Department of Health and Human Services 

OFFICE OF 

INSPECTOR GENERAL 

JUNE GIBBS BROWN 

Inspector General 

MAY 2000 

OEI-04-97-00460 

Health Care Financing Administration 

Controls Are Not Preventing Duplicate 

Payments 
OFFICE OF INSPECTOR GENERAL 

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

amended by Public Law 100-504, is to protect the integrity of the Department of Health and 

Human Services programs as well as the health and welfare of beneficiaries served by them. This 

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

inspections, sanctions, and fraud alerts. The Inspector General informs the Secretary of program 

and management problems and recommends legislative, regulatory, and operational approaches to 

correct them. 

Office of Evaluation and Inspections 

The Office of Evaluation and Inspections (OEI) is one of several components of the Office of 

Inspector General. It conducts short-term management and program evaluations (called 

inspections) that focus on issues of concern to the Department, the Congress, and the public. The 

inspection reports provide findings and recommendations on the efficiency, vulnerability, and 

effectiveness of departmental programs. 

OEI's Atlanta Regional Office prepared this report under the direction of Jesse J. Flowers, 

Regional Inspector General, and Christopher H. Koehler, Deputy Regional Inspector General. 

Principal OEI staff included: 

Rodney Holliman, Lead Analyst

Tricia Davis, Program Specialist

Graham Rawsthorn, Team Leader

Brian Ritchie, Program Analyst

Barbara Tedesco, Mathematical Statistician

To obtain copies of this report, please call the Atlanta Regional Office at 404-562-7723. Reports 

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

http://www.dhhs.gov/progorg/oei 
June Gibbs Brown

Inspector General

Health Care Financing Administration Controls are not Preventing Duplicate Payments, 

OEI-04-97-00460

Nancy-Ann Min DeParle

Administrator

Health Care Financing Administration

The Health Care Financing Administration (HCFA) and contractor staff expressed concerns

that regional home health intermediaries and durable medical equipment regional carriers

were being inappropriately billed twice for medical equipment and supplies. At their

request, we initiated an evaluation to quantify the extent of the duplicate payments.

We found vulnerabilities that allowed for duplicate payments to be made for supplies and

equipment provided to Medicare home health beneficiaries. First, intermediaries do not

know what supplies they are paying for because the coding system allows providers to

submit claims for a wide variety of supplies using non-descriptive codes. Second, only

about 3 percent of home health providers are subjected to complete audits that would

potentially reconcile supply claims. Finally, HCFA Common Working File (CWF) edits do

not check for duplication of payments on most equipment and supplies.

The actual inappropriate payments, slightly over $530,000 in 1997, were relatively small

compared to other payment error vulnerabilities in the Medicare program. Of this,

$379,510 was for supplies and $150,722 was for equipment.

The vulnerabilities for supplies may be eliminated when Medicare implements the

prospective payment system for home health, scheduled for October 2000. At that time,

payment for supplies will be included in the prospective payment rate. However, the

vulnerabilities for supplies will remain until the prospective payment system goes into 

effect. 

The vulnerabilities for equipment will continue indefinitely, unless steps are taken to

eliminate them. We suggest that HCFA examine its payment, coding, and editing practices

to enable carriers and home health intermediaries to avoid duplicate equipment payments. 

For example, HCFA could require all medical equipment bills be submitted to the durable

medical equipment regional carriers using the HCFA common procedure coding system. 

Another potential solution would be to expand CWF system edits to detect duplicate

billings between both entities. The HCFA may also want to assess other potential cost

effective solutions.
Page 2 

BACKGROUND 

The HCFA has primary responsibility for protecting the Medicare Trust Fund from fraud, 

waste, and abuse. To accomplish this goal, HCFA contracts with private insurance companies 

to process Medicare claims and conduct program integrity functions. 

Claims Jurisdiction and Responsibility 

The HCFA contracts with five regional home health intermediaries to process claims for home 

health care. Which intermediary processes home health claims generally depends on the State 

in which the home health agency is located. Home health providers file claims under both Part 

A and Part B. 

The HCFA contracts with four durable medical equipment regional carriers to process claims 

for durable medical equipment, prosthetics, orthotics and supplies. Which carrier processes 

equipment and supply claims is governed by a beneficiary’s place of residence. Suppliers are 

required to file claims under Part B. 

The HCFA’s claims submission requirements differ for submitting medical equipment and 

supply claims to intermediaries and carriers. Figure 1 highlights such similarities and 

differences. 

FIGURE 1

Claims Submission Requirements 

Part A Part B

Providers Suppliers

Supplies 

Revenue codes HCPCS codes 

required required 

Intermediaries Carriers 

Revenue and HCPCS HCPCS codes 

codes required required 

Equipment 
Page 3 

Medical Equipment Claims 

The HCFA requires home health providers to use both HCFA Common Procedure Coding 

System (HCPCS) codes and revenue codes when billing intermediaries for medical equipment. 

The HCPCS codes generally relate to specific items while revenue codes are used to group 

supply items. Providers are reimbursed for medical equipment according to the HCPCS fee 

schedule. 

The HCFA also requires suppliers to use HCPCS codes when billing carriers for medical 

equipment. The codes are itemized and reimbursed according to the HCPCS fee schedule. 

Medical equipment processed through the intermediaries share the same HCPCS codes as 

medical equipment processed through the carriers. 

Supply Claims 

The HCFA guidelines require home health providers to use revenue codes to bill intermediaries 

for medical supplies. Suppliers, on the other hand, are required to use HCPCS codes when 

billing carriers for supplies. 

Program Safeguards 

The HCFA requires intermediaries and carriers to conduct focused medical reviews on a 

certain percentage of processed claims. Present practices limit the reviews to providers and 

suppliers with aberrant billing histories. Intermediaries, when reviewing aberrant providers, 

request detailed descriptions and medical justifications for billed services and supplies. 

Intermediary and carrier claims are processed through a CWF. The CWF is used to obtain, 

maintain, and distribute beneficiary specific Medicare data. The CWF uses a Part A/B 

crossover edit that alerts intermediaries and carriers to potential duplicate payment situations. 

The CWF’s system edit for potential duplicate payments is triggered when dates of service and 

procedure codes are the same for intermediary and carrier claims. Questionable claims are 

then manually reviewed to ensure appropriate payment. 

Prospective Payment System 

The Balanced Budget Act of 1997 requires HCFA to implement a prospective payment system 

for home health agencies. The new payment system is schedule for October 1, 2000. The 

statute requires that payment for most items and services be made to the agency that 

established a plan of care. Medical equipment is not included in the prospective payment 

system. 
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METHODOLOGY 

We conducted a national inspection of home health providers’ and medical equipment 

suppliers’ equipment and supply claims. We analyzed equipment and supply billings for 

Calendar Year 1997. 

We interviewed HCFA central office and regional staff to determine what controls were in 

place to prevent duplicate payments. Additionally, we visited one intermediary and one carrier 

to discuss billing and payment processes and vulnerabilities. We also reviewed HCFA policies, 

carrier manuals, and the proposed home health prospective payment system regulation. 

Finally, we reviewed prior Office of Inspector General and General Accounting Office (GAO) 

reports and interviewed officials who prepared them. 

We used a 5 percent sample of the 1997 National Claims History file and identified 50,946 

Medicare beneficiaries with medical equipment or supply claims processed through 

intermediaries and carriers. These beneficiaries had over $26 million in intermediary charges 

for equipment and supplies. We randomly sampled 500 beneficiaries, 50 with equipment 

claims and 450 with supply claims. 

We compiled applicable equipment and supply claims data for each sampled beneficiary. To 

quantify duplicate billings, intermediary and carrier medical review staff reviewed and analyzed 

our data. Attachment A provides further details on our methodology. 

QUESTIONABLE PAYMENTS 

We identified $5,789 as possible duplicate payments for equipment and supplies for 33 

beneficiaries in our sample. The amount of questionable payments totaled $2,326 for 

equipment and $3,463 for supplies. The following examples illustrate such questionable 

payments. 

< One beneficiary had a wheelchair billed to a carrier and a similar wheelchair billed to an 

intermediary for two overlapping months. The rental charges for the second 

wheelchair totaled about $240. 

< Both a carrier and intermediary paid for surgical dressings for the same beneficiary for 

the same month. The questionable payments totaled $480. 

< In September 1997, an intermediary processed diabetic supply claims for a beneficiary. 

During the same month, a carrier reimbursed a supplier $71 for the same diabetic 

supplies. 

< A home health provider billed an intermediary for various equipment including a leg 

rest, walker, and commode in July 1997. A carrier paid $278 for the same equipment 

during the same month and for the same beneficiary. 

We projected the $5,789 in questionable payments made to suppliers for our sampled 

beneficiaries to the Medicare population that had both Part A and Part B claims as described 
Page 5 

in our methodology. We estimated that the amount of payments made in error to the suppliers 

was approximately $530,000 (+/- $57, 200 at the 95% confidence level). 

VULNERABILITIES 

In a 1995 report,1 GAO recommended controls to prevent duplicate payments by 

intermediaries and carriers for supplies. The HCFA did not implement the recommendations 

because it believed a proposed Medicare Transaction System would alleviate the identified 

problems. However, the new system was not implemented. Therefore, HCFA did not tighten 

controls to prevent duplicate payments for equipment and supplies. Thus, HCFA’s payment 

process for equipment and supplies is still vulnerable to duplicate billing. 

Cost Reports 

Intermediaries pay supply claims without knowing specifically what they are paying for. To 

illustrate, HCFA policies allow home health providers to bill for a wide variety of supplies 

under revenue codes. The revenue codes do not adequately describe the type and amount of 

supplies billed for under each code. For example, one of the beneficiary claims that we 

reviewed had $3399 billed under revenue code 270 for medical supplies. The bill did not 

provide any other details that would allow the intermediary to determine the appropriateness of 

the charges. We requested that the provider submit supporting documentation and discovered 

that the intermediary had paid for such items as 4x4 gauze, tape, ostomy pouches, sterile Qtips, and gel wipes. The supplies were all appropriate in this example. 

Furthermore, according to HCFA and intermediary staff, intermediaries would obtain and 

analyze supporting documentation for supplies only if providers were subjected to a complete 

audit. Intermediaries annually conduct complete audits on about 3 percent of home health 

providers. 

Common Working File 

All claims processed through intermediaries and carriers are also processed through a CWF. 

The HCFA uses the CWF to compare all claims with historical beneficiary data to verify 

eligibility for benefits and payment. The HCFA also uses the CWF to conduct many types of 

automated edits to determine if payment for claims should be approved or rejected. The CWF 

edits, however, do not prevent duplicate payments for equipment and supplies billed to 

intermediaries and carriers. 

Supply claims processed through intermediaries and carriers do not share a common identifier. 

Therefore, identifying potential duplicate situations for supplies is very difficult. Although the 

CWF edits do not rely on an exact code match, the time period that the edit covers is too 

restrictive to identify duplicate payments. For example, the CWF edit would only identify a 

1 Medicare: Excessive Payments for Medical Supplies Continue Despite Improvements, GAO/HEHS-95-171 
Page 6 

potential duplicate payment if a carrier was billed for supplies for a specific date of service and 

an intermediary received a claim for an appropriate supply revenue code for the exact same 

date of service and same Medicare beneficiary. 

Claims for equipment, on the other hand, use HCPCS codes whether billed to intermediaries or 

carriers. Even with this common identifier, the time window used for CWF edits, as mentioned 

above, is too restrictive. Therefore, the CWF edits do not adequately prevent duplicate 

payments for equipment. 

Finally, the CWF does not have duplicate payment edits for the majority of the equipment and 

supplies processed by intermediaries and carriers. 

CONCLUSION AND RECOMMENDATIONS 

The HCFA and contractor staff raised concerns about duplicate payments for equipment and 

supplies under the Medicare home health program. As described in this report, we found 

vulnerabilities that allowed this to happen. However, the inappropriate payments were small 

relative to other vulnerabilities in the Medicare program. Furthermore, the prospective 

payment system for home health, when implemented, may eliminate the problem for medical 

supplies which will be included in the prospective payment rate. However, the vulnerabilities 

for supplies will remain until the prospective payment system goes into effect. Medical 

equipment remains vulnerable as it will not be included in the prospective payment rate. 

We suggest that HCFA examine its payment, coding, and editing practices to enable carriers 

and home health intermediaries to avoid duplicate equipment payments. For example, HCFA 

could require all medical equipment bills be submitted to the durable medical equipment 

regional carriers using HCPCS codes. Another potential solution would be to expand CWF 

system edits to detect duplicate billings between both entities. The HCFA may also want to 

assess other potential cost effective solutions. 

I hope that you find this information responsive to HCFA’s request. Please do not hesitate to 

call me or George Grob, Deputy Inspector General for Evaluation and Inspections, or have 

your staff contact Stuart Wright at (410) 786-3144 with any comments or questions. 

COMMENTS 

The HCFA concurred with our findings and recommendations. Specifically, that payment, 

coding and editing practices be modified to enable carriers and home health intermediaries 

avoid duplicate payments. The full text of their comments is attached in appendix B. 

Attachments 
Attachment A 

Detailed Inspection Methodology 

We used a 5 percent sample of the National Claims History file and identified 77,842 Medicare 

beneficiaries for whom providers had billed intermediaries for equipment and supplies totaling 

$33.8 million. Using the same file, we determined that 50,946 of the 77,842 beneficiaries also 

had equipment or supply claims billed to carriers. These beneficiaries had over $26 million in 

intermediary charges for equipment and supplies. 

Hence, we started with 50,946 Medicare beneficiaries who could have had questionable 

equipment and supply claims made on their behalf to both intermediaries and carriers. Out of 

the 50,946 beneficiaries, we identified 162 who had equipment claims and 50,784 who had 

supply claims at intermediaries and carriers in calendar year 1997. 

Equipment 

We randomly sampled 50 of the 162 beneficiaries with equipment claims. Using the National 

Claims History file, we compiled applicable equipment claims submitted to intermediaries and 

carriers for Calendar Year 1997. Equipment claims submitted to intermediaries or carriers 

share a common identifier (HCPCS codes). Intermediary and carrier medical review staff 

reviewed our data to identify questionable payment situations. 

Supplies 

We pulled a stratified random sample of 450 of the 50,784 beneficiaries with supply claims. 

Supply claims submitted to intermediaries and carriers do not share a common identifier. 

Carriers use HCPCS codes that identify individual supply items while intermediaries use 

revenue codes to group many supply items. Therefore, sampling beneficiaries with supply 

claims required several steps. 

First, intermediary and carrier medical review staff compiled a listing of HCPCS codes for 

supplies that were billable to carriers and would also “likely” be billed to intermediaries using 

supply revenue codes. 

Next, we reviewed claims for the 50,784 beneficiaries and identified 11,994 beneficiaries who 

had one or more of the “likely” HCPCS codes paid in Calendar Year 1997. The remaining 

308,790 beneficiaries did not have any of the “likely” codes paid in 1997. Therefore, we 

grouped them as “unlikely” supply matches. That is, they had supplies billed at both 

intermediaries and carriers during calendar year 1997, but the supplies billed to a carrier were 

not considered the type of supplies that should be billed to an intermediary. However, since 

we could not determine what specific supplies were billed to the intermediaries because of their 

use of non-descriptive revenue codes, we did not exclude the “unlikely” population from our 

sample. 

1
Attachment A 

We stratified the 11,994 beneficiaries that we considered “likely” based on dollar ranges of 

allowed charges. Table 1 illustrates our sample. 

TABLE 1 

SAMPLE FOR SUPPLIES 

Strata Population Sample 

SUPPLIES - UNLIKELY 38,790 50 

SUPPLIES - LIKELY 

likely matches < $100 5,340 50 

likely matches from $100 < $500 3,575 50 

likely matches from $500 < $3,000 2,580 100 

likely matches equal to or greater than $3,000 499 200 

Sub Total of Supplies - Likely 11,994 400 

TOTAL 50,784 450 

Next, using the National Claims History data, we identified the intermediary that processed 

each beneficiary’s home health claims. Each intermediary requested the appropriate home 

health provider to submit the supporting documentation for the 450 beneficiaries sampled from 

our supply strata. We obtained medical records and lists of billed items, including supply 

items, from home health providers for 384 of the 450 beneficiaries. Home health providers did 

not provide requested documentation for the remaining 66 beneficiaries. 

Intermediary and carrier nurses reviewed the lists of billed items. Based on the line item 

descriptions, the nurses identified supply items that were billable to the carriers and assigned 

them HCPCS codes. Finally, armed with compilations of supply items billed to intermediaries 

and carriers for the 384 beneficiaries, the nurses identified questionable payments. 

2
Attachment A 

We did not reconcile whether the home health provider or the supplier billed appropriately for 

each questionable payment. Instead, we assumed the carrier payment was the questionable 

payment. Therefore, we calculated the questionable payments for supplies based on the actual 

carrier allowed charges. 

Confidence Intervals 

Sample Size Questionable 

Payments 

+/- Lower 95% 

Confidence Interval 

Upper 95% 

Confidence Interval 

500 $530,232 $57,200 $473,032 $587,432 

3
Attachment B 

4
Attachment B 

5