Department of Health and Human Services 

OFFICE OF 

INSPECTOR GENERAL 

Medicare Allowances for 

Lymphedema Pumps 

JUNE GIBBS BROWN 

Inspector General 

JULY1998 

OEI-04-97-00130 
OFFICE OF INSPECTOR GENERAL 

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

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

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

a nationwide program of audits, investigations, inspections, sanctions, and fraud alerts. The 

Inspector General informs the Secretary of program and management problems and recommends 

legislative, regulatory, and operational approaches to correct them. 

Office of Evaluation and Inspections 

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

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

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

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

effectiveness of departmental programs. 

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

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

Principal OEI staff included: 

GION QUARTERS 

Betty Apt, Project Leader Stuart Wright, Program Specialist 

Jacqueline Watkins, Program Analyst Brian Ritchie, Technical Support 

Greg Jones, Program Analyst 

To obtain copies of this report, please call the Atlanta Regional Office at 404-562-7743. 

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

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

PURPOSE 

To summarize trends in Medicare allowed charges for lymphedema pumps, and to ascertain the 

impact of Office of Inspector General investigations and Health Care Financing Administration 

controls on Medicare payments for lymphedema pumps.. 

BACKGROUND 

Lymphedema pumps are pneumatic compression devices used to treat patients afflicted with 

lymphedema. Lymphedema is a condition characterized by swelling of tissues in an affected 

body part due to accumulation of excessive fluid. 

FINDINGS 

Medicare allowed charges for lymphedema pumps skyrocketed from 1991 to 1995 

Medicare allowed charges for the most expensive type lymphedema pump (E0652) increased 

from $18.5 million in 1991 to $106.7 million in 1995--almost a 500 percent increase in 4 years. 

The Office of Inspector General focused a national initiative on fraudulent lymphedema pump 

suppliers 

In September of 1994, the Office of Investigations, Office of Inspector General (OIG) began a 

national initiative to curtail lymphedema pump fraud and abuse. Resulting from that initiative, 

some DME suppliers were convicted for fraudulently misrepresenting the type of pump issued to 

Medicare beneficiaries in order to obtain higher reimbursement. 

Durable Medical Equipment Regional Carriers and The Health Care Financing 

Administration enhanced policies and controls for lymphedema pumps 

Concurrent with the OIG investigations and convictions, Durable Medical Equipment Regional 

Carriers (DMERCs) began to intensify their review of lymphedema pump claims. Additionally, 

the Health Care Financing Administration (HCFA) began to develop new coverage and payment 

policies. The policies limited coverage of the most expensive model lymphedema pump to very 

specific instances, and then only after other treatments and less expensive model pumps had been 

tried. Further, HCFA required that a Certificate of Medical Necessity (CMN) accompany claims 

for all models of lymphedema pumps. Providers also had to submit documentation that more 

conservative methods of treatment had been ineffective in treating a lymphedema condition. 

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Medicare allowances for lymphedema pumps have declined dramatically since 1995 

Medicare allowed charges for the most expensive type of lymphedema pump (E0652) dropped 

from $106.7 million in 1995 to $8.8 million in 1996--a 92 percent decrease in 1 year. 

Efforts of the OIG, HCFA, and DMERC will save the Medicare program $381 million 

The efforts of the OIG, HCFA, and DMERCs saved the Medicare program $76.2 in 1 year. If 

HCFA’s new documentation requirements and continued OIG surveillance succeed in 

discouraging unnecessary payments for the expensive model lymphedema pump, the 5-year 

savings will total $381 million. 

CONCLUSION 

In view of the apparent success in dealing with this problem, the OIG is canceling further 

inspection of this equipment. We will continue to monitor expenditures and re-instate a study if 

necessary. 

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TABLE OF CONTENTS 

PAGE 

EXECUTIVE SUMMARY 

INTRODUCTION ............................................................. 

FINDINGS 

@Medicare Allowances Skyrocketed ............................................. 

l OIG Initiative Focuses on Fraudulent Suppliers ................................... 

l DMERCs and HCFA Enhance Policies and Controls ............................... 

@Medicare Allowances Decline Dramatically ...................................... 

@Medicare Saves $381 Million ................................................. 

CONCLUSION ............................................................... 

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INTRODUCTION 

PURPOSE 

To summarize trends in Medicare allowed charges for lymphedema pumps, and to ascertain the 

impact of Office of Inspector General investigations and Health Care Financing Administration 

controls on Medicare payments for lymphedema pumps. 

BACKGROUND 

Medicare Coverage of Lymphedema Pumps 

Medicare covers pneumatic compression devices, commonly called lymphedema pumps, for 

Medicare beneficiaries afflicted with lymphedema. Lymphedema is a relatively uncommon 

medical condition characterized by swelling of tissues in an affected body part due to 

accumulation of excessive fluid. The condition results from an impairment to the normal 

clearing function of the lymphatic system or from excessive production of fluid from lymphatic 

vessels. Factors precipitating the onset of lymphedema include surgical procedures involving 

removal of groups of lymph nodes, obstruction of the lymphatic system by malignant tumors, 

and congenital anomalies. Lymphedema pumps are medical devices designed to control and 

reduce swelling in affected body parts, usually a limb. 

Medicare reimburses for lymphedema pumps under three different HCPCS codes: E0650, 

E065 1, and E0652. Generally, lymphedema pumps are classified as either segmented or nonsegmented, depending on whether distinct segments of the devices can be inflated sequentially. 

The less sophisticated, and least expensive pumps, are coded E0650 and E065 1, and cost 

Medicare about $600 and $800, respectively. The most sophisticated and expensive pumps are 

coded E0652, and cost Medicare about $4,000 to $6000. This device is characterized by 

calibrated gradient pressure, capable of delivering individually determined pressure to each 

segmental unit. 

METHODOLOGY 

To summarize trends in Medicare allowed charges for lymphedema pumps, we obtained and 

arrayed expenditure data for lymphedema pump codes. We obtained data from the Medicare Part 

B Extract and Summary System (BESS). To ascertain the impact of Office of Inspector General 

investigations and HCFA payment controls, we reviewed recent reports, congressional 

testimony, and national investigation results related to lymphedema pumps. 

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

the President’s Council on Integrity and Efficiency. 

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FINDINGS 

MEDICARE ALLOWED CHARGES FOR LYMPHEDEMA PUMPS SKYROCKETED 

FROM 1991 TO 1995 

As illustrated in Figure 1, Medicare allowed charges for the most expensive type lymphedema 

pump (E0652) increased from $18.5 million in 1991 to $106.7 million in 1995--almost a 500 

percent increase in 4 years. Lymphedema pumps coded E0650 and E065 1 did not experience 

large increases as did those coded E0652. 

Figure 1 

Medicare Allowed Charges for 

Lymphedema Pumps 

1992 1993 1994 

Year 

--v-- E065Chs- E065l-t~ E0652 

THE OFFICE OF INSPECTOR GENERAL FOCUSED A NATIONAL INITIATIVE ON 

FRAUDULENT LYMPHEDEMA PUMP SUPPLIERS 

The Office of Investigations, Office of Inspector General (OIG) has been investigating 

lymphedema pump suppliers since the early 1990s. However, in September 1994, the Office 

began a national initiative to curtail lymphedema pump fraud and abuse. The OIG served 30 

durable medical equipment suppliers with subpoenas asking for all records from 1989 through 

1993 related to their lymphedema pump billing. . 

Resulting from the 1994 OIG initiative, HCFA suspended payments for some medical suppliers 

until the investigations were completed. Also, some DME suppliers were convicted for 

fraudulent practices. For example, several investigations showed that manufacturers and 

providers misrepresent the type of pump issued to Medicare beneficiaries in order to obtain 

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higher reimbursement. In some cases, the more expensive lymphedema pump was provided to 

patients who had only regular edema which could have been treated with the lower cost pump. 

Suppliers used various scams to get reimbursed for lymphedema pumps. The following is a 

sample of OIG cases concluded during the last 3 years: 

1995 

A New Jersey DME company submitted claims for lymphedema pumps that did 

not meet specifications, resulting in overpayments of approximately $192,960. 

The supplier agreed to repay $100,000, and entered into a compliance plan 

designed to prevent future improper billings. 

A Maryland DME company agreed to pay $1.5 million to resolve liabilities under 

the Civil Monetary Penalties Law. The company submitted claims for 

lymphedema pumps that did not meet specifications for the code used. The 

company was overpaid $690,000. 

Two New Jersey DME suppliers who had billed Medicare $5000 for pumps that should 

have been reimbursed at $600 agreed to pay Medicare close to $1 million. The company 

that sold the pumps to the suppliers also agreed to pay $4.9 million to settle allegations 

that they had misrepresented the product. 

A New Jersey supplier was sentenced for Medicare fraud and obstruction of 

justice. The supplier billed Medicare for pumps that were medically unnecessary. 

The false claims that the supplier submitted indicated that a less expensive pump 

had been tried before using the more expensive one. The supplier was ordered to 

pay $220,100 in restitution. 

A Washington State DME owner was sentenced to 12 months. This supplier 

billed Medicare for the most expensive lymphedema pumps, but delivered less 

expensive pumps. The supplier was required to pay $148,500 in restitutions, 

fines, and penalties. 

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DURABLE MEDICAL EQUIPMENT REGIONAL CARRIERS AND THE HEALTH 

CARE FINANCING ADMINISTRATION ENHANCED POLICIES AND CONTROLS 

FOR LYMPHEDEMA PUMPS 

Concurrent with the OIG investigations and convictions, in 1994 Durable Medical Equipment 

Regional Carriers (DMERCs) began to intensify their review of lymphedema pump claims. For 

example, DMERCs began to automatically review claims for all three models of lymphedema 

pumps. 

Also, the Health Care Financing Administration (HCFA) began to develop expanded coverage 

and payment policies. HCFA required that a Certificate of Medical Necessity (CMN) 

accompany claims. A CMN is a form that a physician completes and signs to certify that a 

patient has a documented, medical need for a lymphedema pump. The CMN elicits specific 

information about a patient’s medical condition and need for a lymphedema pump. 

HCFA further required that documentation of a patient’s condition accompany a claim for 

reimbursement. A simple diagnosis code on a claim or CMN is rarely adequate to explain a 

patient’s condition. There should also be documentation that conservative measures were tried 

before ordering a pump to treat lymphedema condition. Such measures may include limb 

elevation and custom fitted gradient-pressure compression dressings. 

In 1995, HCFA further revised its lymphedema coverage and payment policy to require that the 

most expensive lymphedema pump (E0652) be used as a treatment of last resort. A physician is 

required to provide additional information to document the need for the more expensive pump. 

The information must include 

0 more details about a patient’s medical condition than claims for the less expensive pumps, 

0 nature, time, and results of other treatment methods attempted, including the less 

expensive pumps, 

0 treatment plan, including details about the pressure needed for each chamber of the pump, 

0 features of the provided system that a patient requires, and 

0 pump model number and manufacturer’s name. 
MEDICARE ALLOWED CHARGES FOR LYMPHEDEMA PUMPS HAVE DECLINED 

DRAMATICALLY SINCE 1995 

As illustrated in Figure 2, Medicare allowed charges for the most expensive type lymphedema 

pump (E0652) dropped from $106.7 million in 1995 to $8.8 million in 1996--a 92 percent 

decrease in 1 year. 

Figure 2 

Medicare Allowed Charges for 

Lymphedema Pumps 

$120 ~“-‘--‘“--- x- x~““““_“---_­

“l-~-lll.-l--- ._..l.“.-“.-- -.-... “_.-.““...“..-. . _......_. -_-. 

Year 

--v- E0650-0 E06!3+3- E0652 

Medicare allowed charges for code E0652 continued to decline in 1997. Claims for January 

through September 1997 totaled approximately $460,000. HCFA estimated that those claims 

represent about 63 percent of claims that were be filed for 1997. Therefore, projected claims for 

code E0652 are around $730,000, as compared to $8.8 million in 1996. 

Allowed charges for pumps submitted under code E065 1 increased about $2.7 million. Allowed 

charges for Code E0650 pumps remained relatively unchanged. 

EFFORTS OF THE OIG, HCFA, AND DMERC WILL SAVE THE MEDICARE 

PROGRAM $381 MILLION 

Compared to the peak level of 1995, the efforts of the OIG, HCFA, and DMERCs have been 

successful. Combined, those efforts reduced Medicare allowed charges for the code E0652 pump 

$97.9 million in one year. Taking into consideration the $2.7 million increase in the code E0651 

lesser-priced pump, Medicare allowed charges for all pumps decreased $95.2 million. 

The reduction in allowed charges resulted in a savings of $76.2 million for 1996 in Medicare’s 80 

percent portion of allowed charges. This brings the projected 5-year savings to $381 million. 

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CONCLUSION 

Concerted efforts by the OIG, HCFA, and DMERCs seem to have curtailed growth and 

contributed to declines in Medicare allowed charges for the most expensive model lymphedema 

pumps. Prosecutions of and payment of restitutions by lymphedema pump suppliers has sent a 

message that fraudulent billing for lymphedema pumps will not be tolerated. New policies and 

more stringent documentation requirements by DMERCs made billing for the high priced 

lymphedema pumps more difficult. 

In view of the apparent success in dealing with this problem, the OIG is canceling further 

inspection of lymphedema pumps. We will continue, however, to monitor expenditures and reinstate an inspection if necessary. 

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