly2 

percent of non-tape and 5 percent of tape payments that exceeded DMERC 

guidelines were made by DMERC D. 

THE HCFA AND DMERCS HAVE TAKEN CORRIKTNE ACTIONS TO 

ADDRESS WOUND CARE ABUSES AND CONTINUE TO EXPLORE OTHERS. 

Reviked wound care policy to ckzrijj coverage guidelines 

The most significant action taken by the HCFA to address abuses in wound care was 

the publication of revised a coverage policy. This policy developed along with the 

DMERCS, provides specific utilization and medical necessity standards that should 

clarify acceptable clinical practices. 

% DMERG3 idkntijied 54 abusive suppliem, some of which are the same companies 

using thfikrentprovider identification numbem 

Through pre- and postpayment reviews, the DMERCS have identified 54 suppliers 

suspected of questionable billing practices. The DMERC D identified 30 of these 

suppliers; DMERC C, 17, DMERC B, 10, and DMERC ~ 7. Seven suppliers were 

identified by more than one DMERC. The 54 suppliers include 21 identified in this 

report. The DMERCS require these suppliers to document future claims. The 

DMERCS also referred suppliers to the Office of Inspector General for investigation 

or suspended their payments. The DMERC A has even dedicated a portion of the 

medical review staff to wound care. However, DMERC officials believe they do not 

have the resources necessary to perform the proper level of review needed to assure 

sufficient control. In certain situations, questionable billing was attributed to a 

misunderstanding of wound care policy. In these cases, DMERCS provide the 

necessa~ education to clari~ the acceptable guidelines. 

In total, 81 suppliers were identified as being suspected of questionable billing 

practices. Of the these suppliers, 33 were identified by DMERCS, 21 by both the 

DMERCS and the Office of Inspector General (OIG), and 27 solely by the OIG, 

These 27 suppliers were part of the 48 suppliers identified as receiving three quarters 

of the excessive payments in our sample. Some of the suppliers had common 

identifying information linking them together. One group of three suppliers shared a 

common official. Another group of two suppliers also shared common officials. One 

group of four suppliers shared a common address. Another two suppliers shared a 

common address. The DMERCS expressed frustration in National Supply 

Clearinghouse’s inability to prevent this abuse. 

12

i%e HCFA k pumuing altemathxx to the cuwent cost reirnbumement rnecharukn. 

The HCFA continues to pursue a systematic solution to the abuses presented in this 

and other reports through a requirement for “bundling” of services in nursing home 

settings. Under such an approach, the nursing home would be responsible for 

providing commonly needed services to residents of that facility, rather than allowing 

for separate billing by suppliers. Such a solution would eliminate the incentives 

suppliers now have to aggressively seek out patients in nursing homes and market 

their products inappropriately in those settings. It would also ensure that nursing 

homes take on appropriate responsibilities for services and supplies delivered to 

residents in their facilities. 

13

RECOMMENDATIONS


Mter Medicare's e~ansion of thewound care benefit in March 1994, it is not 

surprising that recent activity shows an increase in the number of beneficiaries. This 

coupled with the use of costlier specialty products have resulted in an increase in 

Medicare expenditures. In both January and February 1995 wound care activity was 

higher than in any month in 1994. With an increase in wound care activity and the 

level of abuse identified in this report, the need for stricter controls is evident. We 

believe the new guidelines should provide the framework for those controls. We also 

support ongoing activity in HCFA and the DMERCS to educate providers and 

suppliers about proper billing for such supplies. We hope the information contained 

in this report is helpful in their efforts. 

A long term solution to wound care supply abuses would require HCFA to bundle 

services in their Medicare or Medicaid payments to nursing homes. For example, the 

nursing home patients that received wound care supplies would not be separately 

reimbursed for these supplies but have them included in the per diem rate paid by 

Medicare or Medicaid. We continue to support HCFA’S efforts to pursue a bundling 

policy. We believe the level of abuse we found in skilled nursing and nursing facilities 

under Medicare Part B enhances this position. 

To address the immediate problems with wound care supplies identified in this report, 

we recommend that: 

�	 HCFA should target their limited program integrity resources to those areas 

identified as most vulnerable to abuse. This could include edit screens at each 

DMERCS to track such wound care products as tape and hydrogel. 

�	 HCFA should continue to monitor wound care activity through 1996 to 

determine if the level of questionable payments continues. If questioned 

payments continue unabated, HCFA may need to reconsider the current wound 

care benefit. 

AGENCY AND OUTSIDE ORGANIZATIONS COMMENT’S 

We solicited and received comments on our draft reports from HCFA and other 

concerned organizations. The organizations that provided us with responses were the 

Health Industry Distributors Association (HIDA), the Health Industry Manufacturers 

Association (HIMA), and the National Association for the Support of Long Term 

Care (NASL). The complete text of their responses is included in Appendix C. A 

summary of the comments and our response follows. 

14

HCFA CommenB 

The HCFA agreed with the recommendations. In addition, HCFA responded that 

they have developed a legislative proposal to require bundling of services, including 

wound care supplies, in Medicare and Medicaid payments to nursing homes. They 

believe that this may serve as an incentive for nursing homes to more closely monitor 

the use of wound care supplies. The HCFA also provided us with a technical 

comment concerning the need to emphasize the difference between national and 

regional coverage policies on wound care supplies. 

0u13ide Oganizalions’ Comments 

The organizations commented that they strongly support HCFA’S expansion of the


national coverage policy for wound care supplies and that no reduction in the current


scope of the benefit should be considered. They believe that the DMERCS’ delay in


implementing wound care policies and utilization standards after HCFA’S expansion of


the policy was the primary factor in creating an environment ripe for potential abusive


practices. While the organizations support the need for implementing DMERC


medical policies for wound care supplies that reflect current clinical practice, they also


believe that some of the utilization standards in the DMERC policy to be


implemented on October 1, 1995 are incorrect and need to be resolved before


implementation occurs. The NASL and HIMA also stated that the DMERC policy


prior to March 30, 1994 that we discuss in the background section of our report was


never fully implemented.


All these groups believe there are significant flaws in the methodology we used to


determine the magnitude of questionable billing of wound care supplies. The primary


weakness, they believe, is the “unfair” application of DMERC guidelines to claims that


were not affected by these guidelines. Secondly, the outside organizations feel the


OIG’S failure to determine the appropriateness of wound treatment on an individual


basis does not allow for an effective analysis. For example, the number of wound


covers applied to a patient with multiple wounds may exceed the DMERC guideline


for a single wound cover. In addition, NASL cited that the OIG did not account for


the nature of the dressing, i.e., primary or secondary, which also affects the frequency


of changes. The NASL also believes that only the largest claims were targeted for


review which skewed the findings.


The HIDA and HIMA believe that the new DMERC guidelines will have a positive


effect in addressing any abuses in wound supplies that may exist. The HIDA wanted


the OIG to highlight that most suppliers do not engage in questionable billing practice.


The NASL and HIMA recommend a future review of wound supply activity to “ensure


the proper integrity of the benefit.” The HIDA recommends (1) the use of


Certificates of Medical Necessity for abusive suppliers and overutilized items, (2) the


establishment of a technical review committee representing suppliers, patients, and


clinicians to work with HCFA and the DMERCS in analyzing claim activity, and (3)


bundling most medical supplies into the nursing facilities Part A claim only for the first


15 
100 days. Finally, HIM believes HCFAand OIGshould give themedicalpoliq 

guidelines a chance to take effect before they reach any conclusion on the 

recommendation regarding bundling of wound care products. 

OIG RESPONSE 

While we believe the initial lack of DMERC policies without utilization standards for 

wound care supplies played a part in allowing abuses to occur, we do not believe it to 

be the entire cause of abusive supplier practices. Even without specific utilization 

standards, suppliers are supposed to be able to support the medical necessity of the 

wound care products they deliver. Some of the examples of questionable billings that 

we encountered were not mere misunderstandings of medical policies for wound care. 

For example, when suppliers are billing for amounts large enough to purchase 12.5 

miles of tape or 5 gallons of hydrogel wound filler in a 6-month period this would fall 

out of even the most generous clinical guidelines. 

We have made changes in the report to reflect the comments that HCFA made about 

clari~ing the difference between national and local policies. We have also added 

additional language in the report to emphasize that during the phase-in of the 

DMERCS, the previous carriers were still processing claims using their own policies. 

However, we believe our methodology was sound and consistent with prior OIG 

efforts to identi& claims that appear questionable. We did not target only the largest 

claims for our review, we selected a statistically valid random sample of all wound care 

claims. In response to the organizations’ concern that we used the DMERCS’ 

proposed guidelines for our review, we used these policies because we felt the 

utilization standards they contained would provide us with information on the scope 

and nature of the problems with wound care supply claims. The supply industry had 

participated in the development of these guidelines and were generally supportive of 

them. Furthermore, there were no other non-trade association guidelines available for 

wound care supply utilization that were as extensive as the proposed DMERC policies. 

Finally, we thought this information would be useful to HCFA and the DMERCS in 

preparing for the implementation of the policy guidelines. 

For individual claims, we assumed each type of wound supply used on a patient was 

medically necessary. It was the utilization of each type of wound supply that we 

reviewed. It is possible, as suggested by outside organizations, that what appears to be 

excessive utilization could be explained by the same type of dressing being used on 

more than one wound. However, the opposite is also the case. Various kinds of 

dressings could have been used on only one wound. 

As we noted in this report, DMERC D reviewed a sample of billings for wound care 

supplies. They did determine the actual number and type of wound care supplies 

needed for effective treatment. Based on the findings of the medical review, they 

16

disallowed 61 percent of the claims. In addition, the General Accounting Office found 

extensive overbilling in its review of wound supplies, 

Our data was intended as an early warning to HCFA about the scope of potential 

abuse concerning wound care supplies. 

17

APPENDIX A


WOUND CARE SUPPLY UTILIZATION GUIDELINES 

OCTOBER 1, 1995 

HCPCS WOUND CARE PRODU(X STANDARD


K0196 Alginatedressingwoundcover, without adhesive, 16 sq. in. or less llday


K0197 Alginate dressing wound cover, without adhesive, > = 16 sq. in. e = 48 sq. in. Vday


K0198 Alginate dressing wound cover, without adhesive, more than 48 sq. in. I/day


K0199 Alginate dressing wound filler, per 6 inches I/day


K0203 Composite dressing wound cover, with adhesive, 16 sq. in. or less 3/weelr


K0204 Composite dressing wound cover, with adhesive, > = 16 sq. in. < = 48 sq. in. 3iweek


K0205 Composite dressing wound cover, with adhesive, more than 48 sq. in. 3fweek


K0206 Contact layer, 16 sq. in. or less I/week


K0207 Contact layer, > = 16 sq. in. <= 48 sq. in. Vweek


K0208 Contact layer, more than 48 sq. in. liweek


K0209 Foam dressing wound cover, without adhesive, 16 sq. in. or less 3/week


KO21O Foam dressing wound cover, without adhesive, > = 16 sq. in. < = 48 sq. in. 31week


K0211 Foam dressing wound cover, without adhesive, more than 48 sq. in. 3Jweek


K0212 Foam dressing wound cover, with adhesive, 16 sq. in. or less 3/week


K0213 Foam dressing wound cover, with adhesive, > = 16 sq. in. e = 48 sq.in 3~eek


K0214 Foam dressing wound cover, with adhesive, more than 48 sq. in. 3~eek


K0215 Foam dressing wound filler, per gram I/day


K0216 Gauze non-impregnated, without adhesive, 16 sq. in. or less 31day


K0217 Gauze non-impregnated, without adhesive, > = 16 sq. in. < = 48 sq. in. 3/day


K0218 Gauze non-impregnated, without adhesive, more than 48 sq. in. 3/day


K0219 Gauze non-impregnated, with adhesive, 16 sq. in. or less I/day


K0220 Gauze non-impregnated, with adhesive, > = 16 sq. in. < = 48 sq.in. llday


K0221 Gauze non-impregnated, with adhesive, more than 48 sq. in. I/day


K0222 Gauze impregnated, without adhesive, 16 sq. in. or less llday


K0223 Gauze impregnated, without adhesive, > = 16 sq. in. c = 48 sq. in. I/day


K0224 Gauze impregnated, without adhesive, more than 48 sq. in. Vday


K0228 Gauze impregnated, without adhesive, 16 sq. in. or less I/day


K0229 Gauze impregnated, without adhesive, > = 16 sq. in. <= 48 Sq.in. Vday


K0230 Gauze impregnated, without adhesive, more than 48 sq. in. I/day


K0263 Gauze elastic, all types, per linear yard same as primary


K0264 Gauze nonelastic, per linear yard same as primary


K0266 Gauze impregnated, any width, per linear yard same as prima~


K0234 Hydrocolloid dressing wound cover, without adhesive, 16 sq. in. or less 3~eek


K0235 Hydrocolloid dressing wound cover, without adhesive, > = 16 sq. in. < = 48 sq. in. 3jweek


K0236 Hydrocolloid dressing wound cover, without adhesive, more than 48 sq. in. 3/week


K0237 Hydrocolloid dressing wound cover, with adhesive, 16 sq. in. or less 3~eek


K0238 Hydrocolloid dressing wound cover, with adhesive, > = 16 sq. in. < = 48 sq. in. 3/week


K0239 Hydrocolloid dressing wound cover, with adhesive, more than 48 sq. in. 3/week


K0240 Hydrocolloid dressing wound filler, paste, per fluid ounce 3/week


K0241 Hydrocolloid dressing wound filler, dry form, per gram 3/week


A-1

HCPC?3 WOUND CARE PRODUCT


K0242 Hydrogel dressing wound cover, without adhesive, 16 sq. in. or less


K0243 Hydrogel dressing wound cover, without adhesive, > = 16 sq. in. < = 48 sq. in.


K0244 Hydrogel dressing wound cover, without adhesive, more than 48 sq. in.


K0245 Hydrogel dressing wound cover, with adhesive, 16 sq. in. or less


K0246 Hydrogel dressing wound cover, with adhesive, > = 16 sq. in. c= 48 sq. in.


K0247 Hydrogel dressing wound cover, with adhesive, more than 48 sq. in.


K0248 Hydrogel dressing wound tiller, gel, per fluid ounce


K0249 Hydrogel dressing wound filler, dry form, per gram


K0251 Specialty absorptive dressing wound cover, 

without adhesive, 16 sq. in. or Iess 

K0252 Specialty absorptive dressing wound cover, 

without adhesive, > = 16 sq. in < = 48 sq. in. 

K0253 Specialty absorptive dressing wound cover, 

without adhesive, more than 48 sq. in. 

K0254 Specialty absorptive dressing wound cover, 

with adhesive, 16 sq. in. or less 

K0255 Specialty absorptive dressing wound cover, 

with adhesive, > = 16 sq. in c = 48 sq. in. 

K0256 Specialty absorptive dressing wound cover, 

with adhesive, more than 48 sq. in. 

K0257 Transparent film, 16 sq. in. or less, each dressing


K0258 Transparent film, > = 16 sq. in. < = 48 sq. in.


K0259 Transparent film, more than 48 sq. in.


K0154 Wound pouch, each


K0261 Wound filler, not elsewhere classified, gel/paste, per fluid ounce


K0262 Wound filler, not elsewhere classified, dry form, per gram


A4460 Elastic bandage, per roll


K0265 Tape, all types, per 18 sq. in.


A4454 Tape, all types, all sizes


STANDARD 

Vday 

I/day 

llday 

3/week 

3&+eek 

3/week 

3/month 

I/day 

Vday 

I/day 

llevery other day 

l/every other day 

l/every other day 

3fweek 

3iweek 

3/week 

3/week 

I/day 

ljweek 

per wound cover 

per wound cover 

A-2

APPENDIX B


CONFIDENCE INTERVALS 

We reported our projected totals by multiplying 100 by the point estimates in our 

samples. The point estimates represent the total allowance, number of supplies, or 

number of beneficiaries. The tables below include confidence interval columns. The 

number provided in this column is the semi-width of the confidence interval for each 

of the projected totals. The semi-width is the standard error of the projection 

multiplied by 1.96 when computing confidence intervals at the 95 percent level. The 

semi-width added to or subtracted from the estimated mean or total (projection) 

provides a 95 percent confidence interval. The table title numbers below correspond 

with the table numbers in the report. 

Table 1. Wound Cam Supply Activily 1990-1994 

B-1

Table 3. Exeesak Alhmanees and Units by Wound Care Pmduel 

II I Total I +/- $1,812,399 I $6,249,390 I +/- 718,681 I 2,849,300 II


Specialty Absorptive Questionable +/- $1,432,297 $3,963,916 +1- 559,430 1,768,200 Dressings 

Percentage +/- 6% 62% +1- 6% 63% 

Total +/- $1,322,270 $3,613,564 +/- 289,025 909,000 

Other Supplies Questionable +/- $1,110,985 $2,792,247 +/- 261,352 748,600 

Percentage +/- 18% 77% +/- 8% 82% 

Total +/- $18,109,615 $98,026,991 +/- 9,200,087 80,928,100 1! JI

II I Tape I +/- $1,494,300 I $9,026,991 ] Cannot Project II
 I I I
 Questioned


Non-Tape +/- $12,696,195 $54,666,420 +1- 5,468,348 40,982,000 II I


B-2

Top Four Wound (hre .SUppka That Exceded Utilimtion Guidelines 

Hydrogel filler - K0248/KO148KE 

Hydrogel cover - K0244/KO148KD +/- $6,988,253 $21,149,221 

Foam dressing cover - K0209/KO151KB 

Tape - A44541K0265 +/- $1,494,300 $9,792,200 

Wound Care Mivity - Eight Stak 

IINon-Tape -8 States +1- $17,514,890 $61,703,540 +/- $12,418,648 $37,017,607 +/- 3,012 31,900 

Tape -8 states included +/- $705,562 $5,142,581 +/- 3,788 17,600 

Wound Care Activity- Fm (lpemtion RestcueTrust States 

Non-Tape -5 Statea +/- $9,930,713 $35,640,150 +/- $5,686,759 $18,552,330 

Tape -5 States included +/- $1,151,600 $3,698,300 m 

Table 5- Total Wound Care SupplyPaymentsper Carrier 

Submitted +/- $5,205,336 $80,658,330 +/- $532 $2,192 

DMERC C Aflowed +1- $3.034.259 $41.420.600 +/- $272 $1.385 

B-3


I 
Table 6- EmxasiveWound Care SupplyPaymentsPer Canier 

B-4 
APPENDIX C 

AGENCY AND OUTSIDE ORGANIZATIONS’ COMMENTS 

c-1 
*a+ % 

+.” 

: DEPARTMENT OF HEALTH& HUMAN SERVICES tiealt~ Care F;mncing Adminitiration 

i

?. # %,+ 

-2

@coma’

+Q,.	 The Administrator 

Washington, D.C, 20201 

~Am =F27KMi 

w w 

FROM Bruce C. Vk&ck 

v Administrator 

SUBJECT CMfLceof I.uspectm (kmeml (CIIG) Draft Reports onQuestkmableMedicare 

Payments for Wound Care Supplies” (OEI-03-94-00790) 

TO	 JuneGibbsIkown 

liwpector(3em2ral 

We reviewed the subject report which contains information on mcme pqmen~ for 

woundcaresupplies. 

Our detailedcmumentson the report findings md recommendations are attached for your 

consideration, Thankyou for the opportunity m review and comment on this report. 

Pkase m-n.tact us if youwould like to discussOUImmments. 

Attachment 
Health Care l?i.uanciwAtistration (H@’A) Co~~@ts on 

46 @fke of InspectorGexIeral(010) DraftReuort 

Questionable Medicare Paments for Wound Care Surmlies” 

@EI-04-944X1790) 

OIG Recommendation A 

HCFA shouldtarget %nitedprogramintegityresourcesto thoseareasidentifkdaSmost 

w.dnembkto abuse.ThiscouldincludeeditscreensateaohDurableMedicalIlquipment 

RegionalCarrier (DMERC) to track suchwoundcareproductsastapeandI@ogel. 

HCI?A Response 

We Gcmmr. FICFAhas taken a number of speeific actions to target pro= iu*f@Y 

resources to thoseareasmost vulnerableto abuse.For example, HCFA reqpires that d 

Medicarecarriersmaximkepm- lxotetim by focusingand identi medical 

feview efforts on areaswhere services being billedhavesignificantpotentialto be 

md.icdly urmect?sstuyand excessive. The DMERCS direct their rudieal review efforts 

to monitortheutilization of woundcaresupplies.TheDhlt311Cs havedevelqed M

HCFA has revieweda revigedRegional Medical Review Policy (R.MPR) fix surgkd 

dressingswhich is scheduled to & implementedinoetober 1995. With this policy, we 

believetheKMERCS will be &t@r able to control @e appropriate utilization and 

coverage of surgical dressings. In dditio~ I-ICFAhas developed a Legislative ppowd to 

require bundlingof skillednursingfacilitiesandnursingfacilitiesservicestht b _ 

wouldrequire thebundling of payment forwoundcm q@.ks ~ M@GIMC fUId 

MedimidpaymentstoINJ.Hinghomes, T& mays- = ~ i=five for nMS@ homes 

to mom. closely monitor the usc of woundcaresupplies. 

CXGReeommendatiq 

HCFA should eontinu.eto monitor wound care activity through 19% to d~ ifti 

level of questionable paymenis eontinnes. If questionable payments umtkkue*ate& 

HCFAmayneedto reconsiderthecurrentwoundcarebenefit. 
Page 2 

HCFA Rcsuonsq 

We concur. HCFA andtheDMERCS will continue tomonitorwoundcamactivity 

throu@ 1996, Mhough we do not believe it would be appropriateto c~c ournational 

surgicaldressingpolicy, wedo agreethatwe should reevaluate mu medical review 

claims processing eflbrts if questionable payments continue unabated The 

implementation of the revised 1?;!R will assist the 13Ml?RCsin ensuring appropriate 

coverage and utilization of surg.ml dressings, 

Technical C cmlments 

It k impm-tant to Wk tie di.fl’mmce between the national cov~ge and regional coverage 

of policies cmsurgicsl dressings. HCl?A’Snational pcdky for surgical dressings was 

more restrictive prim to the Mu& 1994 revision, * ~mt appears to WxdhSe 

I-ICFA’Snational @Yeragepoliw with de ~&.fERCRMPR Prior to March 30, 1994, 

section 2079 of Medicare Gwriers Manual did limit surgicai dressk.g coverage ti ~~ 

dressings required as the result of a surgicalprocedure pm-formed by aphysician. 

However,themedicalnecessity time limits as well as the CertMcate of Medical 

Necessitys@.missionmqaent wereimposedby theDMERCS throughtheir RMHG. 
+i!:!l!iil


HE4L TFi INDUSTRY DISTRIBUTORS ASSOCIATION 

Serving Med!cal Products Distributors& Home Care Com,oanies Since 1902 

September 19, 1995 

June Gibbs Brown


inspector General


7>epartrnent of Health and Human Semites


330 Independence Avenue, SW


Washington DC 20201


Dear Ms. Brown: 

I. INTRODUCTION 

“	 The Health Industxy Distributors Association (HIDA) is pleased to comment on the draft 

reports on wound care supplies, entitled “Que~”onaZdeMedicare Payments for Wwnd 

Care Supplies, “ “Miw2eting of Wwnd Care Supplies,” and” Wound Care Supplies: 

Operation Resiore Tmst Data,” issued by the Office of the Inspector General (OIG). 

HIDA is the national trade association of home care companies and health and medical 

product distribution firms. Created in 1902, HIDA now represents over 900 home care 

companies and wholesale and retail medical product distributors with nearly 2000 

locations. Pursuant to a physician prescriptio~ HIDA members provide durable medical 

equipment prosthetics, orthotics, and mppiies (DMEPOS) seMces to Medicare 

beneficiaries who are being treated in their homes and to beneficiaries residing in nursing 

homes. 

II. STATEMENTS IN RESPONSE TO DRAFT REPORTS 

The following are statements we have in response to your three& wound care reports. 

More detailed discussion of these points follow: 

Q	 ~ DMERCS DELAY IN DEVELOPING SURGICAL DRESSINGS MEDICAL POLICIES 

WITH APPROPRIATE UTILIZATION AND MEDICAL NECESPJ’I’YPARAMETERS WAS 

THE PRIMARY FA~OR IN CREATING AN ENWRONMXNT RJPEFOR POTENTIALLY 

ABUSIVE ACHVllTES. 

� ~ REVISION OF SECXION 2079 OF~ MEDICARE CARRIERS lw#UnJAL

EXPANDING THESURGICfi XIRESSTNGS B~ WASBASEDONSOUNDCLXNXCAL 

DECISION MAKING.pATIENTSSHOULD NOTBEINJEOPARDYOF LOSING A BENEFIT 

DUE TO THE FAILURE OF THE GOVHWMENT TO IMPLEMENT TIMELY UTILIZATION 

AND MEDICAL NECESSARY PARAMETERS � 

66 Canal Center Plaza, Suite 520, Alexandria, VA 22314.1538 . 703-549-4432 . FAX 703-549-6495 
THE OIG UNFAIRLY APPLKESDMERC DRAFT GUIDELINES WHICH WILL NOT BE IN 

EFFECI’ UNTIL OCTOBER 1, 1995 TO IDEN’ITFY QUESTIONABLE BILLING PRAC1’ICES. 

IMPLEMENTATION OF NEW MEDICAL POLICY GUIDELINES MUST BE GIVEN A 

CHANCETO TAKE EFFECX”BEFORE CONCLUSIONS PERTAINING TO APPROPRIATE 

BILLING CAN BE REACHED. 

THE OIG SURVEY PRESENTEDWLEA.D~G ~ o~-s~~ Q~s~oNs To 

NURSING HOMES AND BENEFICIARIES. 

THE OIG SHOULD SURVEY SUPPLIERSTO OIWAIN A FAIR DEPICTION OF THE 

MARKETPLACE BEFORE ISSUING THE FINAL REPORTS 

~ OIG INCORRECTLY IMPLIES THAT LEGITIMATE MARKET-DRIVEN SUPPLIER 

SERVICES ARE INAPPROPRIATE. 

THE OIG SHOULD GIVE GREATER EMPHASIS TO ITS FINDING THAT THE 

PROBLEMS ARE LIMITED TO ASMALL MINORITY OF SUPPLIERS AND NURSING 

FACIIXITES. 

III. ANALYSIS OF CONCERNS 

A. Survey Process And Ouestions 

At the onset, HIDA would like to express its disappointment in the manner in which these 

reports were developed and presented. The OIG wound care surveys which were mailed 

to nursing facilities and beneficiaries were one sided and misleading. Many of the 

questions directed at the nursing homes and the beneficiaries are phrased “has a supplier 

[or supplier representative] evef’ or “have you ever.” These questions are leading and 

ambiguous and if answered “yes,” would result in an unfavorable portrait of the supplier 

even though the practice may have occurred once in the course of ten years. 

Despite these misleading and one-sided questions, the OIG still found that the problems 

identified were limited to a very few suppliers, concentrated in a few states, and involved a 

limited number of nursing kilities. The OIG concluded that almost two-thirds of 

“excessive” wound care payments were found in eight states and that three-quarters of 

“excessive” payments were made to 48 suppliers, 7 percent of the sample. The surveys 

clearly reflect that the vast majority of suppliers are operating their businesses in a 

responsible manner. This point must be emphasized in the final reports. 

B. Sudier Services 

We are concerned that many of the questions seem to be critical of the valuable services 

which suppliers provide in the normal course of business. Supplier provide critical 

&nctions which hold down or eliminate costs the nursing tkility would incur including the 

following: 
.	 BiIIing\coIIection ~tities requked togenerate patient spdcprodu~u@tion 

iniiormation for payment of a product ilom payers for Medicare Part & Pti B and 

private 

.	 EDI,ar Co& Technology to support order processing product hand@k pacmfk 

billing and collectio% and labor efficiency through time and motion study 

.	 Delive@Transpor@tiondmento~ A&nagement activities related to the movement of 

a product to the facility, within a facility ;%arcode, inventory managemen~ storage) 

and activities required to send and receive product order information for the facility 

and for individual residents 

.	 Value-A&d Services including providing classes to nurses and clinicians for CEU 

credits on product availability and appropriateness for clinical objective 

These services are essential benefits that customers receive, and nursing fidities expect to 

receive, from suppliers in the marketplace and should be recognized and acknowledged by 

~ the OIG. 

In this report, there are numerous examples where the OIG has failed to acknowledge the 

~es of necessary services which suppliers provide. For example, question #l 5 of the 

nursing home .swvey asks the following: “Have supplier represen~”ves ever helped you 

aktennine which patients in your facility qualfy for Me&care reimbursement of wound 

care supplies?” Roughly 32 percent of nursing facilities responded “yes”. What is not 

stated is the fact that “ifthe supplier is billing Medicare for the supplies, the supplier has the 

responsibility to know Medicare’s billing requirements. The nursing facility frequently asks 

the supplier if a particular patient’s condition meets the Medicare coverage requirements. 

In this instance the supplier has helped the nursing facility determine if the patient qualifies 

for Medicare reimbursement. This help is a positive semice, not a negative one, and should 

be cited in your reports accordingly. 

Another exampleoccurswhen the OIG implies in the report(s) that supplier access to 

patient charts is inappropriate. Page seven of the ‘M2.rketing of Wound Care Sup@ef’ 

report states the following: 

“Woundcare suppliers have requestedto review medicalrecordsin 17 percentofnursinghomes. 

Mhm6~tititie -nm~tim*for tim —*kti~ . the 

eligibilityofpadents,viewthe physiciano- nxordmeabmntprogreudomandto gather 

supportingdwumenmo.onforbillingpurpmes.”

Medicare frequently reminds suppliers that they are ultimately responsible for insuring that 

the supplier’s claims are accurate and medically necessary. A responsible supplier would 

thus ask for verification that supplies bfled to Medicare are indeed medically necessary 

and used by the patient via access to nursing facility patient charts. It should also be noted 

that the new DMERC surgical dressing medical policy will require suppliers “to have a 

mechanismfor determiningthe quantityof dressingsthat the patientis actuallyusing and 

to adjusttheir provision of dressings accordingly.” 
C. i%e DMERC Process


The OIG should emphasize in the reports that the new DMERC process is critical to a


successful Medicare program. It is easy to lose sight of the fact that the DMERCS have


been iidly in place only since October 1, 1993. Wh.hMl time Medical Directors


developing very strict physician practice guidelines defining medical necessity for medical


supplies, including the development and publication of specific limits on how many units


of medical supply a particular Medicare beneficiary can receive, inappropriate over-


utilization has and wilJ be curbed. This controlled DMERC environment is the best model


for Medicare control of the progra~ particularly in comparison to nursing home cQst


reports.


The problem that has occurred with surgical dressings was that the DMERCS failed to act 

in a timely manner to implement DMERC medical policies with definitive utilization and 

medical necessity parameters. The !ack of these definitive guidelines was the prime factor 

causing abusive billing practices. 

,,	 The OIG correctly acknowledges in their reports that the DMERCS have developed a 

policy to ciari@ the coverage of the wound care benefit. This policy is expected to be 

eff’ve October 1, 1995. While HIDA has requested delay in implementation of the 

policy until cefiain details are resolved, HIDA has long advocated that the development of 

consensus DMERC surgical dressings medical policies is a necessary solution to 

addressing potential fraud and abuse. 

D. Ihe OIG Unfairlv AudiedDA4ERC Drafi Guiaklines Which Are Not In Effect 

W is perplexing is the fact the OIG in its Wmnd Care Supplies: Operation Restore 

That and Queti”onable Medicai Paymentifor Wnmd Care Supplies reports “applied the 

proposed DMERC dratl guidelines to these claims [claims analyzed for purposes of the 

reports] to ident@ questionable billing practices.” The OIG is thus developing conclusions 

on what products “exceeded utilization guidelines” based on a policy that wasn’t in effkct 

during the time period studied (June 1994 through Febrwuy 1995). Further, we question 

the OIG’S assumption that one type of wound cover equals one wound site. A patient with 

multiple wounds coul~ and many times does, use the same type of wound cover for 

treating more than one wound. This assumption by the OIG led to an overstatement of 

how many wound care products were unnecessary since it didn’t account for the fact the 

product could be used for more than one wound. 

HIDA ‘uges the OIG to allow the new DMERC surgical dressing guidelines to be given a 

chance to take effkct before reaching any definitive conclusions. The product utdization 

guidelines combined with the billing modifiers, which identi& the number of wounds on 

which a particular product is being use~ should create fiture data which can be 

meaningtidly analyzed. The draft OIG reports do not provide accurate data because they 

were based on a policy not implemented. 
W. HIDA RECOMMENDATIONS 

H.IDA is interested in working with the DMERCS, HCF& the OIG, nursing homes, 

beneficiaries and others to ensure that the surgical dressigs benefit provides necessary 

care to beneficiaries without any Medicare tiudulent abusive practices. In addition to 

revising its fln.aireport to address the concerns raised in this statemen~ HIDA offers the 

following recommendations. We are interested in meeting with you to discuss how best to 

implement them. 

A. CMN’S For Abusive Sutmliers And Overutiiized?tems 

First, we agree with the OIGS recommendation to HCFA that they “target their limited 

program integrity resources to those areas identified as most vulnerable to abuse.” This is 

precisely why HIDA has strongly recommended that those suppliers placed on a list by the 

Secretary of Health and Human Services (“Secretary”) in accordance with Section 

1834(a)(l S)(B)(i) and (ii) of the Social Security Act (amended by the Social Security Act 

“	 Amendments of 1994) be subject to the certificate of medical necessity (CMN) physician 

completion requirement in Sections 1834(j)(2)(A) and 1834a(16). Section 1834(a)(15)@) 

states that the “Secretary may develop and periodically update a list of suppliers of items 

for which payment may be made under this subsection with respect to whom (i) the 

Secretary has found that a substantial number of claims for payment under this part for 

items fhrnished by the supplier have been denied on the basis of the application of section 

1862(a)(l) ~iterns and services. ..are not reasonable and necessary for the diagnosis or 

treatment of illness or inju@]; or (ii) the Secretary has identified a pattern of 

overutilization resulting from the business practice of the supplier.” 

It is imperative that HCFA and the DMERCS develop and make available to suppliers the 

criteria under which a supplier would be placed on this prepayment list, and the 

procedures suppliers would follow to appeal any such determination. Suppliers must be 

afforded appropriate due process before being placed on such a list. 

Further, suppliers should be subject to the CMN physician completion requirement for 

those, if any, items which are placed on a list by the Secretary in accordance with Section 

1834(a)(l 5)(A) of the Social Security Act. Section 1834(a)(15)(A) states that “the 

Secretary may develop and periodically update a list of items for which payment maybe 

made under this subsection that the Secretary determines, on the basis of prior payment 

~erience, are frequently subject to unnecessary utilization throughout a carrier’s entire 

semice area or a portion of such area.” ~ for example, it is deemed that surgical dressings 

have been overutilized then a medical necessity form should be required. Once aga@ it is 

imperative that HCFA and the DMERCS establish a fair process, with appropriate due 

process considerations, to ensure that overutilized items are determined in a fhir manner. 
B. Technical Review Committee To Review D&a 

Secon& HIDA believes the OIGS recommendation to the DMERCS to “edit screens...to 

track such wound care products as tape and hydrogel” is an important step in ehhmting 

any potential Iiaudulent and abusive activity. However, the DMERCS ad HCFA can and 

sh~~d do more in this area. As we have stated on numerous occasions, HID-Ais eager to 

work with the durable medical equipment regional carriers (DMERCS) and Health Care 

Fiicing Administration (HCFA) in tracking and analyzing claims processing utilizdon 

data in order to ensure the appropriate administration and interpretation of the DMERCS 

surgical dressings medical re~ew- policies (as well as all other medical polices). This could 

be accomplished if the DiM!ZRCs an&or HCFA e~blisheda technical review committee 

whose pn:mary respom”bility wouki be to rew”ewand andjrze W resulting>om the 

surg”cal &essings Mealcare beneJt. The committee should consist of a wide range of 

representatives of organizations and patients, including suppliers, clinicians, claims 

processors, and patientdconsumers. The committee would suggest specific prepayment 

screens and refinements to the medical review policies based on post payment audits and 

otherrelevantinformation. The committee co~d generate regul& reports which would be 

the basis for positive changes to the surgical dressings policy. 

For example, it would be particularly helpfid to analyze the number of exceptions to the 

utilization parameters. For example, if 80 percent of chirns require additional 

documentation in order to appropriately exceed the utilization parameters set forth in a 

particular provision of the policy, it would then be legitimate to question whether that 

parameter is appropriate. 

Consoli&ted Billin~ ProDosal 

Thir& HIDA supports efforts to consolidate all billing for medical supplies into a nursing 

iicility’s Medicare Part A cost report for billing which occurs during the Medicare 

covered nursing hcility stay. Therefore, only the nursing fmility muld bill for these 

services and supplies during the Medicare covered stay through its Part A cost report. To 

avoid any disruption of medically necessary supplies for the beneficiary, certain technical 

changes to Part A rules also need to be made. AUenteral and parented nutrition products 

should be recognized as part of a nursing facility’s ancilkuy cat% not routine costs. HIDA 

strongly opposes any changes to a supplier’s ability to bfl Part B for medical supplies 

fi.unished to Medicare beneficiaries after the first 100 day Part A stay. 
V. CONCLUSION ‘ 

HIDA appreciatesthe opportunity to comment on the OIGS draflwound care reports. 

Please contact myself or Stephen M. ~ Ass&ant Director of &mrnrnent Relations, 

Regulatory MWrs at (703) 549-4432 if you have any questions or comments. 

.. . . 

shcw/ .


Cara C. Bachenheimer, Director 

Government Relations4’ cc:	 George Grob, OIG 

Penny Thompsoq OIG 

Rob Vko, OIG 

Judy Bere~ HCFA 

S. Wayne Kay, HIDA 

Craig Jefies, HIDA 
IHMA
 .,. AI Tli \Du STRY MANuFACTURERS ASSOC #, ’old 

September 20, 1995


The Honorable June Gibbs Brown


Inspector General


Department of Health& Human Services


330 Independence Avenue, S.W.


Room 5246


Washington, D.C. 20201


Dear Ms. Brown:


The Health Industry Manufacturers Association (HIMA) is pleased to be asked by your office to


respond to the three draft reports concerning wound care supplies. We will be limiting our


comments to the two reports, “Questionable Medicare Payments for Wound Care Supplies” and


“Wound Care Supplies: Operation Restore Trust Data.” The Health Industry Manufacturers


Association (HIMA) is a Washington, D.C.-based national trade association representing more


than 700 manufacturers of medical devices, diagnostic products, and health information systems.


HIMA’s members manufacture more than 90 percent of the nearly $50 billion of health care


technology products purchased annually in the United States.


First and foremost, HIMA firmly believes that the decision of HCFA to expand the wound care


benefit was the medically correct decision and no reduction in the current scope of the benefit


should be entertained. The previous limitations applied to wound care coverage were not in the


best interests of Medicare beneficiaries. At the same time, we have been on record both verbally


and in written correspondence with HCF~ the DMERC medical directors and the OIG that


appropriate management controls needed to be integrated in the implementation of the wound


care benefit to avoid inappropriate or fraudulent practices. HIMA has repeatedly expressed


concern that the filure to implement these controls contemporaneously with the expansion of


the wound care benefit would lead to problems with abusive or possibly fraudulent activities.


Chronology of HIk?4’s Role in the Expansion of the Wound Care Benejit 

Since 1992, IIIA@ in collaboration with the National Pressure Ulcer Advisory Committee 

(NPUAP) and the Wound Ostomy Continence Nurses Society (WOCN), has worked with both 

HCFA and the DMERC medical directors to present proposals for updating HCPCS codes and 

medical coverage policies that would reflect current clinical practice and wound care technology. 

In fact, in March 1993, HCFA asked HIN@ NPUAP and WOCN to present a consensus 

World Leaders in i4ea/fh Care /nnovaf/on 
The Honorable June Gibbs Brown


September 20, 1995


Page 2


proposal and educational seminar for the DMERC medical directors to define surgical dressing 

products and their clinically appropriate usage from a mu[ti-disciplinary health care pro.tider 

perspective. Even at that time, our proposal included recommendations that addressed potential 

fraud and abuse.1 

In 1993, the DMERC medi -al directors released their draft coverage policy on surgical


dressings. m along with dozens of other clinical and provider associations commented on


the restrictiveness of the policies.2 The comments included “the two-week coverage limitation of


surgical dressings was unretilistic and unsupported; the debridement criteria significantly deny


appropriate and necessa~ treatments, the definition of surgical wounds was narrow and


inappropriate and that classification and use specifications of dressings were inappropriate and


limit the proper treatment of wounds.”


The DMERC medical directors noted that they were prevented from making any substantive


changes in the draft policies due to the restrictive nature of Section 2079 of the Medicare


Carriers Manual, which they consider to be national policy. Over 30 beneficiary, clinician and


industry groups met with HCFA Coverage Director Bob Wren in September 1993 to present a


draft of a proposed revision to this policy. After a meeting with HCFA Administrator Bruce


Vladeck and Dr. Helen Smits in December 1993, agreement was reached on a rewrite of section


2079.


Since that time, m in tandem with clinical and supplier associations, has worked with 

HCFA and the DMERC medical directors on the rewriting of section 2079, and the current final 

medicrd policy on surgical dressings. Furthermore, the National Coalhion for Wound Care (of 

which HIMA is a member) gave recommendations on utiliition parameters for surgical 

dressings to help curb fraud and abuse.3 These controls were not implemented. 

In February 1995, HIMA met with HCFA and OIG staff and representatives of clinical and 

supplier associations to address the DMERCS’ allegations of fraud and abuse in the wound care 

benefit.4 HCFA and OIG staff were reminded that, due to the delayed implementation of the 

final DMERC coverage policy, utilization and quality assurance standards were not in place. 

This lack of controls were a factor in the allegations of abuse in the industry. 

Specifzc Comments 

Any review of claims data must acknowledge the fact that the revisions of section 2079 policy 

created a new wound care benefit. Comparisons of data before and after the date of 

implementation are inherently suspect because the benefits are not comparable. 

In reviewing the draft report “Questionable Medicare Payments for Wound Care Supplies,” 

HIMA has concerns over the methodology used to chronicle the “excessive utilization evident in 
� 

� 

� 

� 

The Honorable June Gibbs Brown 

September 20, 1995 

Page 3 

all wound care products.” We believe that the OIG has taken inappropriate clinical utilization 

parameters to review clinical practice retrospectively. We submit that to take utilization 

parameters fioin a final coverage policy that is not yet in force and apply tliem to those claims is 

totally inappropriate and can only lead to erroneous conclusions about utilization. This situation, 

coupled with the fact that HIN@ along with many of the clinical and supplier associations, 

believes that sf:me of the utilization parameters in the final Dh&RC cover ~.gepolicy (e.g., 

hydrogel) are incorrect makes for a dramatic overstatement by the OIG concerning the utilization 

of wound care products. 

Along these lines, in reviewing Appendix C of the draft report, “Wound Care Supplies: 

Operation Restore Trust Data,” we would like to offer the following specific points: 

In the hydrogel category, the alleged excessive overutilization was based on the


new utilization parameter of three ounces in 30 days, whereas the old utilization


parameter was at least once a dy. This is one of the utilization parameters in the


October 1995 final policy that we are in disagreement with the DMERC medical


directors and have sent them comments to this effect.


In the gauze category, we question what products were used in the


K02 18/A4200KD category, because to our knowledge no products exist in retail


catalogs (i.e., Briggs, Suburban Ostomy) that fit this categoxy.


In the A4323 category, there was $14,684 paid for saline solutio~ which is a noncovered item. We question why the DMERCS paid this since it was a noncovered item. 

Furthermore, in regard to tape, we wish to make the following points: 

Previous medical policy, including transitional policy, reimbursed for “tape, any 

type, any size” on a per roll basis, without regard to utilization on wounds. In 

effect, a small length roll of tape, e.g., 1 x 18 inches was reimbursed at the same 

rate as a standard length roll of e.g., 1.5“ or 2“ x 10 yards. The old and 

transitional policies encouraged overpayment for small rolls, but underpayment 

for the longer rolls and overutilization of tape. The new medical policy, with 

reimbursement by the” 18 square inches,” will greatly reduce incentives for 

overutilition and overpayment. This change just went into effect in June, 1995, 

afier the OIG audit, and so none of the OIGs sample includes this important 

change. Our expectation is that a similar sample audit conducted in 1996 will 

show significant improvement in the area of excessive payment for tape. 

It is our suspicion that a large amount of excessive payment for tape came about 

in conjunction with the use of kits, where supplies, including tape, have been 
The Honorable June Gibbs Brown


September 20, 1995


Page 4


billed separately. Since the draft language of the new medical policy has become 

available this summer, with its denial of coverage and payment for wound care 

kits, it is our feeling that kit suppliers and the biller/supplisrs which they have 

semiced, are changing their practices. We feel that this will result in fewer 

situations of excessive allowances and utilization of tape for surgical dressing 

applications. 

Finally, we would like to clari~ some of the statements made in the first few pages of the report 

entitled, “Questionable Medicare Payments for Wound Care Supplies.” On page 1, it states that 

“In 1994, 61?40of the average allowance per beneficiary was for specialty dressings, up from 

40’%in 1992.” We believe that this statement is misleading to the reader, since in 1992, these 

specialty dressings were not covered in the Medicare program. The next line states, “These 

specialty dressings are priced as high as $35 for large hydrogel wound covers.” Again, we take 

exception to this since the appropriate verb should be “reimbursed by the HCFA fee schedule” 

and not “priced.” Furthermore, in rechecking HCFA’s calculations for various codes, such as 

this one, we determined that the fee schedules were in many cases incorrect, due to arithmetic 

errors. This particular one, we estimated to be $25.65 compared to HCFAs calculation of 

$35.00. 

On page 2, the draft states, “the former HCFA policy covered only primary dressings resulting 

from a surgical procedure for usually no more than two weeks.” In reality, this DMERC policy 

was never in effect, and as I indicated earlier in our chronology of HIMA involvement in 

surgical dressing policy, there was such an outcry fi-om the beneficiary and clinical community 

concerning the lack of patient care in the proposed policy, that the policy was changed. 

Furthermore, before DMERC consolidation occurred, local medical coverage policy determined 

coverage to be anywhere Iiom two weeks to unlimited, depending on medical necessity. In fact, 

clinical associations (WOCN and NPUAP) have always recommended that the duration of 

coverage should be governed by indkidual medical necessity rather than predetermined limits. 1 

Conclusion 

As we stated in our introduction, we applaud HCFA for its decision to expand the wound care 

benefit. The benefit is medically sound and reflects the latest knowledge of wound care practice 

and technology. We do agree with the OIG and HCFA that the new guidelines set forth in the 

final DMERC coverage policy should provide the ilamework for the controls. We believe that 

HCFA and the OIG should give the medical policy guidelines a chance to take effect before they 

reach any conclusions regarding the fate of wound care coverage. This includes any 

recommendations regarding the bundling of wound care products. Agaiq since the reports are 

based upon a flawed analysis of da~ the reports are not meaningful and should not be released. 

The product utilization guidelines combkd with the billing modtiers which identfi the 

number of wounds on which a particular product is being used, and the addhional medical 
The Honorable June Gibbs Brown


September 20, 1995


Page 5


necessity criteria outlined in the policy should create fhture data which can be meaningfidly 

dissected. HIMA recommends that perhaps the OIG should reexamine the database a year after 

the benefit is in place to ensure the proper integrity of the benefit. 

We appreciate having the opportunity to comment. 

Sincerely, 

Marcia Nusgart, R. Ph.


Associate Vice President, Home Care


Enclosures 

MNlbcj 
Reference List 

1.	 Recommendations on Surgical Dressing Codes, March 23, 1993, NPUAP, WOCN, 

HIMA to HCFA and the DMERC medical directors. 

2.	 June 11, 1993 letter to DMERC medical directors from over two dozen provider, 

supplier, clinical and manufacturer associations concerning the DMERC medical 

coverage policy on surgical dressings. 

3. NCWC proposal to DMERC medical directors on surgical dressing proposal. 

4.	 November 21, 1994 HIMA letter to the Honorable June Gibbs Brown, to convene a 

meeting concerning alleged fraud and abuse in the wound care industry. 
4,4 laNATIONAL ASSOCLXTION FOR THE SUPPORT OF LONG TERMC 

P. O. Box 4857 c AUSTIN, TEXAS c 78765 � 5121451-0059 “ 4214 MEDICAL PARKWAY,SUITE 209 � AUSTIN, TEXAS � 

September 20, 1995 

Ms. June Gibbs Brown


i .~spector General


U.S. Department of Health and Human Services


330 Independence Ave., SW Room 54246


Washh@on, D.C. 20201


Dear General Brown: 

I am writing on behalf of the members of the National Association for the Support 

of Long Term Care (NASL), an organization of companies dedicated to the improvement 

of services for the long term care patient. NASL has been very active in the development 

of the surgical dressing benefit through its membership in the National Coalition for 

Wound Care (NCWC) and its own efforts. We are pleased to have this opportunity to 

comment on the drafts of the three reports, “Questionable Medicare Payments For Wound 

Care Supplies”, “Marketing of Wound Care Supplies”, and “Wound Care Supplies: 

Operation Restore Trust Data”. We are, however, troubled by the short time period given 

for the submission of these comments. These reports are quite detailed and a more 

thorough response could be offered if more time were available, This letter contains some 

general comments. Attached to this letter is a list of bullet points identi@ing the most 

serious analytical short comings we find with the reports. 

In reviewing these reports, we are forced to conclude that there are serious flaws 

in the analytical methodology used to arrive at the report’s conclusions. Several of the 

medical policies used to analyze the extent of questionable billing are the subject of 

considerable controversy in the wound care community at large. Moreover, it is 

consensus within the clinical community and within industry that each wound must be 

examined individually to determine the appropriateness of the surgical dressings used to 

heal the wound. The quantity of dressings necessary to heal a wound varies significantly 

based on a patient’s healing rate. Accordingly, we believe that the general conclusions 

contained in the reports are seriously flawed. 
Putting aside the doubts we have about the methodology, we wish to point out 

that the reports raise issues concerning the surgical dressing benefit that our organization 

has been working with HCFA and the DMERCS to address for some time. Since the 

surgical dressings benefit was formally revised to reflect current clinical practice, NASL 

has been working with the HCFA and the DMERC medical directors to develop and issue 

medical policies implementing the benefit. We advucated the development of utilization 

parameters for the various types of dressings to be tised, in order to identi~ those 

suppliers whose claims appeared to exceed the reasonable needs of the patient. We also 

advocated the restriction of the use of khs in the sale of surgical dressings in order to limit 

the excessive sale of products contained in such kit.’..In fact, we provided suggested 

language to the DMERCS for their consideration. As the reports correctly point out, the 

lack of clear policies had contributed to problems existing in the surgical dressing 

program. The overwhelmingly majority of these problems have been resolved in the past 

two years. 

The reports appear to show that there is sufilcient information available to identify 

a small group of suppliers whose practices are questionable. This demonstrates the 

efilcacy of using utilization guidelines to identi~ outliers. It also shows that the problems 

identified are limited to relatively few suppliers who have commanded a significant 

percentage of the market geographically. More than adequate enforcement mechanisms 

exist to discipline these suppliers who are abusing the system. We strongly believe in such 

an approach to control the abuse of the program. 

The revised surgical dressings benefit, which took effect March 1, 1994, was 

undertaken because of a clear recognition by the HCFA that a more clinically appropriate 

surgical dressing benefit was an important benefit of the Medicare program. In the 

absence of such a program, beneficiaries with serious wounds, such as Stage 4 decubitis 

ulcers, would be deprived of the benefits of appropriate wound healing products. Whale 

the reports concentrate on what is perceived to be a serious abuse of the system, we must 

not lose sight of the efficacy of the benefit in relieving the suffering of these patients ad 

avoiding the necessity for acute care of intractable wounds. 

We hope that these comments are helpfil to you. If additional time is granted, we 

will endeavor to supply more detail than contained herein. Thank you again for thk 

opportunity. 

Sincerely, 

Tom Kowalskl 

Executive Director 

TK/kh 

Ghhs, 9/20/95, respome 2 
BULLET POINTS 

“QUESTIONABLE MEDICARE PAYMENTS FOR WOUND CARE SUPPLIES”: 

The prior restrictive HCFA coverage poli .y was never filly implemented by the 

various carriers. Policy prior to 1994 as determined by the different carriers varied 

from the very restrictive policy described in this report to the policy of Pennsylvania 

Blue Shield, which allowed for coverage Gfa surgically debrided wound until it healed. 

The limit of the coverage of surgical dressings to a two week period post surgery was 

included in the proposed medical policies of the new DMERC medical directors and 

never really took effect. The rewrite of Section 2079 was the result of thk destructive 

and overly restrictive policy. 

The dollar utilization show in Table 1 is particularly instructive when analyzed in light 

of the above. The policies of the different carriers obviously led to higher utilization as 

shown by this table. 

Table 2 is incorrect. The policy referred to as existing prior to March of 1994 at best 

describes a policy that was in place for a limited number of providers depending on 

their carrier prior to the DMERC. Since this restrictive policy never applied to all 

providers, it is impossible to use it for any comparison on utilization. 

The methodology of the analysis of the surgical dressing claims is fatally flawed in 

several ways. One serious error is the use of the DMERC guideline for amorphous 

hydrogel wound filler. It is understood that this guideline is based upon an average 

wound size of 1 centimeter by 1 centimeter. In order to determine the proper amount 

of hydrogel needed to treat any given wound, it is absolutely necessary to know the 

size of the wound. Since this report dld not examine the pertinent information on each 

wound analyzed, its conclusions with regard to hydrogel are of no value whatsoever. 

The same criticism can be applied across the board to the use of the DMERC 

guidelines for this analysis. The DMERCS themselves concede that the guidelines 

must be applied on a wound by wound basis. It is far too simplistic to analyze 

utilization in the manner used in the report. 

Two assumptions of the analysis must also be questioned. First, the report assumed 

each type of wound cover represented a separate wound site. This assumption 

appears to disregard the use of Primary and Secondary dressings. A second 

assumption, that tape is used on both Primary and Secondmy dressings, is also in 

error. 

Gihhs, 9{20195, response 3 
.	 In choosing the claims to analyze the utilization of tape, the investigators used a 

methodology pre-ordained to result in overutilization. They appear to have 

deliberately chosen those claims for which the highest possible billings were submitted. 

�	 The contention that excessive utilization is evident in all wound care products is 

clearly in error. In using the DhlERC guidelines, the investigators failed to recognize 

the dispute that indust~ and the clinical community have concerning the utilization 

parameters for secondary dressi~~gs.While the DMERC policies would appear to limit 

the frequency of change of some secondary dressings to a lower limit than the primary 

dressing, this limit is clinically ui.sound. Clearly, secondary dressings must be changed 

when the primary dressings are changed. By applying this unsound policy, a finding of 

overutilization is predetermined for many secondary dressings and for many primary 

dressings when used as secondaries. This is the reason for the findings on page 8 that 

foam dressings and hydrogel wound filler are heavily overutilized. This combination 

of dressings is very popular among the clinical community and the use of a foam 

secondary is crucial in allowing the hydrogel to maximize its dwell time. The 

guidelines promulgated by the DMERC medical directors would result in erroneous 

findings both as to the hydrogel for the reasons stated earlier and as to the foam 

dressings which, when used as a primary, have a lower change frequency than 

hydrogel. 

.	 The investigators should take no comfort in the findings of DMERC D, since the 

examination conducted by that DMERC was of suppliers whose conduct was already 

in question. No general conclusions concerning the industry as a whole can be drawn 

or supported by findings related to individual suppliers that have been singled out 

because of their prior conduct. The conclusions concerning the amount of tape used 

are probably inaccurate. 

.	 During the period analyzed, the payment for tape was based on a per roll charge. The 

rolls most commonly used contained only three feet of tape and not ten yards. 

Accordingly, the analysis appears to be in error as to the amount of tape provided. 

.	 The fact that the five Operation Restore Trust States account for a high proportion of 

the wound care supplies is only logical since these are the states with the largest 

Medicare market. 

.	 Since the SNF or NF population is at highest risk for decubitis ulcers, it is not 

surprising that this population uses a disproportionate amount of the surgical dressing 

benefit. 

.	 Since the revision the surgical dressing benefit (~2079), NASL has been urging 

DMERC medical directors to issue clear medical policies for the surgical dressing 

benefit. Now that this is finally and belatedly coming about, OIG has used these 

policies to investigate, in a look back, past practices. This is absurd. OIGS 

description of its retrospective confirmation of this past state of events using the 

Gibbs. 9i20f95, response 
collaboratively developed criteria on highly selected data as a “report” based on a 

random claim sampling in the executive summa~ is misleading. OIG’s 

recommendations are infected by this error--prospective implementation of the same 

medical review criteria, as planned and revised where appropriate, is the right solution. 

“MARKETING OF J70UND CARE SUPPLIES” 

.	 NASL objected to the wording of the questionnaire from which this data was taken. 

At that time, we pointed o,:t that the wording of the questionnaire seemed to be biased 

and unlikely to develop mc,mingfil data. 

.	 Overall, we feel that the results of this survey show that the majority of suppliers and 

facilities act responsibly and avoid abuses. 

“WOUND CARE SUPPLIES: OPERATION RESTORE TRUST DATA” 

.	 This report seems to simply take the conclusions of the “Questionable Payments” 

report and rehash them for the Operation Restore Trust states. All of the points made 

above for that report apply to this one. 

Gibbs, 9\20/95, response