Department of Health & Human Services 

OFFICE OF

INSPECTOR GENERAL

 

. 

QUESTIONABLE BILLING BY 

SUPPLIERS OF LOWER LIMB 

PROSTHESES 

 

Daniel R. Levinson 

Inspector General 

August 2011 

OEI-02-10-00170 

 
 

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 EXECUTIVE SUMMARY

OBJECTIVES

1. To identify payments for lower limb prostheses in 2009 that did not 

meet certain Medicare requirements.

2. To identify Medicare payments for lower limb prostheses in 2009 

for beneficiaries with no claims from their referring physicians.

3. To identify suppliers of lower limb prostheses that had 

questionable billing in 2009. 

4. To describe the program safeguards in place in 2009 and the first 

half of 2010 to prevent inappropriate payments for lower limb 

prostheses. 

BACKGROUND

Medicare covers lower limb prostheses under its Part B Durable 

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

benefit. Between 2005 and 2009, Medicare spending for lower limb 

prostheses increased 27 percent, from $517 million to $655 million, 

while the number of Medicare beneficiaries receiving lower limb 

prostheses decreased by 2.5 percent, from almost 76,000 to about 

74,000. 

Lower limb prostheses are designed to replace, as much as possible, 

the function of a missing limb. A prosthesis joins the beneficiary’s 

residual limb at one of several sites, such as the hip, above or below 

the knee, the ankle, or the foot. Medicare requires that a supplier 

have an order from a physician before providing prostheses to the 

beneficiary. This physician is known as the referring physician. After 

receiving the order, the supplier fits the beneficiary with the most 

appropriate prostheses. Medicare also requires that suppliers follow 

local coverage determination policies, which provide guidelines for 

determining the beneficiary’s potential functional level and specify 

how suppliers must submit claims for certain types and combinations 

of prostheses. 

The Centers for Medicare & Medicaid Services (CMS) contracts with 

Durable Medical Equipment (DME) Medicare Administrative 

Contractors (MAC) to process and pay claims for lower limb 

prostheses. These contractors also apply processing edits and conduct 

data analysis that may lead to medical reviews. In addition, CMS 
 

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EXECUTIVE SUMMARY

contracts with Zone Program Integrity Contractors (ZPIC) and DME 

Program Safeguard Contractors (DME PSC) to conduct analyses for 

aberrant billing and to investigate allegations of fraud.

We based this study on an analysis of Medicare Part B claims for 

lower limb prostheses from 2009 and an analysis of Part A and B 

claims from 2004 to 2009 for beneficiaries who received lower limb 

prostheses in 2009. We also interviewed CMS contractors. 

FINDINGS

In 2009, Medicare inappropriately paid $43 million for lower limb 

prostheses that did not meet certain requirements; these 

payments could have been prevented by using claims processing 

edits. These payments were for claims that did not meet the 

requirements specified in the local coverage determination. The 

$43 million is based solely on an analysis of claims data and does not 

include payments that a medical record review may find to be 

unreasonable or unnecessary. Most of these payments were made to

suppliers that incorrectly billed for prostheses for both the right and 

left limbs using two claims, rather than one. Billing in this manner 

allows these suppliers to appear to be billing for only one limb when in 

fact they are billing for both limbs. In other cases, the claims did not 

include any information about the beneficiaries’ potential functional 

level when it was required, or the claims were for prostheses that were 

not medically necessary given the beneficiaries’ potential functional 

level. 

Medicare paid an additional $61 million for beneficiaries with no 

claims from their referring physicians. These beneficiaries had no 

Medicare Part A or Part B claims that included their referring 

physicians during the last 5 years, meaning they did not have an office 

visit with or receive any other services from their referring physicians

during this time. Billing for prostheses when the beneficiary had no 

claims from the referring physician raises questions about whether 

the physician ever evaluated the beneficiary and whether these 

devices were medically necessary. 

In 2009, 267 suppliers of lower limb prostheses had questionable 

billing. In 2009, 136 suppliers frequently submitted claims that did 

not meet certain Medicare requirements or were for beneficiaries with 

no claims from their referring physicians. An additional 131 suppliers 
 

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EXECUTIVE SUMMARY

had other questionable billing, such as billing for a high percentage of 

beneficiaries with no history of an amputation or missing limb. 

Medicare contractors conducted varying degrees of program 

safeguard activities related to lower limb prostheses. The four DME 

MACs had varying claims processing edits in place, but none had edits 

for all requirements. In addition, none of the DME MACs conducted 

medical reviews, and not all conducted data analyses or provided 

education related to lower limb prostheses. All five ZPICs and DME 

PSCs conducted data analyses and opened investigations related to 

lower limb prostheses.

RECOMMENDATIONS

We recommend that CMS:

Implement additional claims processing edits to prevent 

inappropriate payments. CMS should instruct the four DME MACs 

to implement claims processing edits based on all of the local coverage 

determination requirements. 

Strengthen monitoring of billing for lower limb prostheses. CMS 

should instruct the DME MACs, ZPICs, and DME PSCs to monitor 

billing for lower limb prostheses using the measures discussed in this 

report. CMS should develop thresholds for these measures and 

instruct its contractors to conduct additional reviews of suppliers that 

exceed the thresholds. 

Implement requirements for a face-to-face encounter to establish 

the beneficiary’s need for prostheses. We recommend that CMS 

implement requirements that the referring physician document that a 

face-to-face encounter occurred. This would help ensure that lower 

limb prostheses provided to beneficiaries are medically necessary. 

Revise the requirements in the local coverage determination. CMS 

should work with the DME MACs to clarify several aspects of the local 

coverage determination. First, CMS should clarify the definitions of

beneficiaries’ functional levels. Second, CMS should revise the local 

coverage determination or take other steps to require that

licensed/certified medical professionals, such as physical therapists, 

evaluate beneficiaries to determine their potential functional levels. 

Finally, CMS should consider denying as medically unnecessary 

certain combinations of prostheses. 
 

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EXECUTIVE SUMMARY

Enhance screening for currently enrolled suppliers of lower limb 

prostheses. Federal regulations place new DMEPOS suppliers at the 

high-risk level and currently enrolled DMEPOS suppliers at the 

moderate-risk level. CMS should consider placing current suppliers of 

lower limb prostheses at the high-risk level, thus subjecting them to the 

more rigorous screening procedures.

Take appropriate action on suppliers with questionable billing. In 

a separate memorandum, we will refer the suppliers that we identified 

to CMS for appropriate action. 

AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 

RESPONSE 

CMS concurred with five of the six recommendations. In response to 

our first recommendation, to implement additional claims processing 

edits, CMS concurred and stated it would instruct the DME MACs to 

implement consistent claims processing edits based on local coverage 

determination requirements.

In response to our second recommendation, to strengthen monitoring 

of billing for lower limb prostheses, CMS concurred and stated it 

would issue guidance to the DME MACs and instruct them to consider 

the measures used in this report as supplemental criteria for detecting 

high-risk suppliers. 

In response to our third recommendation, to implement requirements 

for a face-to-face encounter to establish the beneficiary’s need for 

prostheses, CMS concurred and stated it is exploring its current 

authorities to implement such requirements. CMS also stated that it 

would issue an educational article to further explain policy 

requirements for lower limb prostheses to providers and suppliers. 

In response to our fourth recommendation, to revise the local coverage 

determination, CMS concurred and stated it would review the 

definitions for the functional levels and develop refinements as 

appropriate. CMS also stated it would consider adapting an algorithm 

to guide determination of the functional status of the beneficiary. 

CMS did not explicitly comment on our recommendation to consider 

requiring that an objective party determine the functional level. We 

ask CMS to consider this approach because it would further ensure 
 

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that beneficiaries receive only prostheses appropriate for their 

functional levels. 

In response to our fifth recommendation, to enhance screening for 

currently enrolled suppliers of lower limb prostheses, CMS did not 

concur and stated that it has in place sufficient tools that allow for 

increased scrutiny of existing DMEPOS suppliers. CMS noted that if 

an existing supplier meets one of several triggering events, that 

supplier automatically is elevated to the high-risk level. Based on this 

report and the findings of other Office of Inspector General reports on 

DMEPOS, we maintain that all current suppliers of lower limb 

prostheses should be placed at the high-risk level.

In response to our sixth recommendation, to take appropriate action 

on the suppliers with questionable billing, CMS concurred and stated 

it would share our information with the DME MACs and the Recovery 

Auditors. Recovery Auditors review Medicare claims on a 

postpayment basis to identify inappropriate payments. 
 

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 TABLE OF CONTENTS

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

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

FINDINGS ................................................. 11

In 2009, Medicare inappropriately paid $43 million for lower limb 

prostheses that did not meet certain requirements; these payments 

could have been prevented by using claims processing edits .... 11

Medicare paid an additional $61 million for beneficiaries with no 

claims from their referring physicians....................... 12

In 2009, 267 suppliers of lower limb prostheses had questionable 

billing ................................................ 13

Medicare contractors conducted varying degrees of program 

safeguard activities related to lower limb prostheses .......... 16

RECOMMENDATIONS ..................................... 18

AGENCY COMMENTS AND OFFICE OF INSPECTOR

GENERAL RESPONSE .................................... 20

APPENDIX ................................................ 22

A: Medicare Payments for Lower Limb Prostheses, by Type,

2009 .............................................. 22

B: Centers for Medicare & Medicaid Services Comments ...... 23

ACKNOWLEDGMENTS ..................................... 27
 

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 INTRODUCTION

OBJECTIVES 

1. To identify payments for lower limb prostheses in 2009 that did not 

meet certain Medicare requirements. 

2. To identify Medicare payments for lower limb prostheses in 2009 for 

beneficiaries with no claims from their referring physicians.

3. To identify suppliers of lower limb prostheses that had questionable 

billing in 2009. 

4. To describe the program safeguards in place in 2009 and the first 

half of 2010 to prevent inappropriate payments for lower limb 

prostheses. 

BACKGROUND

Medicare covers lower limb prostheses under its Part B Durable 

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

benefit. Between 2005 and 2009, Medicare expenditures for lower limb 

prostheses increased 27 percent, from $517 million to $655 million, 

while the number of Medicare beneficiaries receiving lower limb 

prostheses decreased by 2.5 percent, from almost 76,000 to about

74,000.1

Recently, in a number of cases, suppliers fraudulently billed for lower 

limb prostheses. For example, one supplier was convicted of health 

care fraud after billing Medicare nearly $1 million for prostheses that 

were not medically necessary.

 In 2009, lower limb prostheses represented 81 percent of 

Medicare Part B payments for all prostheses. 

2 In another case, a husband and wife 

were indicted on charges of billing Medicare $1.5 million for prostheses 

and other items for deceased beneficiaries as well as for beneficiaries 

who had never been evaluated by their referring physicians.3

1 Office of Inspector General (OIG) analysis of Part B claims data from the Centers for 

Medicare & Medicaid Services’ (CMS) National Claims History File for 2005 and 2009. 

2 Melissa Correa Velazquez, El Vocero, “Lluvia de fraudes al Medicare,” July 28, 2010. 

Accessed at http://www.vocero.com/noticias/ley-y-orden/9412-lluvia-de-fraudes-almedicare.html on September 26, 2010. The information is no longer available online.

3Department of Justice (DOJ) and the Department of Health and Human Services (HHS), 

Maria and Armando Montiel Charged in a 469 Count Indictment for Medicare Fraud, 

August 11, 2010. Accessed at http://www.stopmedicarefraud.gov/HEATnews/puertorico.html 

on August 10, 2011.
 

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INTRODUCTIO N

Further, during initial discussions about this study, staff at CMS 

raised a number of concerns about lower limb prostheses. They were 

concerned that suppliers were providing higher priced prostheses when 

lower priced ones were more appropriate, noting that these practices 

result in inappropriate Medicare payments. 

This evaluation was conducted as part of the Health Care Fraud 

Prevention and Enforcement Action Team (HEAT) initiative, which 

focuses on reducing health care fraud through innovative data analysis 

and enhanced cooperation between DOJ, OIG, and CMS.4

Lower Limb Prostheses 

Lower limb prostheses are designed to replace, as much as possible, 

the function of a missing limb. A beneficiary typically requires lower 

limb prostheses after amputation because of complications from a 

disease, such as diabetes. Other beneficiaries need prostheses because 

they were born without one or both lower limbs. A prosthesis joins the 

beneficiary’s residual limb at one of several sites, such as the hip, 

above or below the knee, the ankle, or the foot.5

Prostheses can be temporary or definitive. Temporary prostheses are 

used when the amputated limb is still maturing. Once the residual 

limb has matured, the supplier fits the beneficiary with definitive 

prostheses. Definitive prostheses are meant for prolonged use and are 

typically replaced every 3 to 5 years. They are also typically more 

expensive than temporary prostheses. 

 

Prostheses are further divided into base prostheses and additions. A 

supplier will typically fit a beneficiary with a base prosthesis and then 

enhance the base prosthesis with several additions. For example, a 

base prosthesis for a beneficiary with an above-the-knee amputation 

typically consists of a foot, an ankle, a shin, a knee, and a socket that 

interfaces with the residual limb. The additions include enhancements 

to the base prosthesis, such as a more sophisticated socket or knee or 

an insert or suspension system for the socket. 

Medicare pays suppliers for prostheses according to a national fee 

schedule. Medicare payments for a given prosthesis vary across 

States; however, they cannot be higher than the ceiling price or lower 

4 DOJ and HHS, HEAT Task Force Success, Accessed at 

http://www.stopmedicarefraud.gov/heatsuccess/index.html on January 11, 2010.

5 For the purpose of this report, we refer to each of these sites as a site of amputation.
 

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INTRODUCTION

than the floor price set by CMS. In 2009, over one-quarter of the 

$655 million that Medicare spent on lower limb prostheses was for 

sockets ($167 million), followed by inserts or suspension systems 

($113 million) and base prostheses ($107 million). See Appendix A for 

2009 Medicare spending for each type of lower limb prostheses. 

Medicare Requirements for Lower Limb Prostheses

Provisions of the Social Security Act (the Act) govern Medicare 

payment for all items or services, including lower limb prostheses. The 

Act states that Medicare will cover only services and items considered 

reasonable and necessary for the diagnosis or treatment of illness or 

injury or to improve the functioning of a malformed body part.6

In addition, Medicare requires that a supplier have an order from a 

physician before providing prostheses to the beneficiary.

 

7 This 

physician is known as the referring physician. Upon receiving the 

order, the supplier consults with the referring physician as needed to 

confirm the order and to recommend any necessary changes and 

evaluates the beneficiary.8 The supplier fits the beneficiary with the 

most appropriate prostheses. The supplier then determines the group 

of codes that best describes the prostheses provided, choosing from 

178 Healthcare Common Procedure Coding System (HCPCS) codes

that are specific to lower limb prostheses.9

Further, local coverage determination policies provide additional 

Medicare requirements for lower limb prostheses. These policies, 

consistent with policies for other DMEPOS, are identical across the 

country.

 In this report, we refer to 

each HCPCS code as a prosthesis.

10

6 The Act § 1862(a)(1)(A), 42 U.S.C. § 1395y(a)(1)(A).

 The local coverage determination specifies how suppliers 

7 CMS, Medicare Program Integrity Manual (PIM), Pub. No. 100-08, ch.5, § 5.2.1 (as of 

Rev. 242; effective 03-01-08). A new physician order is required when there is a change in 

the order, when an item needs to be replaced, and when there is a change in the supplier. 

CMS, Medicare PIM, Pub. No. 100-08, ch.5, § 5.2.4 (as of Rev. 242; effective 03-01-08).

8 CMS, DMEPOS Quality Standards, October 2008.

9 HCPCS is a standardized coding system maintained by CMS to ensure uniform billing. 

The 178 HCPCS codes for lower limb prostheses include all defined codes from L5000 to 

L5999.

10 CMS, Medicare PIM, Pub. No. 100-08, ch.13, § 13.1.4. The four identical local coverage 

determinations are entitled Local Coverage Determination for Lower Limb Prostheses. In 

addition, four identical policy articles on lower limb prostheses provide additional 

requirements. For the purposes of this report, we refer to all eight documents as “the local 

coverage determination.” We used the version of the local coverage determination that was 

in effect in 2009.
 

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INTRODUCTION

must submit claims for certain types and combinations of prostheses. 

In particular, it states that each claim must include a modifier to 

indicate whether the prosthesis is for the right or left limb. When a 

supplier provides a prosthesis for each limb on the same date, the 

supplier must submit only one claim and include both the right and 

left modifiers on the claim.11

The local coverage determination also has guidelines for determining 

the beneficiary’s potential functional level. Specifically, it states that a 

beneficiary is placed at one of five potential functional levels based on 

the reasonable expectations of the supplier and the referring 

physician. When determining the potential functional level, suppliers 

must take into account the beneficiary’s history, current condition, and 

desire to walk. The supplier then uses a modifier on the claim to 

indicate the beneficiary’s potential functional level (K0 to K4). 

Prostheses are not considered medically necessary if the beneficiary 

has the lowest potential functional level (K0), which indicates that he 

or she does not have the ability or the potential to walk. In addition, 

for some prostheses, the local coverage determination specifies the 

minimum potential functional level that the beneficiary must have for 

the prosthesis to be considered medically necessary. 

 

Further, the local coverage determination limits the number of certain 

prostheses that can be billed on a claim. If the number of units of 

these prostheses exceeds the limit, the additional items will be denied 

as not medically necessary. The local coverage determination also 

considers certain combinations of prostheses to be medically 

unnecessary. For example, certain sockets are not allowed for use with 

temporary base prostheses. Finally, the local coverage determination

states that HCPCS L5990, a specific type of foot addition, will be 

denied as not medically necessary.12

In addition, CMS recently established new screening procedures for

provider enrollment. Screening may include, for example, licensure 

and criminal background checks. CMS created three levels of 

screening—limited, moderate, and high—based on the risk of fraud, 

11 Typically, a supplier bills for a set of prostheses on one claim, listing each prosthesis as a 

separate line item on that claim. For the purposes of this report, we refer to claim line items 

as claims. 

12 While not covered by Medicare, this HCPCS code may be covered by other health care 

insurers. 
 

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INTRODUCTION

waste, and abuse.13 New DMEPOS suppliers were placed at the 

high-risk level, while currently enrolled DMEPOS suppliers were 

placed at the moderate-risk level.14

Lastly, recent legislation established a face-to-face encounter

requirement for certain DMEPOS.

 

15 For specified DMEPOS that 

require a written order prior to delivery, the referring physician must 

document that a physician, physician assistant, nurse practitioner, or 

clinical nurse specialist has had a face-to-face encounter with the 

beneficiary before writing the order for the item.16

Claims Processing and Program Safeguard Activities

 

CMS contracts with four DME Medicare Administrative Contractors 

(MAC) to process and pay claims in different areas of the country. In 

addition to developing local coverage determinations, the DME MACs 

apply processing edits to reject, deny, or suspend claims. If the DME 

MAC rejects a claim, the supplier may resubmit it after making the 

necessary corrections. If the DME MAC suspends a claim, it reviews 

the medical records to determine whether the claim should be paid. 

DME MACs may also conduct medical reviews of claims based on 

proactive data analysis to prevent improper payments or to collect 

overpayments. In addition, they conduct outreach and education to 

suppliers. 

CMS also contracts with Zone Program Integrity Contractors (ZPIC) 

and DME Program Safeguard Contractors (PSC) to identify fraud and 

abuse in their jurisdictions. These contractors conduct data analysis to 

check for aberrant billing and to investigate allegations of fraud and 

abuse. They may refer claims to DME MACs to collect overpayments 

or to law enforcement for further investigation. CMS is transitioning 

the role of the PSCs to the ZPICs.

13 76 Fed. Reg. 5862, 5867 (Feb. 2, 2011). 

14 42 CFR § 424.518 (b)(1)(x) and (c)(1)(ii), effective March 25, 2011.

15 In addition to establishing the new requirement for DMEPOS, section 6407(c) of the 

Patient Protection and Affordable Care Act (ACA), P.L. 111-148, authorized CMS to apply 

the face-to-face encounter requirement to other Medicare items and services based on a 

decision that it would reduce the risk of waste, fraud, or abuse.

16 Section 6407(b) of the ACA, amending 1834(a)(11)(B) of the Act. CMS can specify that 

the requirements at 1834(a)(11)(B) for a written order before delivery and for a face-to-face 

encounter apply to any durable medical equipment (DME) (see section 1834(a)(13) of the 

Act) or any orthotics or prosthetics (see sections 1834(h)(3) and (h)(4)(C) of the Act). As of 

May 2011, CMS had not applied the face-to-face requirement to lower limb prostheses.
 

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INTRODUCTION

METHODOLOGY 

We based this study on: (1) an analysis of all paid Part B claims for 

lower limb prostheses from 2009; (2) an analysis of paid Part A and 

Part B claims17 from 2004 to 2009 for beneficiaries who received lower 

limb prostheses in 2009; and (3) structured interviews with staff from 

the following CMS contractors: the DME MACs, ZPICs, and DME 

PSCs. 

Using CMS’s National Claims History File, we identified all paid

Part B claims for lower limb prostheses (HCPCS codes L5000 to 

L5999) for 2009.18 For beneficiaries who had a prosthesis claim in 

2009, we identified all of their paid Part A and Part B claims during 

the 5 years prior to their first prosthesis claim in 2009.19 We used the 

beneficiary’s Health Insurance Claim Number to link these Part A and 

Part B claims to the 2009 prostheses claims. 

Identification of Medicare Payments for Lower Limb Prostheses That Did 

Not Meet Certain Requirements or Were for Beneficiaries With No 

Claims From Their Referring Physicians

We first analyzed the claims data to determine the number of claims 

that did not meet the requirements specified in the local coverage 

determination and the total Medicare payments for these claims. We 

considered a paid claim to not meet these requirements if the supplier 

(1) did not indicate whether the prosthesis was for the right or left 

limb, (2) billed for a prosthesis for both limbs on the same date using 

two claims,20 (3) did not meet potential functional level 

requirements,21 (4) billed for a higher number of units of a prosthesis 

than allowed on a claim, (5) billed for combinations of prostheses that 

were not allowed, or (6) billed for prostheses that were not covered. 

17 Note that we did not include DME claims.

18 We included all claims from the 50 States, the District of Columbia, Puerto Rico, the 

U.S. Virgin Islands, American Samoa, and Guam.

19 For the purposes of this report, we refer to the 5 years prior to the beneficiary’s first 

prosthesis claim in 2009 as “the last 5 years.” 

20 The supplier should bill for prostheses for both limbs on the same claim, using a right 

and a left modifier. 

21 In this report, we did not verify whether the potential functional level assigned to the 

beneficiary was appropriate. We did verify: (1) whether the supplier indicated the 

beneficiary’s potential functional level on each claim and (2) whether the prostheses were 

medically necessary for the potential functional level indicated on the claim. 
 

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INTRODUCTION

Next, we analyzed the claims data to determine the number of claims 

for beneficiaries with no claims from their referring physicians during 

the last 5 years and the Medicare payments for these claims. Using 

the National Provider Identifier and Unique Physician Identification 

Number on the prostheses claims, we identified each beneficiary’s 

referring physician. We then used these physician identifiers to 

determine whether the referring physician was included on any of the 

beneficiary’s Part A and Part B claims, which would indicate that the 

beneficiary had an office visit or received other services from the 

referring physician. If a beneficiary had more than one referring 

physician in 2009, we determined whether the beneficiary had a 

Part A or Part B claim with any of the referring physicians.

Identification of Suppliers That Had Questionable Billing

Medicare paid 4,575 suppliers for lower limb prostheses in 2009. To 

identify the suppliers that had questionable billing, we based our 

analyses on suppliers that had at least 10 beneficiaries and that were 

paid at least $100,000 for lower limb prostheses in 2009. These

included 1,632 of the 4,575 suppliers and accounted for 92 percent of

the $655 million billed for lower limb prostheses. 

For each supplier, we first determined the percentage of its claims that 

did not meet Medicare requirements specified in the local coverage 

determination. If that percentage was greater than the 75th percentile 

plus two times the interquartile range, we considered the supplier to 

have an unusually high percentage of claims that did not meet these 

requirements.22

Next, we identified suppliers of lower limb prostheses that had other 

questionable billing. We developed seven measures based on the 

results of past OIG analyses and fraud investigations related to lower 

limb prostheses, as well as input from CMS staff and contractors. As 

above, we considered a supplier to be unusually high on a measure if it 

was greater than the 75th percentile plus two times the interquartile 

range. The seven measures include: 

 We conducted a similar analysis to identify suppliers 

that had an unusually high percentage of claims for beneficiaries with 

no claims from their referring physicians during the last 5 years. 

22 This is a standard method for identifying members of a population with unusually high 

values on a statistic compared to the rest of the population. See J.W. Tukey, Exploratory 

Data Analysis, Addison-Wesley, 1977. 
 

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INTRODUCTIO N

• The percentage of beneficiaries that suppliers have in common. We 

based this measure on the number of each supplier’s beneficiaries 

who also received lower limb prostheses from another supplier.

• The percentage of beneficiaries who had no Part A or Part B history 

related to an amputation during the last 5 years. We based this 

measure on the number of each supplier’s beneficiaries who did not 

have a Part A or Part B claim that included a diagnosis code 

associated with a missing lower limb or a procedure code associated 

with a lower limb amputation or prosthesis fitting. 

• The percentage of beneficiaries with unusual combinations of 

prostheses. We considered two prostheses billed on the same date 

for the same limb to be unusual if they were both definitive base 

prostheses or were for different sites of amputation. While certain 

prostheses may be provided more than once for the same limb on the 

same date, definitive base prostheses should be provided only once. 

Also, if a supplier routinely provides prostheses for different sites of 

amputation—such as below the knee and above the knee—for the

same limb, that is a cause for concern.23 

• The percentage of beneficiaries who received prostheses for both 

limbs. Nationwide, 15 percent of Medicare beneficiaries who had

lower limb prostheses in 2009 received prostheses for both limbs.24

• The percentage of beneficiaries who received prostheses for 

above-the-knee amputations. On average, the payment per 

beneficiary for prostheses for above-the-knee amputations is more 

than twice the payment for below-the-knee amputations.25 

• High average payment per beneficiary for above-the-knee 

prostheses.26 We based this measure on the total payment for 

23 For this analysis, we included prostheses that were appropriate for only one site of 

amputation, such as a below-the-knee socket. Of the 181 lower limb prostheses, about 

100 are appropriate for one site of amputation, while the remaining prostheses are 

appropriate for multiple sites. 

24 OIG analysis of prostheses claims data from the National Claims History File for 2009.

25 Prostheses for above-the-knee and below-the-knee amputations accounted for 88 percent 

of all Medicare spending on lower limb prostheses. Prostheses for other sites accounted for 

the remaining 12 percent of total spending. OIG analysis of prostheses claims data from the 

National Claims History File for 2009. 

26 To determine the average payment per beneficiary, we included prostheses that are 

appropriate for one site of amputation or for multiple sites. If a prosthesis was appropriate 

for multiple sites, we identified the site based on other prostheses provided on the same date 

for the same limb. 
 

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INTRODUCTION

above-the-knee prostheses divided by the number of each supplier’s 

beneficiaries who received these prostheses. For this analysis, we 

included suppliers that provided above-the-knee prostheses to at 

least 10 beneficiaries. Additionally, because the price for a given 

prosthesis varies by State, we used CMS floor prices so that we could 

compare suppliers across States. 

• High average payment per beneficiary for below-the-knee 

prostheses. We based this measure on the total payment for 

below-the-knee prostheses divided by the number of each supplier’s 

beneficiaries who received these prostheses. As we did in the above 

analysis, we included suppliers that provided below-the-knee 

prostheses to at least 10 beneficiaries. We also used CMS floor 

prices so that we could compare suppliers across States. 

Next, we compared the characteristics of the suppliers that had 

questionable billing to those of other suppliers. Specifically, for both 

groups of suppliers, we calculated the percentage of suppliers that 

were independently owned, rather than owned by a chain, and the 

percentage of suppliers in each State.27

Identification of Program Safeguards To Prevent Inappropriate Payments 

for Lower Limb Prostheses 

 We identified the States in 

which the percentage of suppliers that had questionable billing was at 

least twice as high as the percentage of other suppliers.

We conducted structured telephone interviews with staff from the four 

DME MACs, the three ZPICs, and the two DME PSCs. We discussed 

the program safeguard activities they conducted from January 2009 to 

August 2010.28

We asked the DME MACs about their claims processing edits and any 

medical reviews and analyses they conducted, as well as any education 

they provided about billing for lower limb prostheses. We then asked 

the ZPICs and DME PSCs about any data analyses and investigations 

they conducted regarding suppliers of lower limb prostheses. We 

completed these interviews between August and September 2010.

 

27 We used data from the National Supplier Clearinghouse to identify the State where the 

supplier practiced and determine whether the supplier was independently owned or owned 

by a chain. 

28 Eight of these contractors were able to discuss the safeguard activities they conducted 

since January 2009. The ninth contractor began operations in January 2010 and was able to 

discuss its activities since that time. 
 

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INTRODUCTION

In addition, we reviewed documentation from all of the contractors. 

Specifically, we requested and reviewed documentation related to their 

claims processing edits, data analyses, investigations, and any 

education they provided. 

Limitations

The findings in this report are based on analysis of claims data; we did 

not conduct a medical review of any claims to determine the medical 

necessity of the prostheses. In addition, the measures included in our 

analysis are not intended to be a comprehensive set of measures for 

identifying questionable billing. 

Standards 

This study was conducted in accordance with the Quality Standards 

for Inspection and Evaluation issued by the Council of the Inspectors 

General on Integrity and Efficiency.
 

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In 2009, Medicare inappropriately paid $43 million for 

lower limb prostheses that did not meet certain 

requirements; these payments could have been 

prevented by using claims processing edits

 FINDINGS

Of the $655 million that 

Medicare paid for lower 

limb prostheses in 2009, 

$43 million was for claims 

that did not meet the 

requirements specified in the local coverage determination. These

payments—for 32,260 claims for 9,265 beneficiaries—could have been 

prevented if claims processing edits had been in place.29

As shown in Table 1, Medicare paid $20.1 million to suppliers that 

incorrectly billed for a prosthesis for both the right and left limbs on 

the same date using two claims, rather than one claim. Billing on 

different claims enables suppliers to appear to be billing for only one 

limb, when, in fact, they are billing for both limbs. 

 The 

$43 million is based solely on an analysis of claims data and does not 

include payments that a medical record review may find to be 

unreasonable or unnecessary. 

Table 1: Inappropriate Medicare Payments for Lower Limb 

Prostheses, 2009 

Inappropriate 

Payment Amount

Percentage of 

All Paid Claims

Billed for a prosthesis for each limb on the 

same date using two claims, rather than one 

claim

$20.1 million 3.3%

Did not meet potential functional level 

requirements $17.8 million 1.0%

Did not indicate whether the prosthesis was 

for the left or right limb $2.7 million 0.4%

Billed for combinations of prostheses that 

were not allowed $1.6 million 0.4%

Billed for a higher number of units of 

prostheses than allowed $0.9 million 0.1%

Billed for prostheses that were not covered $0.4 million < 0.1%

Total* $42.6 million 5.2%

* The figures in the last two columns do not sum to the total because a claim may have 

failed to meet multiple requirements. 

Source: OIG analysis of Part B prostheses claims, 2010.

29 This amount may not be the total cost savings to the Medicare program. In some cases, 

when a claims processing edit rejects a claim, the supplier may resubmit the claim after 

making the necessary corrections.
 

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FINDINGS

Medicare paid another $17.8 million for claims that did not meet 

potential functional level requirements. As noted, beneficiaries have 

one of five potential functional levels, depending on their health status 

and desire to walk. In most cases, the claims did not include any 

information about the beneficiaries’ potential functional level when it 

was required. In other cases, Medicare paid for prostheses that were 

not medically necessary given the potential functional level of the 

beneficiaries as indicated on the claims. For example, some suppliers 

billed for a knee addition that was designed for the highest potential 

functional level, even though the beneficiary had a lower potential 

functional level.

Further, Medicare inappropriately paid $2.7 million for claims that did 

not indicate whether the prostheses were for the right or left limb. It 

also paid $1.6 million for combinations of prostheses that were not 

allowed. Most commonly, Medicare inappropriately paid for a 

definitive socket in combination with a temporary base prosthesis. 

Lastly, Medicare paid over $1 million for a higher number of units of 

certain prostheses than was allowed and for prostheses that were not 

covered by the program. 

Medicare paid an additional $61 million 

for beneficiaries with no claims 

from their referring physicians

In addition to the $43 million 

that did not meet certain 

Medicare requirements, another 

$61 million was for beneficiaries 

with no claims from their referring physicians. Specifically, these 

beneficiaries had no Medicare Part A or Part B claims that included 

their referring physicians during the last 5 years, indicating they did 

not have an office visit or receive any other services from their 

referring physicians during this time. These payments were for 55,274 

claims for 7,066 beneficiaries. 

Medicare requires the beneficiary’s referring physician to write an 

order specifying the beneficiary’s need for prostheses. Billing for 

prostheses when the beneficiary had no claims from the referring 

physician raises questions about whether the physician ever evaluated 

the beneficiary and whether these devices were medically necessary. 
 

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FINDINGS

In 2009, 267 suppliers of lower limb 

prostheses had questionable billing

In 2009, 136 suppliers 

frequently submitted claims 

that did not meet certain 

Medicare requirements or were for beneficiaries with no claims from 

their referring physicians. An additional 131 suppliers had other 

questionable billing, such as billing for a high percentage of 

beneficiaries with no history of an amputation or missing limb or a

high percentage of beneficiaries with unusual combinations of 

prostheses. 

These 267 suppliers differed from other suppliers of lower limb 

prostheses. For example, two-thirds of these suppliers were 

independently owned, rather than owned by a chain, compared to 

41 percent of other suppliers. In addition, these suppliers were at least 

twice as likely as other suppliers to be in Alabama, Mississippi, Puerto 

Rico, or Wyoming. 

In 2009, 136 suppliers frequently submitted claims that did not meet

certain Medicare requirements or were for beneficiaries with no claims 

from their referring physicians 

These 136 suppliers accounted for $22 million of the payments in 2009 

that did not meet certain Medicare requirements or were for 

beneficiaries with no claims from their referring physicians. One 

supplier alone accounted for $2.5 million of these payments. As shown 

in Table 2, 114 suppliers frequently submitted claims that did not 

meet Medicare requirements specified in the local coverage 

determination. Between 16 and 89 percent of their claims did not meet 

these Medicare requirements, whereas half of all suppliers had 

2 percent or less of claims that did not meet these requirements. In 

addition, 33 suppliers frequently submitted claims for beneficiaries 

with no claims from their referring physicians during the last 5 years. 

Between 32 and 100 percent of these suppliers’ claims were for 

beneficiaries with no claims from their referring physicians. 
 

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FINDINGS

Table 2: Suppliers That Frequently Submitted Claims That Did Not Meet Certain

Medicare Requirements or Were for Beneficiaries With No Claims From Their 

Referring Physicians, 2009

Median Among All 

Suppliers

Suppliers With 

Unusually High Values*

Range of 

Percentages

Number of 

Suppliers

Percentage of claims that did not meet certain 

Medicare requirements 2 percent 16 to 89 percent 114

Percentage of claims for beneficiaries with no 

claims from their referring physicians 8 percent 32 to 100 percent 33

Total** 136

* We considered a supplier’s percentage to be unusually high if it was greater than the 75th percentile plus two 

times the interquartile range.

** The figures do not sum to the total because 11 suppliers frequently submitted both types of claims. 

Source: OIG analysis of Part B prostheses claims, 2010.

An additional 131 suppliers had other questionable billing

One hundred thirty-one suppliers had unusually high values for at 

least one of the seven other measures we reviewed. In addition, 34 of 

the suppliers that frequently submitted claims that did not meet 

certain Medicare requirements or were for beneficiaries with no claims 

from their referring physicians also had unusually high values for at 

least 1 of the 7 measures listed in Table 3. 

As shown in Table 3, 56 suppliers routinely had beneficiaries in 

common with other suppliers. These suppliers had between 23 and 

92 percent of their beneficiaries in common with other suppliers, 

whereas half of all suppliers had 4 percent or less of their beneficiaries 

in common with other suppliers. In addition, 13 suppliers frequently 

had beneficiaries with no history of an amputation or missing limb 

during the last 5 years. At least 65 percent of the beneficiaries of these 

suppliers had no amputation or missing limb history, whereas half of 

all suppliers had no history of an amputation or missing limb for 

28 percent or less of their beneficiaries. 

Further, 68 suppliers frequently billed for unusual combinations of 

prostheses. Specifically, these suppliers frequently billed for two 

prostheses on the same date for the same limb that were either 

(1) both definitive base prostheses or (2) prostheses for different sites 

of amputation. Most commonly, these suppliers billed for a 
 

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FINDINGS

below-the-knee definitive base prosthesis (L5301) in combination with 

a socket that is appropriate for an ankle amputation (L5632).

Table 3: Suppliers With Other Questionable Billing, 2009

Median Among All 

Suppliers

Suppliers With 

Unusually High Values*

Range of Values Number of 

Suppliers

Percentage of beneficiaries that suppliers 

have in common 4% 23 to 92% 56

Percentage of beneficiaries with no history 

of an amputation or missing limb 28% 65 to 95% 13

Percentage of beneficiaries with unusual 

combinations of prostheses 3% 18 to 89% 68

Percentage of beneficiaries who received 

prostheses for both limbs 13% 36 to 77% 13

Percentage of beneficiaries who received 

prostheses for above-the-knee amputations 16% 45 to 92% 16

Average payment per beneficiary for 

above-the-knee prostheses $14,695 $29,798 to $40,070 4 

Average payment per beneficiary for 

below-the-knee prostheses $6,128 $12,166 to $17,348 10

Total** 165 

This table includes the 36 suppliers that also frequently submitted claims that did not meet certain Medicare 

requirements or were for beneficiaries with no claims from their referring physicians.

* We considered a supplier’s value to be unusually high if it was greater than the 75th percentile plus two 

times the interquartile range.

** The figures do not sum to the total because a supplier may have unusually high values for more than one 

measure. 

Source: OIG analysis of Part B prostheses claims, 2010.

Further, as shown in Table 3, many suppliers had an unusually high 

percentage of beneficiaries who received prostheses for both limbs or 

for above-the-knee amputations. Finally, a number of suppliers had 

unusually high average payments per beneficiary for either above-theknee prostheses or for below-the-knee prostheses. These suppliers

commonly billed for significantly more prostheses—or for more 

complex prostheses—for each beneficiary, compared to other suppliers. 

 
 

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FINDINGS

Medicare contractors conducted varying 

degrees of program safeguard activities related 

to lower limb prostheses

The four DME MACs had 

varying claims processing edits 

in place for lower limb 

prostheses; however, none had 

edits in place for all of the requirements specified in the local coverage 

determination. These edits might have prevented the $43 million that 

Medicare inappropriately paid in 2009 for lower limb prostheses that 

did not meet these requirements. 

Additionally, between January 2009 and August 2010, none of the four 

DME MACs conducted medical reviews and not all conducted data 

analyses or provided education that was specific to lower limb 

prostheses. In contrast, during the same period, all five ZPICs and 

DME PSCs conducted data analyses and opened a number of 

investigations related to lower limb prostheses. 

The four DME MACs had varying claims processing edits in place, but 

none had edits for all requirements 

The DME MACs most commonly had edits in place that checked for 

whether the prosthesis was for the right or left limb and whether the 

beneficiary had the required potential functional level. Additionally, 

two contractors had implemented edits related to the different 

combinations of prostheses that were not allowed, and two had edits 

for prostheses that were not covered. None of the four contractors had 

edits to check for billing for a prosthesis for each limb on the same date 

on different claims or for billing for a higher number of prostheses 

than allowed. Interestingly, the contractor that had the most edits in 

place had not implemented them until June 2010. 

None of the DME MACs conducted medical reviews, and not all had 

conducted data analyses or provided education related to lower limb 

prostheses

None of the four DME MACs conducted medical reviews of lower limb 

prostheses between January 2009 and August 2010. Staff at the DME 

MACs noted that medical reviews of prostheses claims were very 

difficult and required specialized knowledge because of the complicated 

components that needed to be reviewed. Staff also commonly noted 

that assessing the beneficiary’s potential functional level was difficult 

because the local coverage determination did not clearly define the five 

different levels. Staff reported that the vague definitions made it 

difficult to determine whether the more complex prostheses allowed for

higher potential functional levels were medically necessary. 
 

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FINDINGS

In addition, only two of the DME MACs conducted analyses on lower 

limb prostheses claims. One contractor looked for inappropriate 

combinations of prostheses and unusually high use of certain 

prostheses. The other contractor looked for prostheses that were not 

medically necessary based on the beneficiaries’ potential functional 

levels indicated on the claims. 

Finally, three of the four DME MACs provided education to suppliers 

regarding coverage or billing instructions for lower limb prostheses. 

This usually consisted of presentations to suppliers or general 

information that the contractors posted on their Web sites. 

All ZPICs and DME PSCs conducted data analyses and opened

investigations related to lower limb prostheses

All five ZPICs and DME PSCs reported conducting data analyses 

related to lower limb prostheses between January 2009 and 

August 2010. Specifically, four of the five contractors looked at 

replacement frequencies. Two looked at trends involving the 

beneficiaries’ potential functional levels indicated on the claims. One 

checked for medical histories consistent with an amputation. In 

addition, four contractors conducted analyses to identify high 

utilization or billing spikes among suppliers of lower limb prostheses. 

All five ZPICs and DME PSCs reported opening investigations based 

on their analyses, referrals, or beneficiary complaints. In total, they 

reported opening 19 investigations that were specific to lower limb 

prostheses. The issues typically investigated included suppliers’ 

providing prostheses that were not needed by the beneficiary or 

suppliers’ billing for, but not providing, prostheses. According to the 

contractors, the investigations have had differing results. For 

example, three contractors referred three suppliers to law 

enforcement. However, another closed two cases because it could not 

substantiate that the beneficiaries did not need the more complex 

prostheses that are allowed for higher potential functional levels. 

 
 

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 RECOMMENDATIONS

Our findings show a number of problems with Medicare payments for 

lower limb prostheses. In 2009, Medicare inappropriately paid 

$43 million for lower limb prostheses that did not meet certain 

Medicare requirements. These payments could have been prevented 

by using claims processing edits. Medicare also paid an additional 

$61 million for beneficiaries with no claims from their referring 

physicians. Further, we found that 267 suppliers of lower limb 

prostheses had questionable billing. These included, for example, 

suppliers that frequently billed for beneficiaries who had no history of 

an amputation or missing limb or for unusual combinations of 

prostheses. Lastly, we found that the DME MACs had varying claims 

processing edits in place for lower limb prostheses; however, none had 

edits in place for all of the requirements specified in the local coverage 

determination. We recommend that CMS:

Implement additional claims processing edits to prevent inappropriate 

payments 

CMS should instruct the DME MACs to implement claims processing 

edits based on all of the local coverage determination requirements. 

These edits should check: whether the right or left limb is indicated on 

the claim, how a prosthesis for each limb on the same date is billed, 

potential functional level requirements, the number of units allowed 

for certain prostheses, inappropriate combinations of prostheses, and

noncovered prostheses. 

Strengthen monitoring of billing for lower limb prostheses 

CMS should instruct the DME MACs, ZPICs, and DME PSCs to use

the measures discussed in this report to periodically profile suppliers

of lower limb prostheses and focus resources on those that are most 

likely to present a risk to the program. Specifically, the contractors 

should determine for each supplier: (1) the percentage of claims that 

did not meet certain Medicare requirements, (2) the percentage of 

claims for beneficiaries with no claims from their referring physicians, 

(3) the percentage of beneficiaries who had no Part A or Part B history 

related to an amputation, (4) the percentage of beneficiaries who

received unusual combinations of prostheses, (5) the percentage of 

beneficiaries that suppliers have in common, (6) the percentage of 

beneficiaries who received prostheses for both lower limbs, (7) the 

percentage of beneficiaries who received prostheses for above-the-knee 

amputations, (8) the average payment per beneficiary for above-the-
 

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RECOMMENDATIONS

knee prostheses, and (9) the average payment per beneficiary for

below-the-knee prostheses. CMS should develop thresholds for these 

measures and instruct its contractors to conduct additional reviews of 

suppliers that exceed the thresholds. 

The contractors should use this information to target their efforts to 

more effectively prevent inappropriate payments and identify fraud or 

abuse. Contractors could conduct medical reviews of a sample of 

claims from suppliers that exceed the thresholds on the above 

measures and use their findings to recover inappropriate payments, 

place certain suppliers on prepayment review, and initiate fraud 

investigations. 

Implement requirements for a face-to-face encounter to establish the 

beneficiary’s need for prostheses

We recommend that CMS use its authority to implement 

requirements that the referring physician document that a face-to-face 

encounter occurred. This would help ensure that lower limb 

prostheses provided to Medicare beneficiaries are medically necessary. 

Revise the requirements in the local coverage determination

We recognize that the DME MACs have an initiative to revise the local 

coverage determination for lower limb prostheses. CMS should work 

with the DME MACs to clarify several aspects of the local coverage 

determination. 

First, CMS should clarify the definitions of beneficiaries’ potential 

functional levels. In particular, CMS should set an expectation for 

when the beneficiary should achieve the level of walking ability

indicated by his or her potential functional level. After creating 

improved definitions, CMS should consider specifying the range of 

potential functional levels that are appropriate for each prosthesis. 

These changes would help ensure that prostheses are matched to 

beneficiaries’ needs and that CMS contractors can assess the medical 

necessity of these devices. 

Second, CMS should revise the local coverage determination or take 

other steps to require that licensed/certified medical professionals, 

such as physical therapists, evaluate beneficiaries to determine their 

potential functional levels. To further ensure an objective 

determination of the beneficiary’s functional level, CMS should

require that this person not be financially affiliated with the supplier. 

The evaluation should include a written report that provides detailed 

information supporting the determined functional level, and the report 
 

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RECOMMENDATIONS

should be made available to CMS upon request. While Medicare 

would need to cover this additional service, the cost would be offset by 

ensuring that beneficiaries receive only prostheses appropriate for 

their functional levels. 

Lastly, CMS should consider revising the local coverage determination 

to deny as medically unnecessary certain combinations of prostheses, 

such as more than one definitive base prosthesis or prostheses for 

different sites of amputation billed for the same limb on the same date.

Enhance screening for currently enrolled suppliers of lower limb prostheses

Federal regulations place new DMEPOS suppliers at the high-risk

level and currently enrolled DMEPOS suppliers at the moderate-risk

level. Given the high costs of prostheses and the high rates of 

questionable billing, CMS should consider placing current suppliers of 

lower limb prostheses at the high-risk level, thus subjecting them to 

the more rigorous screening procedures. 

Take appropriate action on suppliers with questionable billing 

In a separate memorandum, we will refer the suppliers that we 

identified to CMS for appropriate action. 

AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 

RESPONSE 

CMS concurred with five of the six recommendations. In response to 

our first recommendation, to implement additional claims processing 

edits, CMS concurred and stated it would instruct the DME MACs to 

implement consistent claims processing edits based on local coverage 

determination requirements.

In response to our second recommendation, to strengthen monitoring 

of billing for lower limb prostheses, CMS concurred and stated it would 

issue guidance to the DME MACs and instruct them to consider the 

measures used in this report as supplemental criteria for detecting 

high-risk suppliers. 

In response to our third recommendation, to implement requirements

for a face-to-face encounter to establish a beneficiary’s need for 

prostheses, CMS concurred and stated it is exploring its current 

authorities to implement such requirements. CMS also stated that it 

would issue an educational article to further explain policy 

requirements for lower limb prostheses and to providers and suppliers. 
 

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RECOMMENDATIONS

In response to our fourth recommendation, to revise the local coverage 

determination, CMS concurred and stated it would review the 

definitions for the functional levels and develop refinements as 

appropriate. CMS also stated it would consider adapting an algorithm 

to guide determination of the functional status of the beneficiary. 

CMS did not explicitly comment on our recommendation to consider 

requiring that an objective party determine the functional level. We 

ask CMS to consider this approach because it would further ensure

that beneficiaries receive only prostheses appropriate for their 

functional levels. 

In response to our fifth recommendation, to enhance screening for 

currently enrolled suppliers of lower limb prostheses, CMS did not 

concur and stated that it has in place sufficient tools that allow for 

increased scrutiny of existing DMEPOS suppliers. CMS noted that if 

an existing supplier meets one of several triggering events, that 

supplier automatically is elevated to the high-risk level. Based on this 

report and the findings of other OIG reports on DMEPOS, we maintain 

that all current suppliers of lower limb prostheses should be placed at

the high-risk level. 

In response to our sixth recommendation, to take appropriate action on 

the suppliers with questionable billing, CMS concurred and stated it 

would share our information with the DME MACs and the Recovery 

Auditors. Recovery Auditors review Medicare claims on a 

postpayment basis to identify inappropriate payments. 

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

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 APPENDIX~A

Medicare Payments for Lower Limb Prostheses, by Type, 2009

Type of Lower Limb 

Prostheses

Total Medicare Payments 

(millions)

Average Medicare Payments 

per Prosthesis

Base $107 $1,935

Addition prostheses

Socket $167 $684

Insert or suspension system $113 $508

Knee $92 $3,020

Foot $87 $2,370

Other $79 $542

Ankle $10 $659

Total* $655

* The figures in this column do not sum to the total because of rounding.

Source: Office of Inspector General analysis of Part B prostheses claims, 2010.
A P PEN D x 8 

Agency Comments 

(~~"""""C~A"';;' DEPARTMENT OF HEALTH & HUMAN SERVICES Centers for Medicare & Medicaid Services \, 4(. -~------------.--~ "-l~V<lll11 t Administ'rator 

Washington, DC 20201 

DATE: IJUN 2 42D111 

TO: Daniel R. Levinson 

Inspector General 

FROM: Donald M. Berwick, M.D. 

Administrator 

SUBJECT: Office ofInspector General (OIG) Draft Report: "Questionable Billing b) 

Suppliers of Lower Limb Prostheses" (OBI -02-10-00170) 

Thank you for the opportunity to review and comment on the OIG draft report titled, 

"Questionable Billing by Suppliers of Lower Limb Prostheses." The Centers for Medicare & 

Medicaid Services (CMS) appreciates the time and resources OIGhas invested to determine the 

extent to which Medicare improperly paid claims for lower limb prostheses. 

Lower limb prostheses are covered by Medicare to replace, as much as possible, the function of a 

missing limb. Local coverage determinations for lower limb prostheses further explain libw 

claims must be submitted and what is covered as reasonable and necessary. 

Through data analysis and structured interviews with Medicare contractors, OIG concluded that 

in 2009: 1) Medicare inappropriately paid $43 million for lower limb prostheses; 2) Medicare 

paid for prostheses despite the fact the beneficiaries had no claims from their referring 

physicians; 3) 267 suppliers oflower limb prostheses had questionable billing; and 4) Medicare 

contractors conducted program safeguard activities related to lower limb prostheses to varying 

degrees. . 

The CMS will work to improve our oversight oflower limb prostheses in the future and move 

forward in establishing the necessary changes. OIG made the following recommendations. 

OIG Recommendation 1 

Implement additional claims processing edits to prevent inappropriate payments. 

eMS Response 

. The CMS concurs and will instruct the Durable Medical Equipment Medicare Administrative 

Contractors (DME MACs) to implement consistent claims processing edits based on local 

coverage determination requirements. 

OEI·02·10·00170 QUESTIONABLE BILLING BY SUPPLIERS OF LOWER LIMB PROSTHESES 23 
 

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APPENDIX ~ B
 

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APPENDIX ~ B
 

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APPENDIX ~ B
 

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 APPENDIX ACKNOWLEDGMENTS ~ C

This report was prepared under the direction of Jodi Nudelman, 

Regional Inspector General for Evaluation and Inspections in the New 

York regional office, and Meridith Seife, Deputy Regional Inspector 

General. 

Judy Bartlett and Judy Kellis served as the team leaders for this 

study. Other principal Office of Evaluation and Inspections staff from 

the New York regional office who contributed to the report include 

Christine Moundas, Shanti Nandiwada, and Rachel Siman; other 

central office staff who contributed include Robert Gibbons, Scott 

Manley, and Berivan Demir Neubert. 
Office of Inspector General http://oig.hhs.gov 

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

amended, is to protect the integrity of the Department of Health & Human Services (HHS) 

programs, as well as the health and welfare of beneficiaries served by those programs. This 

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

inspections conducted by the following operating components:

Office of Audit Services 

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

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

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

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

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

mismanagement and promote economy and efficiency throughout HHS.

Office of Evaluation and Inspections 

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

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

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

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

reports also present practical recommendations for improving program operations. 

Office of Investigations 

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

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

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

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

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

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

Office of Counsel to the Inspector General 

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

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

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

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

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

also negotiates and monitors corporate integrity agreements. OCIG renders advisory 

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

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

enforcement authorities.