When a $50 Margin Doesn’t Make Sense: Uncovering the History of the HCPCS

As an O&P clinician, I was highly motivated by the challenge of designing devices that worked, not in replacement of, but in concert with a limb. The way patients described how improved mobility with their AFOs helped them keep up with grandchildren or quelled worries of losing their job, or how the orthoses became their “magic legs” reinforced my idea that AFOs were the underdog of clinical care—perhaps underestimated, but highly effective.

I maintained such optimism until one case made me question if providing AFOs was a sustainable practice.

Ironically, the case seemed simple: I identified which design and manufacturer would best meet the patient’s needs, wrote my note, coded the custom, solid, high-strength carbon AFO, and moved to my next task. After receiving a fabrication quote of roughly $740, I looked back at the allowable for the claim, roughly $790, and my day came to a screeching halt.

Unanswered Questions

I can’t recall my first thought; so many flooded in at once. I wondered how $790 accounted for the value of the device, clinical time, administrative effort, and fabrication costs. Would the $50 margin even cover shipping costs to the fabricator and back? And with margins like this, how long can a clinic operate?

This problem is fairly unique to orthoses. For reference, as of January, the only applicable carbon code for an AFO, L-2755, which encompasses the same general anatomical region as a transtibial prosthesis, reimburses at an average fee schedule of $160.04.¹ Contrastingly, there are two codes for carbon-related transtibial prostheses, L-5940 and L-5629, with average fee schedules of $697.72 and $436.71, for a sum of $1,134.43 for a carbon lamination.¹ Per unit, the prosthetic fee schedule is over seven times greater than the orthotic equivalent. When asked to comment on the disparity, Ben Wright, CPO/L, owner, Wright Orthotics and Prosthetics, Texas, states, “It should be just as valuable, but it isn’t.”

Wright has consistently provided advanced carbon AFOs throughout his clinical career. To sustainably provide this care, Wright encourages balancing clinical revenues to include “different types of [devices] to help offset the costs of AFOs.” He adds, “if I were just doing AFOs, and nothing else, I would barely stay afloat.”

This article could end here with a proposition to reduce costs to cover expenses other than fabrication. However, Wright comments on how much prices for high-strength AFOs can reasonably drop, “I don’t know if there’s a whole lot lower to go, which is scary because [the] costs of things are not going down, they’re going up.” Reducing the expense would mean downgrading the quality of materials and the reliability of the manufacturer, which, as Wright says, “if you’re going to cut costs, you [have] to make sure you’re not sacrificing quality.” So, with the minimum-feasible cost on the horizon, we must focus on other options to protect AFO provision.

Uncovering the History of the HCPCS

To begin understanding why this AFO’s margin was so low, I compared the claim’s allowable with the Centers for Medicare & Medicaid Services (CMS) fee schedule, the reference point for many private payer schedules. In the publicly available fee schedule, maximum payment amounts for all durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) codes are listed. Each code’s fee schedule is highly specific, but only a nebulous statement referencing “fee schedule payment methodologies,” alludes to their origins.² Even referencing detailed code descriptions, it is unclear if the payment covers a material, procedure, service, functional characteristic, or unit of clinical time. So, I wondered, where did these dollar figures come from?

The story begins one year after President Lyndon B. Johnson signed the Social Security Amendments of 1965 that established Medicare and Medicaid.³ In response, the American Medical Association (AMA) developed the Current Procedural Terminology (CPT) code set in 1966 (this did not include O&P services).^4,5 Today, the CPT code set is modified annually by the AMA, and is classified as Healthcare Common Procedure Coding System (HCPCS) Level I codes.⁶

While the AMA had been operating its own code set for over a decade, O&P was still billed inconsistently by clinicians’ “individual fee[s] for each individual service,” and it wasn’t until 1977 that medical billing codes were federally mandated.^7,8 Under Public Law 95-142, the Health Care Financing Administration (HCFA), which today is CMS, was established and charged with creating “a uniform system for the reporting [of]…bill data,” in other words, a code set.⁸ A year later, a coding system known originally as the HCFA Common Procedure Coding System (HCPCS) was established to describe procedures and services not included in the CPT set.⁹ In 1979, the American Orthotic & Prosthetic Association and Blue Cross Blue Shield South Carolina established a pilot code set specifically for O&P.⁷ Four years later, in 1983, HCPCS absorbed CPT codes, creating an aggregate code set with two categories.¹⁰ This most closely approximates the system we work with today.

Payment Lineage

In chronic absence of consistent payment rates or related determination methods, procedures for a uniform CMS fee schedule were established in the landmark Omnibus Budget Reconciliation Act (OBRA) of 1987 and clarified to specifically address O&P in the OBRA of 1990. This legislation added section 1834 to the Social Security Act, which made local purchase prices “equal to the average allowable charge in the locality for the purchase of the item for the 12-month period ending with June 1987,” and replaced the “reasonable charge” system with the CMS fee schedule in 1989.^11,12 The fee schedule was based on a survey of payments from 1986-1987—payments that reflected however clinicians might have valued services and whatever amount a Medicare carrier happened to pay.

Responding to the O&P profession’s concerns regarding fee schedule–based payment, the OBRA of 1990 tasked the United States General Accounting Office (GAO) with evaluating “whether O&P practitioners should receive separate payments for their professional services in fitting patients.”¹² To answer this question, the GAO released its 1993 report, which all clinicians are encouraged to read, titled “Separate Payment for Fitting Braces and Artificial Limbs Is Not Needed.” In analyzing seven codes, the study found surplus margins ranging from 18 percent to 65 percent of the associated payment. This finding produced the report’s central conclusion, reflected directly in its title.

The GAO recommendation is based on notably flawed justification. First, the mere seven surveyed HCPCS codes were all prosthetic codes. How could the adequacy of orthotic payments be judged only from prosthetic data? If present reimbursement levels give us any indication, I would bet that orthotic surpluses rarely approached even the lowest prosthetic margin. Nevertheless, the GAO recommended that orthotists also did not need to be paid for professional services, simply because a margin existed for prosthetic devices. Second, did an 18 percent or 22 percent margin truly cover clinical expenses associated with providing a Flex Foot system or transtibial socket insert, respectively? And what justifies the changing margin between codes? The mere existence of a margin was good enough to assume sufficient payment. There are many unanswered questions, yet the recommendation stands.

Dated Benchmarks

The benchmark era of the 1980s coexisted with significant renovation of orthotic care. The novel total contact orthosis was introduced in the mid-1970s with the advent of thermoplastics, finally providing the profession with a groundbreaking alternative to classic metal-and-leather construction.¹³ Clinical theories redefining orthotic goals, methods, and success were being established into the mid-1990s and onward.^14,15 It was within this turbulent era that the value of O&P care was enshrined in law.

While O&P was evolving internally, federal legislation simultaneously expanded implicit expectations of clinical output to more appropriate standards. The Americans with Disabilities Act of 1990 protected public participation for people with disabilities, stating that no “individual with a disability shall…be excluded from participation in or be denied the benefits of the services, programs, or activities of a public entity.”¹⁶ The integration mandate effectively raised the implied functional capacity of the O&P devices that support that participation—traversing features including curbs, slopes, uneven terrain, and community barriers became federally encouraged functional capabilities.¹⁷ Despite the expansion, the baseline value of O&P care was not reconsidered.

Similarly, in the Bipartisan Budget Act of 2018, orthotist and prosthetist responsibilities were again extended under federal legislation with the re-inclusion of the orthotists’/prosthetists’ notes in the medical record.^18,19 Thereafter, clinicians became responsible for generating defensible medical documentation to withstand appeal and audit-level scrutiny. Again, even with substantial increases in professional scope, reexamination of baseline professional value remained absent.

Under the Guise of Change

Existing methods to ensure fee schedules keep pace with the times are a thin veil for what is instead a system designed to cap current prices at their worth in 1986. Current fee schedule adjustments increase by urban Consumer Price Index (CPI) minus the national productivity adjustment to ensure consistency with the 1986 standard rather than facilitating value growth. Even for new codes, payment determinations prioritize historical precedent with “continuity of pricing” and “comparability” protocols; there is always a reference to the past, even when one doesn’t exist as is the case with “gap-fill” pricing. This process deflates current prices to the 1986 equivalent and then applies “update factors.” A CMS-authored example of the procedure states that for a “DME item’s gap-filled price [of] $100.00 in 2023 for a product introduced to the market in 2023, the fee schedule amount would be $53.40 using the annual deflation and update factors.”²⁰ Even entirely novel codes, describing technology in no way available in the 1980s, cannot escape the era of shoulder pads, MTV, and acid-wash jeans.

Reassessing Value

Value, at its most fundamental form, equals perceived benefit minus cost. Certainly, in the late 1980s, the value of orthotic care was in flux. Today we can definitively approach this calculation with data to support a new case, data that did not exist when these determinations were originally made.¹²

In 2025, Balkman et al. found that the lower-limb orthosis user population in the United States stands to gain immense overall health improvement. With baseline anxiety, fatigue, pain interference, physical function, and ability to participate in social roles and activities significantly lower than the general US population, and often lower than lower-limb prosthesis users, the magnitude of potential benefit to lower-limb orthosis users is substantial.²¹ This data both demonstrates and calibrates the benefit component of the AFO value calculation.

Similar to historical expansions of professional expectations and scope, the “So Every BODY Can Move” campaign seeks insurance coverage for devices that must withstand different forces, impacts, torque, moisture, and temperature to support recreational activities. As this legislation is passed in more states and expectations for device performance—the benefits aspect of our value calculation—and clinician responsibility continue to expand, a reconsideration of the value of orthotists’ and prosthetists’ work is certainly warranted.

Despite lacking reimbursement incentives, current practice analyses show that orthotists are rising to the occasion. In 2022, orthotists in the United States provided more AFOs than any other orthotic device.²¹ Of the AFOs provided, 71 percent were custom-molded, compared to only 64 percent in 2000, demonstrating increasing complexity of clinical work.^22,23 Illustrating clinicians’ fidelity to evidence and earnest commitment to precision, from 2015 to 2022 the percentage of AFOs provided using advanced, evidence-based tuning protocols rose from 18 percent to 44 percent.^22,24 Without financial incentives, the tenacious and integrity-bound character of our orthotists will dwindle. Clinics must continue to keep the lights on, and AFO care, with unsustainable revenue and regularly running margins into the red, will fade, no matter the quality.

Despite our growth and evolution, we are bound to a 40-year-old value proposition of our work, and ideally, this would not be the case. What I won’t suggest, however, is a total reconstruction of the HCPCS system—in many ways, it works as-is, and an overhaul just isn’t realistic. But, as the system moves forward and we are presented with opportunities to make incremental changes, let us advocate for our profession as a unified entity, well informed of our past and present. The history written here is the author’s interpretation of the documents referenced, and readers are highly encouraged to access them to do their own analysis. Hopefully, moving forward, we can inch toward AFO payments that incentivize high-quality care for a high-potential population, and clinicians may continue to provide care that changes lives.

Kendall Brice, MS, CPO, education and research coordinator, Fabtech Systems, graduated from Baylor College of Medicine’s Orthotics and Prosthetics Program and has a bachelor’s degree in kinesiology and sports medicine from Rice University. In her clinical time, Kendall provided a broad spectrum of care from lower-limb prosthetics to scoliosis and craniosynostosis care, and she has consistently emphasized advanced lower-limb orthotic care in her practice.

References

1. Centers for Medicare & Medicaid Services. DMEPOS26_JAN.Xlsx. DMEPOS Fee Schedule Files, 2026. https://www.cms.gov/medicare/payment/fee-schedules/dmepos/dmepos-fee-schedule.
2. Centers for Medicare and Medicaid Services. 2026. DMEREAD file for 2026 durable medical equipment, prosthetics, orthotics, & supplies (DMEPOS) fee schedule public use file.
3. National Archives. Medicare and Medicaid Act (1965). https://www.archives.gov/milestone-documents/medicare-and-medicaid-act
4. Dotson, P. 2013. CPT codes: What are they, why are they necessary, and how are they developed?” Advances in Wound Care 2(10):583–87.
5. American Medical Association. 2025. History of CPT® content. https://www.ama-assn.org/practice-management/cpt/history-cpt-content.
6. Centers for Medicare & Medicaid Services. 2026. Healthcare Common Procedure Coding System (HCPCS) | CMS. Accessed February 10, 2026. https://www.cms.gov/medicare/coding-billing/healthcare-common-procedure-system.
7. Fairley, M. 2008. L-Codes: Are they meeting the needs of O&P? The O&P EDGE 7(8).
8. Public Law 95-142, Pub. L. Nos. 95–142, 1203 1977. https://www.govinfo.gov/content/pkg/statute-91/pdf/statute-91-pg1175.pdf.
9. Medicare News. New CMS coding changes will help beneficiaries. Centers for Medicare & Medicaid Services, October 6, 2004.
10. AAPC. What is HCPCS?” Accessed February 17, 2026. https://www.aapc.com/resources/what-is-hcpcs.
11. Omnibus Budget Reconciliation Act of 1987, Pub. L. Nos. 100–203, 100 (1987).
12. United States General Accounting Office. Separate payment for fitting braces and artificial limbs is not needed. GAO/HRD-93-98. 1993. https://www.gao.gov/assets/hrd-93-98.pdf.
13. Patent No: US 8,088,320. filed October 10, 2010, and issued January 3, 2012. https://patentimages.storage.googleapis.com/3d/22/5d/61c58e8bdc3a86/US8088320.pdf.
14. Kirby, K.A. 2017. Evolution of foot orthoses in sports. In: Werd, M., Knight, E., Langer, P. (eds) Athletic Footwear and Orthoses in Sports Medicine. Springer, Cham Owen, Elaine.
15. Owen, E. 2010. 2010. The importance of being earnest about shank and thigh kinematics especially when using ankle-foot orthoses. Prosthetics and Orthotics International 34(3):254–69.
16. ADA.Gov. Americans with Disabilities Act of 1990, as amended. Accessed February 19, 2026. https://www.ada.gov/law-and-regs/ada/.
17. ADA.Gov. Statement of the Department of Justice on enforcement of the integration mandate of Title II of the Americans with Disabilities Act and Olmstead v. L.C. Accessed February 12, 2026. https://www.ada.gov/resources/olmstead-mandate-statement/.
18. Bipartisan Budget Act of 2018, HR 1892 § 50402 (2018). https://www.govinfo.gov/content/pkg/BILLS-115hr1892enr/html/BILLS-115hr1892enr.htm.
19. The American Orthotic & Prosthetic Association. 2018. So Congress (and the Federal Law) now says our orthotist/ prosthetist notes are officially part of the medical record for purposes of medical necessity determinations…now what? https://aopanet.org/so-congress-and-the-federal-law-now-says-our-orthotist-prosthetist-notes-are-officially-part-of-the-medical-record-for-purposes-of-medical-necessity-determinations-now-what/.
20. Centers for Medicare & Medicaid Services. DMEPOS payment determinations for new items & services. Accessed February 25, 2026. https://www.cms.gov/medicare/payment/fee-schedules/durable-medical-equipment-prosthetic-devices-prosthetics-orthotics-supplies/dmepos-payment-determinations-new-items-services.
21. Balkman, G. S., B. J. Hafner, and A. M. Bamer, et al. 2025. Evaluating patient-reported health outcome profiles of lower limb orthosis users. Disability and Rehabilitation 47(18):4840–48.
22. American Board for Certification. 2022. Practice Analysis of Certified Practitioners in the Disciplines of Orthotics and Prosthetics.
23. American Board for Certification. 2000. Practice Analysis of the Disciplines of Orthotics and Prosthetics.
24. American Board for Certification. 2015. Practice Analysis of Certified Practitioners in the Disciplines of Orthotics and Prosthetics.

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