Department of Health and Human Services 

OFFICE OF 

INSPECTOR GENERAL 

PAYMENT FOR DURABLE MEDICAL 

EQUIPMENT BILLED DURING SKILLED 

NURSING FACILITY STAYS 

JUNE GIBBS BROWN 

Inspector General 

OCTOBER 1994 

OEI 06-92-00860 
EXECUTIVE SUMMARY 

PURPOSE 

To determine if incorrect Medicare payments are being made for durable medical 

equipment services billed to Medicare Part B during a skilled nursing facility stay. 

BACKGROUND 

Federal law states that durable medical equipment (DME) may only be billed to Part B of 

the Medicare program if the equipment is provided in the beneficiary’s residence. 

However, the law specifies that a skilled nursing facility cannot be considered a residence. 

For this reason, equipment billed to Part B during a beneficiary stay in such a facility is 

incorrectly paid. 

Four regional carriers, called Durable Medical Equipment Regional Carriers, now process 

claims for durable medical equipment and other items covered under Part B of Medicare. 

Establishing these carriers provides an opportunity to develop guidelines that address 

equipment abuses or program weaknesses. Examining equipment billed during a skilled 

nursing facility stay, at this time, provides an opportunity to develop a baseline for future 

comparison of these carriers’ effectiveness. 

For this evaluation, data were obtained from a one-percent sample from the Common 

Working File database. All part B durable medical equipment services, for all 

beneficiaries identified as having a skilkd nursing facility stay during 1991, were included 

in the sample. An analysis of information on the 1022 items of equipment contained in 

the sample, and obtained from the carrier, was completed. Similar information was 

obtained from the 1992 data base, although the major focus of this report is 1991. 

FINDINGS 

Approximately $8.9 million in 1991 and $10.8 million in 1992 was incorrectly allowed 

for durable medical equipment billed during skilled stays. 

The inability of the suppliers and carriers to accurately determine the beneficiary’s 

location during a skilled stay, leads to incorrectly paid equipment claims. 

● Ninety-nine percent of durable medical equipment bills, submitted by suppliers for 

patients in skilled nursing facilities, represen~ ~he location as “home” or “other. “ 

● l%ere is some evidence that dl~erences exist in screening activities used by “high 

charge” and other carn”ersto detect incorrect DA4E billing. 

i 
Most incorrect equipment billings during a skilled stay represent items prescribed for 

use prior to, or after, a skilled stay. A review of certificates of medical necessity was 

undertaken. This review indicated 77 percent of the items billed represented continued 

billings for previously prescribed items or new prescriptions for use after discharge. 

Approximately half of the patients in our sample were not discharged to their homes, 

meaning incorrect payments for equipment might continue. Incorrect billing for 

equipment may continue for some time after the skilled stay. This may occur due to the 

patient’s receiving care in a non-residential setting after discharge. 

RECOMMENDATIONS 

We recommend that HCFA take action in the following areas to minimize the 

opportunity for incorrect Durable Medkal Equipment payments. 

Improve the place of service coding system. The HCFA could: 

● Utilize data from the Statistical Analysis DME regional carrier to identify 

and review suppliers who consistently use the “other” place of service 

category, and take appropriate actions based on the reviews. 

● Disseminate materials which indicate the limited circumstances under which 

“other” may be appropriately used to bill DME. 

● Educate the four new Durable Medical Equipment Regional Carriers 

(DMERCS) on the accurate use of place of service codes. 

● Require the new carriers to provide on-going education to the suppliers on 

the accurate use of place of service codes. 

● Suggest that the new carriers develop an item for inclusion in their 

database, that is transmitted to the Common Working File, to provide a 

continuing history of the patient’s location. 

Improve the supplier knowledge of beneficiary loc~”on. The HCFA could: 

● Ensure that the four new carriers instruct suppliers of their responsibility 

for determining the beneficiary location, before billing Part B equipment. 

● Ensure that the DMERCS undertake sample reviews of suppliers claims and 

exchange their findings with the other DMERCS, so that all can take 

appropriate action on the supplier’s claims. 

Review the Durable Medical Equipment Re@”ona.1Carn”ersprocesses. The HCFA could: 

● Assess the effectiveness of the new Common Working File edit of Part B 

equipment and skilled nursing facility charges, and evaluate whether 

additional edits should be developed to review all skilled stay bills, upon 

submission, for overlap with durable medical equipment billing. 

● Encourage the DMERCS to examine this problem. The OIG, in 

collabomtion with HCFA, may also review this area in the future to 

examine the impact of implementing the new DMERC processes. 

ii 
AGENCY COMMENTS 

We solicited and received comments from the Health Care Financing Administration 

(HCFA) on our draft report. 

The HCFA concurred with the intent of our three recommendations. In addition, they 

suggested alternative steps that could also be taken to achieve the intent of our 

recommendations. We have incorporated the suggestions proposed by HCFA in the listing 

of options presented in our recommendations. 

See Appendix B for the full text of the HCFA comments. 

... 

111 
TABLE OF CONTENTS 

EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . 

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

FINDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. Incorrectly Allowed DME During 1991 And 1992 . . . . . . . . . 

. Supplier And cafiel-Knowledge Of Beneficiary Location . . . . . 

. Billings Dufing StiyS For Items T_Jsed Before Or After Stays . . . 

● Continuation Of Incorrect Payments . . . . . . . . . . . . . . . . . . 

RECOMMENDATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . 

. . . . . . . . . . . 

. . . . . . . . . . . 

. . . . . . . . . . 

. . . . . . . . . . . 

. . . . . . . . . . . 

1 

1 

4 

4 

5 

8 

. . . . . . . . . . 10 

. . . . . . . . . . 11 

ENDNOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 

APPENDICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0Al 

A: 1991 Carrier Information For One-Percent Sample . . . . . . . . . . . . . . . . . . . Al 

B: Agency Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..B1 
INTRODUCTION 

PURPOSE 

To determine if incorrect Medicare payments are being made for durable medical 

equipment (DME) services billed to Medicare Part B during a skilled nursing facility stay. 

BACKGROUND 

Federal law states that DME may only be billed to Part B1 of the Medicare program if 

the equipment is provided in the beneficiary’s residence. However, the law specifies that 

a Willed Nursing Facility cannot be considered a residence. 2 For this reason, DME 

billed to Part B during a beneficiary stay in a SNF is incorrectly paid. 

While DME billed during a nursing home stay is not payable, carrier rules may allow 

some DME to be paid during a portion of an individual’s SNF stay. First, DME USd in 

a beneficiary’s residence for a portion of a month, prior to a SNF stay, may be billed and 

paid; however, the DME may not be re-billed during a Part A SNF stay.3 Secondly, an 

item of DME may be billed on the day of discharge from a SNF to a “residence.” 

Four regional carriers now process claims for DME, prosthetics, orthotics, and certain 

other items covered under Part B of Medicare. The establishment of DME carriers 

provides an opportunity to develop guidelines to address DME abuses or program 

weaknesses.4 An examination of DME billed during a SNF stay, at this time, provides 

an opportunity to develop a baseline for future comparison of Durable Medical Equipment 

Regional Carriers’ (DMERCS) effectiveness. Corrective systems are also identified to 

limit vulnerabilities found in this inspection. 

SCOPE 

This inspection is the frost of a series examining payment for services in nursing homes. 

Subsequent reports will address other topics and include nursing home services provided 

under both the Medicare and Medicaid program. 

METHODOLOGY 

Data for this inspection were obtained from a one-percent sample from the Common 

Working File database (See Table 1). All sample beneficiaries identified as having a Part 

A SNF stay during 1991 were included in the sample. All Part B DME services 

commencing from the first through the last covered day of the SNF stay, which 

represented 1022 items, were included for analysis. Projections can be made to the 

1 
TABLE 1 

Category of DME 

Wheel Chairs 

Wheel Chair Accessories 

Rollabout Chair 

Hospital Beds 

Bed Side Rails 

Walkers 

Walker Attachments 

Canes 

Crutches 

Commode Chairs/Pans 

Oxygen Concentrators 

Portable Gas/Oxygen Systems 

Nebulizers and IPPB Machines 

Oxygen Contents 

Pressure Pads/Mattresses 

Heating Pads 

Traction and Bar Devices 

Patient Lifts 

Suction Pump/Home 

Part B DME Allowed During A SNF Stay 

From The 1991One Percent Common Working File Sample 

HCPC Codes Items Of 100% 

Total 1% 

In Category 

For 1991 

DME From 

1991 CWF Charges Projected 

Charges 

23 265 $16,046 $1,604,600 

8 20 $929 $92,900 

1 13 $709 $70,900 

10 154 $18,446 $1,844,600 

1 2 $21 $2,100 

6 148 $9,816 $981,600 

2 15 $563 $56,300 

2 9 !$231 $23,100 

2 2 $77 $7,700 

5 83 $5,714 $571,400 

9 82 $21,809 $2,180,900 

2 39 $1,861 $186,100 

4 46 $2,351 $235,100 

1 1 $215 $21,500 

9 48 $2,841 $284,100 

1 1 $69 $6,900 

5 47 $2,260 $226,000 

2 14 $1,117 $111,700 

1 7 $550 $55,000 

Continuous Airway Pressure Device 1 2 $211 $21,100 

Neuromuscular Stimulator 1 2 $191 $19,100 

IV Poles 1 11 $263 $26,300 

AmbulatoW Infusion Pump 1 2 $332 $33,200 

Home Blood Glucose Monitor 1 3 $438 $43,800 

Repair, Non-routine Service, DME 

Miscellaneous 2 6 $1,607 $160,700 

TOTAL 101 1022 $88,667 $8,866,700 

2 
universe of Medicare beneficiaries, since all DME billed during a SNF stay were included 

in the sampling frame. Similar information was obtained from the 1992 Common 

Working File, although the major focus of this report is 1991.5 

The information obtained from the database i.:~.uded relevant patient identifying 

information, coded place of service, carrier identification, nursing home identification, the 

location by State, and the patient discharge disposition at the end of the SNF stay. Part B 

claims information was also collected. 

Information concerning Part B claims processing for DME claims, as well as measures 

taken to avoid incorrect payment of DME, was also obtained from the carriers. A copy of 

the claim, certificate of medical necessity, and payment information for each piece of 

billed DME contained in the 1991 database were requested from the carriers. Of the 1022 

items requested, information was returned for 964 items. However, only 637 items had 

useable information on certificates of medical necessity and 712 on payment disposition. 

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

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

3 
FINDINGS 

Approximately $8.9 Million In 1991 And $10.8 Million In 1992 Was Incorrectly 

Allowed For DNIE Billed During SNF Stays. 

Total incorrect payments for DME billed DME Items Incorrectly Billed during a SNF stay in 1991 were $88,667. During A SNF STA~ 

Projected to the entire SNF population, 

these figures represent $8.867 million in 140,000 

incorrect payments and 102,200 DME 120,000 102,200 

items incorrectly billed in 1991. In 1992 100,000 

the projected amount of DME incorrectly 80,000 

paid during a SNF stay represented 60,000 

117,700 items at a cost of $10.790 40,000 

million. This represents a 15 percent 20,000 

increase from 1991 to 1992 in the number n 9 

of DME items incorrectly billed and 1991 1992 

allowed during a SNF stay. 

Twenty-three percent of the incorrectly allowed DA4Epayments were associated with coinsurance and deductibles, represenh”ngan unnecessary burden for benejician”es. 

We reviewed the payment history for 712 of the 1022 claims from 1991, to examine the 

Medicare and beneficiary financial responsibility for the incorrectly allowed DME. Based 

on this review, 23 percent, or $2.04 million of the incorrectly allowed DME charges, 

represented deductibles and co-insurance paid by the beneficiary, other insurance 

programs, or the State (in the case of some Medicaid recipients) in 1991.6 This 

represents inappropriate deductible or co-insurance payments made by each beneficiary for 

equipment billed during their SNF stay. 

Carriers who processed claims for the larger industrial States allowed greater incorrect 

payments for DME. 

The carriers with the greatest amounts of incorrectly allowed DME billed during a SNF 

stay, were those that processed claims for the larger industrial States, as noted in Table 2. 

These items of DME represent over half of all incorrectly allowed DME charges and 

items. This simple finding may indicate that the greater volume of incorrectly billed items 

increases the effort required to determine if each item of DME is billed correctly. There 

are implications from this finding for the newly formed DMERC’s, since each carrier will 

be responsible for a greater volume of claims, covering a larger geographical area. One 

implication for the four DMERC’s is the need for some ongoing system to compare DME 

billing with SNF billing during a specified time frame, as well as a system of tracking 

beneficiaries admitted to a SNF, to reduce incorrect billings and payments. 

4 
TABLE 2 

Ten Carriers Representing The Largest Charges 

And Number Of DME Items Billed During A 1991 SNF Stay 

Carner Jurisdiction Total Items of 

Charges* DME* 

Health Care Service Corp-Med Illinois $7427 75 

Part B 

Pennsylvania Blue Shield• Pennsylvania, Delaware, New $6990 72 

Jersey, D. C. Virginia, Maryland 

California Physicians Service California $6900 I 84 

Transamerican Medicare ICalifornia I $5433 I 71 

Nationwide Mutual Insurance Ohio & West Virginia $4994 51 

Company - Medicare 

Blue Cross Blue Shield of Texas Texas $4292 43 

Empire Blue Cross and Blue New York $4136 41 

Shield 

Medicare Part B -Florida BCBS Florida $4012 50 

Blue Cross Blue Shield of Michigan $3980 I 53 

CIGNA Medicare Admin. lTennessee & North Carolina I $3025 I 42 

* These figures represent data from the 1% Common Working File 

The Inability Of The Suppliers And Carriers To Accurately Determine The 

Beneficiary’s Location During A SNF Stay Leads to Incorrectly Paid DME Claims. 

Ninety-nine percent of DME bills, submitted by suppliers for patients in Part A SNF stays, 

represent the location as “home” or “other. “ 

Incorrect payments for DME were almost evenly divided between place of service codes 

representing “home” (50 %), and “other” (49.2 %). Both of these codes represent an 

incorrect payment, since the services were billed during a SNF stay. The remaining .8 

percent of the incorrect payments were identifkd as occurring in a SNF, a nursing facility 

or during End Stage Renal Disease treatment. Finally, the 1991 and 1992 data indicate 

that the same number of items were coded “SNF” in each year. 

Prior to September 16, 1991, there were 14 codes to indicate the place where the 

Medicare service was rendered. Many of these codes, including “other,” represented 

more than one possible place of service. After September 16, 1991, HCFA greatly 

expanded the number of available codes to allow designation of at least 27 possible places 

5 
6 

of service. In addition, no code represented more than one setting. These coding changes 

provided the opportunity to better represent the actual place of service and decrease the 

incorrectly paid DME during a SNF stay. However, the code “99,” “other,” continued to 

be listed as an option for place of service. When examining the 1991 and 1992 SNF 

DME data, we found that the utilization of the code “99” or “other” declined from 49.2% 

in 1991 to 22% in 1992.7 However, as noted in the first finding, the number of items 

incorrectly allowed during a SNF stay increased. 

Carriers policies regarding screening of DA4E claims vary. 

We surveyed the 40 current Medicare Part B carriers to examine their efforts to determine 

if a person receiving DME is located in a SNF. Twenty-nine of the 39 carriers answering 

this question indicated they have a process to verify if the “place of service” code is 

consistent with any other information on the claim, or known about the beneficiary. 

However, if the place of service indicates home, many carriers do not have further edits 

to determine if the information on the claim is correct. This indicates a lack of 

knowledge by the supplier of the beneficiary location at the time the supplier bills,g or a 

false claim submission, since the DME represented in this database was billed during an 

individual’s SNF stay. 

To further examine the use of the code “99,” representing “other,” carriers were also 

asked for specific examples of the correct use of “other.” Six of the 40 carriers indicated 

there are times when “99” would be accepted as correct; four stated “99” is accepted 

when referring to a pharmacy as the point of sale or the DME supplier’s place of 

business. Additionally, two accepted “99” when used to describe a retirement home, or 

when used to represent the beneficiary’s home. Thirty of the carriers indicated the use of 

code “99” did not reduce the ability of a carrier to pay accurately. Finally, 13 of 37 

carriers said providers are using place of service “99” inappropriately. 

i%ere is some evidence that dl~erences exist in screening activities used by “high charge” 

and other carriers to detect incorrect DME billing. 

We also compared the efforts to control incorrect DME payments of the ten carriers with 

the largest DME charges9 paid during SNF stays with the remaining carriers (see 

Table 3). On questions that pertained to knowledge of the location of the beneficiary 

receiving DME, the “high” charge carriers always indicated fewer routine efforts to 1) 

determine DME recipient location, 2) examine the consistency of the coded Place Of 

Service (POS) with other information, and 3) examine bills with POS “99” for the 

appropriateness of another code. The “high” charge carriers were also less likely to 

believe that providers used POS “99” inappropriately, or to have undertaken any focused 

review of incorrect DME payments. Additionally, these carriers were more likely to be 

able to provide an example of when a DME payment would be made for a beneficiary in a 

SNF. It appears that the carrier efforts, as shown in Table 3, may have an impact on 

decreasing incorrectly allowed DME payments. 
TABLE 3 

Comparison Of Responses By Top Ten “HIGH” Charge Carriers And All Other 

carriers To Questions Regarding Efforts To Control Incorrect DME Payments 

Percent of Ten Percent of All 

“High” Charge Other Carrkrs 

Carriers Responding 

Responding Yes Yes 

When a bill for DME is received and the Place Of 40% 69% 

Service (POS) marked on the claim does not indicate 

HVF, are efforts routinely made to determine if the 

~erson receiving the DME is in a SNF? 

[s any verification done when processing a DME 66% 76% 

;laim to confii the POS coded is consistent with any 

~ther information either on the claim or known about 

:he beneficiary? 

[f a claim for DME lists the POS as “99” (other), is 50% 66% 

the POS reviewed to determine if one of the HCFA 

specified POS codes should be used? 

Do you believe that providers are using POS “99” 44% 47% 

inappropriately? 

Have you undertaken any focused review on incorrect 44% 66% 

payments made for DME in the past three years? 

Are there any instances you can think of where a 30% 17% 

payment for an item of DME would be made even 

though the beneficiary is in a SNF? 

Can you provide a speciilc example(s) of when POS 10% 18% 

“99” has been used appropriately for a DME claim? 

Joes the use of code “99” on claims reduce the 30% 15% 

:arrier’s ability to pay accurately? 

>oes the use of code “99” on claims reduce the 22% 32% 

:arrier’s ability to pay in a timely manner? 

The HCFA hus developed a Common Working File Alert for DklE items with service dates 

overlapping an inpatient admission. 

In the summer of 1993, during the transition to DMERC claims payment of DME, HCFA 

developed an edit for use by the Common Working File. The edit’s purpose is to alert 

the DMERC to the possibility of a DME service coinciding with an inpatient admission. 

While the Common Working File activates the alert, the DMERC is responsible for 

reviewing the Part B claim to determine if a DME item was billed for a patient currently 

receiving inpatient care. After review, the DMERC may either approve or reject the 

claim for payment. 

7 
8 

However, there arelimitations tothe alert that has been developed. This alert dependson 

a SNF or other inpatient bill being processed prior to the receipt of a Part B DME claim 

by the DMERC. If a SNF bill is not processed before a DME claim is received, an alert 

will not occur due to no overlapping service date. There is no reverse edit in place to 

review all SNF or inpatient claims when they are received, to determine if the beneficiary 

is also receiving DME. Thus, the current edit process continues to allow incorrect DME 

payments for SNF patients. 

A COMMON WORKING FILE EDIT 

DMERCS OF DME CLAIMS WHICH 

A NURSING HOME STAY 

Beneficiary ~ 

Enters SNF 

Cl,, m to, 

3NF l-l f)tay

INTERMEDIARY /3

Processing of SNF 

Claim/Cost Report 

Application of Edits 

EDIT = DME service date overlap 

with an inpatient admission 

ALERTS 

OVERLAP 

Beneficiary A Purchases or Rents a Wheelchair 

causes DA02 alert to DMERC 

i 

Mo v.$ment i Reject Approve i of Clafm Detail I Claim Claim d 

l——————————— . 

Most Incorrect DME Billings During A SNF Stay Represent Items Prescribed For Use 

PAor To Or After A SNF Stay. 

The certificates of medical necessity that we received were examined to determine whether 

services billed during a SNF stay were provided in the SNF, were continued billings for 

items in use before the stay, or were billed during the stay for items used after the stay. 

Any of these represents an incorrect DME payment, but each indicates a different reason 

for the incorrect payment. 
To determine if any of the above mentioned conditions occurred, we reviewed the DME 

claims information and certificates of medical necessity. Of the 1022 items of DME 

billed during a SNF stay that were included in the 1991 one percent sample, we obtained 

certificates of medical necessity from the carriers for 637; or 62% of the total number of 

DME items billed. This represents $5.358 million, or 60% of the total amount of 

incorrectly paid DME. 

Certificate Of Medical Necessity 

In Relation To SNF Stay 

3507’1 292 

300 i 

250 200 

200 1 126 

150 “ 

100 ~. 

50 

0 &mlllll ~–+_ 

Before During* Last Six Day Of After 

Days** Discharge 

Total N = 637 

● Excludes last week 

● * Excludes day of discharge 

Certificates of Medical Necessity Prior To A SNF Stay 

A review of the certificates of medical necessity, obtained from the carriers, showed that 

292 (46 %) of the items had dates indicating they had been prescribed prior to the SNF 

stay. Payments made for the items certifkl as medically necessary before entering the 

SNF, and for which charges continued to be billed after entering the SNF, represent 

$2.614 million, or 49 % of the incorrectly paid DME with certiilcates of medical 

necessity. 

It is logical to assume these items of DME were being used in the beneficiaries’ homes 

prior to obtaining care in the SNF. Although DME used in the home may be paid if it 

was billed for use prior to entering a SNF, even though the beneficiary resided in a SNF 

for a portion of the billed month, this DME should not be rebilled during the beneficiary’s 

SNF stay. 

9 
Certificates of Medical Necessity During a SNF Slay 

Our review of the certificate of medical necessity data showed 333 of the billed DME 

items were certified as medically necessary during the beneficiaries’ SNF stay. While 

only 7 items had certificates on the date of discharge, 200 items had certificates of 

medical necessity commencing during the last six days of the beneficiaries’ SNF stays 

(excluding discharge date). This could indicate that these 200 items were prescribed for 

use at the beneficiaries’ homes ~r discharge from the SNF. 

The remaining 126 items may also represent DME that had been prescribed prior to 

entering the SNF, for which the certificates of medical necessity were renewed during this 

stay; or, these items could represent DME prescribed and used during the SNF stay. 

Either situation indicates incorrectly paid DME. A random review of these 126 claims, 

indicates that many of the certificates of medical necessity do not stipulate whether they 

are a renewal or a new prescription. However, on the claims that provided a space to 

stipulate whether this was a new or renewed certificate of medical necessity, all indicated 

that this was a new certificate for the item of DME. 

Approximately Half Of The Patients In Our Sample Were Not Discharged To Their 

Homes, Meaning Incorrect Payments For DME Might Continue. 

Patient Discharge Disposition 

70% 

60% 

50% 

40% 

30% 

20% 

1 o% 

o% L’ 

Upon Leaving Part A SNF Stay 

56%. ~ 

‘0’ 4’.& “ 

Home Short SNF ICF Other Died Still 

Term Hospital Institution Patient 

We examined the patient disposition status to determine whether incorrect DME billings 

may continue after the patient is discharged from the SNF setting. Our examination 

indicated that 44 percent of the beneficiaries either died or did not return to their home 

upon discharge from the SNF. Thus DME billings may not be appropriate for some time, 

due to the patient’s receiving care in a setting which is not a residence. Furthermore, five 

percent of the sample represented DME items billed for beneficiaries who died. 

10€
11 

RECOMMENDATIONS 

Action is needed to minimize the opportunity for incorrect DME payments. The action 

should address the need to reduce initial incorrect billing, as well as detect any incorrect 

billing after it occurs. 10 The responsibility fo:- :.~eaction, while generally falling within 

the purview of HCFA, must also include the involvement of the DMERCS and the 

suppliers. The recommendations that follow pertain to 1) education on the appropriate use 

of “other,” 2) broadening the responsibility for supplier knowledge of beneficiary’s 

location, 3) consistent use of a Common Working File edit to review DME claims for 

SNF or other inpatient activity and payment rejection, and 4) Review of DMERC 

processes to reduce incorrect DME billing during a SNF stay. 

We recommend that HCFA take action in the following areas to minimize the 

opportunity for incorrect DME payments. 

Improve the pkzce of service coding system. The HCFA could: 

● Utilize data from the Statistical Analysis DME regional Carrier to identify 

and review suppliers who consistently use the “other” place of service 

category, and take appropriate actions based on the reviews. 

● Disseminate materials which indicate the limited circumstances under which 

“other” may be appropriately used to bill DME. 

● Educate the DMERCS on the accurate use of place of service codes. 

● Require the DMERCS to provide on-going education to the suppliers on the 

accurate use of place of service codes. 

● Suggest that the DMERCS develop an item for inclusion in their database, 

that is transmitted to the Common Working File, to provide a continuing 

history of the patient’s location. 

Improve the supplier knowledge of beneficiary locah”on. The HCFA could: 

● Ensure that the DMERCS instruct suppliers of their responsibility for 

determining the location of a beneficiary, before billing Part B DME. 

● Ensure that the DMERCS undertake sample reviews of suppliers claims and 

exchange their findings with the other DMERCS, so that all can take 

appropriate action on the supplier’s claims. 

Review the DMERC processes. The HCFA could: 

● Assess the effectiveness of the new Common Working File edit of Part B 

DME and SNF charges, and evaluate whether additional edits should be 

developed to review all SNF bills, upon submission, for overlap with DME 

billing. 

● Encourage the DMERCS to examine the problem of DME billed and 

allowed during SNF stays. The OIG, in collaboration with HCFA, may 

also review this area in the future to examine the impact of implementing 

the new DMERC processes. 
12 

OIG RESPONSE TO AGENCY COMMENTS 

We solicited and received comments from the Health Care Financing Administration 

(HCFA) on our draft report. 

The HCFA concurred with the intent of our three recommendations. In addition, they 

suggested alternative steps that could also be taken to achieve the intent of our 

recommendations. We have incorporated the suggestions proposed by HCFA in the listing 

of options presented in our recommendations. 

See Appendix B for the full text of the HCFA comments. 
13 

ENDNOTES 

1. Nursing home services are divided into two parts: 1) typical inpatient services, such as 

room and board, provided by the SNF, and 2) other services, provided by outside 

suppliers and practitioners, which are not part of routine inpatient care. These two types 

of services are paid for in two different ways. Skilled nursing facility services can only 

be billed to Medicare when they are considered “extended care services, ” that is services 

required as an extension of a prior hospital stay. These SNF services are covered by the 

Hospital Insurance Program, or Part A. Part A covers basic care, as well as certain 

additional services provided to a patient in a SNF for up to 100 days. The Supplementary 

Medical Insurance Program, or Part B, is an optional benefit which may pay for certain 

services, provided by outside suppliers, that are not included in the Part A payment. 

2. Title XVIII, Section 1861(n). 

3. Medicare carriers Manual Section 4105.3 states that “no payment may be made for 

rental for any month throughout which the patient is in an institution which does not 

qualify as his or her home...”. This statement, however, does not indicate that only the 

dates of stay in a SNF should be considered. Consideration of DME payment can be 

affected by a prior stay in a hospital, or other non-residence setting, and discharge to a 

setting other than a residence. Such additional stays could result in the beneficiary being 

in a non-residence setting for the entire month. Thus, although a SNF stay has dates 

indicating that the stay began and/or ended during the middle of the month, it may still be 

inappropriate to pay for DME, as the beneficiary was not in their residence for any 

portion of the month due to other inpatient stays. 

4. Federal Register, Vol. 57, No. 118, Thursday, June 18, 1992, rules and regulations, 

pg. 27290, final rule for Medicare Program; Criteria and Standards for Evaluating 

Regional Durable Medical Equipment, Prosthetics, Orthotics and Supplies (DMEPOS), 

5. The database created for this report originally contained only 1991 information. 

However, during the course of the inspection, the 1992 CWF one percent random sample 

became available. A decision was made to include 1992 data when possible. However, 

claims information for the 1991 data had been requested and obtained prior to the 

availability of the 1992 database. For this reason, information pertaining to Certificates of 

Medical Necessity and payments were not obtained for 1992. 

6. Information was obtained for 712 of the 1022 items of DME in 1991, or 69.6% of all 

incorrectly billed DME items. These claims represented $60,426.44 or 68% of all the 

incorrectly paid DME dollars. If we assume that this portion of the claims is 

representative of the entire sample, we can project to the Medicare population and 

determine the cost allocation to Medicare and other individuals, either beneficiaries or 

other insurance companies and programs. Based on the 712 claims reviewed, the 

Medicare responsibility for the amount paid represented 77 percent of the incorrectly paid 

DME. Based on the logic stated above, this would represent $6.827 million when 

projected to the entire Medicare population. The remaining 23 percent, or $2.04 million 
14 

of the incorrectly allowed DME charges, represented deductibles and co-insurance paid by 

the beneficiary, other insurance programs, or the State (in the case of some Medicaid 

recipients). 

7. Although the use of “other” declined between 1991 and 1992, the use of the code for 

“home” increased from 50 percent in 1991 to 77 percent in 1992. Thus, 99 percent of the 

items billed during a SNF stay in 1992 continue to incorrectly represent the patient’s 

location. 

8. The Medicare Carriers Manual, Section 4105.3, in discussing incurred expenses for 

DME, indicates, “The first month’s expense for rental is incurred on the date of delivery 

of the equipment. Expenses for subsequent months are incurred on the same date of the 

month. ” This language does not indicate whether suppliers are required to know the 

location of the beneficiary before billing for subsequent months use of DME. 

9. The carriers with the largest DME charges were also the carriers with the greatest 

number of items paid during SNF stays. 

10. The recovery of payments made for incorrectly allowed DME items is not discussed 

in this report’s recommendation section, since the issue was examined only in the SNF 

population. However, the recovery of overpayments will be addressed in a subsequent 

report, when the issue is examined in the context of all nursing home settings. 
CT 

BCBS 

o 0 0 

co. 

A -1 

APPENDIX A 

1991 Carrier Information For One-Percent 

Carrier Jurisdiction 

Blue Cross and Blue Shield Alabama 

of Alabama 

Arkansas BCBS 

AETNA Medicare 

Transamerican Medicare 

California Physicians 

Service 

BCBS of Colorado 

The Travelers MedicareMedicare Part B -Florida 

AETNA Medicare 

AETNA Life Ins, Med. 

Claim Admin 

Arkansas & Louisiana 

Arizona & Nevada 

California 

California 

Colorado 

Connecticut 

Florida 

Georgia 

Hawaii 

Sample Database 

Total Items of DME Cost 

Charges DME Per Bed Day 

$1,169 19 $1.53 

$3,012 39 $1.87 

$2,171 22 $1.93 

!$5,433 71 $3.30 

$6,900 84 $3.71 

$1,166 7 $9.96 

$988 12 $2.22 

$4,012 50 $2.11 

$1,116 19 $1.54 

$100 2 $0.92 

$2,059 30 $2.52 

$7,427 75 $2.91 

$1,242 14 $2.38 

$2,150 20 $3.15 

$960 10 $2.13 

$2,288 25 $2.84 

$419 5 $2.97 

$3,980 53 $1.89 

$794 9 $1.59 

$2,635 34 $2.51 

IASD Health Services Corp Iowa 

Health Care Service CorpMed Part B 

AdminaStar Federal 

BCBS of Kansas 

AdminStar of Kentucky 

C & S Administrative 

Services for Meal, Med. 

Part B 

BCBS of Maryland 

BCBS of Michigan 

Travelers Medicare 

Blue Cross Blue Shield of 

Minnesota 

General American Life Ins 

Illinois 

Indiana 

Kansas, Nebraska & 

West Missouri 

Kentucky 

Massachusetts, Maine, 

New Hampshire & 

Vermont 

Maryland 

Michigan 

Minnesota 

Minnesota 

East Missouri 
of RI 

A -2 

1991 Carrier Information For On&Percent 

Carrier 

The Travelers Medicare 

BCBS of Montana 

BCBS of North Dakota 

BCBS of Western New 

York, Upstate Med. Div. 

Part B 

Group Health Incorporated/ 

Medicare 

Empire Blue Cross and 

Blue Shield 

Nationwide Mutual Ins Co 

- Medicare 

Aetna Medicare 

Aetna Oregon 

Pennsylvania Blue Shield 

Seguro De Servicios de 

Salud de PR 

Jurisdiction 

Mississippi 

Montana 

North Dakota, South 

Dakota & Wyoming 

Western New York, 

Upstate 

New York (Queens) 

New York 

Ohio & West Virginia 

Sample Database 

Total Items of DME Cost 

Charges DME Per Bed Day 

$1,358 16 $4.90 

$313 2 $8.23 

$286 3 $4.40 

$648 9 $1.37 

$626 7 $1.60 

$4,136 41 $2.39 

$4,994 51 $2.66 

10klahoma & New I $81O I 8 I $4.96 

Mexico 

Oregon $1,841 18 $4.05 

Pennsylvania, Delaware, $6,990 72 $2.41 

New Jersey, D. C., 

Virginia & Maryland 

Puerto Rico $1,184 11 $4.87 

Blue Cross and Blue Shield Rhode Island o 0 0 

BCBS of South Carolina South Carolina $346 10 $0.98 

CIGNA Medicare Admin. Tennessee & North $3,025 42 $1.62 

ICarolina I I I 

BCBS of Texas Texas $4,292 43 $4.60 

,BCBS of Utah Utah $1,770 17 $2.83 

Travelers Ins Co. Medicare Virginia $1,086 17 $2.81 

B, Virginia 

Washington State Medicare Washington $1,639 13 $3.89 

part B 

Wisconsin Physicians Wisconsin $352 6 $2.14 

Service 

II 
B-1 

APPENDIX B 

AGENCY COMMENTS: 

HEALTH CARE FINANCING ADMIMSTRATION 

It should be noted that the jidl texl of lhe HCFA comments addresses two reports on 

skilled nursing faciliry paymen~ issues. The comments pertaining to this report are found 

on pages one ~hroughfour.