OIG targets other industries

OIG book: Reduce payments to DME companies and save

By MATTHEW HAY
HHBR Washington Correspondent

WASHINGTON – The Department Health and Human Services (HHS; Washington) Office of Inspector General (OIG) continues to view the durable medical equipment (DME) industry as an area ripe for Medicare payment reduction. The OIG’s Red Book, which outlines various measures that have not been fully implemented, cites several DME items that it says require attention.

The OIG proposed that the Health Care Financing Administration (HCFA; Baltimore) should take immediate steps to reduce Medicare payments for hospital beds used in the home environment, including the elimination of the higher reimbursement rate currently paid during the first three months of rental. According to the OIG, Medicare payments for hospital beds used in the home are "substantially higher" than rates paid by other payers. In addition, Medicare is the only payer that pays a higher reimbursement rate for the initial rental period.

The OIG estimates that DME suppliers can recover the wholesale cost of a bed within the first four months and as many as 7.5 times over the useful life of the bed. The OIG projected a $40 million savings over each of the next five years from an inherent reasonableness reduction and another $15 million savings over each of the next five years through elimination of the higher initial rate. The OIG said HCFA concurs with this recommendation and is considering options to determine "the best approach to achieve a fair price" for hospital beds.

According to the OIG, HCFA should also require "periodic review and renewal of the conditions of medical necessity for beneficiary use of Group 2 support surface equipment used for the care of decubitus ulcers or pressure sores. In 1996, new durable medical equipment regional carrier (DMERC) guidelines were developed to control medically unnecessary payment for these items. "While the 1996 guidelines appear to be having a positive impact on controlling Medicare costs for support surfaces, inappropriate payments are still noted" said the OIG. "In 1996, 29% of beneficiaries sampled used support surfaces that were medically unnecessary, compared with 47% in 1995."

The OIG projected savings of $12 million a year over each of the next five years, but added that HCFA did not agree with this recommendation and expressed concern about the timeliness and costs associated with using a CMN for Group 2 equipment.

The OIG also projected roughly $8 million each year over the next five years if HCFA, in concert with the DMERCs, develops guidelines that better define orthotic devices and distinguish between custom-made and off-the-shelf devices. The OIG reported that 19% of Medicare payment for these devices are for medically unnecessary devices. In addition, 68% of the orthotic billings for patients in nursing facilities were "questionable" and the DMERCs have "no policy for the majority of the orthotic billing codes."

The OIG also recommended the development of policies for orthotic codes and screens for billing many orthotic devices. In addition, the OIG proposed that HCFA work with the American Orthotic and Prosthetic Association (AOPA; Alexandria, VA) to develop a table of devices that should not be used together and consider stricter standards for the AOPA, which is allowed to bill for orthotics such as professional credentials.

The OIG said HCFA concurred with its recommendations and has revised its national codes to distinguish among categories of devices.