Medicare improperly paid $34M to medical equipment suppliers: OIG

Medicare improperly funneled $34 million to suppliers of durable medical equipment from 2015 through 2017, the Office of Inspector General found, enabling those suppliers to collect a further $8.7 million from beneficiaries through deductibles and coinsurance.

The money went toward durable medical equipment, prosthetics, orthotics and supplies (DMEPOS) that beneficiaries used during inpatient stays. Medicare covers such items, but it is supposed to pay for them with inpatient claims through the inpatient facility, which makes its own deals with DMEPOS suppliers.

Extrapolating those payments, the figures could reach hundreds of millions of dollars, auditors found. 

"Medicare overpaid the suppliers because the system edits that should have prevented or detected the overpayments were not adequate," the OIG wrote. "If the system edits had been designed properly since 2008, Medicare could have saved $223.1 million, and beneficiaries could have saved $56.3 million in deductibles and coinsurance that may have been incorrectly collected from them or from someone on their behalf."

OIG recommended that the Centers for Medicare & Medicaid Services work with suppliers to recoup the improperly paid funds. CMS concurred with some of the recommendations and agreed to:

  1. Recover the $34 million from suppliers.
  2. Recommend that suppliers refund $8.7 million to Medicare beneficiaries.
  3. Identify and recover any improper payments following the end of the audit period (Dec. 31, 2017).
  4. Correct system edits to fully prevent or detect overpayments to DMEPOS suppliers during future inpatient stays.

OIG also recommended that CMS take any further necessary actions, including seeking legislation, to require suppliers to refund beneficiaries if they do not do so willingly. CMS didn't concur with that recommendation but said it would consider whether to recommend it in the president's next budget.

Durable medical equipment, such as respiratory equipment and wheelchairs, is defined as equipment that "can withstand repeated use, serves primarily a medical purpose," and "is not generally useful to a person in the absence of an illness or injury." DMEPOS suppliers also provide prosthetics—devices that replace a body organ or function—and orthotics such as neck and arm braces. 

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The DMEPOS claims also included supplies and drugs related to the use of durable medical equipment, such as inhalation drugs or tumor chemotherapy agents.

The vast majority, 80%, of improper DMEPOS payments were made in acute-care hospitals, amounting to $27 million of improper payments. The payments also occurred in inpatient rehab facilities, long-term care hospitals, critical access hospitals and inpatient psychiatric facilities.