The 2016 OIG Work Plan for DME Suppliers

Posted on in Billing/Reimbursement

By: Kelly Grahovac, The van Halem Group, LLC

A new year will soon be upon us and with that comes a new OIG Work Plan! Each year, the Office of Inspector General publishes their Work Plan, which summarizes new and ongoing projects the OIG plans to pursue with respect to HHS programs and operations. Why is that important to you? Because once the OIG identifies their areas of focus, audit contractors such as the DME Medicare Administrative Contractors (DME MACs), Supplemental Medical Review Contractor (SMRC), Comprehensive Error Rate Testing contractor (CERT), Recovery Audit Contractors (RACs), and Zone Program Integrity Contractors (ZPICs) typically follow suit and focus on similar topics or issues. By having this knowledge, you can make a determination on the vulnerability of your business practices and then take the appropriate steps to identify your risk areas. Once you’ve identified areas of risk you will be better suited to implement the appropriate controls or corrective action plans needed to minimize the possibility of an extensive prepayment review (which ties up your cash flow) or a post payment review (which could result in an extrapolated overpayment). 

For the past few years, the OIG has lacked originality in their Work Plan. Meaning, the same areas of focus have carried over from year 2013 to 2014 and even into 2015, with little to no changes. With 2016 fast approaching, I can say that the most recent Work Plan has ushered in some new projects for the OIG. While that may not be exciting news to you, the DME supplier, it should at the very least pique your interest, especially if you provide any of the equipment and supplies on the list. Projects that have carried over do not hold less importance, but rather, should signal that the OIG still believes more investigation needs to be done.  Conversely, anything new to the plan this year should put you on alert for the types of audits that may come your way from the CMS audit contractors.

The Same as Last Year

Power mobility devices continue to be on the forefront of the OIG’s Work Plan in 2016, with no new projects, but rather a continued focus on policies and practices. The OIG will examine the lump-sum purchase versus rental option to determine whether potential savings can be achieved by Medicare if certain power mobility devices (PMDs) are rented over a 13-month period rather than acquired through a lump-sum purchase. Attention to supplier compliance with payment requirements of PMDs to determine whether such payments were in accordance with Medicare requirements is also on the task list. The focus will be on whether Medicare payments for PMD claims submitted by medical equipment suppliers are medically necessary and are supported in accordance with requirements at 42 CFR § 410.38.

How does this relate to other auditors? Suppliers began seeing RACs auditing PMD claims earlier this year. The bottom line? As long as the OIG continues to keep PMDs on the list the RAC will keep auditing them. This time around, pay close attention to the technical requirements, meaning date stamps, start dates, etc.

Supplier compliance with payment requirements for nebulizer machines and related drugs to determine whether claims are medically necessary and that the requirements were met also stays on the Work Plan for 2016. This one remains a hot topic as a result of Medicare paying approximately $632.8 million for inhalation drugs in calendar year 2014. With an improper payment rate of 42 percent, inhalation drugs were sixth on a list of the top 20 DMEPOS services with the highest improper payments in the 2014 Comprehensive Error Rate Testing report.

Suppliers have also seen these audits increase in 2015, not only from the DME MACs but even more recently the SMRC, Strategic Health Solutions, got in on the audit fun, adding nebulizers and drugs to their list of current projects.

The OIG will also keep diabetic testing supplies on their radar, this time only focusing on the effectiveness of system edits to prevent inappropriate payments for test strips and lancets to multiple suppliers. The OIG indicated that prior investigations found that inappropriate payments were made to multiple suppliers for test strips and lancets dispensed to the same beneficiaries with overlapping service dates. The difference for the 2016 plan is the explanation the OIG has provided as basis to continue review of these system edits. Specifically, “The LCDs issued by the pertinent claims processing contractors state that medical equipment suppliers may not dispense test strips and lancets until beneficiaries have nearly exhausted the previously dispensed supplies. The LCDs also require that beneficiaries or their caregivers specifically request refills before the suppliers dispense them.”

Recent audits by the DME MACs and the SMRC have shown focus to the technical aspects of the LCD, specifically the refill requirements. At The van Halem Group we have seen that the auditors are focusing on the written record of the phone conversation/contact between the beneficiary and the supplier. Focus has also been on the proof of delivery (POD).

What’s New?

The increase in billing for ventilators is on the OIG’s radar for 2016 and they have provided several points of focus on the topic. The OIG will describe billing trends for ventilators, Respiratory Assist Devices (RAD), and Continuous Positive Airway Pressure (CPAP) devices from 2011-2014 as well as examine factors associated with the increase in ventilator claims. This is in direct response to CMS and its contractors expressing concerns about the increase in billing for ventilators, specifically HCPCS code E0464.

From 2013 to 2014, there has been a 127 percent increase in allowed amounts for E0464. The number of beneficiaries receiving a pressure support ventilator increased from 8,633 in 2013 to 19,085 in 2014. According to the OIG, suppliers may be inappropriately billing for ventilators for beneficiaries with non-life-threatening conditions, which would not meet the medical necessity criteria for ventilators and might instead be more appropriately billed to codes for RADs or CPAPs. The OIG goes on to list the covered conditions listed in the NCD and then goes on to clarify that ventilators would not be considered reasonable and necessary to treat any of the conditions described in the LCDs for either CPAPs or RADs. The impact of the Competitive Bidding Program on ventilator billing trends will also be part of the OIG’s investigation.

If you are a supplier billing Medicare for a ventilator, the addition of this to the 2016 Work Plan should come as no surprise to you. The van Halem Group has worked collaboratively with suppliers, manufacturers, state and national associations as we all navigate the murky waters of coverage for this equipment. Recent months have shown increased audits by the DME MACs on the E0464 and most recently, the RACs. Given the product category and generous reimbursement you can guarantee that the OIG and the CMS and its contractors will keep ventilator audits going.

Orthotic braces are a new addition to the 2016 Work Plan, this year in two different aspects: supplier compliance with payment requirements and reasonableness of Medicare payments compared to payments by other payers. Regarding the comparison in payments made for orthotic braces to amounts paid by non-Medicare payers, such as private insurance companies, the OIG will seek to identify potentially wasteful spending. In part, by estimating the financial impact on Medicare and on beneficiaries of aligning the fee schedule for orthotic braces with those of non-Medicare payers.

While it is new for orthotics, compliance with payment requirements is not a new concept for the Work Plan. In the case of orthotics, however, prior OIG work indicated that some suppliers were billing for services that were medically unnecessary or were not documented in accordance with Medicare requirements. Additionally, the Plan includes the following verbiage “Further, LCDs issued by the four Medicare contractors that process DMEPOS claims include utilization guidelines and documentation requirements for orthotic braces.”

Both the increase in direct-to-beneficiary marketing of orthotics both on television and online and an influx in mail order suppliers have contributed to an increase in the billing of orthotics and, as a result, the audits have increased. While the DME MACs have been auditing orthotics for some time, the ZPICs have most recently gotten in on the act, with more devastating results. Translation? Extrapolated overpayments resulting from ZPIC audits of orthotics are becoming increasingly common.

In early 2015, February to be exact a joint DME MAC article was published as a coverage reminder when billing osteogenesis stimulators, resulting from CERT reviews. The OIG took notice and has added them to this year’s Plan. Specifically, they will examine the lump-sum purchase versus rental option to determine whether potential savings can be achieved if osteogenesis stimulators are rented over a 13-month period rather than acquired through a lump-sum purchase.

As always, being compliant in your billing practices to include having the appropriate documentation as defined in the LCD can result in lesser scrutiny to your business, particularly in an audit. Being proactive in your processes, not only by ensuring your documentation meets policy requirements, but also through awareness of the services being reviewed by the OIG and other audit bodies allows you to prepare your beneficiaries’ files and your office staff.

The van Halem Group offers a wide array of audit services, including proactive, or prescreen claim reviews. If you find the services you bill Medicare appear on this list, or if you just want to be more prepared as we enter 2016, contact us. Since 2006 we have saved our clients over $25 million in claims denials and overpayments.

Let us help you! Visit us at