KX Modifier Did Not Prevent Unallowable Claims, Says OIG

An April 2012 report issued by the Department of Health and Human Services (HHS) Office of Inspector General (OIG) has found that the KX modifier was not effective in ensuring that durable medical equipment, prosthetics, orthotic, and supplies (DMEPOS) suppliers that submitted Medicare claims had the required supporting documentation on file. The reviews were conducted of four contractors that processed the DMEPOS claims for Jurisdictions A through D for claims with 2007 dates of service.

Of the 400 sampled items, suppliers had the required documentation on file for 163 items. Suppliers did not have the required documentation on file for the remaining 237 items. As a result, the contractors made unallowable payments totaling $19,767 for 237 of the 400 sampled items. Based on this sample, the OIG estimates that contractors paid about $316.4 million in unallowable Medicare payments to suppliers.

The types of missing or incomplete documentation were:

  • Physician orders (147 of 400, or 37 percent).
  • Proof of delivery (84 of 400, or 21 percent).
  • Use or compliant use follow-up statements (78 of 312, or 25 percent).
  • Physician statements (25 of 88, or 28 percent).
  • Sleep studies (7 of 312, or 2 percent).

According to the OIG report, these errors occurred because the contractors did not supplement their electronic edits with sufficient prepayment and post-payment review to ensure that suppliers maintained required documentation. The edits could determine only whether the required KX modifier was on the claims and did not prevent payments for unallowable claims. Also, one contractor, at the request of the suppliers, would add the KX modifier to claims when the suppliers had neglected to insert it.

The Centers for Medicare & Medicaid Services (CMS) said it concurs with the following recommendations that the OIG has made and will take action in response to them.

  • Ensure that contractors recover the overpayments identified in the OIG's individual reports to contractors for specific DMEPOS items claimed for which the suppliers did not have the required documentation.
  • Develop an alternative mechanism, such as having contractors perform additional prepay and post-pay reviews, to ensure that suppliers maintain the required documentation for the specific DMEPOS items included in this review that currently use the KX modifier.
  • Take appropriate action for suppliers that did not meet the supplier standard for maintaining proof of delivery.
  • Issue a special alert emphasizing the documentation that suppliers must have in their files to support the use of the KX modifier before billing Medicare.