OIG gears up for DME investigations

Sunday, November 20, 2005

WASHINGTON -- When it comes to investigating how CMS spends money for durable medical equipment, the Office of Inspector General appears intent on leaving no stone unturned. The agency, which investigates federal health and welfare program management, unveiled its 2006 Work Plan last week.

Here's a rundown on DME issues it plans to look into:

Durable medical equipment payments for beneficiaries receiving home health services
During recent audits of home health agency (HHA) services, beneficiaries have indicated during interviews that they receive numerous durable medical equipment (DME) items and supplies. We will review medical records for DME items and supplies furnished to beneficiaries receiving HHA services to determine whether the items and supplies were reasonable and necessary for the beneficiaries' conditions.

Medicare payments for therapeutic footwear
Under certain circumstances, Medicare covers therapeutic footwear for beneficiaries who have diabetes and at least one of several related conditions. Medicare payments for therapeutic footwear totaled over $130 million in 2003. A previous OIG report indicated that a significant percentage of payments made for therapeutic footwear did not have adequate documentation to support the beneficiaries' medical need for the footwear. The objective of this study will be to determine whether therapeutic footwear furnished by individual suppliers was reasonable and necessary for the beneficiaries to whom it was provided.

Medical necessity of durable medical equipment
We will determine the appropriateness of Medicare payments for certain items of durable medical equipment, such as power wheelchairs, wound care equipment and supplies, and glucose test strips. We will assess whether the suppliers' documentation supports the claim, whether the item was medically necessary, and/or whether the beneficiary actually received the item.

Medicare pricing of equipment and supplies
We will compare Medicare payment rates for certain medical equipment and supplies with the rates of other Federal and State health programs, as well as with wholesale and retail prices. Our review will cover such items as wheelchairs, parenteral nutrition, wound care equipment and supplies, and oxygen equipment and supplies.

Home blood glucose testing supplies
We will assess the appropriateness of Medicare Part B payments made to a supplier for home blood glucose testing supplies, specifically test strips and lancets. Medicare covers the supplies based on the medical needs of the diabetic patients. The utilization guidelines issued by Medicare allow up to 100 test strips and 100 lancets every 3 months for non-insulin treated patients, and up to 100 test strips and 100 lancets every month for insulin treated patients. However, Medicare may cover supplies in quantities greater than the utilization guidelines if certain criteria are met.

Medicare drug reimbursement computation of average sales price
We will evaluate drug manufacturers' methodologies for computing the average sales price (ASP). This calculation will be used for determining the Medicare reimbursement of certain classes of drugs. It is a new requirement enacted as part of the MMA.

Collecting and maintaining average sales price data
We will evaluate CMS's system for collecting and maintaining the ASP data. Medicare Part B currently covers prescription drugs furnished incident to physician services, prescription drugs used with durable medical equipment, and other statutorily covered drugs. Under the MMA, Medicare will base payments for most of these drugs on the ASP. The MMA requires manufacturers to report accurate ASP information to CMS. We will also assess CMS's oversight of the ASP reporting.

Effectiveness of average sales price cost controls
We will examine why reported average sales prices are rising, how these increases reflect provider costs, and the extent to which these price changes have affected the expected cost reductions of the average sales price program. The MMA introduced drug reimbursements based on manufacturers' average sales prices. The intent of the MMA was both to control Medicare drug expenditures and also link Medicare reimbursement to costs incurred by providers. Emerging evidence, however, indicates that the reported average sales price for certain drugs have been rising, thereby increasing Medicare costs.

Monitoring of market prices for Part B drugs
The MMA made significant changes to the way Medicare reimburses for Part B drugs. Beginning in 2005, Medicare generally pays for drugs based on the average sale price methodology. The MMA mandates that OIG conduct studies, which may include market surveys, to determine widely available market prices for Part B drugs. The market price will then be compared to average sales price. Also, as mandated by the MMA, we will compare reported average manufacturer prices to average sales price.

Duplicate payments for Part B drugs under the competitive acquisition program
We will determine if there are duplicate payments to physicians for Part B drugs purchased from vendors selected through a competitive bidding process and those directly reimbursed under the average sales price system. We will further evaluate what systems CMS has in place to prevent duplicate payments for Part B drugs.