The U.S. Department of Health & Human Services (HHS) Office of Inspector General (OIG) issued a report on December 19, in which it determined that Medicare payment amounts for L-0631 back orthoses (short code: LSO sag-coro rigid frame pre) were more than four times greater than supplier acquisition costs.
According to the report, from 2008 to 2011, Medicare claims for L-0631 back orthoses more than doubled, increasing Medicare allowances from $36 million to more than $96 million. Suppliers may bill Medicare for a variety of back orthosis products using this L-Code, and the acquisition cost for each product may vary according to the manufacturer and model provided. However, Medicare does not collect information on the supplier acquisition costs or the models of L-0631 back orthoses provided to beneficiaries. Therefore, the OIG said it conducted this study to assist the Centers for Medicare & Medicaid Services (CMS) in determining whether the Medicare payment amount is appropriate.
To conduct the study, the OIG examined Medicare claims for L-0631 with dates of service from July 1, 2010 through June 30, 2011. It randomly selected a sample of 350 suppliers and then randomly selected one claim from each, and then requested that suppliers provide the acquisition cost of the L-0631 orthoses they purchased for the claims, reflective of any discounts, rebates, fees, or charges. OIG also requested that suppliers describe the services they provided to beneficiaries, including fitting and adjustment services and instructions for using the orthoses.
The OIG found that the average Medicare-allowed amount for L-0631 back orthoses was $919 and the average supplier acquisition cost was $191. Consequently, Medicare and its beneficiaries paid approximately $37 million more for L-0631 back orthoses than suppliers paid to acquire them. Beneficiary copayments alone would have almost covered the suppliers’ acquisition costs.
The description for the L-0631 back orthosis code includes not only the orthosis but also fitting and adjustment services. However, for one-third of claims, suppliers did not report providing fitting and adjustment services. For those claims that did involve fitting and adjustment services, 9 percent were provided by a certified orthotist, 42 percent of claims were provided by office personnel, and 48 percent involved services performed by physicians or other professionals. For 93 percent of claims, suppliers did not report providing any additional services other than general instructions.
The OIG recommended that CMS use supplier acquisition cost information to lower the fee schedule amount for L-0631 back orthoses by including it in the Competitive Bidding Program or by using CMS’ inherent reasonableness authority. CMS concurred that Medicare payments for L-0631 back orthoses should be adjusted to more closely reflect supplier acquisition costs and the level of service provided when furnishing the devices.
In response to this report, the American Orthotic & Prosthetic Association (AOPA) said it has commissioned an in-depth review of the data on this code, including the reported mix of providers billing this code, and will relate that data where and as appropriate. It will also continue the ongoing work on the issue of competitive bidding and will provide further reports on that as well.
To read AOPA’s complete response, read the December 20 AOPA in Advance Smart Brief.
