Department of Health and Human Services 

OFFICE OF 

INSPECTOR GENEML 

QUESTIONABLE MEDICARE PAYMENTS


FOR INCONTINENCE SUPPLIES


JUNE GIBBS BROWN 

Inspector General 

DECEMBER 1994 

OEI-03-94-00772 
OFFICE OF INSPEHOR GENERAL 

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 Semites’ (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 three OIG operating components: the O&e of Audit Services, the 

Office of Investigations, and the Office of Evaluation and Inspections. The OIG also informs 

the Secretary of HHS of program and management problems and recommends courses to 

correct them. 

OFFICE OF AUDIT SERVICES 

The 010’s Office of Audit Services (OAS) provides all auditing services for HHS, either by 

conducting audits with its own audit resources or by overseeing audit work done by othens. 

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 in order to reduce waste, abuse, and 

mismanagement and to promote economy and efficiency throughout the Department. 

OFFICE OF INVESTIGATIONS 

The OIG’S Office of Investigations (01) conducts criminal, civil, and administrative 

investigations of allegations of wrongdoing in HHS programs or to HHS beneficiaries and of 

unjust enrichment by providers. The investigative efforts of 01 lead to criminal convictions, 

administrative sanctions, or civil money penalties. The 01 also oversees State Medicaid fraud 

control units which investigate and prosecute fraud and patient abuse in the Medicaid program. 

OFFICE OF EVALUATION AND INSPECHONS 

The 010’s Office of Evaluation and Inspections (OEI) conducts short-term management and 

program evaluations (called inspections) that focus on issues of concern to the Department, 

the Congress, and the public. The findings and recommendations contained in these inspection 

reports generate rapid, accurate, and up-to-date information on the efficiency, vulnerability, 

and effectiveness of departmental programs. This report was prepared in the Philadelphia 

Regional Office, under the direction of Joy Quill, Regional Inspector General and Robert A. 

Vito, Deputy Regional Inspector General. Project staff included: 

PHILADELPHIA REGION HEADQuARTERs 

Robert A. Katz, Project Leader Thomas A. Noplock, Ft-ogramSpecialist 

Robert A. Baiocco, Bogam Analyst Brian P. Ritchie, Technical Suppoti Staf 

Linda M. Ragone, Rogram AnaZyst Barbara Tedesco, Technical Support Staf 

Cynthia Hansford, Administrative Staff 

To obtain a copy of this repo~ pleasecallthe Philadelphia Regional Office at (S(K))531-9562 
EXECUTIVE SUMMARY


PURPOSE 

This report examines trends in allowances and questionable billing practices for 

incontinence supplies under Medicare Part B between 1990 and 1993. 

BACKGROUND 

Incontinence is the inability of the body to control urinary and bowel functions. 

Under the Medicare Part B program, the Health Care Financing Administration 

(HCFA) will reimburse suppliers that provide incontinence supplies to aid individuals 

whose incontinence condition “...is of long and indefinite duration.” Such 

reimbursement is provided only as part of Medicare’s coverage for prosthetic devices 

such as catheters and external urinary collection devices. The HCFA will also 

reimburse for accessories, such as irrigation syringes and sterile saline solution, that aid 

in the effective and therapeutic use of these devices. Currently, claims are processed 

by four Durable Medical Equipment Regional Carriers (DMERCS). 

We selected claims for a 1 percent sample of beneficiaries who received one of 43 

types of supplies for incontinence care. We arrayed the data by type of supplies, 

carrier, and major suppliers. We then analyzed the statistical information to develop 

trends. We also applied current and proposed HCFA guidelines for these 

incontinence supplies in 1993. We focused on two facets of billing: accessories that 

can only be billed with prosthetic devices; and frequency limitations on prosthetic 

devices. 

FINDINGS 

M&iicare albwancesfor tionthence suppliesmore thandimbledin threeyeats &spite a 

dropin the numberof benejiciariaurihgtheresupplies. 

Incontinence allowances rose from $S8 million in 1990 to $230 million in 1993, an 

increase of $142 million. During the same period, the number of beneficiaries 

receiving incontinence supplies fell from 312,200 to 292,700. Allowances per 

beneficiary increased from $282 to $786. 

Four typesof incontinencesuppliesaccountfor abnostail the increasein M&are 

allowanc~. 

Between 1990 and 1993, Medicare allowances for irrigation syringes, sterile saline 

irrigation solution, lubricant, and female external urinary collection pouches increased 

$129 million. This accounts for 91 percent of the $142 million total increase. 

i 
Questionablebifli.ngpractimx nuryaccountfor abnosthalfof intontmence “ alhwancesin

1993. 

Medicare allowed $107 million in 1993 for supplies whose billing is questionable. 

Almost $88 million was paid for incontinence accessories that were not billed in 

conjunction with a prosthetic device. An additional $19 million was paid for 

beneficiaries whose utilization of certain prosthetic devices appears excessive. The 

allowances were concentrated in one carrier and a small number of suppliers and 

beneficiaries. 

A proposedchangeh HCFA policy willprobab~ add-as qudonable billingpractices. 

Inconsistencies and lack of clear utilization guidelines in carrier policies contributed to 

the large number of questionable incontinence claims paid by Medicare in 1993. A 

proposed draft policy (to be issued by the four Durable Medical Equipment Regional 

Carriers) will clari& covered services and provide a mechanism to link incontinence 

accessory supplies to prosthetic devices. 

NEXT STEPs 

IncontinenceSupplies 

In response to the information presented in this report and a companion report, the 

Office of Inspector General (OIG) plans to: 

o	 initiate an audit review to examine in more detail payments made for 

incontinence supplies in order to determine if any overpayments are 

involved in this arerq and 

o	 launch a national investigation in this area, examining potentially 

fraudulent practices by specific suppliers of incontinence supplies. 

We also support ongoing activity in HCFA and the DMERCs to develop more specific 

coverage guidelines and educate providers and suppliers about proper billing for such 

supplies. We hope the information contained in this report is helpful as they complete 

this activity. 

OIG Studiesof OtherNumiizgHome Suppl%s 

The OIG will continue studies and audits related to its major initiative examining 

services and supplies provided to Medicare beneficiaries residing in nursing facilities. 

As this report and other OIG work has reflected, the fragmentation of billing for 

services and supplies provided to residents of nursing homes has created a host of 

improper incentives for billers to the Medicare program. 

ii 
“Bundling”OfServices 

We continue to support HCFA’S efforts to pursue a systematic solution to these kinds 

of problems through a requirement for “bundling” of services in nursing home settings. 

Under such an approach, the nursing home would be responsible for providing 

commonly needed services to residents of that facility, rather than allowing for 

separate billing by suppliers. Such a solution would eliminate the incentives suppliers 

now have to aggressively seek out patients in nursing homes and market their products 

inappropriately in those settings. It would also ensure that nursing homes take on 

appropriate responsibilities for services and supplies delivered to residents in their 

facilities. 

.,. 

111 
TABLE OF CONTENTS


EXECUTIVE SUMMARY 

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


FINDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...4


Increased spending . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...4


Four specific supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...4


Questionable billing practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...7


Draft DMERC policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...9


NEXT STEPS O. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...12


APPENDIX


k Confidence Intervals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..A-l

INTRODUCTION


PURPOSE 

This report examines trends in allowances and questionable 

incontinence supplies under Medicare Part B between 1990 

BACKGROUND 

billing practices for 

and 1993. 

MedicareCoverageof IncontinenceSupplies 

Incontinence is the inability of the body to control urinary and bowel functions. 

Reimbursement for incontinence supplies is included as part of Medicare’s coverage 

for prosthetic devices. According to Medicare Carriers Manual section 2130, 

“prosthetic devices (other than dental) which replace all or part of an internal body 

organ (including contiguous tissue), or replace all or part of the function of a 

permanently inoperative or malfunctioning internal body organ are covered when 

furnished on a physician’s order.” 

Under the Medicare Part B program, the Health Care Financing Administration 

(HCFA) will reimburse suppliers that provide incontinence supplies to aid individuals 

whose incontinence condition “...is of long and indefinite duration.” Certain items, 

such as absorbent undergarments or diapers, are specifically excluded from coverage. 

Incontinence supplies include prosthetic devices such as catheters and external urinary 

collection devices such as pouches or cups. Catheters are flexible, tubular instruments 

used to control urinary flow. The HCFA will also reimburse accessories that aid in 

the effective and therapeutic use of these devices. These accessories include items 

such as drainage bags, irrigation syringes, sterile saline solutions, and lubricants. 

However, accessories are not covered in the absence of a prosthetic device. 

Canierl-%xessingof IncontinenceSupply(lkirns 

In June 1992, HCFA issued a final rule designating four Durable Medical Equipment 

regional carriers (DMERCS) to process all claims for durable medical equipment, 

prosthetics, orthotics, and supplies. Effective October 1, 1993, the DMERCS replaced 

more than 50 area carriers which had previously processed DME claims. The 

geographical areas formerly serviced by the carriers were phased in under the 

DMERCS on a staggered basis. Each DMERC issued its own coverage and 

reimbursement policies that implement Medicare guidelines. 

However, for urological supplies, the DMERCS issued a draft of a single national 

policy in October 1994. In addition to redefining and clari&ing some of the definitions 

used in claims for incontinence and urological supplies, the policy establishes 

documentation requirements for higher than usual quantities of supplies. The non1 
coverage of diapers and similar absorptive pads is emphasized. The policy also 

reinforces the condition of “permanence” for coverage purposes and stresses that 

accessories not used in conjunction with covered catheters or external urinary 

collection devices are not covered. 

Mdicare FraudAlert 

One DMERC issued a Medicare Fraud Alert in June 1994 describing a supplier 

scheme involving the marketing of incontinence kits to nursing homes. In this case, 

the supplier advised nursing home officials that Medicare was paying for the kits under 

a “pilot program.” According to the alert, supplier representatives provide kits 

containing accessories such as syringes, saline solution, and lubricants, to the nursing 

home in exchange for beneficiary names and Medicare health insurance claim 

numbers. The marketing representative then orders bulk quantities of supplies billed 

under the beneficiaries’ claim numbers. 

The alert also indicated that the supplier marketing program stated that the 

beneficiary should be treated three times per day with the contents of the kit. This 

resulted in a supplier billing Medicare $1,800 per month per beneficiary in one carrier 

jurisdiction. 

METHODODGY 

To determine the trends in incontinence allowances, we arrayed payment and 

utilization data for each incontinence supply. We also analyzed the utilization data for 

possible questionable billing practices. 

We first reviewed each DMERC’S coding and coverage guidelines and interviewed 

DMERC officials to identify 43 codes used to reimburse incontinence supplies. These 

did not include any “local” codes used by individual carriers. Supplies were segregated 

into three groups: catheters, external urinary collection devices, and accessories. The 

HCFA and DMERC officials provided the designation for each billing code. 

We selected all services for 43 codes for a 1 percent sample of beneficiaries from the 

Part B Medicare Annual Data Procedure File for calendar year 1990 and the National 

Claims History 100% Physician/Supplier Data for calendar years 1991 through 1993. 

From the 1993 sample of 2,927 beneficiaries, we obtained an additional file for 

231 beneficiaries who accounted for 51 percent of all incontinence allowances, 

beginning with the beneficiary with the highest amount billed. This file contained all 

Part B services, in addition to incontinence. 

From the sample of incontinence services, we calculated Part B Medicare allowed 

payments, supply frequency, and number of beneficiaries. Allowed payments include 

both the 80 percent Medicare payment and the 20 percent coinsurance fee paid by 

beneficiaries. We arrayed the data by billing code, carrier, and major suppliers. We 

then analyzed the statistical information to determine trends in incontinence 

2 
expenditures. Welimited our analysis for frequency utilization to the period 1991 

through 1993 because frequency reported in 1990 was not comparable to later years. 

According to DMERC coding policies, 11 of the 23 billing codes that cover accessories 

are also used to reimburse ostomy care. We did not include any semices for the 11 

codes associated with beneficiaries who received only ostomy care. We also did not 

include services billed under code A4323, “sterile saline irrigation solution,” when it 

was not biIled in conjunction with other incontinence supplies. According to DMERC 

officials, code A4323 may be used in conjunction with other non-incontinence supplies 

such as enteral nutrition products. 

To determine the nature and extent of questionable billing practices, we interviewed 

DMERC officials including medical directors and fraud control unit personnel. We 

reviewed coverage and utilization standards for 1) the three Medicare carriers that 

were among the highest in allowances in 1993, 2) the current DMERCS, and 3) the 

proposed DMERC national urological standards. 

We projected our findings by multiplying sample results by 100. Confidence intervals 

for our findings are presented in Appendix A. 

We applied current and proposed DMERC guidelines to the selvices billed for the 43 

incontinence supplies in 1993. We focused on two facets of billing: 1) accessories that 

can only be billed with prosthetic dew”ces, such as catheters and external urinary 

collection devices; and 2) frequency limitations on prosthetic devices. For each 

practice, we reported Medicare allowances and frequencies above the tolerance 

guidelines by type of supply, carrier, supplier, and number of beneficiaries receiving 

supplies. 

This report is one of a series of reports concerning Medicare payments for 

incontinence supplies. Markeh”ng of Incontinence Supplies (OEI-03-94-00770), describes 

supplier and nursing home practices that can lead to questionable payments and 

examines issues concerning Medicare beneficiaries’ use of incontinence supplies. The 

third report, Medicaid Payments for Incontinence Supplies (OEI-03-94-00771), will 

examine how the Medicaid program processes claims for incontinence supplies in 14 

States. 

This inspection was conducted in accordance with the Qualify Standards for Iizspections 

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

3

FINDINGS


MEDICARE ALLOWANCES FOR INCONTINENT CE SUPPLIES MORE THAN 

DOUBLED IN THREE YEARS DESPITE A DROP IN THE NUMBER OF 

BENEFICL4RIESUSING THESE SUPPLIES. 

Medicare Part B allowances for incontinence supplies rose from $88 million in 1990 to 

$230 million in 1993, an increase of $142 million. The most significant portion of that 

increase came in 1993 when allowances increased $111 million, almost doubling horn 

the previous year. Over the same time period, the number of beneficiaries receiving 

incontinence supplies has actually decreased. In 1990, 312,200 beneficiaries received 

incontinence supplies. In 1993, this figure fell to 292,700. Allowances per beneficiary 

more than doubled from $282 in 1990 to $786 in 1993. 

Between 1991 and 1993, the number of incontinence supplies paid for by Medicare 

more than tripled. In 1991, Medicare Part B reimbursed suppliers for 19 million 

incontinence supplies. In 1992, reimbursed supplies increased to 25 million. In 1993, 

supplies more than doubled from the previous year to 60 million. The table below 

provides a summary of incontinence activity between 1990 and 1993. 

Table 1. Incontinence Activity 1990-1993 

Allowances $88 million $108 million $119 million $230 million 

No. of Beneficiaries 312,200 334,300 281,400 292,700 

Allowances per $282 $322 $423 $786 

Beneficiary 

No. of Supplies N/A 18.8 million 24.7 million 59.5 million 

FOUR TYPES OF INCONTINENCESUPPLIES ACCOUNT FOR ALMOST ALL 

THE INCREASE IN MEDICARE ALLOWANCES. 

Between 1990 and 1993, Medicare allowances for irrigation syringes (billing code 

A4322), sterile saline irrigation solutions (A4323), lubricants (A4402), and female 

external urinary collection pouches (A4328) increased $129 million. This accounts for 

91 percent of the $142 million increase for all supplies. The table on the next page 

shows increases in allowances for the four supplies according to their billing code. 

4

Table 2 Increase in Four Supply Codes 

Although the total number of incontinence beneficiaries decreased 6 percent between 

1990 and 1993, the number of beneficiaries receiving these four supplies showed 

significant increases. The table below displays the number of beneficiaries served for 

each of the four supply codes. 

Table 3. Number of Beneficiaries Served for Four Supply ClxJes 

Allowancesfor accesroriaand colktion devicesrosesi@@icant&between1990 and 

1993 whik allowaruxxfor cathetm ilwreaxd only rnoikrtly. 

Allowances for accessories rose from $61 million to $183 million, an increase of 

200 percent. In 1990, only $198,900 was spent on all external urinary collection 

devices. By 1993, expenditures skyrocketed to $16 million, an 8,051 percent increase. 

In contrast, allowances for catheters grew 15 percent from $27 million to $31 million 

between 1990 and 1993, an annual increase of 5 percent. 

The nature of supply allowances has also changed. In 1990, indwelling catheters 

(A4338), bedside drainage bags (A4357), and irrigation trays (A4320) accounted for 

almost half of all allowances. By 1993, 53 percent of all allowances were made for 

irrigation syringes, sterile saline solution, and lubricants. 

The rise in supply utilization mirrors the change in allowances. In 1991, Medicare 

paid for 19 million incontinent supplies. By 1993, this figure had tripled to 60 million. 

Suppliers were reimbursed for 63,200 external urinary collection devices in 1991 and 

5 
. . . .

2 million in 1993, anincrease of3,410 percent. Female pouches account forahnost 

95 percent of the external urinary collection devices supplied in 1993. The number of 

catheters rose from 6 million in 1991 to 7 million in 1993. Intermittent urinary 

catheters increased 1.5 million but was offset by a decrease in the number of insertion 

trays, external catheters, and indwelling catheters. 

Allbwamxr are concentratedin one catir anda smallnumberof supplkisand 

benejichti. 

One carrier and a small number of suppliers and beneficiaries account for a significant 

portion of allowances. Florida Blue Shield accounted for 55 percent of all 

incontinence allowances in 1993, while six carriers made 50 percent of the allowances 

in 1990. Of the 1 percent sample claims reviewed in 1993, less than 1 percent of all 

suppliers received total annual payments of $50,000 or more, accounting for over onequarter of all payments. In contrast, no supplier received total payments that 

exceeded $50,000 in 1990. While 60 percent of the suppliers received total payments 

of $100 or less in 1990, the number dropped to 40 percent in 1993. The following 

table details incontinence payments by supplier between 1990 and 1993. 

Table 4. Incontinence Payments Per Supplier 

“Tdtat ‘ “199p, “: ‘“” ”,;:,””””’”,”:::::,::, ”::i:ii!::::. , ‘“““:, ‘ii$s”::’:’~’’’; 

j : ~:p.QJ~::,.:.,. ,. :,, ,:,: ,,”;::: , , ., ,: ,,; ..,..”.:: :..:.:.,2,.:. ..,:;;::” ‘,:”:::,::..:., :,;:::::’:;:;:;,;::’::;:. “’”, :, ,;~ow$q:.:,::: ;:::, ‘“”,::!l&;Q$:,;” ‘“’,;::. :::;.:.,; ‘:’:g..$$::.;:; ::,,$:,;; .:.’..::,:;g:j::,::$:.$;::;;:’;~~uf:::::;j; 

?,,:.:;.:’?, :!;”’’;:is~p~q$rs:::... . ..... . ,,. ‘:.:.:..: “:”:Nl~*a~$,i*;;.$: :“::,,:$qpp]i$f#$<: ,. :;i::;~b$~$~$;;:;$

Under $100 

$100-$199 

$200-$499 

$500-$999 

$1,000-$4,999 

$5,000-$9,999 

$10,000-$49,000 

$50,000+ 

60.0 3.3 39.3 0.8 

9.0 2.5 10.9 1.0 

12.9 8.2 16.9 3.5 

7.4 10.2 12.2 5.4 

8.9 37.0 15.4 19.1 

1.1 14.5 2.7 11.7 

0.8 24.4 2.2 30.9 

0.0 0.0 0.5 27.5 

In 1993, 10.3 percent of beneficiaries received services over $2,000 and accounted for 

57 percent of allowances. In 1990, payments were less concentrated in such large 

payments. only 21 percent of allowances were made to beneficiaries who received 

$2,000 or more in semices. In 1990, 53 percent of beneficiaries received $100 or less 

in incontinence supplies, while 33 percent received comparable payments in 1993. 

The table on the next page details allowances by beneficiary. 

6

Table 5. Incontinence Allowances Per Beneficiary 

Under $100 I 52.5 I 5.7 I 32.6 I 1.7 II 

$100-$199 I 12.2 I 6.2 I 12.7 I 2.3 II 

$200-$499 18.9 21.8 19.4 8.2 I 

$500-$999 10.5 26.4 15.0 13.3 I 

$1,000-$1,999 4.0 18.7 9.9 17.8 I 

$2,000-$2,999 1.2 10.9 3.9 12.1 1 

$3,000-$3,999 0.5 5.7 1.9 8.5 I 

$4,000+ 0.2 4.6 4.5 36.0 

QUESTIONABLE BILLING PRACTICES MAY ACCOUNT FOR ALMOST 

ONE-HALF OF ALL INCONTINEN CE ALLOWANCES IN 1993 

Medicare allowed $107 million in 1993 for supplies related to questionable billing 

practices. This represents 47 percent of the $230 million in allowances. About 

$88 million was paid for incontinence accessories for beneficiaries who did not receive 

a prosthetic device. Additional payments of $19 million were made for certain 

prosthetic devices that appear to have excessive utilization. These billing practices are 

concentrated in one carrier, few suppliers, and few beneficiaries. 

Accessoti bilkd wMou.tprostheticdevicesh not meet Medicareguidelines. 

In order for Medicare to pay for incontinence accessories the beneficiary must have a 

prosthetic device such as a catheter or a urinary collection device. However, 

$88 million was allowed for accessories that were not billed with a prosthetic device. 

As shown in the table on the next page, virtually all allowances that did not meet 

Medicare guidelines were for just three supplies. The supplies were sterile saline 

solutions, irrigation syringes, and lubricants. In total, these three supplies account for 

94 percent of the $88 million in questionable billings. As a further check, we reviewed 

Part B services provided to 96 beneficiaries with large Medicare allowances and found 

that very few beneficiaries received other durable medical equipment for which these 

supplies would have been appropriate. 

7


—. 
Table 6. Accessories Billed Without Catheter or Collection Device 

Saline Solution 6,467,500 $29 million 

Syringe 10,268,200 $31 million 

Lubricant 11,312,800 $22 million 

Utii?zationfor certaihprostheticdevicesap~am ercemive. 

As much as $19 million in allowances may have been overpaid if the proposed 

DMERC utilization standards had applied to certain prosthetic devices in 1993. Over 

$11 million in 1993 was allowed for female external urinary collection pouches 

(A4328) that exceed the proposed DMERC guidelines of one per day. We are aware 

that at least one supplier was paid for 186 per month, or 6 per day. Another $8 

million was allowed for beneficiaries who received more than one indwelling catheter 

per month. The proposed DMERC policy calls for no more than one indwelling 

catheter per month for routine maintenance. Additional catheter changes are covered 

only if documentation substantiates medical necessity. 

FloridaBik ShieLiaccountedfor most of the quationablealihwanctx 

Florida Blue Shield accounted for $78 million (89 percent) of $88 million in Medicare 

allowances for accessories not billed in conjunction with a catheter or external urinary 

collection device. Over 90 percent of the allowances were for just three supplies: 

irrigation syringes, sterile saline solutions, and lubricants. Almost 70 percent of the 

allowances for female external urinary collection pouches was also through Florida 

Blue Shield. 

The allowances for the indwelling catheters that exceeded one per month involved 

numerous carriers. Four carriers accounted for over 40 percent of allowances. The 

carriers were Pennsylvania Blue Shield (15 percent), Illinois Blue Shield (10 percent), 

Blue Shield of Greater New York (9 percent), and Nationwide of Ohio (7 percent). 

The remaining 60 percent was paid by 44 other carriers. 

Allowamxzrwereconcentmtedinfew suppliem 

Approximately 5 percent of suppliers (19 in the sample of 471) accounted for over 

three-quarters of the accessories billed without catheters or external urinary collection 

devices. All but one of these suppliers were paid by Florida Blue Shield. 

8

Ten suppliers in our sample accounted for all payments for female external urinary 

collection pouches. All but three of the suppliers were paid by Florida Blue Shield. 

only 3 of the 11 codes used to reimburse indwelling catheters showed any 

concentration of allowances for suppliers. For each of these codes, A4311, A4313, 

and A43 15, one supplier received at least two-thirds of all allowances in our sample. 

The remaining allowances was shared by several suppliers. 

F&v beneficiariesreceivemost of the allowances. 

A total of 821 beneficiaries (28 percent from the sample of 2,927) received accessories 

without a prosthetic device. At least 360 of these beneficiaries were billed for 

irrigation syringes, sterile saline solutions, and lubricants. 

All the excessive allowances for female collection pouches were made to 3 percent of 

beneficiaries sampled. For each of the indwelling catheter codes except A4338, all 

excessive payments were made to 1 percent to 6 percent of the beneficiaries sampled. 

However, almost one-third of the beneficiaries in our sample received more than one 

catheter per month of those billed under A4338. 

A PROPOSED CHANGE IN DMERC POIJCIES WILL PROBABLY ADDRESS 

QUESTIONABLE BILLING PRACTICES. 

Inconsistencies and the lack of clear utilization guidelines and controls among carriers 

contributed to the large number of questionable incontinence claims paid by Medicare 

in 1993. Current DMERC policies, while more consistent, still do not contain clear 

coverage definitions. A proposed draft DMERC policy further clarifies covered 

services and provides a mechanism to link incontinence accessory supplies to 

prosthetic devices. 

l%wious canierpolicia did not containclearguidanceon coverageand approptite 

util&atim. 

We reviewed policies of three carriers which were among the highest in incontinence 

allowances for 1993 and found that their guidelines differed for the same types of 

supplies. For example, for one indwelling catheter code, one carrier allowed two per 

month while another allowed eight. For one supply code, one carrier allowed 4 per 

day, the second allowed 1 per week, and the third allowed 30 per month. For the 

female urinary collection device (A4328), an item with a large number of questionable 

allowances, two carriers had no utilization guidelines and the third allowed four per 

month. 

The carrier with the highest questionable allowances for 1993 had no frequency or 

utilization controls for any incontinence supplies except for two intermittent catheter 

codes. Neither this carrier nor the two other carriers had controls to prevent 

allowances for incontinence supplies when billed without a prosthetic device. 

9

Cumntpolicks, whik strongm,do not go far enough 

Current DMERC policies categorize the incontinence supplies benefit under coverage 

of prosthetic devices. For a prosthetic device to be covered, “the physician must 

certify that the condition resulting in the need for the device is of long and indefinite 

duration (at least 3 months).” 

All four DMERCS have utilization controls for indwelling catheters, limiting the 

number of catheters to two per month for routine maintenance. Three DMERCS 

have strengthened coverage policies for lubricant, stating that it can no longer be 

reimbursed as a separate supply since it is included in catheter insertion trays. 

The DMERCS have also adopted a uniform certificate of medical necessity form. This 

certificate must be filled out, signed, and dated by the ordering physician and kept on 

file by the supplier. 

Not all DMERCS have computer edits or controls in place to ensure that supplier 

claims conform with DMERC policies. While all four DMERCS have a utilization 

standard for indwelling catheters, only two have computer edits. Only one DMERC 

has an on-line edit to check claims for particular supplies to ensure that the certificate 

of medical necessity adequately supports the use of these supplies. 

Even though the DMERC manuals limit payment for supplies to those that are for the 

effective use of a prosthetic device, DMERCS do not have controls to prevent 

payment for incontinence supplies when the beneficiary has neither a catheter nor an 

external urinary collection device. Without these controls, Medicare will continue to 

pay for incontinence supplies that do not meet Medicare coverage guidelines. 

ThedrafiDMERCpolicy providixunfom coverageand utilizationstandar&thatwill 

lead to improvedprocessingof iizcontkencesupplycZaims. 

The proposed DMERC national guidelines on urological supplies will prevent 

Medicare payment for supplies not used with covered prosthetic devices. As the draft 

policy clearly states, “urological supplies that are not used with catheters or external 

urinary collection devices will be denied as noncovered.” It provides even more 

explanation in the case of sterile saline solution and irrigation syringes by maintaining 

that “irrigation supplies that are used for care of the skin and/or perineum of 

incontinent patients are not covered.” 

The new policy requires suppliers to add a modifier to urological supply codes when 

the supplies are used with a catheter or external urinary collection device. The new 

ZX modifier, as it is known, would be added to the end of a code submitted on 

claims for catheters, external urinary collection devices, or supplies required for the 

effective use of one of these items. The modifier indicates that “specified coverage 

criteria in the medical policy have been met and documentation is available in the 

supplier’s records.” 

10 
If this policy is implemented and claims processing controls are created to ensure that 

required modifiers are used, large numbers of questionable allowances such as those 

found in 1993 can be avoided. If the policy had been implemented in 1993, Medicare 

and beneficiaries could have saved as much $88 million in questionable payments. 

The proposed policy provides more explicit definitions of covered items. It clearly 

defines female urinary collection devices, insertion trays, and anchoring devices. It 

also lists supplies sometimes paid for previously that will no longer be covered since 

they are not required for the effective use of incontinence prosthetic devices (e.g. skin 

barriers and appliance cleaners). 

The policy also contains utilization standards for many incontinence supplies. For 

instance, no more than one indwelling catheter per month will be covered for routine 

catheter maintenance. The new policy allows only one male external catheter and one 

female pouch collection device per day. These new utilization standards coupled with 

computer edits or controls should significantly decrease the number of excessive 

incontinence supplies billed to Medicare. 

11

NEXT STEPS


InconthwnceSupplkr 

In response to the information presented in this report and a companion report, the 

Office of Inspector General (OIG) plans to: 

o	 initiate an audit review to examine in more detail payments made for 

incontinence supplies in order to determine if any overpayments are 

involved in this area; and 

o	 launch a national investigation in this area, examining potentially 

fraudulent practices by specific suppliers of incontinence supplies. 

We also support ongoing activity in HCFA and the DMERCS to develop more specific 

coverage guidelines and educate providers and suppliers about proper billing for such 

supplies. We hope the information contained in this report is helpful as they complete 

this activity. 

OIG Studiesof OtherNumi.ngHome Suppik 

The OIG will continue studies and audits related to its major initiative examining 

services and supplies provided to Medicare beneficiaries residing in nursing facilities. 

As this report and other OIG work has reflected, the fragmentation of billing for 

services and supplies provided to residents of nursing homes has created a host of 

improper incentives for billers to the Medicare program. 

“Bundling”of Semkes 

We continue to support HCFA’S efforts to pursue a systematic solution to these kinds 

of problems through a requirement for “bundling” of services in nursing home settings. 

Under such an approach, the nursing home would be responsible for providing 

commonly needed services to residents of that facility, rather than allowing for 

separate billing by suppliers. Such a solution would eliminate the incentives suppliers 

now have to aggressively seek out patients in nursing homes and market their products 

inappropriately in those settings. It would also ensure that nursing homes take on 

appropriate responsibilities for services and supplies delivered to residents in their 

facilities. 

12

APPENDIX A


CONFIDENCE INTERVALS 

We reported our findings by multiplying 100 by the point estimates in our samples.


The point estimates represent the total allowance, number of supplies, or number of


beneficiaries. The confidence intervals present the range of possible findings at the 95


percent level. The 95 percent confidence level represents approximately two standard


deviations from the sample mean. The two standard deviations, or semi-width, is


determined by multiplying 1.96 by the standard error of the sample mean. The


variance from the point estimate is determined by multiplying the semi-width of by the


sample size. The confidence internal is the plus or minus range of the variance from


the point estimate.


The 95 percent confidence intervals are presented in the following tables.


Table 1. Inamtinencx Activity 1990-1993 (p.4) 

Table 2 ItIemase in Four su@iea Bdween 1990 and 1993 (@) 

Irrigation Syringe 1900 +/- $3s1,600 $679,700 

A4322 

1993 +/- $3,308,200 $43,271,W 

Saline Solution 1990 +/- $1,365,700 $7,035,500 

A4323 

1993 +/- $4,sss,600 $47,020,200 

Female Pouch 1990 +/- $25,160 $18,500 

A4328 

1993 +/- $2,643,800 $15,295,~ 

Lubricant 1990 +/- $333,100 $494,100 

A4402 

1993 +1- !S2.766.300 $31.958.300 

A-1

Table 3. Quawona - Me BifIing Phctimt(p.7)

IIFemale Pouch +/- $3,070,135 $11,117WJ 

1 I 

II Indwelling Catheter I +/- $1,644,595 I $S,156,900 II 

l\ AcceaaorieauI/o Prosthetic Device I +/-$10,7S4,752 I $s7,570,500 II 

Table 4. saline solu~ _ ad IAi&ant Billed Wkbout Pmatktx - Dmice (p%) 

Saline Solution No. of Supplies +/- 1,2%,309 6,467,500 

A4323 

Aflowana +/- $.4,223,731 $2S,70S,=2 

Irrigation Syringe No. of Supplies +/- 1,23s,503 10,26s,200 

A4322 

Allowance +/- $3,6ss,280 $30,s45,900 

Lubricant No. of Supplies +/- 1,562456 llwv300 

A4402 

Allowance +/- $3,027,SSS $21,914,501 

Tabfe 5. Florida Blue Shield AUowmce of &xsao&s Wltboutl%aktic - Q@) 

A-2

Department of Health and Human Services 

OFFICE OF 

INSPECTOR GENERAL 

QUESTIONABLE MEDICARE PAYMENTS


FOR INCONTINENCE SUPPLIES


# sERVICES 

4+ “&@ 

‘7 + 

SW JUNE GIBBS BROWN

~ Inspector General


s


%


% @

$-- DECEMBER 1994 4+daa > 0EI-03-94-O0772 
OFFICE OF INSPE~OR GENERAL 

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’ (HI-IS) 

programs as well as the health and welfare of beneficiaries served by those programs. ‘l?hk 

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

inspections cxmducted by three OIG operating components: the Office of Audit *MUX, the 

Office of Investigations, and the Office of Evaluation and Inspections. The OIG also info~ 

the Secretary of HHS of program and management problems and recommends courses to 

correct them. 

OFFICE OF AUDIT SERVICES 

The OIGS Office of Audit Services (OAS) provides all 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 in order to reduce waste, abuse, and 

mismanagement and to promote economy and efficiency throughout the Department. 

OFFICE OF INVESTIGATIONS 

The OIGS Office of Investigations (01) conducts criminal, civil, and administrative 

investigations of allegations of wrongdoing in HHS programs or to HHS beneficiaries and of 

unjust enrichment by providers. The investigative efforts of 01 lead to criminal convictions, 

administrative sanctions, or civil money penalties. The 01 also oversees State Medicaid fraud 

control units which investigate and prosecute fraud and patient abuse in the Medicaid program. 

OFFICE OF EVALUATION AND INSPECITONS 

The OIG’S Office of Evaluation and Inspections (OEI) conducts short-term management and 

program evaluations (called inspections) that focus on issues of concern to the Department, 

the Congress, and the public. The findings and recommendations contained in these inspection 

reports generate rapid, accurate, and up-to-date information on the efficiency, vulnerability, 

and effectiveness of departmental programs. This report was prepared in the Philadelphia 

Regional Office, under the direction of Joy Quill, Regional Inspector General and Robert A. 

Vito, Deputy Regional Inspector General. Project staff included: 

PHILADELPHIA REGION HEADQUARTERS 

Robert A Katz, Project Leader Thomas A. Noplock, Program Specialist 

Robert A. Baiocco, Progam Analyst Brian P. Ritchie, Technical Support Staff 

Linda M. Ragone, Program Analyst Barbara Tedesco, Technical Suppoti Stafl 

Cynthia Hansford, Administrative Staff 

To obtain a copy of this repo~ please call the Philadelphia Regional Office at (800) 531-9562 
EXECUTIVE SUMMARY


PURPOSE 

This report examines trends in allowances and questionable billing practices for 

incontinence supplies under Medicare Part B between 1990 and 1993. 

BACKGROUND 

Incontinence is the inability of the body to control urinary and bowel functions. 

Under the Medicare Part B program, the Health Care Financing Administration 

(HCFA) will reimburse suppliers that provide incontinence supplies to aid individuals 

whose incontinence condition “...is of long and indefinite duration.” Such 

reimbursement is provided only as part of Medicare’s coverage for prosthetic devices 

such as catheters and external urinary collection devices. The HCFA will also 

reimburse for accessories, such as irrigation syringes and sterile saline solution, that aid 

in the effective and therapeutic use of these devices. Currently, claims are processed 

by four Durable Medical Equipment Regional Carriers (DMERCS). 

We selected claims for a 1 percent sample of beneficiaries who received one of 43 

types of supplies for incontinence care. We arrayed the data by type of supplies, 

carrier, and major suppliers. We then analyzed the statistical information to develop 

trends. We also applied current and proposed HCFA guidelines for these 

incontinence supplies in 1993. We focused on two facets of billing: accessories that 

can only be billed with prosthetic devices; and frequency limitations on prosthetic 

devices. 

FINDINGS 

Medicareallowancesfor hcontiiumce suppliesmore thandoubledin threeyearsdespitea 

dropin the numberof bmejiciariesusingthesesupplies. 

Incontinence allowances rose from $88 million in 1990 to $230 million in 1993, an 

increase of $142 million. During the same period, the number of beneficiaries 

receiving incontinence supplies fell from 312,200 to 292,700. Allowances per 

beneficiary increased from $282 to $786. 

Four typesof incontinencewppliesaccountfor abnostail the increasebaMdicare 

allowances. 

Between 1990 and 1993, Medicare allowances for irrigation syringes, sterile saline 

irrigation solution, lubricant, and female external urinary collection pouches increased 

$129 million. This accounts for 91 percent of the $142 million total increase. 

1 
Questionablebillingpmcticesmay accountfor almosthalfof ikcontihence albwances in

1993. 

Medicare allowed $107 million in 1993 for supplies whose billing is questionable. 

Almost $88 million was paid for incontinence accessories that were not billedin 

conjunction with a prosthetic device. An additional $19 million was paid for 

beneficiaries whose utilization of certain prosthetic devices appears excessive. The 

allowances were concentrated in one carrier and a small number of suppliers and 

beneficiaries. 

A proposedchangein HCFA policy willprobablyaddressquationablebilbgpmctictx 

Inconsistencies and lack of clear utilization guidelines in carrier policies contributed to 

the large number of questionable incontinence claims paid by Medicare in 1993. A 

proposed draft policy (to be issued by the four Durable Medical Equipment Regional 

Carriers) will clari@ covered services and provide a mechanism to link incontinence 

accesso~ supplies to prosthetic devices. 

NEXT STEPS 

Iiontinence Supplies 

In response to the information presented in this report and a companion report, the 

Office of Inspector General (OIG) plans to: 

o	 initiate an audit review to examine in more detail payments made for 

incontinence supplies in order to determine if any overpayments are 

involved in this area; and 

o	 launch a national investigation in this area, examining potentially 

fraudulent practices by specific suppliers of incontinence supplies. 

We also support ongoing activity in HCFA and the DMERCS to develop more specific 

coverage guidelines and educate providers and suppliers about proper billing for such 

supplies. We hope the information contained in this report is helpful as they complete 

this activity. 

OIG Studiesof OtherNiwsikgHome Supplies 

The OIG will continue studies and audits related to its major initiative examining 

services and supplies provided to Medicare beneficiaries residing in nursing facilities. 

As this report and other OIG work has reflected, the fragmentation of billing for 

semices and supplies provided to residents of nursing homes has created a host of 

improper incentives for billers to the Medicare program. 

11 
“Bundli&’ of Sewices 

We continue to support HCFA’S efforts to pursue a systematic solution to these kinds 

of problems through a requirement for %undling” of services in nursing home settings. 

Under such an approach, the nursing home would be responsible for providing 

commonly needed services to residents of that facility, rather than allowing for 

separate billing by suppliers. Such a solution would eliminate the incentives suppliers 

now have to aggressively seek out patients in nursing homes and market their products 

inappropriately in those settings. It would also ensure that nursing homes take on 

appropriate responsibilities for services and supplies delivered to residents in their 

facilities. 

... 

111 
TABLE OF CONTENTS


PAGE 

EXECUTIVE suMMARY 

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


FINDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...4


� Increased spending . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...4


� Four specific supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...4


� Questionable billing practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...7


� DraftDMERCpolicy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...9


NEXT STEPS . .. O. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12


APPENDIX


A Confidence Intervals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..A-l

INTRODUCTION


PURPOSE 

This report examines trends in allowances and questionable billing practices for 

incontinence supplies under Medicare Part B between 1990 and 1993. 

BACKGROUND 

MedicareCoverageof IiacontinenceSupplies 

Incontinence is the inability of the body to control urinary and bowel functions. 

Reimbursement for incontinence supplies is included as part of Medicare’s coverage 

for prosthetic devices. According to Medicare Carriers Manual section 2130, 

“prosthetic devices (other than dental) which replace all or part of an internal body 

organ (including contiguous tissue), or replace all or part of the function of a 

permanently inoperative or malfunctioning internal body organ are covered when 

furnished on a physician’s order.” 

Under the Medicare Part B program, the Health Care Financing Administration 

(HCFA) will reimburse suppliers that provide incontinence supplies to aid individuals 

whose incontinence condition “...is of long and indefinite duration.” Certain items, 

such as absorbent undergarments or diapers, are specifically excluded from coverage. 

Incontinence supplies include prosthetic devices such as catheters and external urinary 

collection devices such as pouches or cups. Catheters are flexible, tubular instruments 

used to control urinary flow. The HCFA will also reimburse accessories that aid in 

the effective and therapeutic use of these devices. These accessories include items 

such as drainage bags, irrigation syringes, sterile saline solutions, and lubricants. 

However, accessories are not covered in the absence of a prosthetic device. . 

Canierl%oc&g of IncontzkenceSupply(3iJims 

In June 1992, HCFA issued a final rule designating four Durable Medical Equipment 

regional carriers (DMERCS) to process all claims for durable medical equipment, 

prosthetics, orthotics, and supplies. Effective October 1, 1993, the DMERCS replaced 

more than 50 area carriers which had previously processed DME claims. The 

geographical areas formerly serviced by the carriers were phased in under the 

DMERCS on a staggered basis. Each DMERC issued its own coverage and 

reimbursement policies that implement Medicare guidelines. 

However, for urological supplies, the DMERCS issued a draft of a single national 

policy in October 1994. In addition to redefining and clarifying some of the definitions 

used in claims for incontinence and urological supplies, the policy establishes 

documentation requirements for higher than usual quantities of supplies. The non-
coverage of diapers and similar absorptive pads is emphasized. The policy also 

reinforces the condition of “permanence” for coverage purposes and stresses that 

accessories not used in conjunction with covered catheters or external urinary 

collection devices are not covered. 

M&care FraudAkrt 

One DMERC issued a Medicare Fraud Alert in June 1994 describing a supplier 

scheme involving the marketing of incontinence kits to nursing homes. In this case, 

the supplier advised nursing home officials that Medicare was paying for the kits under 

a “pilot program.” According to the alert, supplier representatives provide kits 

containing accessories such as syringes, saline solution, and lubricants, to the nursing 

home in exchange for beneficiary names and Medicare health insurance claim 

numbers. The marketing representative then orders bulk quantities of supplies billed 

under the beneficiaries’ claim numbers. 

The alert also indicated that the supplier marketing program stated that the 

beneficiary should be treated three times per day with the contents of the kit. This 

resulted in a supplier billing Medicare $1,800 per month per beneficiary in one carrier 

jurisdiction. 

METHODOIK)GY 

To determine the trends in incontinence allowances, we arrayed payment and 

utilization data for each incontinence supply. We also analyzed the utilization data for 

possible questionable billing practices. 

We first reviewed each DMERC’S coding and coverage guidelines and interviewed 

DMERC officials to identify 43 codes used to reimburse incontinence supplies. These 

did not include any “local” codes used by individual carriers. Supplies were segregated 

into three groups: catheters, external urinary collection devices, and accessories. The 

HCFA and DMERC officials provided the designation for each billing code. 

We selected all services for 43 codes for a 1 percent sample of beneficiaries from the 

Part B Medicare Annual Data Procedure File for calendar year 1990 and the National 

Claims History 100% Physician/Supplier Data for calendar years 1991 through 1993. 

From the 1993 sample of 2,927 beneficiaries, we obtained an additional file for 

231 beneficiaries who accounted for 51 percent of all incontinence allowances, 

beginning with the beneficiary with the highest amount billed. This file contained all 

Part B services, in addition to incontinence. 

From the sample of incontinence services, we calculated Part B Medicare allowed 

payments, supply frequency, and number of beneficiaries. Allowed payments include 

both the 80 percent Medicare payment and the 20 percent coinsurance fee paid by 

beneficiaries. We arrayed the data by billing code, carrier, and major suppliers. We 

then analyzed the statistical information to determine trends in incontinence 

L 
expenditures. Welimited our analysis for frequency utilization to the period 1991 

through 1993 because frequency reported in 1990 was not comparable to later years. 

According to DMERC coding policies, 11 of the 23 billing codes that cover accessories 

are also used to reimburse ostomy care. We did not include any services for the 11 

codes associated with beneficiaries who received only ostomy care. We also did not 

include services billed under code A4323, “sterile saline irrigation solution,” when it 

was not billed in conjunction with other incontinence supplies. According to DMERC 

officials, code A4323 may be used in conjunction with other non-incontinence supplies 

such as enteral nutrition products. 

To determine the nature and extent of questionable billing practices, we interviewed 

DMERC officials including medical directors and fraud control unit personnel. We 

reviewed coverage and utilization standards for 1) the three Medicare carriers that 

were among the highest in allowances in 1993, 2) the current DMERCS, and 3) the 

proposed DMERC national urological standards. 

We projected our findings by multiplying sample results by 100. Confidence intervals 

for our findings are presented in Appendix A. 

We applied current and proposed DMERC guidelines to the services billed for the 43 

incontinence supplies in 1993. We focused on two facets of billing: 1) accessories that 

can only be billed with prosthetic devices, such as catheters and external urinary 

collection devices; and 2) frequency limitations on prosthetic devices. For each 

practice, we reported Medicare allowances and frequencies above the tolerance 

guidelines by type of supply, carrier, supplier, and number of beneficiaries receiving 

supplies. 

This report is one of a series of reports concerning Medicare payments for 

incontinence supplies. Marketing of Incontinence Supplies (OEI-03-94-00770), describes 

supplier and nursing home practices that can lead to questionable payments and 

examines issues concerning Medicare beneficiaries’ use of incontinence supplies. The 

third report, Medicaid Payments for Incontinence Supplies (OEI-03-94-00771), will 

examine how the Medicaid program processes claims for incontinence supplies in 14 

States. 

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

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

3

FINDINGS


MEDICARE ALLOWANCES FOR INCONTINENTCE SUPPLIES MORE THAN 

DOUBLED IN THREE YEARS DESPITE A DROP IN THE NUMBER OF 

BENEFICIARIES USING THESE SUPPLIES. 

Medicare Part B allowances for incontinence supplies rose from $88 million in 1990 to 

$230 million in 1993, an increase of $142 million.- The most significant portion of that 

increase came in 1993 when allowances increased $111 million, almost doubling from 

the previous year. Over the same time period, the number of beneficiaries receiving 

incontinence supplies has actually decreased. In 1990, 312,200 beneficiaries received 

incontinence supplies. In 1993, this figure fell to 292,700. Allowances per beneficiary 

more than doubled from $282 in 1990 to $786 in 1993. 

Between 1991 and 1993, the number of incontinence supplies paid for by Medicare 

more than tripled. In 1991, Medicare Part B reimbursed suppliers for 19 million 

incontinence supplies. In 1992, reimbursed supplies increased to 25 million. In 1993, 

supplies more than doubled from the previous year to 60 million. The table below 

provides a summary of incontinence activity between 1990 and 1993. 

Table 1. Incontinence Activity 1990-1993 

No. of Beneficiaries 

I 312,200 I 334,300 r 

281,400 r 292,700

Allowances per $282 $322 $423 $786 

Beneficiary 

No. of Supplies N/A 18.8 million 24.7 million 59.5 million 

FOUR TYPES OF INCONTINENCE SUPPLIES ACCOUNT FOR ALMOST ALL 

THE INCREASE IN MEDICARE ALLOWANCES. 

Between 1990 and 1993, Medicare allowances for irrigation syringes (billing code 

A4322), sterile saline irrigation solutions (A4323), lubricants (A4402), and female 

external urinary collection pouches (A4328) increased $129 million. This accounts for 

91 percent of the $142 million increase for all supplies. The table on the next page 

shows increases in allowances for the four supplies according to their billing code. 

4

Table 2 Increase in Four Supply Codes 

T’:;;: 

,,:,Pp.&,: “$990.?~lo@l$i 

Syringe $0.7 million 

Saline Solution $7.0 million 

Female Pouch $0.02 million 

Lubricant $0.5 million 

::,::; ji!193 Mloianci’:’:i: 

$43.3 million 

$47.0 million 

$15.3 million 

$32.0 million 

j~@jas*;~~~~#! ;’:;~jig;:;“ 

$42.6 million 

$40.0 million 

$15.3 million 

$31.5 million 

Although the total number of incontinence beneficiaries decreased 6 percent between 

1990 and 1993, the number of beneficiaries receiving these four supplies showed 

significant increases. The table below displays the number of beneficiaries served for 

each of the four supply codes. 

Table 3. Number of Beneficiaries Served for Four Supply Codes 

Syringe I 7,400 I 62,700 I 747 percent 

Saline Solution I 45.300 I 95.900 I 112 Percent 

Female Pouch I 600 I 9,400 I 1,467 percent 

Lubricant 5,700 59,900 951 percent 

Allbwaruzrfor accessorialand collectiondevicesrose si’ijicantly between1990 and 

1993 whik alibwancesfor cathetenikreased on$ modestly. 

Allowances for accessories rose from $61 million to $183 million, an increase of 

200 percent. In 1990, only $198,900 was spent on all external urinary collection 

devices. By 1993, expenditures skyrocketed to $16 million, an 8,051 percent increase. 

In contrast, allowances for catheters grew 15 percent from $27 million to $31 million 

between 1990 and 1993, an annual increase of 5 percent. 

The nature of supply allowances has also changed. In 1990, indwelling catheters 

(A4338), bedside drainage bags (A4357), and irrigation trays (A4320) accounted for 

almost half of all allowances. By 1993, 53 percent of all allowances were made for 

irrigation syringes, sterile saline solution, and lubricants. 

The rise in supply utilization mirrors the change in allowances. In 1991, Medicare 

paid for 19 million incontinent supplies. By 1993, this figure had tripled to 60 million. 

Suppliers were reimbursed for 63,200 external urinary collection devices in 1991 and 
2 million in 1993, anincrease of3,410 percent. Female pouches account for almost 

95 percent of the external urinary collection devices supplied in 1993. The number of 

catheters rose from 6 million in 1991 to 7 million in 1993. Intermittent urinary 

catheters increased 1.5 million but was offset by a decrease in the number of insertion 

trays, external catheters, and indwelling catheters. 

Allowanmnare concentratedm one cam>randa smullnumberof supplierxand 

bemfkiark 

one carrier and a small number of suppliers and beneficiaries account for a significant 

portion of allowances. Florida Blue Shield accounted for 55 percent of all 

incontinence allowances in 1993, while six carriers made 50 percent of the allowances 

in 1990. Of the 1 percent sample claims reviewed in 1993, less than 1 percent of all 

suppliers received total annual payments of $50,000 or more, accounting for over onequarter of all payments. In contrast, no supplier received total payments that 

exceeded $50,000 in 1990. While 60 percent of the suppliers received total payments 

of $100 or less in 1990, the number dropped to 40 percent in 1993. The following 

table details incontinence payments by supplier between 1990 and 1993. 

Table 4. Incontinence Payments Per Supplier 

Under $100 60.0 3.3 39.3 0.8 

$100-$199 9.0 2.5 10.9 1.0 

$200-$499 12.9 8.2 16.9 3.5 

$500-$999 7.4 10.2 12.2 5.4 

$1,000-$4,999 8.9 37.0 15.4 19.1 

$5,000-$9,999 1.1 14.5 2.7 11.7 

$10,000-$49,000 0.8 24.4 2.2 30.9 

$50,000+ 0.0 0.0 0.5 27.5 

In 1993, 10.3 percent of beneficiaries received services over $2,000 and accounted for 

57 percent of allowances. In 1990, payments were less concentrated in such large 

payments. only 21 percent of allowances were made to beneficiaries who received 

$2,000 or more in services. In 1990, 53 percent of beneficiaries received $100 or less 

in incontinence supplies, while 33 percent received comparable payments in 1993. 

The table on the next page details allowances by beneficiary. 

6

Table 5. Incontinence Allowances Per Beneficiary 

QUESTIONABLE BILLING PRACTICES MAY ACCOUNT FOR ALMOST 

ONE-HALF OF ALL INCONTINENCE ALLOWANCES IN 1993 

Medicare allowed $107 million in 1993 for supplies related to questionable billing 

practices. This represents 47 percent of the $230 million in allowances. About 

$88 million was paid for incontinence accessories for beneficiaries who did not receive 

a prosthetic device. Additional payments of $19 million were made for certain 

prosthetic devices that appear to have excessive utilization. These billing practices are 

concentrated in one carrier, few suppliers, and few beneficiaries. 

Accessoti bilkd withoutprostheticdevicesdo not meet Medicareguidelines. 

In order for Medicare to pay for incontinence accessories the beneficiary must have a 

prosthetic device such as a catheter or a urinary collection device. However, 

$88 million was allowed for accessories that were not billed with a prosthetic device. 

As shown in the table on the next page, virtually all allowances that did not meet 

Medicare guidelines were for just three supplies. The supplies were sterile saline 

solutions, irrigation syringes, and lubricants. In total, these three supplies account for 

94 percent of the $88 million in questionable billings. As a further check, we reviewed 

Part B services provided to 96 beneficiaries with large Medicare allowances and found 

that very few beneficiaries received other durable medical equipment for which these 

supplies would have been appropriate. 

7

Table 6. Accessories Billed Without Catheter or Collection Device 

Saline Solution I 6,467,500 I $29 million 

Syringe 10,268,200 $31 million I 

Utikztiknfor certaihprostheticdevicesappeanexcessive. 

As much as $19 million in allowances may have been overpaid if the proposed 

DMERC utilization standards had applied to certain prosthetic devices in 1993. Over 

$11 million in 1993 was allowed for female external urinary collection pouches 

(A4328) that exceed the proposed DMERC guidelines of one per day. We are aware 

that at least one supplier was paid for 186 per month, or 6 per day. Another $8 

million was allowed for beneficiaries who received more than one indwelling catheter 

per month. The proposed DMERC policy calls for no more than one indwelling 

catheter per month for routine maintenance. Additional catheter changes are covered 

only if documentation substantiates medical necessity. 

FloridaBlue Shiekiaccountedfor most of the questionableallowancm. 

Florida Blue Shield accounted for $78 million (89 percent) of $88 million in Medicare 

allowances for accessories not billed in conjunction with a catheter or external urinary 

collection device. Over 90 percent of the allowances were for just three supplies: 

irrigation syringes, sterile saline solutions, and lubricants. Almost 70 percent of the 

allowances for female external urinary collection pouches was also through Florida 

Blue Shield. 

The allowances for the indwelling catheters that exceeded one per month involved 

numerous carriers. Four carriers accounted for over 40 percent of allowances. The 

carriers were Pennsylvania Blue Shield (15 percent), Illinois Blue Shield (10 percent), 

Blue Shield of Greater New York (9 percent), and Nationwide of Ohio (7 percent). 

The remaining 60 percent was paid by 44 other carriers. 

Allowanceswereconcentratedinfm suppliem 

Approximately 5 percent of suppliers (19 in the sample of 471) accounted for over 

three-quarters of the accessories billed without catheters or external urinary collection 

devices. All but one of these suppliers were paid by Florida Blue Shield. 

8

Ten suppliers in our sample accounted for all payments for female external urinary 

collection pouches. All but three of the suppliers were paid by Florida Blue Shield. 

Only 3 of the 11 codes used to reimburse indwelling catheters showed any 

concentration of allowances for suppliers. For each of these codes, A4311, A4313, 

and A43 15, one supplier received at least two-thirds of all allowances in our sample. 

The remaining allowances was shared by several suppliers. 

Few benejkiariesreceivemost of the allowarum. 

A total of 821 beneficiaries (28 percent from the sample of 2,927) received accessories 

without a prosthetic device. At least 360 of these beneficiaries were billed for 

irrigation syringes, sterile saline solutions, and lubricants. 

All the excessive allowances for female collection pouches were made to 3 percent of 

beneficiaries sampled. For each of the indwelling catheter codes except A4338, all 

excessive payments were made to 1 percent to 6 percent of the beneficiaries sampled. 

However, almost one-third of the beneficiaries in our sample received more than one 

catheter per month of those billed under A4338. 

A PROPOSED CHANGE IN DMERC POLICIES WILL PROBABLY ADDRESS 

QUESTIONABLE BILLING PRAC17K!ES. 

Inconsistencies and the lack of clear utilization guidelines and controls among carriers 

contributed to the large number of questionable incontinence claims paid by Medicare 

in 1993. Current DMERC policies, while more consistent, still do not contain clear 

coverage definitions. A proposed draft DMERC policy further clarifies covered 

services and provides a mechanism to link incontinence accessory supplies to 

prosthetic devices. 

l%vicmr cam”erpolicierdid not containckar guidknceon coverageand appropriate 

utilization 

We reviewed policies of three carriers which were among the highest in incontinence 

allowances for 1993 and found that their guidelines differed for the same types of 

supplies. For example, for one indwelling catheter code, one carrier allowed two per 

month while another allowed eight. For one supply code, one carrier allowed 4 per 

day, the second allowed 1 per week, and the third allowed 30 per month. For the 

female urinary collection device (A4328), an item with a large number of questionable 

allowances, two carriers had no utilization guidelines and the third allowed four per 

month. 

The carrier with the highest questionable allowances for 1993 had no frequency or 

utilization controls for any incontinence supplies except for two intermittent catheter 

codes. Neither this carrier nor the two other carriers had controls to prevent 

allowances for incontinence supplies when billed without a prosthetic device. 

9

Currentpolicieq whik strongm,do not go far enough. 

Current DMERC policies categorize the incontinence supplies benefit under coverage 

of prosthetic devices. For a prosthetic device to be covered, “the physician must 

certify that the condition resulting in the need for the device is of long and indefinite 

duration (at least 3 months).” 

All four DMERCS have utilization controls for indwelling catheters, limiting the 

number of catheters to two per month for routine maintenance. Three DMERCs 

have strengthened coverage policies for lubricant, stating that it can no longer be 

reimbursed as a separate supply since it is included in catheter insertion trays. 

The DMERCS have also adopted a uniform certificate of medical necessity form. This 

certificate must be filled out, signed, and dated by the ordering physician and kept on 

file by the supplier. 

Not all DMERCS have computer edits or controls in place to ensure that supplier 

claims conform with DMERC policies. While all four DMERCS have a utilization 

standard for indwelling catheters, only two have computer edits. Only one DMERC 

has an on-line edit to check claims for particular supplies to ensure that the certificate 

of medical necessity adequately supports the use of these supplies. 

Even though the DMERC manuals limit payment for supplies to those that are for the 

effective use of a prosthetic device, DMERCS do not have controls to prevent 

payment for incontinence supplies when the beneficiary has neither a catheter nor an 

external urinary collection device. Without these controls, Medicare will continue to 

pay for incontinence supplies that do not meet Medicare coverage guidelines. 

l% draftDMERCpolicy providesunform coverageand utilizationstkmdardrthutwill 

ikadto improvedprocessingof incontinencesupp~ cliziins. 

The proposed DMERC national guidelines on urological supplies will prevent 

Medicare payment for supplies not used with covered prosthetic devices. As the draft 

policy clearly states, “urological supplies that are not used with catheters or external 

urinary collection devices will be denied as noncovered.” It provides even more 

explanation in the case of sterile saline solution and irrigation syringes by maintaining 

that “irrigation supplies that are used for care of the skin and/or perineum of 

incontinent patients are not covered.” 

The new policy requires suppliers to add a modifier to urological supply codes when 

the supplies are used with a catheter or external urinary collection device. The new 

ZX modifier, as it is known, would be added to the end of a code submitted on 

claims for catheters, external urinary collection devices, or supplies required for the 

effective use of one of these items. The modifier indicates that “specified coverage 

criteria in the medical policy have been met and documentation is available in the 

supplier’s records.” 

10 
If this policy is implemented and claims processing controls are created to ensure that 

required modifiers are used, large numbers of questionable allowances such as those 

found in 1993 can be avoided. If the policy had been implemented in 1993, Medicare 

and beneficiaries could have saved as much $88 million in questionable payments. 

The proposed policy provides more explicit definitions of covered items. It clearly 

defines female urinary collection devices, insertion trays, and anchoring devices. It 

also lists supplies sometimes paid for previously that will no longer be covered since 

they are not required for the effective use of incontinence prosthetic devices (e.g. skin 

barriers and appliance cleaners). 

The policy also contains utilization standards for many incontinence supplies. For 

instance, no more than one indwelling catheter per month will be covered for routine 

catheter maintenance. The new policy allows only one male external catheter and one 

female pouch collection device per day. These new utilization standards coupled with 

computer edits or controls should significantly decrease the number of excessive 

incontinence supplies billed to Medicare. 

11

NEXT STEPS 

IiacontinenceSupplies 

In response to the information presented in this report and a companion report, the 

Office of Inspector General (OIG) plans to: 

o	 initiate an audit review to examine in more detail payments made for 

incontinence supplies in order to determine if any overpayments are 

involved in this area; and 

o	 launch a national investigation in this area, examining potentially 

fraudulent practices by specific suppliers of incontinence supplies. 

We also support ongoing activity in HCFA and the DMERCS to develop more specific 

coverage guidelines and educate providers and suppliers about proper billing for such 

supplies. We hope the information contained in this report is helpful as they complete 

this activity. 

OIG Studia of OtherNumihgHome Supplies 

The OIG will continue studies and audits related to its major initiative examining 

services and supplies provided to Medicare beneficiaries residing in nursing facilities. 

As this report and other OIG work has reflected, the fragmentation of billing for 

services and supplies provided to residents of nursing homes has created a host of 

improper incentives for billers to the Medicare program. 

“Bundli@ of Services 

We continue to support HCFA’S efforts to pursue a systematic solution to these kinds 

of problems through a requirement for “bundling” of sewices in nursing home settings. 

Under such an approach, the nursing home would be responsible for providing 

commonly needed services to residents of that facility, rather than allowing for 

separate billing by suppliers. Such a solution would eliminate the incentives suppliers 

now have to aggressively seek out patients in nursing homes and market their products 

inappropriately in those settings. It would also ensure that nursing homes take on 

appropriate responsibilities for services and supplies delivered to residents in their 

facilities. 

12

Ill

APPENDIX A


CONFIDENCE INTERVALS 

We reported our findings by multiplying 100 by the point estimates in our samples.


The point estimates represent the total allowance, number of supplies, or number of


beneficiaries. The confidence intervals present the range of possible findings at the 95


percent level. The 95 percent confidence level represents approximately two standard


deviations from the sample mean. The two standard deviations, or semi-width, is


determined by multiplying 1.96 by the standard error of the sample mean. The


variance from the point estimate is determined by multiplying the semi-width of by the


sample size. The confidence interval is the plus or minus range of the variance from


the point estimate.


The 95 percent confidence intervals are presented in the following tables.


Table 1. IIKXNItinenceAclivily 19W -1993 (p.4) 

Table 2 Inuease in Four Supplies Between 1990 and 1993 (@) 

Irrigation Syringe +/- S.38L600 $679,700 

A4322 

1993 +/- $3,308,200 $43,271,800 

Saline Solution 1990 +/- $1,365,700 $7,035,500 

A4323 

1993 +/- $4,888,600 $47,020,200 

Female Pouch 1990 +/- $25,160 $18,500 

A4328 

1993 +/- $2,643,800 $15.295.200 

Lubricant 1990 +/- $333,100 $494,100 

A4402 

1993 $31,958,300 

... >-

x 

~400
 11180= r.-
 } Won 

Xwoz 

Iwioz 
APPENDIX A


CONFIDENCE INTERVALS 

We reported our findings by multiplying 100 by the point estimates in our samples.


The point estimates represent the total allowance, number of supplies, or number of


beneficiaries. The confidence intervals present the range of possible findings at the 9S


percent level. The 95 percent confidence level represents approximately two standard


deviations from the sample mean. The two standard deviations, or semi-width, is


determined by multiplying 1.96 by the standard error of the sample mean. The


variance from the point estimate is determined by multiplying the semi-width of by the


sample size. The confidence interval is the plus or minus range of the variance from


the point estimate.


The 95 percent confidence intervals are presented in the following tables.


Table 1. l.amntinemce Activity 1990-1993 (p.4) 

1990 +/- $5,839,100 $87,%9,900 +/- 10,OOO 312,200 +/- $19 $282 -4 I 

1991 II +/- $7,544,939 I $107,504,300 +/- 10,OOO I 334,300 II +/- $23 I $322 

---1 1992 +/- $.8,%3,442 

I 

$118,970,400 +/- 10,OOO 281,400 

,1 

+/- $32 $423 

, 

1993 II +/- $15,579,562 I $229,949,200 +/- 10,OOO 292,700 +/- $53 $786 

Table 2 Increase in Four Sup$iiea Between 1990 and 1993 (p~ 

Irrigation Syringe 1900 +/- $381,600 $679,700 

A4322 

1993 +/- $3,308,200 $43,271,800 

Saline Solution 1990 +/- $1,365,700 $7,035,500 

A4323 

1993 +/- $4,888,600 $47,020,200 

Female Pouch 1990 +/- $25,160 $18,500 

A4328 I I 

1993 +/- $2,643,800 $15,295,200 

Lubricant 1990 +/- $333,100 $494,100 

A4402 

1993 +1- $2,766,300 $31,958,300 

A-1

II Female Pouch I +/- $3.070,135 I $11,117300


II Indwelling Catheter I +/- $1,644,595 I $S,156,900 II


II Acxeaaonea w/o Prosthetic Deviee I +/-$10,7S4,752 I $87,570300 II


Table 4. Wine Solutioq _ ad Ldxicant Bfled WMmut Prodebe “ Device (p.q


A4322 I I I 

Aflowance +/- $3,6ss,280 $30,s45,900 

1 I I I 

Lubricant No. of Supplies +/- 1,562,456 11,312,S00 

A4402 

Allowance +/- $3,027,SSS $21,914,501 

Irrigation Syringe No. of Supplies +/- 1,23s,503 10,26s,200 

Tabfe 5. Florida Blue Shield AUowamx of Acasamk WltboutProsthetic Device (#3) 

A-2