Department of Health and Human Services
 

OFFICE OF 

INSPECTOR GENERAL 

PART B SERVICES DURING 


NON-PART A NURSING HOME 


STAYS: DURABLE MEDICAL 


EQUIPMENT
 

Daniel R. Levinson
 

Inspector General 


July 2009
 

OEI-06-07-00100
 
 

 

 

 

 

 

Office of Inspector General

http://oig.hhs.gov 

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

amended, is to protect the integrity of the Department of Health and Human Services 

(HHS) programs, as well as the health and welfare of beneficiaries served by those 

programs. This statutory mission is carried out through a nationwide network of audits, 

investigations, and inspections conducted by the following operating components: 

Office of Audit Services 

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

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

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

out their respective responsibilities and are intended to provide independent assessments of 

HHS programs and operations. These assessments help reduce waste, abuse, and 

mismanagement and promote economy and efficiency throughout HHS. 

Office of Evaluation and Inspections 

The Office of Evaluation and Inspections (OEI) conducts national evaluations to provide 

HHS, Congress, and the public with timely, useful, and reliable information on significant 

issues. These evaluations focus on preventing fraud, waste, or abuse and promoting 

economy, efficiency, and effectiveness of departmental programs. To promote impact, OEI 

reports also present practical recommendations for improving program operations. 

Office of Investigations 

The Office of Investigations (OI) conducts criminal, civil, and administrative investigations 

of fraud and misconduct related to HHS programs, operations, and beneficiaries. With 

investigators working in all 50 States and the District of Columbia, OI utilizes its resources 

by actively coordinating with the Department of Justice and other Federal, State, and local 

law enforcement authorities. The investigative efforts of OI often lead to criminal 

convictions, administrative sanctions, and/or civil monetary penalties. 

Office of Counsel to the Inspector General 

The Office of Counsel to the Inspector General (OCIG) provides general legal services to 

OIG, rendering advice and opinions on HHS programs and operations and providing all 

legal support for OIG’s internal operations. OCIG represents OIG in all civil and 

administrative fraud and abuse cases involving HHS programs, including False Claims Act, 

program exclusion, and civil monetary penalty cases. In connection with these cases, OCIG 

also negotiates and monitors corporate integrity agreements. OCIG renders advisory 

opinions, issues compliance program guidance, publishes fraud alerts, and provides other 

guidance to the health care industry concerning the anti-kickback statute and other OIG 

enforcement authorities. 

. 
 

 

Δ EXECUTIVE SUMMARY 

OBJECTIVE 

To determine the extent of inappropriate Medicare Part B payments for 

durable medical equipment (DME) provided to nursing home residents 

during non-Part A stays in 2006. 

BACKGROUND 

Medicare Part A covers nursing home care for a beneficiary’s stay of up 

to 100 days in a skilled nursing facility (SNF). If nursing home care is 

still needed after the 100 days or the beneficiary did not qualify for a 

Part A SNF stay, Medicare Part B may provide coverage for certain 

medical and other health care services. However, Part B does not pay 

for DME provided during a nursing home stay unless the nursing home 

qualifies as a beneficiary’s home. A nursing home qualifies as a 

beneficiary’s home only if it does not provide primarily skilled care or 

rehabilitation. Only a small number of nursing homes that are certified 

Medicaid-only, called nursing facilities (NF), or distinct parts of nursing 

homes (hereafter referred to as distinct part nursing homes) may 

qualify as a beneficiary’s home. In contrast, no SNFs or dually certified 

nursing homes (those certified for both Medicare and Medicaid) qualify 

as a beneficiary’s home because they provide primarily skilled care or 

rehabilitation. To identify inappropriate payments for DME, we used 

resident assessment data from the Centers for Medicare & Medicaid 

Services (CMS) to determine all nursing home stays nationwide during 

2006. We then analyzed related Medicare claims data for any DME 

payments during these stays. 

FINDINGS 

Medicare Part B allowed inappropriate payments of $30 million in 

2006 for DME provided during non-Part A stays in Medicare-certified 

SNFs. Medicare paid 77 percent ($23.4 million) of these claims, and the 

remaining 23 percent ($7.1 million) was paid by or on behalf of 

beneficiaries (i.e., by Medicaid, supplemental insurance, or private 

resources). For 98 percent of these claims, suppliers incorrectly 

indicated that the DME was for use in the beneficiary’s home. 

Wheelchairs and oxygen accounted for 72 percent ($22 million) of the 

inappropriately allowed DME payments. Suppliers also indicated on 

claims whether the DME was purchased or rented by the beneficiary. 

We found that the inappropriately allowed DME payments were mostly 

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E X E CUTIVE S U MMAR Y 

rentals (76 percent or $22.9 million) for which there are payment 

limitations upon a beneficiary’s nursing home admission. 

Nearly all of the additional $11.9 million Medicare allowed for DME 

provided during non-Part A stays in Medicaid NFs and distinct part 

nursing homes was inappropriate. This conclusion is based on our 

survey of a sample of 84 NFs and distinct part nursing homes to 

determine the extent to which they provide primarily a skilled level of 

care or rehabilitation. Survey results indicate that nearly all of these 

nursing homes provide primarily skilled care or rehabilitation. 

Consequently, we concluded that nearly all $11.9 million in DME 

payments for Medicare beneficiaries in these nursing homes was 

inappropriately allowed. As with stays in SNFs and dually certified 

SNF/NFs, the inappropriately allowed DME was nearly always billed 

identifying the place of service as the beneficiary’s home (97 percent), 

mostly for wheelchairs and oxygen (72 percent), and made up mostly of 

rentals (78 percent). 

CMS and States do not maintain a primary level of care designation 

for nursing homes that could facilitate accurate claim submission 

by suppliers and proper claim adjudication by payment contractors. 

When suppliers prepare DME claims or claims are processed for 

payment by Medicare Administrative Contractors (MAC), it is 

important that the appropriate place of service code be utilized. If a 

beneficiary resides in a NF or distinct part nursing home that does not 

provide primarily a skilled level of care or rehabilitation, the supplier 

should identify “home” as the place of service. However, suppliers that 

code place of service and MACs that adjudicate claims do not have ready 

access to the primary level of care status of NFs and distinct part 

nursing homes unless this information is provided directly by these 

facilities. They lack access to this information because CMS or States 

did not make these determinations and maintain results in an 

accessible database. However, CMS reported that it does not maintain 

information regarding primary level of care for NFs and distinct parts 

and indicated that States have the responsibility for maintaining this 

information. We contacted all State agencies in an attempt to 

determine the primary level of care provided by NFs and distinct part 

nursing homes. State agency representatives in 21 States reported that 

nursing homes that are licensed in their States must provide primarily 

skilled care or rehabilitation. Of these 21 States, 13 have statutes that 

specifically require this level of care for State licensure. In the 

remaining 29 States, there may be nursing homes that do not provide 

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EXECUTIVE SUMMARY 

primarily skilled care or rehabilitation or include a distinct part that 

does not provide primarily skilled care or rehabilitation. 

RECOMMENDATIONS 

When setting DME payment policy, Congress recognized the 

responsibility of institutions to meet patients’ medical needs, regardless 

of the primary payer for the stays (i.e., Medicare, Medicaid, or private 

resources). Consequently, each nursing home must provide DME as an 

integral part of its basic daily rate unless it is not providing primarily 

skilled care or rehabilitation. Yet, very few nursing homes provide care 

lower than skilled. Although payment contractors routinely deny DME 

payment for claims submitted with a nursing home place of service 

designation, an incorrect place of service designation (i.e., home) results 

in inappropriate payment. Past OIG studies have highlighted this 

issue; however, payment controls are still insufficient to stop 

inappropriate DME payments. 

Given the extent of inappropriate DME payments, we recommend that 

CMS: 

Use electronic resident assessment data contained in the Minimum Data 

Set (MDS) to establish a routine process to periodically (e.g., annually) 

generate a list of non-Part A beneficiary stays in nursing homes that 

provide primarily skilled care or rehabilitation. CMS should then direct 

contractors to identify and recover inappropriate DME payments. 

Further, CMS should direct contractors to identify suppliers that 

repeatedly submit incorrect place of service on DME claims and forward 

such information to the OIG Office of Investigations. 

Implement a process or processes to identify patients entering nursing 

homes with rented DME. Nursing homes could use this information to 

alert suppliers of the beneficiary’s change of address. 

Determine which NFs and distinct part nursing homes provide primarily 

skilled care, thus not qualifying as a beneficiary’s home for DME payment 

purposes. State Medicaid agencies and CMS do not evaluate and 

maintain this information. At a minimum, CMS could require State 

Medicaid agencies to make the determination using the available CMS 

administrative criteria. This designation should then be available to 

claims processors, nursing homes, and suppliers. 

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EXECUTIVE SUMMARY 

Direct contractors to recoup the inappropriate payments identified in this 

report. We will forward claim-specific information to CMS under 

separate cover. 

AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 

RESPONSE 

CMS concurred with our recommendations to establish a routine 

process to periodically identify non-Part A stays using MDS and to 

recover inappropriate payments identified in this study. The draft 

report also recommended that CMS (1) expand the resident assessment 

process to identify whether the patient entered the nursing home with 

DME and (2) use the Online Survey Certification and Reporting system 

to determine and report which NFs and distinct part nursing homes 

qualify as beneficiary homes for DME payment purposes. Although 

agreeing with the underlying objectives of these two recommendations, 

CMS suggesed alternative approaches using claims processing edits to 

address them. In this final report, we defer to CMS on the appropriate 

methods to use to address these recommendations. However, we ask 

that CMS provide specific information on these alternative approaches 

in its final management decision. 

For the full text of CMS’s comments, see Appendix D. 

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Δ TABLE OF CONTENTS 

EXECUTIVE SUMMARY .................................... i 
 

INTRODUCTION ............................................ 1 
 

FINDINGS ................................................. 13 
 

Medicare Part B inappropriately allowed $30 million in 2006 

for DME provided during non-Part A stays in Medicare-certified 

SNFs .................................................. 13 
 

Nearly all of the additional $11.9 million that Medicare allowed 

for DME provided during non-Part A stays in Medicaid-certified 

NFs and distinct part nursing homes was inappropriate ......... 15 
 

CMS and States do not maintain a primary level of care 

designation for nursing homes that could facilitate accurate claim

submission by suppliers and proper claim adjudication by payment 

contractors.............................................. 16 
 

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

Agency Comments and Office of Inspector General Response .... 18 
 

APPENDIXES ............................................. 19 
 

A: Skilled Nursing Facility Definition ....................... 19 
 

B: Durable Medical Equipment Billing Codes ................. 23 
 

C: Defining Primary Level of Care .......................... 24 
 

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

ACKNOWLEDGMENTS ..................................... 29 
 
INTRODUCTION 

 

 

 

Δ INTRODUCTION 

OBJECTIVE 

To determine the extent of inappropriate Medicare Part B payments for 

durable medical equipment (DME) provided to nursing home residents 

during non-Part A stays in 2006. 

BACKGROUND 

Medicare and Medicaid Programs 

Nursing homes offer daily living assistance to elderly and disabled 

individuals who are either physically or mentally unable to live 

independently. Nursing home patients receive a wide array of services 

ranging from medical treatment to meals and from skilled to custodial 

care. Of the available public programs that pay for nursing home care, 

Medicare and Medicaid represent the largest. 

Medicare. Medicare, a Federal health insurance program, covers most 

people 65 years or older, people under age 65 with certain disabilities, 

and people of any age diagnosed with end-stage renal disease. It 

provides a wide range of benefits from institutional care (e.g., nursing 

home stays) to medical products and supplies (e.g., wheelchairs). 

Medicare is administered by the Centers for Medicare & Medicaid 

Services (CMS), which contracts with entities called Medicare 

Administrative Contractors (MAC) to process and pay claims for covered 

services. Medicare-covered services most frequently fall under Parts A 

and B. 

•	 Part A (hospital insurance) helps cover skilled or rehabilitative care 

during beneficiary stays in skilled nursing facilities (SNF); these 

stays are called “Part A stays.” Medicare Part A1 was the primary 

payer for 13 percent of the nursing home residents in 2006.2 During 

a Part A stay in a SNF, Medicare Part A pays for the beneficiary’s 

services in the facility using a consolidated daily rate. This daily 

rate covers many routine services provided by SNFs, including room 

1 Medicare Part A pays for up to 100 days in a SNF benefit period, also known as spell of 

illness, if a beneficiary meets certain conditions, such as a prior hospitalization. The SNF 

benefit period begins the day a beneficiary enters the SNF and ends when the beneficiary 

has not received any subsequent hospital or SNF care for 60 consecutive days. 

2 C. Harrington, H. Carrillo, and B. W. Blank, “Nursing, Facilities, Staffing, Patients, and 

Facility Deficiencies, 2000 Through 2006,” p. 18. Department of Social and Behavioral 

Sciences, University of California, San Francisco. Available online at 

http://www.nccnhr.org/uploads/PartI-PagesfromHarringtonOSCARcomplete2006.pdf. 

Accessed in March 2008. 

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INTROD U C T U C T I O N I O N 

and board, skilled care, and rehabilitative care. Examples of skilled 

care include changing sterile dressings and administering prescribed 

medications; examples of rehabilitative care include physical, 

speech, or occupational therapies. 

When a beneficiary exhausts the 100 days of care allowed under the 

Part A benefit (or did not otherwise qualify for a SNF stay) and 

continues to reside in the SNF, the subsequent days then constitute 

a “non-Part A stay.” During a non-Part A stay, Medicare no longer 

pays for the stay; however, Part B may pay for therapy and supplies 

previously included in the daily rate paid to the SNF. 

•	 Part B (medical insurance) helps cover a wide range of medical 

services and supplies. These services include physician services and 

medical equipment and supplies, including DME. 

Durable Medical Equipment. DME is generally defined as 

equipment that can withstand repeated use, serves primarily a 

medical purpose, is not generally useful to a person in the absence of 

an illness, and is appropriate for use in a resident’s home.3 

Examples of DME include oxygen and respiratory equipment and 

supplies, wheelchairs, hospital beds, walkers, commodes, and blood 

glucose monitors. In most instances, Medicare will pay for rented or 

purchased DME,4 as well as cover repairs of purchased equipment 

and necessary related supplies (e.g., glucose test strips and 

oxygen).5 

In 2006, Medicare Part B benefits totaled $166 billion for 40 million 

beneficiaries.6 Of this amount, approximately $11.7 billion was for 

DME. 

Part B Supplier Billing and Payment. Medicare-enrolled suppliers 

provide DME to Medicare beneficiaries and then submit claims to 

one of four regional MACs, called DME MACs. Section 1842(s) of 

the Act authorizes a fee schedule for many Part B services, including 

3 CMS, “Medicare Benefit Policy Manual” (MBPM). Available online at Medicare Benefit 

Policy Manual, Chapter 15, § 110.1. Accessed in June 2008. 

4 Social Security Act (the Act), § 1861(n). See also 42 CFR 410.38 (a). 

5 CMS, “Medicare Claims Processing Manual.” Available online at Medicare Claims 

Processing Manual, Chapter 20, § 10.2. Accessed in June 2008. 

6 CMS, “Brief Summaries of Medicare & Medicaid,” November 1, 2007. Available online at 

http://www.cms.hhs.gov/MedicareProgramRatesStats/downloads/MedicareMedicaidSummar 

ies2007.pdf. Accessed in June 2008. 

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INTROD 
 UCTION

certain equipment and supplies, which Medicare contractors use to 

reimburse claims.7 Generally, Medicare pays 80 percent of the 

allowed amount, and the beneficiary is responsible for the remainin g 

20 percent. For reimbursement purposes, suppliers must identify 

the DME item for which they are billing using a specific code fro m 

the Healthcare Common Procedure Coding System (HCPCS). 

Home Use Provision. In addition to medical necessity and coding 

accuracy requirements, Medicare payment determinations for DME 

provided to residents of nursing homes are driven by whether the 

nursing home provides primarily skilled care or rehabilitation. 8 

(See Appendix A.) If the nursing home provides primarily skilled 

care or rehabilitation, DME is not covered. This noncoverage stems 

from the legal requirement that DME be used in a beneficiary’s 

home or an institution that can be considered a home. Section 

1861(n) of the Act states that any nursing home meeting the basi c 

definition of a SNF in § 1819(a)(1) of the Act may not be considered 

a patient’s home for this purpose. Thus, only when a nursing home 

provides primarily a nonskilled level of care and few rehabilitat ion 

services can it be considered a beneficiary’s home and qualify for 

DME payment. 

Exceptions to Home Use Provision. Under two exceptions, Medica re 

pays for DME provided in nursing homes that do not qualify as a 

beneficiary’s home: 

(1) The DME was initially provided to the beneficiary at his/her 

home prior to admittance to a nursing home. If this occurs, the 

beneficiary may have rented the DME during the month in 

which he/she enters a nursing home. Medicare will pay for t he 

DME rental for the remainder of the monthly rental period 

that overlaps the nursing home admission. DME MACs will 

direct the billing supplier to submit its bill indicating home as 

the place of service.9 

7 Fee schedule implemented on January 1, 2002, and updated annually. 

8 CMS, Medicare Learning Network Matters Article #SE0745, October 25, 2007. Available 

online at 

http://www.cms.hhs.gov/MLNMattersArticles/2007MMAN/itemdetail.asp?filterType=none& 

filterByDID=99&sortByDID=8&sortOrder=ascending&itemID=CMS1204646&intNumPerP 

age=10. Accessed on May 6, 2008. 

9 CMS, MBPM, chapter 15 § 110.5. Available online at 

http://www.cms.hhs.gov/manuals/Downloads/bp102c15.pdf. Accessed in June 2008. 

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INTRODUCTION 

(2) The DME was provided to the beneficiary in anticipation of a 

discharge from a nursing home to his/her home. In this 

instance, Medicare will allow the DME payment for the 

beneficiary up to 2 days prior to a nursing home discharge 

when the DME is intended for home use. DME MACs will 

direct the billing supplier to use the discharge date for the 

service date and indicate home as the place of service. 

Medicaid. Medicaid was the primary payer for 65 percent of nursing 

home stays during 2006.10 All of these stays were non-Part A stays 

because Medicare did not pay for them. Unlike Medicare, Medicaid is a 

joint State-Federal program administered by the States. Within broad 

Federal guidelines, States establish their own eligibility standards 

encompassing Federal requirements and available options; thus, every 

State operates its Medicaid program differently. However, all State 

Medicaid programs include routine DME as a service covered under the 

facility daily rate.11 12 To ensure that Medicaid recipients with 

Medicare eligibility receive Part B benefits during their nursing facility 

(NF) stays and to facilitate payment by Part B, State Medicaid 

programs routinely pay Part B premiums for qualified beneficiaries. 

Related Payment Legislation 

Congress has recognized the responsibility of nursing homes to meet the 

medical needs of patients, regardless of the primary payer of the stay 

(i.e., Medicare, Medicaid, or private resources). Statutes such as the 

Omnibus Budget Reconciliation Act of 1987 (OBRA 1987) laid the 

foundation for identifying needed patient care through resident 

assessments.13 The OBRA 1987 further required that nursing homes 

provide the necessary care to assist residents in attaining their highest 

practicable level of physical, mental, and psychosocial well-being. 

Congress also enacted legislation such as the Balanced Budget Act of 

1997 (BBA)14 and the Medicare, Medicaid, and SCHIP Benefits 

10 C. Harrington, et al., loc. cit. 

11 The Henry J. Kaiser Family Foundation, “Medicaid Benefits: Online Database.” 

Available online at 

http://www.kff.org/medicaid/benefits/index.jsp?CFID=32790568&CFTOKEN=15412220. 

Accessed in June 2008. 

12 42 CFR § 488.301. 

13 P.L. No. 100-203. 

14 P.L. No. 105-33. 

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INTROD U C T I O N 

Improvement and Protection Act of 2000 (BIPA)15 to further define 

Medicare payment criteria for nursing homes. 

The BBA established a prospective payment system for Part A stays 

and required nursing homes to arrange for and consolidate into a single 

Medicare bill the Part B services that are needed by a resident during 

his or her nursing home stay.16 Prior to the BBA, suppliers and 

providers of Part B services for nursing home residents (e.g., physical 

therapists) billed Medicare directly for their services. Implementation 

of consolidated billing first occurred only for Part A stays. In 2000, 

before the BBA was implemented for non-Part A stays, Congress 

enacted the BIPA. The BIPA maintained consolidated billing for Part A 

stays and therapy services but repealed consolidated billing 

requirements for non-Part A stays. Therefore, claims for beneficiaries 

during non-Part A stays continue to be individually submitted by 

suppliers and providers. 

Mandate for the Office of Inspector General To Monitor Part B Payments 

In repealing the BBA’s consolidated billing provisions for non-Part A 

nursing home stays, Congress anticipated the need to monitor Medicare 

Part B payments during these stays. In section 313 of the BIPA, 

Congress specifically directed the Office of Inspector General (OIG) to 

perform such monitoring. This DME evaluation revisits the study 

entitled “Durable Medical Equipment Payments in Nursing Homes” 

(OEI-06-92-00862), in which OIG identified inappropriate payments of 

$35 million for DME provided during nursing home stays in 1992, much 

of which occurred during non-Part A stays. Several additional studies 

will address other, previously identified, vulnerable Part B payment 

areas (e.g., enteral nutrition therapy and psychotherapy). 

Primary Level of Care and Certification of Nursing Homes 

The Act established minimum health and safety standards17 that must 

be met by suppliers and providers of services participating in the 

Medicare and Medicaid programs. To receive payment under either of 

these programs, nursing homes must comply with the standards set 

forth in 42 CFR pt. 483, subpart B. CMS has oversight over both 

15 P.L. No. 106-554. 

16 BBA, § 4432. 

17 The Act, §§ 1819 and 1919, establish requirements for nursing homes to participate in 

Medicare and Medicaid. See also 42 CFR §§ 483 and 488. 

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INTROD U C T U C T I O N I O N 

programs but contracts with States to perform surveys that ensure 

nursing home compliance. 

In 2006, 3.2 million individuals received nursing home care in 

16,121 nursing homes certified for Medicare or Medicaid.18 Of these 

nursing homes, States surveyed 15,294 in 2006. Based on specific 

survey criteria, a nursing home may be certified as a Medicare SNF, a 

Medicaid NF, a dually certified SNF/NF, or a distinct part SNF or NF. 

However, defining a nursing home’s primary level of care is not a 

specific component of certification surveys. Although the certification of 

a SNF or dually certified SNF/NF for Medicare clearly indicates that a 

nursing home provides primarily a skilled level of care or rehabilitation, 

certification as a NF may not be used as the sole indicator of the 

primary level of care provided. 

Medicare skilled nursing facility. Both SNF and dually certified SNF/NF 

certification criteria require sufficiently high nurse staffing levels that 

such nursing homes are clearly providing primarily skilled care or 

rehabilitation. (See Appendix A for CMS policy defining DME coverage 

in nursing homes.) Dual certification as a SNF/NF results in the same 

outcome: the facility provides primarily skilled care. Between 2002 and 

2006, the number of SNFs decreased by just over 18 percent from 1,058 

to 864, accounting for 5 percent of certified nursing homes. During the 

same time period, the number of dually certified SNF/NFs increased by 

2 percent, from 14,013 to 14,298, and accounted for nearly 89 percent of 

certified nursing homes.19 

Medicaid nursing facility. Between 2002 and 2006, the number of NFs 

decreased by nearly 50 percent, from 1,913 to only 959 (5 percent of 

certified nursing homes).20 Medicaid certification requirements for NFs 

are virtually the same as those for Medicare certification of SNFs. For 

payment purposes, DME MAC policies state that billing for DME for a 

patient in a SNF or a NF will be denied, in effect taking the stand that 

both SNFs and NFs provide skilled care or rehabilitative services. 

However, this payment policy does not take into account that, unlike 

Medicare certification, Medicaid certification of a NF can provide for a 

nonskilled level of care. This level of care would allow a NF to be 

considered as a beneficiary’s home for DME coverage purposes. Thus, 

18 CMS, “Nursing Home Data Compendium,” 2007 Edition. 

19 Ibid. 

20 Ibid. 

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INTROD U C T I O N 

as a certification class, NFs cannot be assumed to be providing 

primarily skilled care or rehabilitation for DME payment purposes. 

CMS or States would need to evaluate each NF using specific 

administrative criteria to determine whether the NF provides primarily 

skilled care or a level of care below skilled. If the latter, the NF could be 

considered a home.21 Only for beneficiaries in these facilities should 

DME suppliers indicate home as the place of service on submitted 

claims. 

Distinct part nursing home. Generally, CMS and States evaluate a nursing 

home’s certification as a single unit, rather than by separately 

evaluating and classifying individual areas or beds within the 

institution. However, some States allow a nursing home to designate a 

particular portion of its nursing home, known as a “distinct part,” 

separately from the rest of the nursing home.22 Medicare and Medicaid 

regulations define a distinct part as a separate, physically identifiable 

unit consisting of all the beds in a particular building, floor, wing, or 

ward.23 Using the CMS Online Survey Certification and Reporting 

system (OSCAR), we identified 2,725 distinct part nursing homes.24 

However, OSCAR did not identify whether the distinct part was a SNF 

or a NF, a critical designation for determining DME payment. As with 

a SNF, a distinct part SNF providing primarily skilled care or 

rehabilitation would not have DME coverage.25 However, if the 

remainder of that nursing home provides a nonskilled level of care, it 

could have DME coverage. The opposite situation would allow DME 

coverage for a beneficiary residing in a distinct part NF not providing 

primarily a skilled level of care, but not in the remainder of the nursing 

home providing primarily skilled or rehabilitative care. 

21 Administrative criteria to identify NFs or distinct part nursing homes that meet the 

basic SNF definition may be used by State agencies conducting certification surveys. These 

criteria appear in CMS’s “State Operations Manual” (SOM), chapter 2, § 2166. Available 

online at http://www.cms.hhs.gov/manuals/downloads/som107c02.pdf. Accessed in June 

2008. 

22 CMS, SOM, chapter 2 § 2762B(4). Available online at 

http://www.cms.hhs.gov/manuals/downloads/som107c02.pdf. Accessed in June 2008. 

23 42 CFR § 483.5(b). 

24 Data extracted from OSCAR by OIG on April 1, 2007. 

25 CMS, MBPM. Available online at 

http://www.cms.hhs.gov/manuals/Downloads/bp102c15.pdf. Accessed in June 2008. 

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INTRODUCTION 

Suppliers and Place of Service Coding 

Suppliers must designate the physical location of the beneficiary, called 

place of service, on submitted claims. For billing purposes, CMS utilizes 

place of service codes ranging from 01 through 99. A DME claim 

submitted with a place of service code for a SNF or NF will be denied.26 

An electronic claims-processing system edit adjudicates each claim and 

generates a denial when a SNF or NF place of service has been coded. 

However, if the NF provides a level of care below skilled or 

rehabilitative, it can be considered the beneficiary’s home for billing 

purposes. In such situations, the supplier should appropriately 

designate home, not a NF, as the place of service on the claim. 

However, it becomes more difficult for a supplier to accurately identify 

the place of service for a beneficiary who moves from his or her home to 

a nursing home. This is particularly problematic for payment purposes 

when the beneficiary has rented DME prior to the nursing home 

admission. 

Following the monthly rental period during which the beneficiary 

moved to a nursing home that may not be considered his or her home, 

the DME claim should show the actual place of service as a SNF or NF, 

which would result in a denial of payment by the DME MAC. If the 

patient resides in a NF or distinct part nursing home that may be 

considered a beneficiary’s home, the claim may still indicate home as 

the place of service. Yet, CMS, DME MACs, and States do not inform 

suppliers that a beneficiary has relocated to a nursing home. CMS 

policies require that suppliers submit accurate claims, but do not 

provide guidance on how or how frequently they must ensure the 

accuracy of the beneficiary’s place of service. Ultimately, suppliers 

depend on the beneficiary or his/her responsible parties to tell them 

when a beneficiary moves into a nursing home. There is no way for 

suppliers to ensure that the beneficiaries do so. Nor do CMS or DME 

MACs have the means to notify a nursing home when a beneficiary has 

rental DME at the time of admittance; claims processing systems 

currently are inadequate for such a purpose. Further, nursing homes 

have not been directed by CMS to obtain this information from 

beneficiaries at the time of admittance. 

26 Noridian, DME MAC, “Supplier Manual,” chapter 5. Available online at 

https://www.noridianmedicare.com/dme/news/manual/chapter5.html#inpatient. Accessed in 

February 2008. 

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INTROD U C T I O N 
 

METHODOLOGY 

Scope 

This study identifies inappropriately allowed Part B payments for DME 

during non-Part A nursing home stays in 2006. A non-Part A nursing 

home stay is any Medicare beneficiary’s nursing home stay which is not 

paid for under the Medicare Part A SNF benefit. If a beneficiary’s stay 

started under the Part A SNF benefit and continued after exhausting 

this benefit, only DME delivered during the latter portion of the stay is 

considered. 

Identification of DME During a Nursing Home Stay 

We utilized several databases obtained from CMS to identify Part B 

payments for DME during non-Part A nursing home stays. These 

databases included the Minimum Data Set (MDS), OSCAR, the 

Enrollment Database (EDB), and National Claims History (NCH). 

Minimum Data Set. We used the MDS to identify the nursing home 

residents, related nursing homes, and nursing home stays. The MDS, a 

component of the resident assessment instrument, includes information 

about each resident’s health, physical functioning, mental status, and 

general well-being.27 However, assessments do not capture whether a 

beneficiary is renting DME at the time of nursing home admission. 

Resident assessments are reported electronically by each certified 

nursing home for each person upon admission and are updated at least 

quarterly.28 The MDS includes nursing home admission and discharge 

dates. States receive assessments from nursing homes and transmit the 

data to CMS. Using the MDS data, we identified all assessed residents 

and their Social Security numbers (SSN). To determine stay dates, we 

extracted all nursing home admission and discharge dates for each 

resident. 

We used assessment dates as proxies for missing admission or discharge 

dates according to the following assumptions: 

•	 If the resident was in the nursing home on January 1, 2006 

(determined from subsequent assessments that were conducted by 

the nursing homes), we used the date of the first assessment 

conducted in 2005 as the admission date. 

27 OBRA 1987. 

28 More frequent assessments are required for stays paid under the Part A SNF benefit. 

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INTROD U C T I O N 

•	 In the case of a missing discharge date, we defined the date of the 

last assessment (received through March 2007) as the date of 

discharge. 

OSCAR. To obtain information about the nursing home (e.g., facility 

name, address, number of beds, and SNF and NF certification status), 

we linked the MDS facility identification number with the facility 

number maintained in the OSCAR. The OSCAR contains survey results 

from certification and complaint surveys. 

Enrollment Database. We used the EDB to identify Medicare 

beneficiaries. This database includes beneficiary-level data (i.e., name, 

SSN, and Medicare Health Insurance Claim Number (HICN)). Using 

this database, we crosswalked SSNs contained in the MDS file to SSNs 

in the EDB to identify Medicare beneficiaries and their associated 

HICNs. We excluded beneficiaries having no matching SSN from 

further analysis. 

National Claims History. We identified DME claims and payments using 

the NCH. We used the HICNs from the EDB to crosswalk to HICNs in 

the NCH to identify all DME claims billed and allowed for Medicare 

beneficiaries during the nursing home stays previously identified using 

the MDS. We then dropped all DME billed for beneficiaries during 

Part A paid nursing home or inpatient hospital stays.29 (See 

Appendix B for a list of the DME HCPCS codes utilized for this study.) 

Finally, we excluded DME during exception time periods. We identified 

and excluded DME claims occurring during the two allowed exception 

time periods—rental payment for the month overlapping any admission 

to a nursing home from home and DME provided within 2 days of a 

beneficiary’s discharge from the nursing home. To be conservative, we 

determined that claims with nursing home admissions between the 

“from” and “through” dates for DME met the exception period, 

regardless of claim length. Additionally, if the claim “through” date was 

the same as the discharge date from the nursing home, we determined 

that the claim met the exception period. Medicare policy stipulates that 

DME claims for items provided 2 or less days prior to a nursing home 

discharge to home are appropriate if the claim date and the discharge 

date are the same. We also took a conservative approach to possible 

29 OIG’s Office of Audit Services routinely conducts audits relating to the issue of 

inappropriate Part B payments occurring during Part A stays. As such, we excluded these 

from our review. 

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INTROD U C T U C T U C T I O N I O N I O N 

discharge locations by defining all discharges as home discharges and 

excluding these claims from analysis. 

For the resulting identified 2006 DME claims allowed for Medicare 

beneficiaries during nursing home stays, we used OSCAR data to 

determine possible trends across the inappropriately allowed DME. 

Data utilized for trends included State, profit/nonprofit status, and the 

number of beds in nursing homes. 

Sampling To Verify Stay Date Accuracy and To Identify Level of Care for 

NFs and Distinct Part Nursing Homes 

To test the validity of the identified stay dates using the MDS and to 

identify primary level of care, we randomly selected a sample of 

300 beneficiaries from the 299,851 beneficiaries identified as having 

DME during non-Part A nursing home stays. Cumulatively, these 

300 beneficiaries had 378 nursing home stays, received medical care in 

311 different nursing homes,30 and had 2,001 DME claims totaling 

approximately $280,896 allowed and $220,242 reimbursed by Medicare. 

The remaining dollars were paid by or on behalf of beneficiaries by third 

parties (i.e., Medicaid, supplemental insurance, or private resources). 

Using this sample, we surveyed the associated NFs and distinct part 

nursing homes to determine the proportion of each actually providing 

primarily a skilled level of care. This sample allowed us to project to the 

universe of DME provided during a NF or distinct part nursing home 

stay. 

Stay date accuracy. We verified stay dates from the MDS by requesting 

admission and discharge date documentation directly from the nursing 

homes. The 378 stay dates determined from the MDS were nearly 

always accurate, with only 5 percent (21) of the reviewed stays having 

wrong or incomplete information. 

Level of care in NFs and distinct part nursing homes. A NF or distinct part 

nursing home may qualify as a beneficiary’s home if it provides a level 

of care less than skilled. CMS reported that it does not maintain 

information regarding primary level of care for NFs or distinct parts 

and indicated that States have the responsibility for maintaining this 

information. We subsequently contacted all State agencies in an 

attempt to determine the primary level of care provided by NFs. 

30 Of the sampled nursing homes, 216 were dually certified SNF/NFs, 9 were certified as 

SNFs, 21 as NFs, and 65 as having a distinct part. 

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INTROD U C T I O N 

To determine the degree to which NFs and distinct part nursing homes 

provide primarily skilled care, we used OSCAR to identify the nursing 

homes in the previously described sample of 311 nursing homes that 

were NFs or distinct part nursing homes. There were 86 such nursing 

homes (21 NFs and 65 distinct part nursing homes). We asked nursing 

home administrators to respond to questions directly related to the 

administrative requirements for defining a skilled level of care.31 (See 

Appendix C.) We received responses from 78 of the 86 nursing homes 

(91 percent). 

Of the 14 responding NFs, 12 (86 percent) indicated that they provide 

primarily a skilled level of care; 63 of 64 (98 percent) responding distinct 

part nursing homes indicated that they provide primarily a skilled level 

of care. Based on this sample, NFs and distinct part nursing homes 

rarely (0.04 percent of the time) qualify as a beneficiary’s home for DME 

payment purposes. Using this point estimate and sample statistics, we 

projected the dollars paid inappropriately to the universe of payments 

for DME during these stays. 

Reporting of Inappropriate DME Payments 

For the findings of this report, we calculated inappropriately allowed 

DME using all of the 2006 DME claims submitted for Medicare 

beneficiaries during non-Part A nursing home stays. Specifically, the 

report findings are not adjusted to account for the small amount of 

errors resulting from our use of the MDS to determine nursing home 

stay dates. As mentioned previously, the results of our verification for a 

sample of stay dates during which DME was provided indicates that 

inaccuracies in the MDS stay date determinations rarely resulted in our 

misclassification of a DME claim during a nursing home stay as 

inappropriately allowed. 

Standards 

This study was conducted in accordance with the “Quality Standards for 

Inspections” issued by the President’s Council on Integrity and 

Efficiency and the Executive Council on Integrity and Efficiency (now 

Council of the Inspectors General on Integrity and Efficiency). 

31 CMS, SOM, chapter 2, § 2166; four specific criteria must be met fully to be considered 

engaged in providing primarily skilled care. 

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FINDINGS 

 

 

 

Δ FINDINGS 

Medicare Part B inappropriately allowed 

$30 million in 2006 for DME provided 

during non-Part A stays in 

Medicare-certified SNFs 

Suppliers received payments 

totaling $30,485,842 for the 

309,626 DME claims allowed for 

Medicare beneficiaries during 

non-Part A stays in nursing homes 

certified as SNFs or dually certified as SNF/NFs. These claims were 

spread across 11,702 nursing homes. Since these nursing homes were 

providing primarily skilled care or rehabilitation, they could not be 

considered the beneficiaries’ homes, a prerequisite for DME coverage. 

Medicare paid 77 percent ($23.4 million) of the allowed amount; the 

remaining 23 percent ($7.1 million) was paid by or on behalf of 

beneficiaries (i.e., Medicaid, supplemental insurance, or private 

resources). 

For 98 percent of the inappropriately allowed claims, suppliers incorrectly 

indicated that the DME provided during nursing home stays was for use in 

beneficiaries’ homes 

For other claims, the places of service indicated by the suppliers were 

custodial homes (1.1 percent) or other places (1.2 percent), such as assisted 

living (0.8 percent), facilities for mentally retarded persons (0.3 percent), 

group homes (0.02 percent), and homeless shelters (0.01 percent). 

Wheelchairs and oxygen accounted for 72 percent ($22 million) of the 

inappropriately allowed DME payments 

The category of wheelchairs and related accessories represents the highest 

expense for inappropriately allowed DME (37 percent). (See Table 1 on 

the following page.) The category of oxygen and respiratory equipment 

and supplies accounts for the second-highest expense (35 percent). 

Rentals accounted for 76 percent of the total inappropriately allowed DME 

payments 

Additionally, oxygen, wheelchairs, and their related components accounted 

for $17.8 million (78 percent) of the $22.9 million inappropriately allowed 

for rentals and 191,805 of the 231,606 related claims. Hospital beds (and 

their related accessories) and decubitus care equipment accounted for 12 

percent and 8 percent of the inappropriately allowed rental amount, 

respectively. In nearly all cases, an ongoing rental had been established 

prior to the nursing home stay. The resulting inappropriately paid 

amount occurred because the supplier failed to identify on submitted 

claims that the beneficiary had relocated to a nursing home and/or failed 

to change subsequent billing using the correct place of service code. We 

did not determine whether the beneficiary had provided the supplier with 

the information about the move to a nursing home. 

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FINDINGS 

Table 1: Inappropriately Allowed Durable Medical Equipment 

Payments by Category 

Category 

Total Amount 

Inappropriately 

Allowed 

Percentage of 

Amount 

Inappropriately 

Allowed* 

($30,485,842) 

Wheelchairs and related accessories $11,395,901 37% 

Oxygen and respiratory equipment and supplies $10,562,263 35% 

Hospital beds and related accessories $3,910,113 13% 

Decubitus care equipment $2,122,838 7% 

Seat/patient lifts $828,853 3% 

Other DME $517,306 2% 

Transcutaneous and/or neuromuscular electrical 

nerve stimulators 

$486,851 2% 

Walkers $411,843 1% 

Bath/commodes $249,875 1% 

Source: OIG analysis of DME payments in non-Part A stays during 2006. 

*Percentages do not equal 100 percent because of rounding. 

Medicare allowed more than $1 million for each of seven separate 

HCPCS codes. (See Table 2.) Together, these items account for 

73 percent ($22.2 million) of the total inappropriately allowed amount. 

The HCPCS E1390 accounts for the single highest inappropriately paid 

code, representing nearly 26 percent of the total inappropriately allowed 

amount. As indicated, most inappropriately allowed DME claims were 

made for routine medical equipment (e.g., oxygen, beds, and 

wheelchairs) that nursing homes could provide to their patients as part 

of their daily rate. 

Table 2: HCPCS With More Than $1 Million Inappropriately Allowed 

HCPCS Item Description 

Total Amount 

Inappropriately 

Allowed 

Percentage of 

Amount 

Inappropriately 

Allowed 

($30,485,842) 

E1390 Oxygen concentrator $7,816,906 26% 

E0260 Hospital bed, semielectric $3,536,488 12% 

K0011 Standard weight-frame motorized/power 

wheelchair 

$3,184,235 10% 

K0001 Standard wheelchair $2,191,881 7% 

K0004 Lightweight high-strength wheelchair $2,112,417 7% 

E0277 Power pressure-reducing air mattress $1,773,773 6% 

K0003 Lightweight wheelchair $1,542,635 5% 

Source: OIG analysis of DME payments in non-Part A stays during 2006. 

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F I NDING 
 S 

The average inappropriate allowed amount associated with nursing homes was 

$2,605 with a median of $1,456. Of the 11,702 nursing homes associated 

with beneficiaries having inappropriate DME payments, 3,637 

(31 percent) exceeded the average. Further, 179 of these nursing homes 

were three or more standard deviations above the average, with the two 

highest totaling $102,875 and $73,227. 

The average inappropriate allowed amount for suppliers was $2,712 with a 

median of $906. Of the 11,243 suppliers associated with inappropriate 

DME payments, 2,873 (26 percent) exceeded the average. Further, 

137 of these suppliers were three or more standard deviations above the 

average, with the two highest totaling $248,340 and $200,382. 

We analyzed the inappropriate allowed DME payments across several 

variables (e.g., geographic location, nursing home characteristics) and 

found no correlations between high payments and these variables. For 

example, 42 percent of the inappropriately allowed DME payments were 

made to suppliers in those States with a similar proportion of certified 

nursing home beds—California, Florida, New York, Ohio, Pennsylvania, 

and Texas. 

Nearly all of the additional $11.9 million that 

Medicare allowed for DME provided during 

non-Part A stays in Medicaid-certified NFs and 

distinct part nursing homes was inappropriate 

In 2006, suppliers received 

payments totaling $11.9 million 

for the 107,928 DME claims 

allowed for Medicare 

beneficiaries during stays in 

3,373 nursing homes identified 

as NFs or as distinct part nursing homes. Medicare paid $9.2 million; 

the remaining $2.7 million was paid by or on behalf of beneficiaries 

(i.e., Medicaid, supplemental insurance, or private resources). Most 

DME claims (83 percent of the 107,928 claims) were made for 

beneficiaries residing in distinct part nursing homes. 

Our conclusion that nearly all of the $11.9 million was paid 

inappropriately is based on the survey of a sample of these nursing 

homes to determine the extent to which they provide primarily skilled 

levels of care or rehabilitation services. Results indicate that nearly all 

of the sampled nursing homes provide primarily skilled care or 

rehabilitation. 

Of the 78 nursing homes responding to our survey, 96 percent do not 

qualify as beneficiaries’ homes for DME payment purposes. Specifically, 

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FINDINGS 

12 of 14 NFs and 63 of 64 distinct part nursing homes provide primarily 

skilled care or rehabilitation. Utilizing this sample, the projected 

amount inappropriately paid was $11.2 million. The 95-percent 

confidence interval ranged from a low of $8.0 million to a high of 

$14.3 million. 

As with non-Part A stays in SNFs and dually certified SNF/NFs, the 

inappropriately allowed DME in NFs and distinct part nursing homes 

were typically billed identifying the places of service as the 

beneficiaries’ homes (97 percent), mostly for wheelchairs and oxygen 

(72 percent), and consisted mostly of rentals (78 percent). 

CMS and States do not maintain a primary level of 

care designation for nursing homes that could 

facilitate accurate claim submission by suppliers 

and proper claim adjudication by payment 

contractors 

When suppliers prepare DME 

claims or claims are processed for 

payment by DME MACs, it is 

important that the appropriate 

place of service codes be utilized. 

However, suppliers that code 

place of service and MACs that 

adjudicate claims do not have ready access to the primary level of care 

status of NFs and distinct part nursing homes unless this information is 

provided directly by these facilities. The lack of access to this 

information results from CMS or States not making these 

determinations and maintaining results in an accessible database. 

CMS reported that it does not maintain information regarding primary 

level of care for NFs and distinct parts and indicated that States have 

the responsibility for maintaining this information. We contacted all 

State agencies in an attempt to determine the primary level of care 

provided by NFs and distinct part nursing homes. Twenty-one States 

require that nursing homes licensed in their States provide primarily 

skilled care or rehabilitation. Of these 21 States, 13 have statutes that 

specifically require this level of care for State licensure. In the 

remaining 29 States, there may be nursing homes that do not provide 

primarily skilled care or rehabilitation, or include a distinct part that 

does not provide primarily skilled care or rehabilitation. 

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Δ RECOMMENDATIONS 

When setting DME payment policy, Congress recognized the 

responsibility of institutions to meet patients’ medical needs, regardless 

of the primary payer for the stays (i.e., Medicare, Medicaid, or private 

resources). Consequently, each nursing home must provide DME as an 

integral part of its basic daily rate unless it is not providing primarily 

skilled care or rehabilitation. Yet, very few nursing homes provide care 

lower than skilled. Although payment contractors routinely deny DME 

payment for claims submitted with a nursing home place of service 

designation, an incorrect place of service designation (i.e., home) results 

in inappropriate payment. Past OIG studies have highlighted this 

issue; however, payment controls are still insufficient to stop 

inappropriate DME payments. 

To address inappropriate payments, we recommend that CMS: 

Use electronic resident assessment data contained in the MDS to 

establish a routine process to periodically (e.g., annually) generate a list 

of non-Part A beneficiary stays in nursing homes that provide primarily 

skilled care or rehabilitation. CMS should then direct contractors to 

identify and recover inappropriate DME payments. Further, CMS 

should direct contractors to identify suppliers that repeatedly submit 

incorrect place of service on DME claims and forward such information 

to the OIG Office of Investigations. 

Implement a process or processes to identify patients entering nursing 

homes with rented DME. Nursing homes could use this information to 

alert suppliers of the beneficiary’s change of address. 

Determine which NFs and distinct part nursing homes provide primarily 

skilled care, thus not qualifying as a beneficiary’s home for DME payment 

purposes. State Medicaid agencies and CMS do not evaluate and 

maintain this information. At a minimum, CMS could require State 

Medicaid agencies to make the determination using the available CMS 

administrative criteria. This designation should then be available to 

claims processors, nursing homes, and suppliers. 

Direct contractors to recoup the inappropriate payments identified in this 

report. We will forward claim-specific information to CMS under 

separate cover. 

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R E C O MMENDA T I O N S 

AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 

RESPONSE 

CMS concurred with our recommendations to establish a routine 

process to periodically identify non-Part A stays using MDS and to 

recover inappropriate payments identified in this study. The draft 

report also recommended that CMS (1) expand the resident 

assessment process to identify whether the patient entered the 

nursing home with DME and (2) use the Online Survey Certification 

and Reporting system (OSCAR) to determine and report which NFs 

and distinct part nursing homes qualify as beneficiary homes for 

DME payment purposes. Although agreeing with the underlying 

objectives of these two recommendations, CMS suggesed alternative 

approaches using claims processing edits to address them. 

We agree that other methods may achieve the same objectives, so we 

have made changes to the recommendations. Rather than prescribe the 

needs assessment as the tool for identifying DME, this final report 

recommends only that CMS implement a process or processes for this 

purpose. Also, we removed reference to OSCAR as the method that 

CMS should use to determine and disseminate information on the home 

status of NFs and distinct part nursing homes. 

We defer to CMS on the appropriate methods to address these 

recommendations. In the comments on the draft report, CMS suggests 

that claims processing edits could address the recommendations, but no 

details were provided on how such edits would work. We ask that CMS 

provide this information in its final management decision. 

For the full text of CMS’s comments, see Appendix D. 

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Δ APPENDIX A 

MEDICARE LEARNING NETWORK MATTERS 

ARTICLE SE0745 REPRINTED* 

Skilled Nursing Facility Definition Used To Determine Durable Medical 

Equipment Coverage and in Ending a Benefit Period or Spell of 

Illness32 

*Italics in document added for emphasis; abbreviations used to save space. 

Coverage of a beneficiary’s skilled nursing facility (SNF) stay under 

Part A (the Original Medicare plan’s hospital insurance program) 

encompasses the overall package of institutional care that the SNF 

furnishes during the course of the beneficiary’s Medicare-covered stay. 

This comprehensive Part A coverage includes durable medical 

equipment (DME) under the heading of “. . . drugs, biologicals, supplies, 

appliances, and equipment . . .” as stated in § 1861(h)(5) of the Social 

Security Act (the Act).33 

When a beneficiary’s SNF stay does not qualify for Part A coverage 

(no qualifying three-day hospital stay, SNF level of care not met, etc.), 

Part B (the supplementary medical insurance program) generally can 

still provide limited coverage for certain individual “medical and other 

health services” described in § 1861(s) of the Act. However, as 

explained below, the scope of coverage under the Part B benefit for DME 

(§ 1861(s)(6) of the Act) specifically excludes items that are furnished for 

use in the SNF setting. 

•	 Section 1861(n) of the Act limits Part B coverage under the DME 

benefit to those items that are furnished for use in a beneficiary’s 

home. This provision further specifies that any institution 

meeting the basic definition of a hospital in § 1861(e)(1) of the Act, 

or of an SNF in § 1819(a)(1) of the Act, cannot be considered a 

patient’s “home” for this purpose. Section 1819(a)(1) of the Act 

(formerly § 1861(j)(1) of the Act), in turn, defines a “SNF” broadly 

as any institution that is engaged primarily in providing skilled 

32 Centers for Medicare & Medicaid Services (CMS), “Medicare Learning Network Matters, 

Article #SE0745,” October 25, 2007. Available online at 

http://www.cms.hhs.gov/MLNMattersArticles/2007MMAN/itemdetail.asp?filterType=none&filterByDID 

=99&sortByDID=8&sortOrder=ascending&itemID=CMS1204646&intNumPerPage=10. Accessed on 

May 6, 2008. 

33 The Act can be accessed online at http://www.ssa.gov/OP_Home/ssact/ssact-toc.htm. 

Accessed in June 2008. 

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APPENDIX A 

nursing (clause (A)) or rehabilitation services (clause (B)) to its 

residents. 

•	 This expansive SNF definition omits the specific, more restrictive 

elements contained in the remainder of §§ 1819(a)-(d) of the Act, 

which list the detailed requirements that an institution must 

meet in order to participate in the Medicare program as a certified 

SNF. Thus, in excluding Part B coverage for DME furnished in 

“SNFs” as defined broadly in § 1819(a)(1) of the Act, Congress 

intended for this exclusion to encompass not only all Medicareparticipating SNFs, but also any other institutions which, though 

not participating in Medicare, do provide the type of care 

described in that section of the law.34 

•	 The blanket prohibition that Congress imposed on any separate 

Part B payment for DME furnished in this setting (see § 144(d) of 

the Social Security Amendments of 1967, P.L. No. 90-248) would 

appear to reflect the view that any institution whose primary 

function is to provide skilled care to its residents would have an 

inherent responsibility to dispense DME, when needed. This 

would mean that payment for such items is already an integral 

part of the skilled facility’s basic inpatient rate. Accordingly, any 

separate, additional DME payment under Part B in this situation 

would be redundant. Modifying or eliminating the statutory 

prohibition on Part B payment for DME furnished in this setting 

would require legislation to amend the law itself. 

Additional Considerations for DME Furnished in Medicaid-Only Nursing 

Facilities 

Additional considerations apply in determining whether a Medicaidonly nursing facility (NF) would meet the basic SNF definition in this 

context. Medicaid NFs were created when the Omnibus Budget 

Reconciliation Act of 1987 (OBRA 1987) enacted nursing home reform 

legislation that combined the previously separate Medicaid categories of 

SNFs and intermediate care facilities (ICF) into a single category. Prior 

to the OBRA 1987 changes, Medicaid SNFs were always considered to 

meet the law’s basic definition of a SNF, while pursuant to a U.S. 

District Court decision in Kron v. Heckler (E.D. La., October 17, 1983), 

34 This policy is also reflected in the regulations in title 42 CFR § 410.38(b) and in CMS’s 

“Medicare Benefit Policy Manual,” chapter 15, § 110.1.D. Available online at 

http://www.cms.hhs.gov/manuals/iom/list.asp. Accessed in June 2008. 

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APPENDIX A 

those facilities licensed or certified solely as ICFs were never considered 

to meet the basic SNF definition. 

•	 The parallel Medicare SNF and Medicaid NF definitions that 

OBRA 1987 established in §§ 1819(a)(1) and 1919(a)(1) of the Act, 

respectively, both turn on the type of care that the facility is 

engaged primarily in furnishing. However, while the NF 

definition in § 1919(a)(1) of the Act contains a clause (A) for 

skilled nursing and a clause (B) for rehabilitation services that are 

identical to their SNF counterparts in § 1819(a)(1) of the Act, it 

also contains an additional clause (C) for health-related 

institutional care above the level of room and board (comparable 

to the type of care furnished by intermediate care facilities (ICF) 

prior to OBRA 1987), which is not found in the SNF definition. 

•	 Thus, if a Medicaid NF is engaged primarily in furnishing skilled 

care under either clauses (A) or (B) of § 1919(a)(1) of the Act, it 

would meet the basic SNF definition and cannot be considered a 

“home” for purposes of DME coverage under Part B. 

Alternatively, if the NF is engaged primarily in furnishing 

essentially ICF-level care under clause (C) of this provision, it 

would not meet the basic SNF definition and can be considered a 

home for DME coverage purposes. Thus, because some NFs meet 

the basic SNF definition while others do not, NFs cannot, as a 

class, automatically be regarded as either qualifying or not 

qualifying as a “home” for DME coverage purposes and, therefore, 

must be evaluated individually under the administrative criteria 

discussed below. 

Administrative Criteria 

Administrative criteria to identify those institutions that meet the 

basic SNF definition are used by each of the State agencies that 

survey the individual institutions within their jurisdictions.35 These 

criteria also were published in the Federal Register as Health Care 

Financing Administration Rulings 83-2 (47 FR 54551, December 3, 

1982) and 83-3 (49 FR 10710, March 22, 1984). Historically, it has 

been the State survey agency’s responsibility to evaluate an 

institution in terms of these criteria. This evaluation reflects the type 

of care that the institution provides to its residents generally (rather 

35 CMS, “State Operations Manual” (SOM), chapter 2, § 2166. Available online at 

http://www.cms.hhs.gov/manuals/downloads/som107c02.pdf. Accessed in June 2008. 

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APPENDIX A 

than the type of care that an individual resident may be receiving at a 

given point in time), because the requirements of the law relate to the 

type of care that an institution is engaged primarily in providing to its 

overall resident population. 

•	 Further, States can choose to incorporate the requirements of 

§ 1819(a)(1) of the Act directly into their own facility licensure 

standards as seen in CMS’s SOM, chapter 2, § 2164. In a State 

that elects to adopt this approach, simply ascertaining that a 

particular nursing home is licensed under the applicable facility 

category of State law can also serve to confirm that the facility 

meets the basic SNF definition in § 1819(a)(1) of the Act. 

Applying the Criteria in Institutions That Contain a Participating “Distinct 

Part” 

•	 Generally, the determination of whether an institution meets the 

basic SNF definition is made by evaluating it as a single unit 

rather than by separately evaluating and classifying individual 

areas within the institution. In order to categorize a particular 

portion of an institution separately from the remainder of that 

institution, it is necessary for that portion to constitute a “distinct 

part” (e.g., a separate, physically identifiable unit consisting of all 

the beds in a particular building, floor, wing, or ward). (See the 

regulations at 42 CFR 483.5(b).) 

•	 In this situation, if the participating distinct part of an institution 

meets the basic SNF definition and the remainder of the 

institution does not, DME payment would be available under 

Part B only in the portion of the institution that qualifies as a 

“home” for DME coverage purposes by virtue of not meeting the 

basic SNF definition. Part B payment would not be available for 

DME furnished in any part of the institution that is identified as 

meeting the basic SNF definition, regardless of the type of care 

that a particular resident may be receiving there. 

A more detailed discussion of situations in which part of an institution 

meets the basic SNF definition and part of it does not appears in 

chapter 5, § 1 of the “Medicare Program Integrity Manual,” also 

available online at http://www.cms.hhs.gov/manuals/iom/list.asp on the 

CMS Web site. This is the same material that originally appeared in 

§ 4105.1 of the “Medicare Carriers Manual,” Part 3 (CMS Publication 

14-3). 

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Δ APPENDIX B 

DURABLE MEDICAL EQUIPMENT BILLING CODES 

INCLUDED IN THE EVALUATION 

HCPCS Codes* Categories 

E0100–E0105 Canes 

E0110–E0118, E0153 Crutches and related accessories 

E0130–E0159 Walkers 

E0160–E0175, E0240–E0249, E0968 Bath/commode and related accessories 

E0180–E0199, E0277, E0370–E0373 Decubitus care equipment 

E0200–E0239, E0249 Hot/cold applications 

E0250–E0373, E0462 Hospital beds and related accessories 

E0424–E0601, E0605, E0618–E0619, Oxygen and respiratory equipment and supplies 

E1353–E1406, K0730–K0738 

E0607 Blood glucose monitor 

E0610–E0620 Pacemaker monitor and defibrillator 

K0606–K0609 Defibrillator accessories 

E0621–E0642 Patient lifts, standing devices/lifts 

E0650–E0675 Pneumatic compressor and appliances 

E0720–E0769 Transcutaneous and/or neuromuscular electrical nerve 

stimulators 

E0776 (without BA modifier)–E0791, K0455, Infusion pump for medications and related supplies 

E1520, K0552, K0601–K0605 

E0830–E0900 Traction equipment 

E0910–E0948, E0951–E0952 Trapeze equipment, fracture frame, other orthopedic 

devices 

E0955–E1298, K codes Wheelchairs and related accessories 

E1340 Repairs and replacements 

E1700–E1702 Jaw motion rehabilitation system and accessories 

* Healthcare Common Procedure Coding System (HCPCS) codes listed within ranges are in specified 

categories, except as specified elsewhere. 

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Δ APPENDIX C 

DEFINING PRIMARY LEVEL OF CARE 

To identify the primary level of care provided by nursing facilities (NF) 

and nursing homes with distinct parts, we utilized our sample of 

311 nursing homes. Of the 311 nursing homes, 65 were identified 

through CMS’s Online Survey, Certification, and Reporting system as 

distinct part nursing homes and 21 were certified as NFs. We contacted 

these 86 nursing homes to determine the primary level of care that they 

provided, independent of their certification status; 78 responded. We 

asked each nursing home to tell us whether it met the following four 

criteria identified in the “State Operations Manual” (SOM) maintained 

by the Centers for Medicare & Medicaid Services (CMS): 

•	 One or more nurses (registered nurses or licensed practical or 

vocational nurses) direct or supervise nursing services without 

regard to whether the facility has the nurse staffing requirement 

“waived.” (SOM § 2166A.) 

•	 Nursing personnel are on duty 24 hours a day. (SOM § 2166B.) 

•	 The number of full-time-equivalent nursing personnel to the number 

of beds is at least an average ratio of 1 to 15 per shift. 

(SOM § 2166C.) 

•	 Other services (e.g., bed and board) are provided to inpatients in 

connection with the furnishing of nursing care, plus one or more 

medically related health services (e.g., physician’s services; 

physical, occupational, or speech therapy; diagnostic and 

laboratory services; and administration of medication). 

(SOM § 2166D.) 

If a nursing home indicated in all four instances that it met the criteria, 

we determined that the facility engaged primarily in providing a skilled 

level of care. 

These four criteria are those identified as CMS’s “Administrative 

Criteria for Identifying Facilities That Meet 1819(a)(1).”36 Section 

1819(a)(1) of the Act discusses nursing services. This section also 

contains the statutory definition of a skilled nursing facility (SNF), 

which is the basis for Medicare certification requirements of SNFs in 

42 CFR 483, subpart B. In many States, licensing laws for all nursing 

36 CMS, SOM. Available online at 

http://www.cms.hhs.gov/manuals/downloads/som107c02.pdf. Accessed in June 2008. 

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APPENDIX C 

homes have incorporated the requirements of § 1819(a) or § 1919(a) of 

the Act or the criteria contained in § 2166. When this is the case, any 

nursing home licensed in such States cannot be considered a resident’s 

home for purposes of spell of illness, durable medical equipment, 

ambulance, and home health benefits. In other States, it may be 

necessary for the State agency to make § 1861(e)(1) or § 1819(a)(1) 

certifications. As indicated, SNFs meet § 1819(a)(1) requirements, as do 

long-term-care nursing homes in States where licensure laws require it. 

In other situations, a facility or a part of a facility meets the standard 

set forth in § 1819(a)(1) of the Act for purposes of determining skilled 

level of care if the nursing home meets each of the four criteria listed on 

the previous page. 

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/",'M",

(~ DEI'ARTMENT OF IIEALTH • HUMAN SERVICES

2OO~""",."",,-SW

~DC20201

TO; Daniel R. Levinson

Inspector 0-JJI

.'ROM: ~ri7.Zer:?r~ Acting Administmlor

DATE: APR 1 0 2009 -

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t

SUIUEcr; Office of Inspector General (OIG) Draft Report: "Purl 13 Serviecs During

Non-Part A Nursing Homc Slays: Durable Medical EquipmCnl" Om-06­

07-00100

Thank you for the opportunity to review and comment on the alxl\"e-referenccd 010 drall

.......

Medicare Parl A CO\'CfS nursing home care for a beneficiary's stay up 10 100 days in a

skilkd nursing facility (SNF). If nursing home care is still needed after the 100 days or

the bcncliciarydoes IIOt qualify for Part A SNF stay, Medi~ Pan B may provide

coverage for certain medical and other health saviccs. However, Pan B does IIOt pay for

durable medical equipment (DME) provided during a nursing home stay unless the

nursing home qualilies as a beneliciary's home.

The OIG found that Medicare Part 13 allowed ilt:l.ppropriute paymcnts of530 million in

2006 for DME provided during non-I',lrt A stay~ in Medieare-eertit1ed SNFs. Medicare

Part Il inappropriately allowed payment of$23.4 million in 2006 for DME provided

durinG non-I'art A stays in Mcdicare·certil1ed SNFs and $7.1 million was paid by or on

behalfofbeneliciaries (i.e.. Medicaid, supplemenlal insurdllee or private resources). For

98 percent oflhe claims in the DIG sample, suppliers illcol'Tl:X:tly indicaled lhat DME was

for use in the beneficiary's home. Ofthc 523.4 million ill inappropriate payments, S22.9

millioo ofthe DME payments were for rentals for which there an: paymelltlimitatioru;

upon a beneficiary's nursing home admission.

The DIG II'Ialk the following reoornmmdalions:

DIG R«ommendalion

Usc electronic resident assessment data contained ill the Minimum Data Set (MDS) to

establish a routine process 10 periodically (e.g., annually) genemte a list of non-PIlr1 A

bencl1cillry stays in nursing homes that provide primarily skilled care or rehabilitation.

Δ APPENDIX D 

AGENCY COMMENTS 

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Page 2 - Daniel R. Levinson

We concur with the rooommendation. eMS will seck to provide Medicare Recovery

Audit Contrnetors access to the MOS data for the pIllpOSC of periodically checking

whether beneficiaries who rec:cived Pan B OME services were residents of nursing

homes lhat do 001 qualify as a beneficiary's home.

OIG R~mmC'ndlllion

Ell:pand the residenl assessmC'flt process 10 idcrllify ...."hC'ther!he patient mtl:!'ed the

nursing home with the DME and whether it is owned or InItC'd by the benefICiary.

eMS R~ponse

We agrec with Ihc underlying objectivc of increasing the available data on DME usage in

nursing homes. llowever, we do not concur wilh lhis recommendation as it is cUlTCntly

stmcture<!. We arc concenled that the recommended approach cssenlially proposes 10

achieve this objective through a clinical vehicle that is 1I0t wcll-suitC'd to this purposc.

The MilS is a clinically-based asscssmenttool used 10 detcnnine patients' health,

physical functioning, and medical conditions. In addition, the MDS is completed by an

interdisciplinary cliniealtearn whose primary focus is care planning. As a result, we do

not see the MOS as an effective mechanism for the accurate collectkm of an inventory of

the palicnlS' OME. including status ofownership. Instead. eMS will explore the

feasibility ofcreating a claims procc:ssing system edillhat would pl'C\'enl improper

payments for DME furnished to benefICiaries during a non-Pan A nursing home stay.

OIG Rerommend:ation

Drtcrmille which nursing facilities (NFs) and distinct pan nursing homes qualify lIS II

beneficiary's home for OME payment purposes and mainlain this designation in Onlinc

Survey, Cenification, and Reponing (OSCAR) system.

CMS Response

We agrec with the underlying objective to explore ways to determine whethcr a nursing

home serves as a resident's home for thc purposes of making proper OME payments;

however, we do not concur with this recommendalion. OIG's recommendation seeks to

usc the OSCAR system lIS a way to designate Nt's or distinct part nursing homes that

qual ify as a beneficiary's home. The OSCAR database's fundamental purpose: is dircctC'd

toward facililY 1Cl-'c! survey and certification information. Thc determination ofwhcthcT

the nursing home is really a specific beneficiary's horne is individualized 10 the

beneflCiary"s coverage for payment pwposcs. Consequently, individual designation of

.....hether a givcn nursing home is a beneficiary's home may not be bc::st located in

OSCAR, However, consi~cnt with the rationale offered in our I"CSpOI1SC to

Recommendation 2, there may be a1ternativc approaches considered by CMS for a claims

processing OOilto prevent improper D~E payments.

APPENDIX D 

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Page 3 - Daniel R. Levinson

OIG Rttommtndalion

Direct contractors to recoup the inappropriate payments identified in this rqlOrt.

eMS Rt1[!On~t

We agree that the inappropriate payments (subjecl to verification by the Medicare

conlrBClors) should be recovered. CMS plans 10 recover the OveTpaymenls idenlified

consistent .....ith the Agency's policies and procedUIl:3.

The OIG will be required to furnish. for each overpayment or potential overpayment, the

data necessary (Medicare contractor numbers, provider numbers, claims information

including the paid date, WC numbers, ctc.) 10 initiatc and complclc recovery aClion. In

addition, Medicare contractor-spedfic data should be wrillen to separate CD·ROMs or

separote hardcopy worksheets in order 10 bener facilitate the transfer of information to

the appropriate contractors.

APPENDIX D 

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APPENDIX ~ D APPENDIX C Δ ACKNOWLEDGMENTS 

This report was prepared under the direction of Kevin K. Golladay, 

Regional Inspector General for Evaluation and Inspections in the Dallas 

regional office, and A. Blaine Collins, Deputy Regional Inspector 

General. 

Leah K. Bostick served as the team leader for this study, and 

Dana McClellen served as lead analyst. Other principal Office of 

Evaluation and Inspections staff from the Dallas regional office who 

contributed to the report included Petra Johansson, Margaret Knight, 

Sai Loganathan, and Jeremy Moore; central office staff who contributed 

include Robert L. Gibbons, Scott Horning, Jennifer Jones, and 

Sandy Khoury. 

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