Department of Health and Human Services 

OFFICE OF 

INSPECTOR GENERAL 

JUNE GIBBS BROWN 

Inspector General 

SEPTEMBER 1999 

OEI-04-97-00390 

Medicare Payments for 

Orthotic Body Jackets 
OFFICE OF INSPECTOR GENERAL 

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

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

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

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

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

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

correct them. 

Office of Evaluation and Inspections 

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

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

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

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

effectiveness of departmental programs. 

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

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

Principal OEI staff included: 

REGION 

Greg Jones, Project Leader

Betty Apt, Team Leader

Jacqueline Watkins, Program Analyst

Peggy Daniel, Program Analyst

HEADQUARTERS 

Stuart Wright, Program Specialist

Barbara Tedesco, Statistician

Brian Ritchie, Program Analyst

Wynethea Walker, Program Specialist

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

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

http://www.dhhs.gov/progorg/oei 
TABLE OF CONTENTS 

EXECUTIVE SUMMARY ............................................... 1

INTRODUCTION ..................................................... 4

FINDINGS

Claims and Payments Decreased Since 1994 .................................. 8

Devices Qualified for Medicare Reimbursement .............................. 9

Forty-Two Percent of L0430 Claims Upcoded ................................ 9

Upcoding Attributed to Lack of Uniformity and Standardization ................. 10

Almost 3.5 Percent of Claims Were Duplicate ............................... 13

RECOMMENDATIONS ............................................... 16

AGENCY COMMENTS ................................................ 17

APPENDICES

A: Survey Response Rates .......................................... 18

B: Coding Issue .................................................... 19

C: Projectable Costs ............................................... 21

D: Duplicate Billings ................................................ 22

E: Agency Comments ............................................... 23

HCFA ...................................................... 24

AOPA ...................................................... 26

ENDNOTES ........................................................ 33
EXECUTIVE SUMMARY 

PURPOSE 

To determine whether or not Medicare inappropriately pays for orthotic body jackets 

under code L0430. 

BACKGROUND 

A code L0430 body jacket is a spinal orthotic device that is covered by Medicare when 

prescribed by a physician. It is defined as a custom fitted one-piece molded plastic body 

jacket with interface material and an anterior or posterior opening. In 1994, the Office of 

Inspector General reported that 95 percent of claims submitted in 1991 were for nonlegitimate orthotic body jackets and should not have been paid. 

The Health Care Financing Administration (HCFA) established Durable Medical 

Equipment Regional Carriers (DMERCs) to process claims for durable medical 

equipment, prosthetics and orthotics supplies beginning in October 1993. HCFA also 

established the Statistical Analysis Durable Medical Equipment Regional Carrier 

(SADMERC) to analyze claims for durable medical equipment, prosthetic and orthotic 

devices and supplies (DMEPOS) and identify trends and aberrancies. Also, in 1993, 

HCFA and the durable medical equipment regional carriers revised their coverage 

guidelines for body jackets to make them more descriptive. 

To determine if suppliers are continuing to bill inappropriately for code L0430 body 

jackets, we conducted this follow-up inspection of claims filed and paid in 1996. 

METHODOLOGY 

We used expert opinion from the SADMERC and the American Orthotic and Prosthetic 

Association (AOPA) to determine the propriety of claims billed under orthotic body jacket 

code L0430. 

FINDINGS 

Medicare Claims and Payments for Orthotic Body Jackets Have Decreased 

Significantly Since 1994 

Claims for orthotic body jackets under Medicare code L0430 decreased 50.1 percent in 

the 5 year period between 1994 and 1998, from 7,214 to 3,602. Likewise, Medicare 

allowed charges for orthotic body jacket code L0430 decreased 45.8 percent from 

$7,086,939 to $3,844,364. 

Medicare Payments for Orthotic Body Jackets 1 OEI-04-97-00390 
<

All Orthotic Devices Claimed as L0430 Body Jackets Were Eligible for Medicare 

Reimbursement 

In our 1994 study, the devices allowed for Medicare payment under code L0430 were 

typically not orthotic body jackets, but rather seat cushions for wheelchair patients. 

Therefore, they were not legitimate Medicare reimbursable products. Conversely, in our 

current inspection, the SADMERC expert said all 153 devices in our sample claimed as a 

body jacket qualified for Medicare reimbursement. 

Suppliers Upcoded 42 Percent of 1996 L0430 Orthotic Body Jacket Claims 

As a result of the upcoding, the Medicare program made excessive payments of $41,405 

to orthotic body jacket suppliers in our sample. Projected to the universe of the total 

Medicare population, the excessive payments from the practice of upcoding totaled 

$828,100. The inappropriate payments for orthotic body jackets under code L0430 

accounted for 32 percent of the total cost of L0430 body jackets that we examined for 

1996. 

Lack of Uniformity and Standardization May Account for Some Upcoding 

The industry offers different types of spinal orthotic products which may be reimbursed by 

Medicare. In many instances the differences between orthotic products are subtle, 

requiring an expert to match them to the proper Medicare code. 

The Medicare guidance for coding devices is vague and outdated. For coding orthoses, 

most individuals in the orthotics industry and HCFA use The Illustrated Guide to 

Orthotics and Prosthetics published by the American Orthotic and Prosthetic Association. 

However, the guide provides simplistic hand drawn pictures that provide little help for 

coding many of the more sophisticated orthotic devices currently in use. 

3.5 Percent of Claims May Have Been for Unnecessary Duplicate Body Jackets 

Nine suppliers billed Medicare for duplicate L0430 body jackets for 10 of our sampled 

289 beneficiaries in 1996. In each instance the second (duplicate) body jacket seemed 

unnecessary. Therefore, Medicare paid $8,400 for L0430 body jackets that may not have 

been needed by beneficiaries. Projected to the total Medicare population, the potential 

loss to the Medicare program is estimated to be about $168,000. 

RECOMMENDATIONS 

< HCFA should review and revise the Medicare coding guidelines. 

< HCFA should require suppliers to include more information on their 

Medicare claims for the products they provide to beneficiaries. 

Medicare Payments for Orthotic Body Jackets 2 OEI-04-97-00390 
< HCFA should encourage the DMERCs to continue, or initiate system 

edits that detect multiple billings of orthotic body jackets to the 

same Medicare beneficiary in a calendar year. 

AGENCY COMMENTS 

The HCFA and the American Orthotic and Prosthetic Association (AOPA) both 

commented on our draft report. 

HCFA agrees that a product classification list is an effective tool to define exactly which 

products should be billed under code L0430, but they do not agree with our 

recommendation that they revise Medicare coding guidelines. Further, HCFA did not 

agree with our suggestion to work with AOPA because it would not be feasible for HCFA 

to work with a national trade organization whose interests may not necessarily coincide 

with that of the Medicare program. We continue to believe that HCFA should use AOPA 

as a resource, at least informally, to clarify Medicare coding guidelines and improve 

coding accuracy. Such consultation is important to help reduce inappropriate Medicare 

payments, since AOPA’s Illustrated Guide is widely used in the orthotics and prosthetics 

community for Medicare billing. 

HCFA did not concur with our second recommendation that they require suppliers to 

provide detailed information of Medicare claims for products they provide to beneficiaries. 

HCFA, instead, believes that random telephone reviews with beneficiaries would be a 

better solution. We agree that telephone reviews are an effective measure for detecting 

improper payments. However, we believe that assuring the propriety of payments before 

claims are paid is preferable to trying to collect improper payments. Therefore, we hope 

HCFA will still reconsider our recommendation. 

Lastly, HCFA concurs with our recommendation that the DMERCs should continue, or 

initiate, system edits that detect multiple billings for orthotic body jackets to the same 

Medicare beneficiary in a calendar year. 

Overall, AOPA feels the report was well done and accurate. 

We made technical changes suggested by HCFA and AOPA. The full text of their 

comments can be found in appendix E. 

Medicare Payments for Orthotic Body Jackets 3 OEI-04-97-00390 
INTRODUCTION 

PURPOSE 

To determine whether or not Medicare inappropriately pays for orthotic body jackets 

under code L0430. 

BACKGROUND 

A L0430 orthotic body jacket is defined as a custom fitted one-piece molded plastic body 

jacket with interface material and an anterior or posterior opening. It is designed to 

provide control of all motion of the Thoracic-Lumbar-Sacral (TLS) region and is often 

prescribed for patients after surgery.1 

Medicare allows payment for eight types of spinal orthoses: Cervical, Cervical-ThoracicLumbar-Sacral Orthoses (CTLSO), Thoracic-Lumbar Sacral Orthoses (TLSO), LumbarSacral Orthoses (LSO), Sacroiliac, Halo Procedures, Torso Supports, and Thoracic-HipKnee-Ankle Orthoses (THKAO). These are represented by over 60 Medicare codes.2 All 

orthotic devices discussed in this report are TLSO and LSO types. An orthotic body 

jacket claimed under Medicare code L0430 is a TLSO. 

The Health Care Financing Administration’s (HCFA) Durable Medical Equipment 

Prosthetics, Orthotics, and Supplies (DMEPOS) Supplier Manual describes 26 TLSO and 

LSO spinal orthotic codes under which suppliers can obtain Medicare reimbursement. Of 

those 26 codes, L0430 is one of 10 that is specifically designated as an orthotic body 

jacket.3 

Orthotic Fitting Methods 

According to the Supplier Manual, there are three types of orthotic fitting methods: 

custom fitted, custom fabricated, and molded to patient model. 

Custom fitted orthoses are assembled from prefabricated components. They are trimmed, 

bent, molded (with or without heat), or otherwise modified for use by a specific patient. 

The L0430 body jacket is a custom fitted orthotic. 

A custom fabricated orthotic is individually made for a specific patient, starting with basic 

materials which include but are not limited to plastic, metal, leather, and cloth. Custom 

fabrication involves substantial work like cutting, bending, molding and sewing. It may 

also incorporate some prefabricated components. 

Medicare Payments for Orthotic Body Jackets 4 OEI-04-97-00390 
Molding to a patient model is the most complex fitting method, and it is usually the most 

expensive. An impression of a body part is made by using a positive plaster model of the 

patient. The orthotic is then custom fabricated by molding it onto the positive model. 

Medicare Coverage of Orthotic Body Jackets 

Spinal orthoses are covered by Medicare--the Federal health insurance program for 

individuals age 65 or older and certain categories of disabled people. Medicare is 

administered by HCFA, Department of Health and Human Services. 

Medicare covers spinal orthoses only when specific conditions are met. They must be 

ordered by a physician to reduce pain by restricting mobility of the trunk, to facilitate 

healing following an injury or surgical procedure on the spine, or to support weak spinal 

muscles or a deformed spine. 

Previous Office of Inspector General Studies on Orthoses 

Between 1990 and 1992, Medicare allowances for orthotic body jackets coded L0430 

rose sharply from $217 thousand to $18 million. In 1994, the Office of Inspector General 

(OIG) reported that 95 percent of claims submitted in 1991 were for non-legitimate 

orthotic body jackets and should not have been paid.4 The devices supplied were usually 

nothing more than a seat cushion for a wheelchair patient. 

Suppliers had marketed the devices to nursing homes as an alternative to restraints which 

were prohibited by the Omnibus Budget Reconciliation Act of 1990. Suppliers used 

loopholes in HCFA guidance and monitoring to claim non-legitimate devices such as 

wheelchair cushions as body jackets. A companion report5 described suppliers marketing 

practices for orthotic body jackets. 

Finally, in 1997, the OIG reported that at least 19 percent of orthoses claimed for 

Medicare reimbursement were medically unnecessary.6 

HCFA Actions 

HCFA established Durable Medical Equipment Regional Carriers (DMERCs) and the 

Statistical Analysis Durable Medical Equipment Regional Carrier (SADMERC) in October 

1993. Also, in 1993 HCFA and the DMERCs revised their coverage guidelines for 

TLSOs (codes L0300-L0440) and LSOs (codes L0500-L0565) to make them more 

descriptive. The guidelines also describe appropriate uses for the products. 

METHODOLOGY 

We reviewed a 5 percent sample of claims for code L0430 contained in HCFA’s 1996 

Common Working File. This sample consisted of 302 L0430 claims which had been filed 

in 1996. We dropped 3 of the 302 claims because we could not locate the address for the 

Medicare Payments for Orthotic Body Jackets 5 OEI-04-97-00390 
supplier. This left us with a sample of 299 paid claims which represented 126 suppliers 

and 289 beneficiaries. Ten beneficiaries in our sample received two body jackets each. 

Data Collection 

We surveyed the 126 suppliers by mail questionnaire to determine services provided to the 

289 Medicare beneficiaries in our sample. We obtained descriptions of orthotic devices 

supplied, how they were custom fitted, who did the custom fitting, and what material was 

used in constructing the devices. We also obtained pictures and brochures showing and 

describing devices they claimed under code L0430. 

Overall, 85 of the 126 suppliers responded to our survey--a response rate of 67.5 percent. 

The respondents represented 184 of the sampled 299 claims--61.5 percent. See appendix 

A for more detailed information. 

Of the 85 suppliers who responded to our survey, 62 (72.9 percent) provided requested 

pictures, brochures, and other descriptive data for orthotic devices provided to 

beneficiaries. The descriptive data was used to ascertain whether or not devices provided 

to beneficiaries were legitimate and properly coded. The 62 supplier responses represent 

153 claims. These 153 claims account for $2,588,688 in total projectable program costs 

of L0430 body jackets that we examined from 1996. See appendix C for more detailed 

information. 

We also reviewed HCFA and DMERC policy guidelines to understand the definition and 

characteristics of orthotic body jackets, Medicare coverage and payment rules, and coding 

guidelines for spinal orthoses. 

We interviewed HCFA officials who are responsible for oversight of orthoses and 

prostheses, pricing representatives from the Region C DMERC, coding staff from the 

SADMERC, and officials from the American Orthotic and Prosthetic Association 

(AOPA)--the trade organization which represents the industry. 

Finally, we examined expenditure data for 1994 through 1997 for spinal orthoses codes 

(L0300-L0565) from the Medicare Part B Extract and Summary System (BESS). 

Data Analysis 

We integrated and compared documentary, testimonial, and analytical evidence on 299 

Medicare claims for orthotic body jackets by 126 suppliers for 289 beneficiaries. Our 

focus was to determine the extent that suppliers appropriately bill Medicare for orthotic 

body jackets under code L0430. In instances where suppliers did not answer every 

question, or provide needed data, we based our analysis on the number who actually 

responded. 

Medicare Payments for Orthotic Body Jackets 6 OEI-04-97-00390 
To determine if suppliers billed appropriately for orthotic body jackets, we compared the 

devices individual suppliers said they provided to Medicare beneficiaries to HCFA 

standards. To make our comparison, we obtained expert opinions from the AOPA and 

from the SADMERC. 

We provided the AOPA and SADMERC experts all pictures, brochures, and other 

descriptions of specific orthotic devices suppliers sent us. They compared the descriptions 

of the devices to HCFA guidelines and standards. In some instances, AOPA and 

SADMERC experts said the quality of the pictures was inadequate for determining 

propriety of coding. In such instances, we excluded the orthotic device and pictures from 

our analysis. 

Where inappropriate claims were paid by Medicare, we calculated the excessive cost to 

Medicare. We then projected the cost to the Medicare population. See appendix B for 

calculations. To determine cost savings to the Medicare program, we used the opinion of 

the SADMERC expert because the SADMERC is charged with coding durable medical 

equipment, orthotics, prosthetics and supplies for Medicare payment. 

_ _ _ _ _ _ _ _ _ _ _ _ _ 

We did our inspection between September 1997 and January 1999. We conducted the 

inspection in accordance with the Quality Standards for Inspections issued by the 

President's Council on Integrity and Efficiency. 

Medicare Payments for Orthotic Body Jackets 7 OEI-04-97-00390 
FINDINGS 

Medicare claims and payments for orthotic body jackets 

have decreased significantly since 1994 

Medicare claims for orthotic body jackets under Medicare code L0430 decreased 50.1 

percent in the 5 year period between 1994 and 1998. In 1994, suppliers submitted 

Medicare claims for 7,214 body jackets. By the end of 1998, the number of claims per 

year had decreased to 3,602. Figure 1 illustrates this decline. 

Figure 1 

Total # of Claims, 1994-1998 

Orthotic Body Jacket - L0430 

8,000 

7,000 

6,000 

$ Amount # of Claims 5,000 

4,000 

3,000 

2,000 

1,000 

0 

1994 1995 1996 1997 1998 

Year 

Likewise, Medicare allowed charges for orthotic body jackets under code L0430 

decreased about 45.8 percent between 1994 and 1998. The allowed charges decreased 

from $7,086,939 in 1994 to $3,844,364 at the end of 1998. Figure 2 illustrates this 

decrease. 

Figure 2 Total Allowed Charges, 1994-1998 

Orthotic Body Jacket - L0430 

7 

6 

5 

Millions 4 

3 

2 

1 

0 

1994 1995 1996 1997 1998 

Year 

Medicare Payments for Orthotic Body Jackets 8 OEI-04-97-00390 
Overall, Medicare allowed charges for spinal orthoses devices (including L0430) 

decreased, but the extent of this decrease was less than that of orthotic body jacket L0430 

devices. Orthoses devices reimbursed by Medicare under codes L0300 through L05657 

decreased 14.9 percent from $34,595,344 in 1994 to $29,449,254 by the end of 1998. 

We illustrate the decrease in Figure 3. 

Figure 3 

Total Allowed Charges, 1994-1998 

Orthoses Codes L0300-L0565 

35 

30 

25 

$ Amount 

Millions 20 

15 

10 

5 

0 

1994 1995 1996 1997 1998 

Year 

All orthotic devices claimed as L0430 body jackets were 

eligible for Medicare reimbursement 

In our 1994 study, the devices allowed for Medicare payment under code L0430 were 

typically not orthotic body jackets, but rather seat cushions for wheelchair patients. 

Therefore, the devices were not legitimate Medicare reimbursable products. 

Conversely, in our current inspection, the SADMERC expert said all 153 of the body 

jacket claims in our sample qualified for Medicare reimbursement. In other words, the 

devices were legitimate Medicare reimbursable orthotic devices. However, they did not 

always meet requirements to be billed under code L0430. 

Suppliers upcoded 42 percent of L0430 orthotic body jacket 

claims in 1996 

Suppliers upcoded 42 percent (65 of 153)8 of orthotic body jacket claims submitted under 

code L0430 in 1996. As a result of the upcoding, the Medicare program made excessive 

payments of $41,405 to orthotic body jacket suppliers for the 65 body jackets in our 

sample. Projected to the universe of Medicare beneficiaries, the excessive payments from 

the practice of upcoding totaled $828,100. Appendix B shows our calculation of 

excessive cost resulting from the upcoding of orthotic devices sold to Medicare 

beneficiaries under code L0430. The excessive cost for orthotic body jackets under code 

Medicare Payments for Orthotic Body Jackets 9 OEI-04-97-00390 
L0430 accounted for 32 percent of the total cost of L0430 body jackets claims that we 

examined from 1996. See appendix C for our calculation. 

We identified improper coding by obtaining expert opinion from SADMERC and AOPA 

representatives. We provided them with photographs, brochures, and detailed 

descriptions of 153 body jackets furnished to Medicare beneficiaries by 62 of the 126 

suppliers we sampled. The SADMERC and AOPA experts compared the descriptions and 

photographs to HCFA standards shown for an L0430 body jacket found in DMERC 

guidelines. 

The SADMERC expert9 advised us that 42.5 percent (65 of 153) of claims should have 

been coded as orthotic devices that were less expensive than an L0430 body jacket. To 

illustrate, suppliers coded 20 L0300 orthotic devices10 as L0430 orthotic body jackets. 

The average Medicare allowed charge for an L0300 in 1996 was $111 as compared to an 

average allowable rate of $1,050 for items coded L0430. 

AOPA experts11 advised us that 16.3 percent (25 of 153) of claims should have been 

coded as orthotic devices that were less expensive than an L0430 body jacket. Therefore, 

the AOPA experts agreed with SADMERC experts that at least 16.3 percent of the 153 

body jackets we reviewed were upcoded. 

SADMERC and AOPA experts disagreed on appropriateness of coding for 40 claims. 

Their disagreement was based largely on the type of strapping used, or construction of the 

particular orthotic device sold to Medicare as an L0430 body jacket. In other words, they 

defined an L0430 body jacket differently. 

Lack of uniformity and standardization may account for 

some upcoding 

Representatives from the orthotic industry, and from HCFA, its contractors, and 

SADMERC all generally agreed that coding orthotics is complex and difficult to do with 

consistent results. Most coding representatives for HCFA and for the orthotics industry 

claim that the complex Medicare coding system combined with vague, outdated guidance 

has created a lack of uniformity and standardization in coding. 

The coding process 

The SADMERC is responsible for assisting manufacturers and suppliers in the proper use 

of the HCFA Common Procedure Coding System (HCPCS). The HCPCS is the means by 

which DMEPOS services and products are identified for billing Medicare. The 

SADMERC in conjunction with the DMERC conducts Coding Verification Reviews to 

determine proper codes for paying suppliers for durable medical equipment, prosthetics, 

and orthotics and supplies provided to Medicare beneficiaries. 

Medicare Payments for Orthotic Body Jackets 10 OEI-04-97-00390 
Vague coding guidance 

The Medicare guidance for coding spinal orthotic devices is vague and outdated. Most 

individuals in the orthotics industry and HCFA use AOPA’s Illustrated Guide to Orthotics 

and Prosthetics in coding orthotics. However, many individuals in the industry we spoke 

to agree the guide provides simplistic hand drawn pictures of orthotic devices that provide 

little help for coding many of the more sophisticated devices currently in use. In the 

guide, AOPA states that the illustrations only provide a generic representation of what a 

device that meets the code criteria might look like. AOPA has noted that it is difficult to 

provide an illustration that would represent every billable device for a particular code; 

however, they are continually trying to improve the guide’s usefulness. 

In some cases, the pictures make orthotic devices appear identical, but the Medicare codes 

and funding differs significantly. Figure 4 provides an example of two different orthotic 

devices. Both devices are included in the AOPA’s Illustrated Guide. The pictures 

illustrate the difficulty in determining the appropriate Medicare code. The pictures of the 

two devices appear identical. However, according to the narrative description, the device 

illustrated by picture A is custom fitted, and picture B illustrates an item that is molded to 

model. 

From a Medicare cost perspective, proper coding of these two orthotic devices is 

important. To illustrate, the average cost for the orthotic device shown in picture A is 

$743. However, the average cost of the device depicted by picture B is $1,093. 

Figure 4 

Orthotic Devices L0350 and L0360 

A B 

Medicare Payments for Orthotic Body Jackets 11 OEI-04-97-00390 
The difficulty of coding orthoses 

At a meeting between the SADMERC coding staff and the AOPA, SADMERC 

representatives noted they often have a difficult time trying to determine the appropriate 

code when suppliers and manufacturers ask for advice. They base their advice on product 

descriptions that suppliers give them over the phone. The SADMERC representatives 

noted that it would be useful if they had a list of product names, model numbers and the 

specific function of a product to help determine the appropriate code to use. 

In many instances the differences between orthotic products are subtle, requiring an expert 

to match them to the proper Medicare code. In such instances, even the experts may 

disagree on the appropriate Medicare code. To illustrate, SADMERC and AOPA experts 

disagreed on the appropriateness of coding for 40 of our sample of 153 orthotic devices 

billed under code L0430 in 1996. Their disagreement was based largely on the rigidity of 

the material used, or construction of the particular orthotic device sold to Medicare as an 

L0430 body jacket. In other words, they defined an L0430 body jacket differently. 

Two such body jackets are depicted by Figure 5 below. The SADMERC and the AOPA 

disagreed on whether or not these body jackets should be coded L0430. In both cases, the 

SADMERC said the jackets did not meet requirements to be coded as a L0430, while the 

AOPA said they did. The SADMERC said both of these jackets should be coded as a 

L1499, which is the code used for devices that do not match the description of any 

existing code. In addition, the SADMERC informed us that most orthotic devices are 

coded as L1499s. Payment for such devices are decided by the DMERCs on a case by 

case basis. 

Figure 5 

Orthotic Body Jackets the SADMERC and the AOPA did not Agree Upon 

5a 5b 

AOPA experts agreed with SADMERC experts that at least 16.3 percent (25 of 153) body 

jackets we reviewed were upcoded. One body jacket that both groups determined was 

upcoded looked similar to an L0430 body jacket, but was not made of a rigid material. 

Medicare Payments for Orthotic Body Jackets 12 OEI-04-97-00390 
Therefore, it would not likely provide the rigid support of the spine required of a L0430 

body jacket. However, the DMERC reimbursed this device at the L0430 rate. The 

Medicare allowable charge of the orthotic device in question is about $136, as compared 

to a cost of about $1,004 for a legitimate L0430 body jacket. 

In some cases code determination is clear and undisputable 

In some instances, the differences among orthotic devices are readily apparent for coding 

purposes. For example, the difference between a custom fabricated device and an “off the 

shelf” device. Figure 6 illustrates an orthotic device that both SADMERC and AOPA 

experts agreed meets the requirements for an orthotic body jacket under code L0430. 

This body jacket represented 80.6 percent (71 of 88) of the orthotic body jacket claims 

that were properly coded, and 46 percent (71 of 153) of all orthotic devices in our sample 

that were claimed under code L0430. 

Figure 6

A Properly Coded L0430 Body Jacket

3.5 percent of claims may have been for unnecessary 

duplicate body jackets 

Nine suppliers billed Medicare for duplicate L0430 body jackets for 10 of the 289 

beneficiaries in 1996. In each instance the second (duplicate) body jacket seemed 

unnecessary. Therefore, Medicare paid $8,400 for L0430 body jackets that may have not 

been needed by beneficiaries. Projected to the universe of the total Medicare population, 

the potential loss to the Medicare program is estimated to be about $168,000. Appendix 

D shows our calculation. 

An orthotist with a major supplier said it is not unusual for a beneficiary to obtain two 

body jackets in a 12 month time period. Possible legitimate reasons for such include body 

changes due to surgery and weight gain or loss. Also, a patient could be dissatisfied with 

the first jacket. However, the circumstances in which the 10 duplicate jackets were 

Medicare Payments for Orthotic Body Jackets 13 OEI-04-97-00390 
provided to the 10 Medicare beneficiaries raised serious questions about the legitimacy of 

the second jacket. 

First, an orthotist with a major supplier said that when a beneficiary had a 

legitimate reason for a second body jacket in a 12 month time period, the normal 

expectation is for the same supplier to furnish it. This expectation occurred in only 

one instance. Only one supplier furnished two jackets (one duplicate jacket) to the 

same beneficiary. 

One supplier furnished five of the duplicate body jackets to five beneficiaries. 

Likewise, one other supplier furnished four duplicate body jackets to four 

beneficiaries. Neither of the two suppliers had furnished both body jackets to 

either of the beneficiaries. 

Second, seven of the nine suppliers involved in furnishing duplicate jackets to 

Medicare beneficiaries in our sample were located in or near Los Angeles, 

California. One of the remaining two suppliers was located in Las Vegas, Nevada, 

and one was located in Hialeah, Florida. 

Third, all 10 beneficiaries received the second (duplicate) body jackets in a very 

short time period after receiving the first body jacket. To illustrate, two different 

suppliers each billed Medicare for an L0430 body jacket for the same beneficiary. 

One of the two suppliers billed Medicare for the second body jacket nine days after 

the other supplier had billed Medicare. 

Likewise, 5 different suppliers billed Medicare for a second body jacket for 5 

beneficiaries within 30 to 33 days after Medicare had been billed for the first body 

jacket for the beneficiaries. Further, 3 different suppliers billed Medicare for a 

second body jacket for 3 beneficiaries within 131 to 135 days after Medicare had 

been billed for the first body jacket for the beneficiaries. 

Finally, one supplier billed Medicare for a second body jacket for one beneficiary 

52 days after this same supplier had billed Medicare for a first body jacket for this 

same beneficiary. 

Because of our concerns, we questioned the carrier about the propriety of the 20 body 

jackets furnished to the 10 Medicare beneficiaries in our sample. The short time period 

involved suggested that either the second body jacket was not needed or not provided. 

The close proximity of most of the suppliers to one another suggested that suppliers could 

be swapping beneficiary Health Insurance Claim Numbers (HICN) to bill for the second 

orthotic body jacket to avoid detection. 

Responding to our questions, the fraud units of the respective carriers advised us that all 

of the suppliers involved have either been suspended or placed in a medical or prepayment 

review status. Further, all of them are under investigation. One of the suppliers has been 

Medicare Payments for Orthotic Body Jackets 14 OEI-04-97-00390 
referred to the Office of Inspector General’s Office of Investigations. However, two of 

the suppliers continue to bill Medicare. Lastly, one was investigated in 1996 and as a 

result had to return $150,000 to HCFA. 

At the time of our review in 1996, only one of four DMERCs had system edits to review 

second orthotic body jacket claims for a Medicare beneficiary in the same calendar year. 

Since 1996, two more have implemented such system edits. The DMERCs noted that a 

second orthotic body jacket claim is denied unless there is a medical necessity determined 

by a physician. As of March 1999, one DMERC still did not have a system edit in place to 

detect duplicate billings. 

Medicare Payments for Orthotic Body Jackets 15 OEI-04-97-00390 
<

RECOMMENDATIONS 

Although claims for orthotic body jackets submitted under code L0430 have decreased, 

almost half are upcoded. This resulted in an excessive cost of $828,100 in 1996 to the 

Medicare Trust Fund. Orthotic coding problems continue to exist because coding 

guidelines are not specific enough, and have not kept up with product changes. If not 

corrected, we project the upcoding problem could unnecessarily cost the Medicare Trust 

Fund over $4 million between 1996 and 2002. 

Likewise, Medicare paid for duplicate orthotic body jacket claims resulting in unnecessary 

costs of $168,000 in 1996. If not corrected by system edits we project this problem could 

cost Medicare over $800,000 over the 5-year period between 1996 and 2002. Therefore, 

we submit the following recommendations for HCFA consideration. 

< HCFA should review and revise the Medicare coding guidelines. 

In doing so, HCFA should work with the SADMERC and AOPA to develop 

Medicare guidelines that more accurately describe the characteristics of the 

devices. Further, HCFA should work with the SADMERC and AOPA to develop 

a new illustrated guide which is more reflective of the orthotic products currently 

in use. Lastly, HCFA should develop a product listing of brand names and model 

numbers that meet the criteria to be billed under each code. 

< HCFA should require suppliers to include more information on their 

Medicare claims for the products they provide to beneficiaries. 

Any of the following kinds of information could be useful for this purpose: a 

description of the body jacket that encompasses its features, a description of the 

spinal problem that requires a body jacket, or a brand name, model number, or 

picture of the body jacket. 

< HCFA should encourage the DMERCs to continue, or initiate, system 

edits that detect multiple billings of orthotic body jackets to the 

same Medicare beneficiary in a calendar year. 

Medicare Payments for Orthotic Body Jackets 16 OEI-04-97-00390 
AGENCY COMMENTS 

The HCFA and the AOPA both commented on our draft report. 

HCFA agrees that a product classification list is an effective tool to define exactly which 

products should be billed under code L0430. They plan to ask the SADMERC to compile 

such a list after responding to Year 2000 and 1997 Balanced Budget Act priorities. 

HCFA did not agree with our recommendation to revise Medicare coding guidelines. 

Instead, they believe a product classification list is a more effective tool than revising the 

coding guidelines. HCFA expressed concern about entering into a formal joint effort with 

AOPA to develop Medicare guidelines. We agree with HCFA that AOPA, as a national 

trade organization, represents the interests of orthotists and prosthetists whose interests 

may not coincide with those of the HCFA. However, we continue to believe HCFA 

should use AOPA as a resource, at least informally, to clarify Medicare coding guidelines 

and improve coding accuracy. Such consultation is important to help reduce inappropriate 

Medicare payments, since AOPA’s Illustrated Guide is widely used by orthotists and 

prosthetists for Medicare billing. Further, AOPA developed a definition of orthotic body 

jacket code L0430 that HCFA may be able to use in the Medicare Carriers Manual. 

HCFA does not concur with our recommendation that they require suppliers to provide 

detailed information on Medicare claims for products they provide to beneficiaries. 

HCFA, instead, believes that random telephone reviews with beneficiaries would be a 

better solution. We agree that telephone reviews are an effective measure for detecting 

improper payments. However, we believe that assuring the propriety of payments before 

claims are paid is preferable to trying to collect improper payments. Therefore, we hope 

HCFA will still reconsider our recommendation. Orthotic body jackets, while 

complicated, are relatively few in number, and additional information about the product 

would be useful to help ensure proper coding and payments. We modified the wording of 

our recommendation to reflect the fact that we did not intend to prescribe a burdensome 

process for providers and HCFA contractors. 

Lastly, HCFA concurs with our recommendation that the DMERCs should continue, or 

initiate, system edits that detect multiple billings for orthotic body jackets to the same 

Medicare beneficiary in a calendar year. 

Overall, AOPA believes the report was well done and accurate. They did raise an issue 

concerning the quality of the pictures we gave them and the SADMERC to analyze. We 

clarified our methodology for this report to show that we excluded the poor quality 

pictures from our analysis. 

We made technical changes suggested by HCFA and AOPA. The full text of their 

comments can be found in appendix E. 

Medicare Payments for Orthotic Body Jackets 17 OEI-04-97-00390 
APPENDIX A 

Survey Response Rates

Overall Sample 

Suppliers Claims Beneficiaries 

# % # % # % 

Sampled 126 100 299 100 289 100 

Undeliverable 18 14.3 41 13.7 38 13.1 

Non-Respondents 23 18.3 74 24.7 74 25.6 

Final Response 

Rate 

85 67.5 184 61.5 177 61.2 

Coding Issue 

Suppliers Claims Beneficiaries 

# % # % # % 

Sampled 85 100 184 100 177 100 

Non-Respondents 23 27.1 31 16.8 31 17.5 

Response 

Rate 

62 72.9 153 83.2 146 82.5 

Medicare Payments for Orthotic Body Jackets 18 OEI-04-97-00390 
Potential Excess Cost Resulting from Upcoding

AOPA SADMERC According to SADMERC: Excessive

Survey/ # of Claims Claims Med Avg Amt Medicare Cost Per Total Excess Cost

Supplier # Claims improper coding improper coding Allwd Chg should have Allwd Claim To Medicare

2 1 0 1 $1,004 $371 $633 $633

3 1 1 0 $998 $998 $0 $0

4 1 0 0 $1,004 $1,004 $0 $0

5 1 0 0 $990 $990 $0 $0

6 1 0 0 $1,004 $1,004 $0 $0

7 2 0 2 $1,081 $161 $920 $1,840

8 10 0 0 $1,081 $1,081 $0 $0

9 1 0 0 $1,081 $1,081 $0 $0

10 1 1 1 $1,004 $136 $868 $868

11 1 1 1 $1,004 $136 $868 $868

11.1 1 1 1 $1,100 $136 $964 $964

13 1 1 1 $1,004 $136 $868 $868

14 2 2 2 $1,004 $136 $868 $1,737

15 1 0 1 $1,004 $339 $665 $665

17 1 0 0 $966 $966 $0 $0

18 1 1 1 $966 $136 $830 $830

19 1 0 1 $1,094 $339 $755 $755

21 1 0 0 $1,096 $1,096 $0 $0

21.1 1 0 0 $1,096 $1,096 $0 $0

22 1 0 1 $938 $373 $565 $565

23 1 0 0 $1,004 $1,004 $0 $0

24 1 0 0 $1,081 $1,081 $0 $0

26 24 0 0 $1,081 $1,081 $0 $0

27 2 0 0 $1,004 $1,004 $0 $0

30 1 0 0 $1,081 $1,081 $0 $0

31 2 0 0 $1,081 $1,081 $0 $0

32 4 0 0 $1,081 $1,081 $0 $0

36 14 0 0 $1,081 $1,081 $0 $0

37 1 0 0 $900 $900 $0 $0

38 2 2 2 $937 $131 $806 $1,611

38.1 2 2 2 $1,050 $131 $919 $1,837

39 3 3 3 $1,050 $131 $919 $2,756

41 2 0 2 $1,096 $339 $757 $1,514

43 1 0 0 $945 $945 $0 $0

44 1 0 1 $1,004 $339 $665 $665

45 1 0 0 $900 $900 $0 $0

47 3 3 3 $1,081 $144 $937 $2,812

48 15 0 15 $1,081 $339 $742 $11,127

49 1 0 1 $1,081 $161 $920 $920

50 1 0 1 $1,081 $373 $708 $708

51 7 0 0 $1,081 $1,081 $0 $0

52 2 0 0 $1,167 $1,167 $0 $0

53 1 0 0 $1,081 $1,081 $0 $0

55 1 0 1 $937 $339 $598 $598

56 1 0 0 $1,004 $1,004 $0 $0

59 1 0 0 $1,094 $1,094 $0 $0

60 2 0 0 $998 $998 $0 $0

61 1 0 1 $1,004 $363 $641 $641

62 1 0 1 $1,167 $430 $737 $737

64 1 0 1 $1,167 $143 $1,024 $1,024

67 1 0 1 $1,081 $339 $742 $742

68 1 0 1 $998 $411 $587 $587

72 1 0 1 $998 $339 $659 $659

72.1 1 0 1 $969 $339 $630 $630

73 1 0 0 $899 $899 $0 $0

79 1 0 1 $945 $371 $574 $574

80 1 0 0 $937 $937 $0 $0

80.1 1 0 0 $1,096 $1,096 $0 $0

82 1 0 0 $1,004 $1,004 $0 $0

83 1 0 1 $1,004 $123 $881 $881

84 5 0 5 $1,081 $339 $742 $3,709

85 7 7 7 $1,050 $131 $919 $6,431

Totals: 153 25 65 $51,756

Medicare Payments for Orthotic Body Jackets 19 OEI-04-97-00390

APPENDIX B APPENDIX B

con’t

Overpayments from Upcoding
Summary Statistics for Overpayments from Upcoding

1. $51,756 (Total Overpayment for Sample) 

2. Multiply the overpayment by .80, since Medicare pays 80% of the allowed charge. 

$51,756 x .80 = $41,405 (Loss to the Medicare program) 

3. Multiply the loss to the Medicare program by 20, since these figures are on a 5 percent 

sample. 

$41,405 x 20 = $828,100 

4. Projected savings over 5 years: 

$828,100 x 5 = $4,140,500 

Confidence Intervals 

Sample Size % of Upcoded 

Orthotic Body 

Jackets 

Lower 95% 

Confidence 

Interval 

Upper 95% 

Confidence 

Interval 

153 42% 34.2% 49.8% 

Sample Size Estimated 

Overpayment 

Lower 95% 

Confidence 

Interval 

Upper 95% 

Confidence 

Interval 

153 $828,100 $672,882 $983,318 

Medicare Payments for Orthotic Body Jackets 20 OEI-04-97-00390 
------------

-------------

APPENDIX C 

Total Projectable Costs of Code L0430 in Sample

1. $161,793 (Total Cost of 153 Orthotics Body Jackets in Sample) 

2. $161,793 

x 20 (Multiply by 20 since it is a 5 Percent Sample) 

$3,235,860 (Total Projectable Costs in Sample) 

3. $3,235,860 

x .80 (Medicare Pays 80%) 

$2,588,688 (Total Projectable Costs in Sample of L0430 Orthotic Body Jackets) 

4. $828,100/$2,588,688 = 32% (Total Percentage of the dollar amount that was upcoded) 

Medicare Payments for Orthotic Body Jackets 21 OEI-04-97-00390 
---------

----------

APPENDIX D 

Duplicate Billings

1. $1,050 (Average allowed cost of an orthotic body jacket in 1996) 

x 10 (Total # of beneficiaries who received two orthotic body jackets)

$10,500 (Potential overpayment for double billing) 

2. $10,500 

x .80 (Percent Medicare pays of the allowable charge) 

$8,400 (Potential loss to the Medicare program) 

3. Multiply the potential loss to the Medicare program by 20, since these figures are based on 

a 5 percent sample. 

$8,400 x 20 = $168,000 (Potential loss to the Medicare program) 

4. Potential Savings over 5 years: 

$168,000 x 5 = $840,000 

Confidence Interval 

Sample Size Potential 

Overpayment 

Lower 95% 

Confidence 

Interval 

Upper 95% 

Confidence 

Interval 

153 $168,000 $65,609 $270,391 

Medicare Payments for Orthotic Body Jackets 22 OEI-04-97-00390 
APPENDIX E 

Agency Comments

Health Care Financing Administration (HCFA) 

American Orthotic and Prosthetic Association (AOPA) 

Medicare Payments for Orthotic Body Jackets 23 OEI-04-97-00390 









ENDNOTES 

1. Source: American Orthotic and Prosthetic Association’s Illustrated Guide to Orthotics 

and Prosthetics. 

2. Source: American Orthotic and Prosthetic Association. 

3. The 26 codes are: L0300, L0310, L0315, L0317, L0320, L0330, L0340, L0350, L0360, 

L0370, L0380, L0500, L0510, L0515, L0520, L0530; orthotic body jacket codes, L0390, 

L0400, L0410, L0420, L0430, L0440, L0540, L0550, L0560, L0565. 

4. Medicare Payments for Orthotic Body Jackets (OEI-04-92-01080). 

5. Marketing of Orthotic Body Jackets (OEI-04-92-01081). 

6. Medicare Payments for Orthotics (OEI-02-95-00380). 

7. The codes used in this analysis: L0300, L0310, L0315, L0317, L0320, L0330, L0340, 

L0350, L0360, L0370, L0380, L0390, L0400, L0410, L0420, L0430, L0440, L0510, 

L0515, L0520, L0530, L0540, L0550, L0560, L0565; (L0500 was not a part of this 

analysis because the code is no longer used). 

8. We selected 299 claims contained in HCFA’s 1996 Common Working File which is a five 

percent random sample of all Medicare claims. Of the providers, 62 furnished descriptive 

information such as photographs and brochures for 153 of the jackets claimed under 

Medicare code L0430. 

9. The expert is the Coordinator of the HCPCS unit of the SADMERC which has 

responsibility for coding reimbursable durable medical equipment for the Medicare 

program. 

10. A L0300 is less expensive and more flexible than a L0430 and it does not provide the rigid 

support that is required of an L0430. It also lacks the interface material required by 

L0430. Source: AOPA’s, Illustrated Guide to Orthotics and Prosthetics and a 

representative from the SADMERC. 

11. Experts are members of the AOPA Coding Committee and AOPA members who train the 

SADMERC on HCPCS coding for orthoses and prostheses. AOPA noted that in cases 

when the coding committee could not agree if a product was appropriately billed as an 

L0430 the majority opinion of the group was used. 

Medicare Payments for Orthotic Body Jackets 33 OEI-04-97-00390