Department of Health and Human Services 

OFFICE OF 

INSPECTOR GENERAL 

MEDICARE ORTHOTICS 

JUNE GIBBS BROWN 

Inspector General 

OCTOBER 1997 

OEI-02-95-00380 
OFFICE OF INSPECTOR GENERAL 

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

protect the integrity of the Department of Health and Human Services programs as well as the 

health and welfare of beneficiaries served by them. This statutory mission is carried out through a 

nationwide program of audits, investigations, evaluations, 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 OIG’s 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 inspection reports provide findings and recommendations on the 

efficiency, vulnerability, and effectiveness of departmental programs. 

OEI’s New York Regional Office prepared this report under the direction of Alan S. Meyer, 

Ph.D., Regional Inspector General. Project staff included: 

New York Retion 

Nancy Harrison, Project Leader 

Lucille Cop, R.N. 

Thomas Bollyky 

Jennifer Caves 

Carmen Sanchez, Administration on Aging 

Headquarters 

Stuart Wright 

Brian P. Ritchie 

Barbara R. Tedesco 

For additional copies of this report, please contact the New York Regional Office at 

(212) 264-1998. 
Department of Health and Human Services 

OFFICE OF 

INSPECTOR GENERAL 

MEDICARE 

sERV 

ORTHOTICS 

JUNE GIBBS BROWb 

Inspector General 

OCTOBER 1997 

OEI-02-95-00380 
EXECUTIVE SUMMARY 

PURPOSE 

To determine the extent of questionable billing practices for Medicare orthotics and how it 

relates to the orthotics industry and to carrier policies and procedures. 

BACKGROUND 

An orthosis is a device, sometimes called a brace, applied to the outside of the body that 

supports a body part. Recent Office of Inspector General (OIG) studies have raised concerns 

about orthotics in general. This inspection is one of many the OIG has undertaken 

addressing durable medical equipment and related devices. 

Any supplier with a HCFA provider number can provide and bill for orthotics. Suppliers of 

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

doctors’ offices. Some suppliers specialize in orthotics while others supply orthotics as well 

as a wide range of durable medical equipment. Suppliers may manufacture the devices in 

their own workshops or obtain devices from other companies. An orthotist is a health 

professional who treats musculoskeletal disorders by designing and fitting custom-made 

orthoses. Orthotists are certified by professional organizations. No State presently licenses 

orthotists but several States are currently considering licensing legislation. 

We used a combination of methods in conducting this inspection. A medical records review 

by medical experts determined if the physical conditions of our sample Medicare 

beneficiaries warranted the use of an orthotic device. We then examined the billing records 

of each beneficiary to look at additional aspects of the use of orthotics and related Part B 

services. We supplemented these reviews with a mail survey to Medicare beneficiaries, a 

mail survey to orthotic suppliers, telephone interviews with carrier representatives, and a 

review of carrier policies. 

FINDINGS 

At Least Nineteen Percent of Orthotics Provided are Medically Unnecessary 

The medical record review found that at least 19 percent of the orthotic devices provided are 

medically unnecessary. Some beneficiaries who received orthotics did not have conditions 

that warrant the use of a device. This represents $6.4 million in Medicare payments. Many 

of the unnecessary orthotics are not rehabilitative, as required. Another 5 percent of orthotic 

devices are medically questionable, which represents $1.5 million. In many of these cases, a 

more sophisticated and expensive device was provided when a lesser device would have 

offered the same benefit. 

Our method of medical review focused on the sample device and did not address the other 
devices provided to the beneficiary in the sample year. Therefore, the percent of devices 

that are medically unnecessary is probably understated. To gain additional insights we 

conducted a review of billings. We found that 54 percent of the billing cases have some type 

of questionable orthotic billing. The two most common problems are many devices being 

billed over a short time frame and several seemingly unnecessary add-on devices being 

billed. 

Durable Medical Equipment Companies are More Likely than Orthotists to Supply 

Questionable Orthotics 

The Medicare orthotics industry is fairly evenly divided between two very different types of 

suppliers: orthotists and durable medical equipment companies. According to the billing 

review, 68 percent of questionable cases are supplied by a durable medical equipment 

company, in contrast to 35 percent of orthotist cases. Devices that do not have fitting 

requirements, such as upper limb devices, and devices provided in the southeast region of the 

country are all more likely to be questionable and more likely to be supplied by durable 

medical equipment companies. Also, beneficiaries supplied by durable medical equipment 

companies are more likely than beneficiaries supplied by orthotists to report never getting the 

device. 

Over Two-thirds of the Orthotics Billings in Nursing Facilities are Questionable 

Sixty-eight percent of the cases in nursing facilities are questionable. Durable medical 

equipment companies are more likely than orthotists to supply orthotics to beneficiaries in 

nursing facilities. Orthotists generally supply orthotics to beneficiaries who live at home. 

Most of the questionable cases in nursing facilities involve devices that do not have fitting 

requirements. All four medical equipment carriers believe there are problems in the way 

devices are supplied to beneficiaries in nursing facilities. They are particularly concerned 

that residents are receiving devices that are not rehabilitative, as required. Another concern 

is over-utilization. 

The Billing Controls of the Durable Medical Equipment Regional Carriers are Limited 

The medical equipment carriers have no policies for the great majority of the orthotic billing 

codes. The codes that do have policies account for 38 percent of the allowed Medicare 

dollars for orthotics in 1995. The carriers do not have policies for upper limb devices, 

which we have identified as most likely to be problematic. Two main reasons cited for the 

paucity of policies: the complexity of orthotics and the lack of clear medical consensus on 

the use of orthotic devices. Due to lack of policies, carrier prepayment checks are limited to 

utilization and supplier screens. 

All the carriers report upcoding and unbundling as major problems. The carriers say these 

problems exist because the current coding system is outdated and has not kept up with 

changes in orthotic technology. 

ii 
RECOMMENDATIONS 

We recognize and support the HCFA initiative underway with the Durable Medical 

Equipment Regional Carriers’ medical directors to find better ways of assuring proper 

payments for orthotics. Based on the nature of unnecessary devices and questionable billing 

that we identified, we recommend that HCFA, in concert with the Durable Medical 

Equipment Regional Carriers: 

Develop guidelines that better define orthotic devices, distinguishing among categories 

of devices such as custom-made and off-the-shelf; 

Develop policies for orthotic codes, giving priority to upper limb devices, which we 

have identified as most problematic; 

Develop screens for billing many orthotic devices on the same day or within a short 

time frame; 

Pay special attention to billing for orthotics in nursing facilities; 

Work with the American Orthotic and Prosthetic Association to develop a table of 

devices that should not be used together; and 

Consider stricter standards for who is allowed to bill for orthotics, such as requiring 

professional credentials for orthotic suppliers. 

COMMENTS 

The HCFA concurred with all of our recommendations. The full text of HCFA’s comments 

is in Appendix E. 

,.. 

111 
TABLE OF CONTENTS 

PAGE 

EXECUTIVE SUMMARY 

INTRODUCTION * . . . . . . ..s a....., a . . . . . . . . . . . . . . . . . . . . . . . 1 

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

� Medical Necessity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 

� Problems with DME Companies . . . . . . . . , . . . . . . . . . . . . . . . . . . . . . . 8 

� Nursing Facilities . . . . . . . . . ~ . . . . . ~ I ~ . . . . . . . . . . . . . . . . . . . . . . 10 

� Billing Controls . . , . . ~ s . . . . ~ o . o . . . . D. ~ . . n . . . . . I . o . e ~ D0 D. 0 11 

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

APPENDICES 

A: Sample ............................................. A-l 

B: Part B Services ........................................ B-l 

c: Confidence Intervals ..................................... C- 1 

D: Non-respondent Analyses .................................. D- 1 

E: Comments ........................................... E-l 

iv 
INTRODUCTION 

PURPOSE 

To determine the extent of questionable billing practices for Medicare orthotics and how it 

relates to the orthotics industry and to carrier policies and procedures. 

BACKGROUND 

Orthotic Devices 

An orthosis is a device, sometimes called a brace, applied to the outside of the body that 

supports a body part. The practice of providing orthoses is called orthotics, which literally 

means the systematic pursuit of straightening or correcting. The devices are usually made of 

rigid materials and are customized for an individual’s use. People who need orthotics range 

from the severely disabled, such as paraplegics or quadriplegics, to someone who requires an 

ankle brace for better gait. A person may need to wear the orthotic all the time for life, or 

every day until the condition improves, or some other time frame as prescribed by the 

physician. Since each orthotic is fitted for a particular patient’s use, an orthotic device 

cannot be used properly by any one else. 

Recent Office of Inspector General (OIG) studies have identified problems with certain 

orthotic devices and raised concerns about orthotics in general. A 1994 OIG study, 

“Medicare Payments for Orthotic Body Jackets” (OEI-04-92-01080), found 95 percent ($14 

million) of claims for an orthotic device called a body jacket paid by Medicare in 1992 were 

for non-legitimate devices. A related study, “Marketing of Orthotic Body Jackets” (OEI-04-

92-01081), identified problems in the marketing of body jackets. The present inspection is a 

result of the questions raised in the body jacket studies, which highlighted the need to look 

more broadly at orthotics as a whole. It is one of many inspections the OIG has undertaken 

addressing durable medical equipment (DME) and related devices. 

Medicare Coverage of Orthotics 

Section 1834(h) of the Social Security Act (the Act) provides for payment of orthotics and 

prosthetics as described in section 1861(s)(9). Prosthetics is the replacement of a body part. 

This inspection does not address prosthetics. The Health Care Financing Administration 

(HCFA) explains the definition of orthotic devices in 42 CFR 414.202 of its regulations, 

which states, “leg, arm, back, and neck braces, and artificial legs, arms, and eyes, including 

replacements if required because of a change in the beneficiary’s physical condition. ” A 

recent HCFA ruling clarifies that the Act’s orthotics benefit regarding braces is limited to 

leg, arm back, and neck braces that are used independently of other medical or non-medical 

equipment. 

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

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

1 
of an illness or injury or to improve the functioning of a malformed body member. Payment 

is prohibited for medical services that are for prevention, palliation, research or 

experimentation. 

In order for an orthosis to be covered by Medicare, it must be a rigid or semi-rigid device 

that is used for the purpose of supporting a weak or deformed body member or restricting or 

eliminating motion in a diseased or injured part of the body. Orthotics claims must have a 

prescription and/or a certificate of medical necessity signed by a physician. Unlike DME, 

orthotics may be provided in a skilled nursing facility, a nursing home, or in the 

beneficiary’s home. 

The HCFA developed a coding system called the HCFA Common Procedure Coding System 

(HCPCS) used for billing. The HCPCS codes LO100 through L4380, called L-codes, are 

designated for orthotic devices. There are other miscellaneous and temporary codes but this 

inspection focuses on L-codes only. There are 465 different L-codes for orthotics. In 1995, 

approximately $188 million was allowed for claims for these codes. 

The L-code listings give a brief description of the device and state whether the device needs 

to be molded to a patient model, custom fabricated, custom fitted, or have no fitting 

specifications. The durable medical equipment carriers explain custom fitted as when 

“substantial adjustments are made to a prefabricated item by a specially trained professional 

to meet the needs and/or unique shape of an individual patient.” Custom fabricated means 

the “brace is made for a specific patient from his/her individualized measurements and/or 

pattern. ” Molded to patient model is the “process in which an impression is made of the 

specified body part. The impression is used to make a positive model of the body part. 

Then the orthotic is custom fabricated and/or fitted using the model.” For the purposes of 

this inspection, we consider a device to have “HCFA fitting requirements” if the L-code 

definitions include the specifications of molded, custom fabricated, or custom fit. 

Medicare Durable Medical Equipment Regional Carriers 

Medicare Part B claims are processed by carriers under contract with HCFA. Carriers are 

responsible for ensuring that coverage requirements are met before approving payment. In 

October 1993, HCFA began processing claims for durable medical equipment, prosthetics, 

orthotics, and supplies through four regional carriers called the Durable Medical Equipment 

Regional Carriers (DMERCs). The four carriers, from regions A, B, C, and D, cover all 

the States, the District of Columbia, and Puerto Rico from their separate headquarters. 

Although fiscal intermediaries also process some claims for orthotics and other DME, this 

report focuses only on the Part B payments made by the regional carriers for orthotic 

devices. 

The Statistical Analysis Durable Medical Equipment Regional Carrier (SADMERC) is under 

contract to produce standard quarterly reports and provide analyses of claims data to identify 

trends and aberrancies. It also conducts postpayment medical review of national suppliers in 

order to determine if future corrective action is needed. All four medical equipment carriers 

2 
use these data to identify suspicious durable medical equipment and orthotic suppliers and 

high dollar and high volume claims for prepayment review. 

Fee Schedule 

The carrier determines fee schedules for most DME and prosthetic and orthotic devices. The 

fee schedule for orthotics gives the floor and ceiling allowed amounts for each L-code. 

Payment for orthotic devices is made on a lump-sum purchase basis using the lesser of the 

fee schedule amount or the actual submitted charge. Orthotics are not rented. Medicare 

pays for 80 percent of the allowed amount. The beneficiary, or the beneficiary’s secondary 

insurance, is responsible for paying the remaining 20 percent. The cost for orthotic devices 

range from $10 for a simple device to $2800 for a more sophisticated one. A supplier is 

paid the same amount from the fee schedule regardless of how many support services, such 

as teaching and fitting the beneficiary, it provides 

Suppliers 

Any supplier with a HCFA provider number can provide and bill for orthotics. Suppliers 

need no financial investment and experience, and little verification is done of their 

applications. Suppliers of orthotic devices include DME companies, orthotists, pharmacies, 

and doctors’ offices. Some suppliers specialize in orthotics while others supply orthotics as 

well as a wide range of DME equipment. Suppliers may manufacture the devices in their 

own workshops or obtain devices from other companies. 

Orthotists 

An orthotist is a health professional who treats musculoskeletal disorders by designing and 

fitting custom-made orthoses , Two organizations offer orthotist certification: the American 

Board for Certification in Orthotics and Prosthetics, Inc., commonly known as ABC, and the 

Board of Certification (BOC). The ABC sets standards of competency and grants a Certified 

Orthotist (CO) credential. To qualify for ABC certification in orthotics, an individual must 

have a college degree, have completed a postgraduate orthotist certificate program from an 

accredited institution, and have at least 1 year of patient management experience. The 

candidate must also pass two written exams and a 3 day clinical exam that tests the ability to 

design, fabricate, and fit a variety of orthoses. Certified practitioners must meet continuing 

education requirements every 5 years to renew their credentials. Currently, there are 

approximately 2,124 ABC certified orthotists in the United States. 

The BOC also certifies orthotists. There are more than 900 BOC certified orthotists. In 

order to sit for the BOC certification examination, which includes written and practical 

components, the applicant is required to have a high school diploma and minimum of 40 

hours of unspecified formal education. In addition, all prospective BOC orthotists need to 

have experience fitting orthoses. 

As of now, no State licenses orthotists. Several States, however, are currently considering 

licensing legislation. 

3 
According to ABC, the orthotist works from a physician’s prescription when providing an 

orthosis. The physician writes the prescription and the patient then sees an orthotist for an 

evaluation. Ideally, the orthotist and physician work together to determine the most effective 

course of action. The orthotist is responsible for: formulating the orthosis’s design and 

selecting materials and components; making all necessary casts, measurements, model 

modifications, and layouts; performing fittings; evaluating the orthosis on the patient; 

instructing the patient in its use; and maintaining patient records, all in conformity with the 

prescription. Since the orthotist is the supplier of the device, the orthotist can bill Medicare 

for it. 

American Orthotic and Prosthetic Association 

The American Orthotic and Prosthetic Association (AOPA) is a trade association for 

suppliers of orthotic and prosthetic devices. The AOPA publishes several journals and 

materials for patient education, lobbies for insurance reimbursement policies, monitors 

legislation, and conducts business education programs for members. 

Operation Restore Trust 

This inspection is a part of the Department of Health and Human Services anti-fraud 

initiative called Operation Restore Trust (ORT) designed to target fraud, waste, and abuse 

related to home health agencies, nursing homes, and durable medical equipment. The ORT 

initiative targets five States that account for 40 percent of the nation’s Medicare beneficiaries 

and program expenditures: California, Florida, New York, Illinois, and Texas. 

METHODOLOGY 

We used a combination of methods in conducting this inspection. A medical record review 

by medical experts was done to determine if the physical conditions of sample Medicare 

beneficiaries warranted the use of an orthotic device. We then examined the billing records 

of each beneficiary to look at additional aspects of orthotics and related Part B services. We 

supplemented these reviews with a mail survey to Medicare beneficiaries, a mail survey to 

orthotic suppliers, telephone interviews with carrier representatives, and a review of carrier 

policies * 

Sample 

We selected a stratified random sample of 658 line items from Medicare claims for orthotics. 

Before selecting the sample, we first chose 20 orthotic L-codes. The 20 codes, which 

together represent approximately 50 percent of the allowed charges for all orthotics in 1995, 

were selected based on one or more of the following three criteria: allowed dollars; rate of 

growth; and/or having been identified during preinspection as potentially problematic. From 

the HCFA 1995 1 percent Common Working file database of claims, we identified a universe 

of 1,708 line items that had one of the 20 sample L-codes. A claim line item shows the Lcode and number of devices billed for that code. More than one device for one code may be 

billed on the same line item. 

4 
The sample was stratified by seven major groupings of codes so we could compare code 

groups. It was not our intention to compare one specific L-code to another because the 

number of individual claims in the sample cells was too small. The grouping of codes was 

based on the part of the body the devices are supposed to support. We identified the 

beneficiary, the supplier, and the referring physician for each device in the sample. See 

Appendix A for more information on our sample selection and response rates and Appendix 

D for non-respondent analyses. 

Medical Record Review 

A medical records review was done by a medical review contractor. The review determined 

whether or not the records showed the beneficiary had a condition that warranted the use of 

the orthotic device that came up in our sample. The reviewers did m look at additional 

orthotic devices that may have been provided to the beneficiary throughout the year. For 

each beneficiary identified in the sample, we requested their medical records from their 

physician, home health agency, or nursing facility. We received 334 medical records for a 

response rate of 51 percent. Another 8 percent of the providers indicated that they did not 

prescribe the device. We analyzed the number of medical records received in relation to our 

billing history review. Those beneficiaries for whom we received no medical records, were 

more likely to have questionable billing histories. The records, prescriptions and certificate 

of medical necessity, and any other documentation received from the supplier to determine 

the medical necessity of the devices billed, were sent to a medical review contractor. The 

contractor had physical or occupational therapists screen the records and, when appropriate, 

refer the records for further review to a physician with a specialty in rehabilitative medicine. 

Billing Review 

In addition to the medical review, we also examined all orthotics billing records for each 

beneficiary in our sample. This review showed us additional aspects of the use of orthotic 

devices that the medical review could not. The billing review determined the following 

questionable categories: 

1) multiple devices (more than two of the same device) or many 

devices billed in a short time frame, 

2) atypical specialty for referring physician (such as pathologists 

who do not see patients), 

3) many add-on devices (parts added to basic devices that seem to 

be duplicates of parts already on device) billed, and 

4) a combination of the problems listed. 

While the medical review focused on the sample device, the billing review included all the 

orthotic and related Part B services. Each sample device had a related case history that 

showed all 1995 orthotics billings for the beneficiary who got the sample device. This gave 

us 658 case histories. A beneficiary’s condition may require an orthotic device and therefore 

the sample device would be deemed medically necessary by the medical reviewer, but if the 

sample device had several add-on items or if the device’s components were billed separately, 

the case would be deemed questionable based on the billing records. 

5 
The Medicare Part B beneficiary billing records include not only the sample device, but all 

1995 orthotic L-codes and related Part B services such as physical therapy, occupational 

therapy, and orthotic training billed for each beneficiary in the sample. See Appendix B. A 

registered nurse from the OIG project team reviewed the beneficiary histories, paying close 

attention to the diagnosis, the types and number of devices billed, the time frame for the 

billings, the related therapies billed, place of service, and the specialty of the referring 

physician. Based solely on the information in the histories, which did m include the 

medical records, the nurse made a judgment as to whether or not the histories raised 

concerns of questionable billing. 

Supplier Survey 

We identified the 370 different suppliers that supplied all the devices in the sample and 

contacted them by mail. The supplier response rate was 77 percent of the 658 cases. We 

asked the suppliers to send us a picture, detailed description, and any brochures of the 

sample device billed. We requested the certificates of medical necessity and/or prescription 

for each case in the sample. They were also asked to provide their most recent annual 

report, when applicable. We mailed the suppliers questionnaires about certain aspects of 

their business, such as how many orthotists they have on staff, who does the custom-fitting, 

who instructs the beneficiary, and how the coding and billing are done. The suppliers also 

identified themselves as DME companies, orthotist practices, or some other business. 

Beneficiary Survey 

Since the sample was picked using line items, some of the same beneficiaries were 

represented in more than one case. Of the 658 sample cases, 576 different beneficiaries 

were identified, 128 of whom are deceased. A mail questionnaire was sent to the remaining 

448 beneficiaries identified in the sample. If the beneficiary was identified in more than one 

sample case, he or she was asked to fill out one questionnaire for each device. Beneficiaries 

were asked to describe the type of orthotic provided to them and compare it to a sketch of 

the device from the AOPA manual that is used throughout the orthotics field. The 

beneficiaries were also asked about the process by which the device was provided and their 

experience with the device. The beneficiary response rate was 61 percent. 

Carrier Interviews 

We interviewed representatives from all four Durable Medical Equipment Regional Carriers 

by telephone. We asked them to identify any prepayment screens and edits they employ 

regarding orthotics. We also obtained and reviewed all medical policies and educational 

materials the carriers have that address orthotics. We discussed each carrier’s process for 

creating screens and edits and asked them what additional screens and edits they would like 

to have. 

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

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

6 
FINDINGS 

AT LEAST NINETEEN PERCENT OF ORTHOTICS PROVIDED ARE MEDICALLY 

UNNECESSARY 

Many beneficiaries receiving orthotics do not have conditions that warrant the use of a 

device 

The medical record review found that at least 19 percent of the orthotic devices provided are 

medically unnecessary. We project that the medically unnecessary devices represent $6.4 

million in Medicare payments. See Appendix C. 

Medically unnecessary orthotic devices are those that the physician medical reviewer 

concluded are inappropriate based on the information in the medical record. A device is 

labeled unnecessary for several reasons: if the beneficiary’s condition does not warrant an 

orthotic device; if the device offers no functional benefit; if the device is for prevention; or if 

it is for palliation, One example that is representative is a non-weight bearing patient, 

demented from Alzheimer’s Disease, who received two knee orthoses. The medical reviewer 

believes that passive range of motion exercises would be sufficient to prevent the increase of 

the contractures and that the orthoses were not functional devices, Another example is a 

patient receiving an immobilizing hand device where a cotton mitten or glove would prevent 

the patient from scratching herself. 

Compared to the devices that were reviewed and found medically necessary, the medically 

unnecessary devices are more likely to have no HCFA fitting requirements, more likely to be 

upper limb devices, more likely to be provided in the southeast region of the country, and 

more likely to be provided to beneficiaries in nursing facilities. The medically unnecessary 

devices are also more likely to be judged problematic in our review of orthotics billing. The 

characteristics of the unnecessary devices will be expanded upon in the subsequent findings 

of this report 

Another 5 percent of orthotics are medically questionable 

The 5 percent of orthotics that are medically questionable represent $1.5 million in Medicare 

payments. Medically questionable orthotic devices are those where the physician medical 

reviewer has questions about the medical necessity of the device. Often the device provided 

is more sophisticated and expensive compared to the device that the beneficiary’s condition 

actually warranted. An example is a bedbound multiple sclerosis patient who received two 

knee orthoses to prevent contractures of the knee joints when the reviewer felt that bivalved 

casts could be used just as effectively. Another example is a patient who had a stroke 

several years ago and the medical record showed a little tightness in the hip. This patient 

received a sophisticated abduction device while the medical reviewer felt a simpler device 

was indicated. 

7 
Like the medically unnecessary devices, the medically questionable devices also involve those 

with no HCFA fitting requirement, upper limb devices, and devices that were judged 

problematic in our review of orthotics billing. 

Fifty-four percent of beneficiaries have questionable billings. 

Since the medical record review looked at only the sample device billed, it probably 

understates the total number of devices that are medically unnecessary. Therefore, to gain 

additional insights, we conducted a further review of orthotic billings. Each sample device 

has a related case history that shows the orthotic billing for the beneficiary who received the 

sample device. Fifty-four percent of these cases show questionable billings. The two most 

common problems are many devices billed over a short time frame (43 percent of the 

questionable billings) and several seemingly unnecessary add-on devices billed (42 percent). 

Other problems were less common: 6 percent of the questionable cases are due to an atypical 

physician specialty, such as pathologists and psychiatrists, and 9 percent have a combination 

of the problems listed above. An example of questionable billing is the 86 year old nursing 

home resident with a diagnosis of decubitus ulcer. The devices billed for this beneficiary 

include three hand/wrist devices with multiple add-ons for thumb and hand and add-ons to 

lower limb devices. In this example a DME company supplied the devices. 

DURABLE MEDICAL EQUIPMENT COMPANIES ARE MORE LIKELY THAN 

ORTHOTISTS TO SUPPLY QUESTIONABLE ORTHOTICS 

The Medicare orthotics industry is fairly evenly divided between two very different types of 

suppliers: orthotists and DME companies. Orthotists account for 43 percent of Medicare 

orthotics supplied; DME companies account for another 50 percent. Doctor’s offices, 

pharmacies, and rehabilitation centers supply the remaining 7 percent. The findings 

presented here will focus on orthotists and DME companies only. As discussed in the 

introduction, orthotists usually have some type of professional certification. Their offices 

usually have few employees, Durable medical equipment companies, on the other hand, are 

not certified and may or may not have a certified orthotist on staff. A. few DME companies 

supply only orthotics, but most DME companies supply general durable medical equipment 

such as wheelchairs, support surfaces, and wound care supplies, as well as orthotics. In 

general, DME companies have more employees than orthotists’ offices. 

Sixty-eight percent of the cases where a DME company supplies the device are 

questionable, in contrast to 35 percent of orthotistcases. 

Many devices billed in a short time was the most common problem noted in the questionable 

DME company cases. In one case, a beneficiary was billed for the same expensive upper 

limb device on the same day of every month for 5 consecutive months. It is important to 

note that orthotic devices are purchased, not rented. In another example, a 72 year old 

beneficiary with contractures received five orthotic devices on the same day. A few days 

later, the supplier billed for replacement laces. The allowed charges for the replacement 

laces alone total $1,322. In many cases, multiple add-on devices were billed for a 

beneficiary supplied by a DME company. One beneficiary was billed a hand/wrist device, 

8 
only to get two more hand/wrist devices with multiple add-ons for the thumb and hand 6 

weeks later. 

Devices that do not have fitting requirements were more likely to be questionable and more 

likely to be supplied by DME companies 

About half the devices supplied have HCFA fitting requirements and half do not. More than 

two-thirds (69 percent) of cases without HCFA fitting requirements, however, were 

questionable while 39 percent with fitting requirements are questionable. 

Durable medical equipment companies supply the majority (69 percent) of the devices 

without HCFA fitting requirements while orthotists supply only 22 percent. The reverse is 

true of devices with fitting requirements: 65 percent of them are supplied by orthotists and 

22 percent are supplied by DME companies. 

The devices that do not have fitting requirements are often called “off-the-shelf” in the 

industry. These devices typically come in small, medium, and large and may have some 

type of strap or fastening mechanism to secure on the patient. Because these devices are not 

made specifically for an individual, many in the industry, especially orthotists, do not 

consider them to be “true” orthotics and believe they should not be included in the same 

category as orthotics. Orthotists supply 90 percent of the devices with the mold fitting 

requirement, which is the most complex fitting requirement, compared to 7 percent supplied 

by DME companies. Molded devices must be made specifically for an individual patient. A 

mold is taken of a patient’s body part and the device is constructed from that mold. 

Sixty-eight percent of cases where the supplier (either orthotist or DME company) buys the 

devices already assembled are questionable in contrast to 34 percent of the cases where 

suppliers make their own devices. Almost three quarters (74 percent) of orthotists report 

manufacturing the devices they supply whereas very few DME companies (2 percent) report 

manufacturing devices. The DME companies say they usually get the whole device from the 

manufacturer. 

Cases with upper limb devices are the most likely to be questionable. Almost all upper limb 

devices do not have fitting requirements. Seventy-four percent of the upper limb cases have 

problems compared to 44 percent of the lower limb cases. Durable medical equipment 

companies supply the great majority (88 percent) of upper limb devices. Orthotists supply 

just 5 percent of the upper limb devices. Orthotists are more likely to supply lower limb 

devices, most of which have fitting requirements. 

Durable medical equipment companies provide fewer services than orthotists; and suppliers 

that provide few services are more likely to supply questionable orthotics 

Most cases (83 percent) with suppliers that report they do not teach patients how to use 

devices are questionable and a little less than half (49 percent) the cases with suppliers that 

did report teaching are questionable. Only 20 percent of beneficiaries supplied by DME 

companies say they were taught to use the devices and many of these beneficiaries were 

9 
taught by nurses or therapists who are not associated with the supplying company. Another 

12 percent of beneficiaries supplied by DME companies say that no one taught them how to 

use the device. In contrast, 60 percent of beneficiaries supplied by orthotists say they were 

taught. 

We found that over three quarters (78 percent) of cases with suppliers that report they do not 

fit devices on patients are questionable. Durable medical equipment companies usually do 

not fit the devices. Only one quarter of the beneficiaries supplied by DME companies report 

being fit by a company representative. Almost 75 percent of the beneficiaries supplied by 

orthotists, however, report being fit with the device by the orthotist. According to 

beneficiary responses, orthotists are also more likely than DME companies to take 

measurements before supplying the device. If a DME company has an orthotist on staff, 

however, it is more likely than companies that have no orthotists on staff to offer more 

services, such as fitting devices and teaching patients. 

Beneficiaries supplied by DME companies are more likely to report never getting the device 

Twenty-three percent of the beneficiaries supplied by DME companies report never receiving 

any type of device or receiving a device that looked nothing like the sketch in the American 

Orthotic and Prosthetic Association manual that we sent them. The sketches in the manual 

are used throughout the industry to identify devices under L-codes. Only 5 percent of the 

beneficiaries supplied by orthotists report never receiving a device or receiving one that 

looked nothing like the sketch. 

Orthotics provided in the southeast region of the country are more likely to be questionable 

Sixty-one percent of the cases in the southeast, compared to 48 percent in the rest of the 

country, are questionable. Usually, this is because too many devices are billed in a short 

time period. The devices provided in the southeast are more likely to be supplied by DME 

companies and more likely to have no fitting requirements. 

OVER TWO-THIRDS OF THE ORTHOTICS BILLINGS IN NURSING FACILITIES 

ARE QUESTIONABLE 

Sixty-eight percent of the orthotics in nursing facilities are questionable and DME 

companies are more likely than orthotists to supply to beneficiaries in nursing facilities 

Overall, two-thirds of the beneficiaries getting orthotic devices live at home and one-third 

live in some type of nursing facility. Orthotists generally supply to beneficiaries who live at 

home and DME companies generally supply to beneficiaries in nursing facilities. Of those 

beneficiaries at home, 60 percent are supplied by orthotists and 33 percent are supplied by 

DME companies. Of those beneficiaries in facilities, however, 11 percent of the 

beneficiaries are supplied by orthotists while a far greater percentage (82 percent) are 

supplied by DME companies. The beneficiaries supplied by DME companies seem to 

include more of those in poor health: 71 percent of the beneficiaries who are now deceased 

had been supplied by DME companies whereas 15 percent had been supplied by orthotists. 

10 
Most of the questionable cases in nursing facilities (72 percent) involve devices that do not 

have fitting requirements. A common problem noted in nursing facilities is the billing of 

multiple hand/wrist devices on the same day or within a very short time period. 

The majority of DME companies (74 percent) report that they get referrals from physical or 

occupational therapists and nursing facilities. In contrast, only 7 percent of orthotists say 

that therapists and nursing facilities are referral sources Orthotists are more likely to get 

physician referrals than are DME companies. A great majority of orthotists (92 percent) 

report that they most often get their referrals from physicians, while just 13 percent of the 

DME companies report the same, 

Medical equipment carriers have concerns about the use of orthotics in nursing facilities 

All four medical equipment carriers believe there are problems in the way devices are 

supplied to beneficiaries in nursing facilities. A major concern is whether the residents 

receiving orthotic devices are rehabilitative, as required. The carriers believe that many 

devices supplied are not medically necessary. For instance, a rolled up wash cloth might be 

better for certain hand contractures than a sophisticated, cumbersome, and expensive 

wrist/hand device. A few carriers point out that a lot of orthotic devices, especially in 

nursing facilities, are prescribed by general physicians who give vague descriptions such as 

“ankle brace, ” then it is left up to the supplier to decide exactly what to supply and bill. 

Another concern in nursing facilities is over-utilization. One carrier representative reports, 

“In one case, the same knee and lower back orthotics were issued to every patient in a 

particular nursing facility. ” At least one supplier agrees with the carriers by saying, 

“individuals or companies have sales people on a quota and all they care about is putting 

orthotic devices on anybody. They just go in a nursing home and tell nursing [staffl that 

these people need splints and most of them don’t. ” 

The carriers also complain that contradictory devices are commonly billed to a single nursing 

home patient. The AOPA is currently developing a table that show codes that should not be 

used in combination with each other. 

THE BILLING CONTROLS OF THE DURABLE MEDICAL EQUIPMENT 

REGIONAL CARRIERS ARE LIMITED 

The medical equipment carriers have no policies for the great majority of the orthotic Lcodes 

The medical equipment carriers have specific medical policies addressing only 15 percent of 

the orthotic L-codes. These codes account for 38 percent of the allowed Medicare dollars 

for orthotics in 1995. Presently the carriers have published policies for spinal, ankle-foot, 

knee-ankle-foot, and ankle positioning orthoses. They do not have policies for upper limb 

devices, which we have identified as most likely to be problematic. 
The policies the carriers do have offer general definitions of devices that could be billed 

under the codes. The policies also give indications for the general purpose and use of the 

devices. For example, a policy indication would be “to reduce pain by restricting the 

mobility of the trunk. ” Some policies also have requirements for supplemental 

documentation, such as photographs of the device, or medical documentation to justify the 

prescription of a particular device. 

The carriers cite two primary reasons for the paucity of policies: the complexity of orthotics 

and the lack of clear medical consensus on the use of orthotic devices. However, policies 

for other durable medical equipment groups such as support surfaces have been developed 

despite the complexity of the issue and lack of medical consensus. The carriers explain that 

orthotics is a complicated subject due to the large number of devices and various L-codes and 

because there are significant differences between devices fabricated from raw materials for a 

particular individual and the “off-the-shelf” devices. These differences have yet to be 

defined. According to the carriers, they are currently working on developing policies for 

more orthotic codes and much of that work is directed towards delineating between the 

custom-fabricated and “off-the-shelf” devices. The carriers also say that the medical 

community, orthotists, and suppliers have not been able to build consensus on the proper use 

of orthotic devices. This disagreement makes it all the more difficult to develop policies. 

One carrier representative noted, “Without a medical consensus, it is a very complicated, 

slow process. ” 

Due to lack of policies, carrier prepayment checks are limitedto utilizationand supplier 

screens 

A carrier cannot implement widespread procedures for processing claims without a 

corresponding published policy. Therefore, claims are generally paid in good faith for those 

L-codes that are not addressed in a policy. When policies do exist, guidelines for that code 

are usually automated to assist the claims processor. Carriers have utilization screens that 

target billing for a particular code. An example of this type of screen is a limit of one 

particular device in the same year for the same beneficiary. 

The carriers also develop screens if they conclude there is a problem supplier. When a 

supplier is under review, all claims from that supplier are evaluated. Usually medical 

justification is required for each claim. Problem suppliers are generally identified through 

beneficiary complaints, utilization screens or post-payment reviews. 

The carn’ers cite problems withcoding 

All the carriers report upcoding and unbundling as problems. Upcoding is the practice of 

billing the device provided under a more expensive code than that device merits 

Unbundling is the separate billing of components, such as add-ons, that make up a single 

device. The carriers say upcoding and unbundling have become problems because the 

existing coding system is outdated and has not kept up with changes in orthotic technology. 

They say the L-codes were established when most orthotic devices were individually 

12 
manufactured or if the device was already made, it was substantially customized for the 

patient. Now the devices are increasingly “off-the-shelf” in nature. 

Carriers believe it is relatively easy to receive a provider number and supply orthotics. They 

suggest that the review of prospective suppliers be more rigorous. Another common 

recommendation was that provision of complicated, molded devices be limited to certified 

orthotists D 

13 
RECOMMENDATIONS 

We recognize and support the HCFA initiative underway with the Durable Medical 

Equipment Regional Carriers’ medical directors to find better ways of assuring proper 

payments for orthotics. Based on the nature of unnecessary devices and questionable billing 

that we identified, we recommend that HCFA, in concert with the Durable Medical 

Equipment Regional Carriers: 

Develop guidelines which better define orthotic devices, distinguishing among 

categories of devices such as custom-made and off-the-shelf; 

Develop policies for orthotic codes, giving priority to upper limb devices, which we 

have identified as most problematic; 

Develop screens for billing many orthotic devices on the same day or within a short 

time frame; 

Pay special attention to billing for orthotics in nursing facilities; 

Work with the American Orthotic and Prosthetic Association to develop a table of 

devices that should not be used together; and 

Consider stricter standards for who is allowed to bill for orthotics, such as requiring 

professional credentials for orthotic suppliers. 

COMMENTS 

The HCFA commented on our draft report and concurs with all of our recommendations. 

The full text of HCFA’s comments is in Appendix E. 

The HCFA agrees with our recommendation to better define orthotic devices, and is 

preparing a report to Congress that describes prosthetic devices, orthotics, and prosthetics 

covered under Part B that do not require individualized or custom fitting and adjustment. 

This report is recommending that the Medicare statute be revised to change the payment 

methodology for all prosthetic devices, orthotics, and prosthetics. 

The HCFA agrees with our recommendation to develop policies for orthotic codes, and is 

currently working with the durable medical equipment carriers (DMERCs) on the feasibility 

of issuing revised regional medical review policies. 

The HCFA agrees with our recommendation to develop billing screens for orthotic devices, 

and will work with the DMERCs to ensure that utilization/frequency edits are in place after 

the development and implementation of the new medical review policies. 

14 
The HCFA agrees with our recommendation to pay attention to billing in nursing facilities 

and believes that the development of policies and edits will strengthen their ability to control 

inappropriate billings for orthotics in nursing facilities 

In addition, the Balance Budget Act of 1997 contains a number of nursing home reforms 

including creating a prospective system for Part A covered services. This bundled payment 

will eliminate separate payment for orthotics as provided under a Part A stay. Also, for 

stays not covered by Part A, the statute requires the nursing facility to bill for items such as 

orthotics. When implemented, these reforms should help control inappropriate billings in 

nursing facilities. 

The HCFA agrees with our recommendation to work with the American Orthotic and 

Prosthetic Association to identify devises that should not be used together. The HCFA 

indicates that they are consulting with them and other relevant professional organizations in 

developing the regional medical review policies. 

The HCFA agrees with our last recommendation, to consider stricter standards as to who can 

bill for orthotics. Since HCFA traditionally relied upon States to determine the extent to 

which physicians and other health care professionals must be licensed in order to furnish 

health care services there is no explicit Medicare statutory authority in this regard. 

However, there is authority under section 1662(a)(A) of the Medicare statute to develop 

standards for “reasonable and necessary” medical services. Using this statute, HCFA expects 

to establish more stringent standards where State licensure is found to be inadequate. The 

HCFA is also considering limiting who will be eligible to supply orthotics in the proposed 

regional medical review policies. 

15 
APPENDIX A 

CODE 

LO420 -

LO430 -

LO700 -

L1680 -

L1686 -

L1832 -

L1844 -

L1845 -

L1855 -

L1960 -

L1970 -

L1990 -

L2036 -

L3730 -

L3740 -

L3805 -

L3860 -

L3904 -

L3963 -

LA310 -

L-CODES INCLUDED IN SAMPLE 

HCFA DESCRIPTION 

Thoracic-Lumber-Sacral Orthoses (TLSO) , two piece construction, molded to 

patient model 

TLSO, with interface material custom-fitted 

Cervical-TLSO, molded to patient model (Minerva type) 

Hip Orthoses (HO), abduction control of hip joints, dynamic pelvic control, 

adjustable hip motion control, thigh cuffs 

HO, Abduction control of hip joint, post-operative abduction hip type, customfitted 

Knee Orthoses (KO), adjustable knee joints, positional orthoses, rigid support, 

custom fitted 

KO, single upright, thigh and calf, with adjustable flexion and extension joint, 

medial-lateral and rotation control, molded to patient model 

KO, double upright, thigh and calf, with adjustable flexion and extension joint, 

medial-lateral and rotation control, custom fitted 

KO, molded plastic, thigh and calf sections, with double upright knee joints 

Ankle-Foot Orthoses (AFO), posterior solid ankle, molded to patient model, 

plastic 

AFO, plastic, molded to patient model, with ankle joint 

AFO, double upright free plantar dorsiflexion, solid stirrup, calf band/cuff 

(Double Bar BK Orthoses) 

Knee-Ankle-Foot Orthoses full plastic, double upright, free knee, molded to 

patient model 

Elbow Orthoses (EO), Double upright with forearm/arm cuffs, 

extensiomflexion assist 

EO, Double upright with forearm/arm cuffs, adjustable position lock with 

active control 

Wrist-Hand-Finger-Orthoses (WHFO), long opponens, no attachment 

WHFO, addition to short and long opponens, adjustable M.P. flexion control 

and I.P. 

WHFO, electric powered 

Shoulder-Elbow-Wrist-Hand Orthoses, molded shoulder, arm, forearm, and 

wrist, articulating elbow joint 

Multi-podus or equal orthotic preparatory management system for lower 

extremities 

A-l 
TABLE A-l 

SAMPLE STRATIFICATION 

STRATA DESCRIPTION OF STRATA 

1 Body 

2 Upper limb; more expensive 

3 Upper limb; less expensive, line item 

allowed charge is more than $280* 

4 Upper limb; less expensive, line item 

allowed charge less than or equal to $280 

5 Lower limb; more expensive 

6 Lower limb; less expensive, line item 

allowed charge is more than $740” 

Lower limb; less expensive, line item 

allowed charge is less than or equal to 

$740 

* In the majority of the cases, the line item was higher than the ceiling price listed in 

Number in Number in 

Universe Sample 

89 60 

102 102 

33 33 

396 80 

154 154 

79 79 

855 150 

1,708 658 

the HCFA schedule because more than 1 device was billed on that line of the claim. 

A-2 
TABLE A-2 

RESPONSE RATES 

STRATA Questionnaires Received Medical Records 

Beneficiary* Supplier Received* * 

6 35 (56%) 65 (82%) 41 (52%) 

7 99 (76%) 114 (76%) 82 (55%) 

Total: 324 (61%) 504 (77%) 334 (51%) 

* Beneficiary response rates are based on questionnaires received from the 530 

live beneficiaries. 

** In an additional 52 (8 percent) of the cases, the referring physician on HCFA’s record 

did not prescribe the device. 

A-3 
APPENDIX B 

Code 

97110 -

97112 -

97113 -

97116 -

97139 -

97150 -

97500 -

97501 -

97530 -

97535 -

97703 -

97799 -

99002 -

PART B SERVICES INCLUDED IN BILLING RECORDS 

Description 

Therapeutic procedure, one or more areas, each 15 minutes; therapeutic 

exercises to develop strength and endurance, range of motion and flexibility. 

Neuromuscular reeducation of movement, balance coordination, kinesthetic 

sense, posture and proprioception. 

Aquatic therapy with therapeutic exercises 

Gait training (includes stair climbing) 

Unlisted therapeutic procedure 

Therapeutic procedure(s), Group (two or more individuals) 

Orthotics training (dynamic bracing, splinting upper and/or lower extremities; 

initial 30 minutes, each visit 

Each additional 15 minutes 

Therapeutic activities, direct (one on one) patient contact by the provider (use 

of dynamic activities to improve functional performance), each 15 minutes 

Self care/home management training (eg. activities of daily living [ADL] and 

compensatory training, meal preparation, safety procedures, and instructions in 

use of adaptive equipment) direct one on one contact with provider, each 15 

minutes 

Checkout for orthotic/prosthetic use, established patient, each 15 minutes 

Unlisted physical medicine/rehabilitation service or procedure 

Handling, conveyance, and/or any other service in connection with the 

implementation of an order involving devices (eg. designing, fitting, 

packaging, handling, delivery or mailing) when devices such as orthotics, 

protectives, prosthetics are fabricated by an outside laboratory or shop which 

items have been designed, and are to be fitted and adjusted by the attending 

physician 

B-l 
APPENDIX C 

CHI-SQUARE TESTS AND CONFIDENCE INTERVALS 

Chi-Square Values 

We computed chi-square values for differences in questionable billing histories for the five 

variables upon which our major findings are based. Chi-square values show that differences 

on all five variables were significant at the 95 percent confidence level. 

Table C-l 

CHI-SQUARE Valuesfor Testing Significance of Differences in Questionable 

Billing Historiesfor Type of Supplier, Type of Device, Fining Requirements, 

Region, and Residence 

VARIABLE I DF* I CHI-SQUARE 

Type of Supplier 

Type of Device 

Fitting Requirements 

Region 

Residence 

*Degrees of Freedom 

2 42.15 

2 50.27 

1 51.42 

1 9.04 

1 20.65 

C-l 

II 
Table C-2 

Projectionsof Cost Savings 

Based on Unnecessaryand QuestionableServices 

Service Outcomes Sample Size Weighted 

Projections 

1) services medically 334 $6,437,786 

unnecessary (n= 61) 

2) services medically 334 $1,532,776 

questionable (n = 20) 

c-2 

Boundaries for 

95% 

Confidence 

Interval 

+/- $1,871,542 

+ /- $703,498 
APPENDIX D 

NON-RESPONDENTANALYSES 

An important consideration in studies of this type is the bias that may be introduced into the 

results if non-respondents differ from respondents to the data collection instruments. To test 

for the presence of any bias, we first obtained information from the HCFA’s one percent 

Common Working File (CWF) for all 658 beneficiaries in our sample, including both 

respondents and non-respondents. We then analyzed the variables that might influence 

whether an individual would respond to the survey or that might affect the responses given. 

For our sample, we looked at place of residence (home vs facility), region of the country 

(Southeast vs rest of U. S.), and device fitting requirements (special requirements vs none). 

Differences between respondents and nonrespondents for each of the three variables were 

tested for significance using Chi-square with the appropriate degrees of freedom. Analyses 

of respondents and non-respondents are presented separately for the medical records review 

and the orthotics supplier survey. 

A. Medical Records Review 

For this portion of the inspection, a beneficiary whose medical records were not obtained and 

reviewed is a non-respondent. There were 324 non-respondents, including 272 beneficiaries 

for whom we received no records and another 52 whose physicians indicated that no orthotic 

devices were ordered (and, therefore, no relevant records existed). The remaining 334 

beneficiaries for whom records were received and reviewed are our respondents. 

The results of this analysis are presented in Tables D-l, D-2, and D-3 below. The Chisquare values given in the tables provide a test of significance for the differences in the 

distribution of respondents and non-respondents for each variable of interest. Also provided 

in the tables are the response rates for the different values of the variables. 

Tables D-l and D-3 show no statistically significant differences between respondents and 

non-respondents for the variables tested. 

Table D-2 shows a statistically significant difference between respondents and nonrespondents with respect to the region of the country in which they live (Southeast vs rest of 

U.S.). In order to test whether this difference introduced any bias, we analyzed answers to 

two key medical record review questions for differences between regions: 1) whether the 

claim was medically questionable (e.g., a simpler device was indicated), and 2) whether the 

device was medically unnecessary. 

The proportion of claims deemed medically questionable in the Southeast was within 1 

percentage point of that for the rest of the country, a statistically insignificant difference. 

However, the proportion of orthotics determined to be medically unnecessary differed by 12 

D-f 
percentage points between regions, so further analysis was required. Assuming that nonrespondents and respondents from the same geographic region had the same proportion of 

medically unnecessary devices, we calculated a hypothetical global rate for medically 

unnecessary devices for all 658 beneficiaries in the sample. This calculation gave only a 

slightly higher medically unnecessary rate of 20 percent (compared to 19 percent for 

respondents). This difference is not statistically significant. 

TABLE D-l 

BENEFICIARY PLACE OF RESIDENCE 

Respondents Non-respondents Total Response 

Rate 

Home 234 70% 209 65% 443 53% 

Facility 100 30% 115 35% 215 47% 

Total 334 324 658 51% 

CHI-SQ = 2.306 

Degrees of Freedom = 1 

TABLE D-2 

BENEFICIARY REGION OF COUNTRY 

Respondents Non-respondents Total Response 

Rate 

Southeast 107 32% 160 49% 267 40% 

Rest of U.S. 227 68% 164 51% 391 58% 

Total 334 324 658 51% 

CHI-SQ = 20.524 I/ Degrees of Freedom = 1

D-2 
TABLE D-3 

Non-respondents 

DEVICE FITTING REOUIREMENTS 

Non-respondents 

Total 334 324 658 51% 

CHI-SQ = 1.190 

Degrees of Freedom = 1 

D-3 
B. Beneficiarv Survev 

For this part of the inspection, a beneficiary for whom a survey was not received is a nonrespondent. There were 324 non-respondents and 206 respondents. 

The results of this analysis are presented in Tables D-4, D-5, and D-6 below. The Chisquare values given in the tables provide a test of significance for the differences in the 

distribution of respondents and non-respondents for each variable of interest. Also provided 

in the tables are the response rates for the different values of the variables. 

All three tables show statistically significant differences between respondents and nonrespondents with respect to each of the three variables analyzed. In order to test whether 

these differences introduced any bias, we analyzed answers to the key beneficiary survey 

question used in our findings: whether or not the beneficiary received a device which looked 

like the one for which Medicare was billed. For each variable analyzed (e.g., place of 

residence), the distribution of answers given by different segments of the sample (e.g., at 

home vs in facility) were within two percentage points of each other. These differences are 

not statistically significant. 

TABLE D-4 

BENEFICIARY PLACE OF RESIDENCE 

Respondents Non-respondents Total Response 

Rate 

Home 260 80% 130 63% 390 67% 

Facility 64 20% 76 37% 140 46% 

Total 324 206 530 61% 

CHI-SQ = 19.034 

Degrees of Freedom = 1 

D-4 

II 
TABLE D-5 

BENEFICIARY REGION OF COUNTRY 

Respondents Non-respondents Total Response 

Rate 

Southeast 126 39% 98 48% 224 56% 

Rest of U.S. 198 61% 108 52% 306 65% 

Total 324 206 530 61% 

CHI-SQ = 3.892 II Degrees of Freedom = 1

TABLE D-6 

DEVICE FITTING REQUIREMENTS 

Respondents Non-respondents Total Response 

Rate 

Has 211 65% 114 55% 325 65% 

requirement 

No 113 35% 92 45% 205 55% 

requirement 

Total 324 206 530 61% 

CHI-SQ = 5.082 

Degrees of Freedom = 1 

D-5 
APPENDIX E 

COMMENTS ON THE DRAFT REPORT 

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

Administration. 

E-l 
.-?&L, ,.. 

,. 

DEPARTMENT OF HEALTH 29 HUMAN SERV1CES Health Care Ftnancing Administrat, 

The Admlnlstrator 

Washington, D.C. 20201 

BATE: AUG 1 I W7 

TO: June Gibbs Brown 

FROM: 

SUBJECT: Office of Inspector General (OIG) Draft Report: “Medicare Orthotics,” 

(OEI-02-95-00380) 

We reviewed the above-referenced report that examines the extent of questionable billing 

practices for Medicare orthotics and how it relates to the orthotics industry and to carrier 

policies and procedures. 

Our detaileci comments are attached for your consideration. Thank you for the 

opportunity to review and comment on this report. 

Attachment 
, 

Comments of the Health Care Financmrr .\dmimstranon (HCF.\) on 

Office of Inspector General (OIG) Draft Report Entitled: 

“r\/tedicare Orthotics,” (OEI-02-95-00380) 

HCFA should, in concert with the durable medical equipment regional caxiers 

(DMERC,s):

Ir-, s 

OIG Recommendation 

Develop guidelines that better define orthotic devices, distinguishing among categories of 

devices such as custom-made and off-the-shelf. 

HCFA Response 

We concur. As required by section 13 l(c) of the Social Security Act Amendments of 

1994, we are preparing a report to Congress tha: describes prosthetic devices, orthotics, 

and prosthetics covered under Part B of the Medicare program that do not require 

individualized or custom fitting and adjustment. This report, presently in final -

Departmental clearance, provides a list of devices that are not prefabricated for proper fit * 

or require individualized modification or custom fitting. Ln addition, a listing is provided 

of those products that need fairly minor adjustments and generally do not require the 

expertise of an orthotist. The report recommends the kledicare statute be revised to 

change the payment methodology for all prosthetic devices, orthotics, and prosthetics: 

regardless of whether they require fitting or adjustments. It also recommends the fee 

schedules be recomputed from the base year, and regional fee schedules be estimated. 

Accordingly, the median value would be used as a payment limit, as in the current 

methodology for DME covered under the Medicare program. We estimate these 

recommendations could save up to $390 million over the next 5 years. 

OIG Recommendation 

Develop policies for orthotic codes, giving priority to upper limb devices, which we ’ 

identified as most problematic. 

HCFA Response 

We concur. We are currently working with the D\lERCs on the feasibility of issuing 

revised regional medical review policies (R~NPs ) that will provide further guidance.on 

the scope and meaning of prosthetics and orthoncs as a Medicare benefit. The 
development of these revised RMRPs are in the prehmin~ stages. The DMERCs are 

holding fact gathering meetings with various representatives of the medical community on 

the use of prosthetics and orthotics in various settings. We expect to issue draft policies 

for public comment early next year. 

--OIG Recommendation 

Develop screens for billing many orthotic devices on the same day or within a short time 

f%me. 

HCFA Response 

We concur. Subsequent to development and implementation of new medical review 

policies and procedure codes, HCFA will work with the DMERCs to ensure that 

utilization/frequency edits are in place. We agree that edits will limit the supplier’s 

ability to upcode or unbundle when billing -Medicare for orthotic equipment. 

. .’ OIGRecommendation 

Pay special attention to billing for orthotics in nursing facilities. 

HCFA Response -. 

We concur. Based on the findings in the OIG report, we recognize there is a need to 

closely monitor billing practices in nursing homes. We believe the development of 

policies and edits will strengthen our ability to control inappropriate billings for oxthotics 

in nursing facilities. Additionally, we will continue to work with the DMERCs to 

determine the other methods for ensuring that orthotics billed to Medicare meet medical 

necessity requirements. 

OIG Recommendation . . 

Work with the American Orthotic and Prosthetic Association to develop a table of 

devices that should not be used together. 

HCFA Response 

We concur. We are consulting with the American Orthotic and Prosthetic Association, as 

well as other relevant professional organizations. as part of the development of the RMRP 

on prosthetics and orthotics previously mentioned 
OIG Recommendation 

Consider stricter standards for who is allowed to bill for orthotics, such as requiring 

professional credentials‘for orthotic suppliers. 

4f-, I 

HCFA Resnonse 

We concur. Because there is no explicit -Medicare statutory authority in this regard, we 

traditionally relied upon states to determine the extent to which physicians and other 

health care professionals must be licensed in order to furnish health care services. In this 

respect, all health care providers under -Medicare are required to meet any applicable state 

licensure’requirements. There is, however, authority under section 1962(a)(l)(A) of the 

Social Security Act to develop standards for what is reasonable and necessary medical 

services. Under this authority, we expect to establish more stringent standards where 

state licensure is found to be inadequate for Medicare purposes. In this context, we are 

ako considering limiting who will be eligible to supply orthotics in the proposed RMRP 

for prosthetics and orthotics. I