OIG-HHS audit finds inadequate documentation in more than half of certain durable medical equipment claims

by Ben Vernia | January 27th, 2010

The OIG-HHS released an audit report on January 11 describing its review of durable medical equipment, prosthetics, orthotics and supplies (DMEPOS) claims requiring a “KX” modifier, which is appended to certain categories to indicate that the supplier must maintain supplemental documentation of the claim’s medical necessity. The auditors sampled 100 claims from a universe whose reimbursement totaled nearly $258 million. Of those 100 claims, suppliers lacked the required documentation in 54 cases. Extrapolating these results to the entire universe, the OIG-HHS calculated a total overpayment of over $127 million.

The claims OIG-HHS reviewed were for therapeutic shoes for diabetics, continuous positive airway pressure (CPAP) systems, respiratory assist devices, and pressure reducing support services. This is a minority of the total categories of DMEPOS for which Local Coverage Determinations require use of the KX modifiier to indicate that the supplier is maintaining additional documentation.

The auditors found missing documentation in several categories:

  • Proof of delivery – 23% of items required were missing
  • Physician’s orders – 20% of items required were missing
  • Use or compliant-use follow-up documentation – 26% of items required were missing
  • Physician’s statement – 18% of items required were missing

In addition, 19% of the claims were missing more than one of the required items.

In its summary of findings, the OIG reports:

These errors occurred because Palmetto GBA’s electronic edits in place were not effective for determining whether suppliers had the required documentation on file when they used the KX modifier on claims. The edits could only determine whether the required KX modifier was on the claim.

In essence, it appears that the DME Regional Carrier at the time of the claims required providers to use the KX code, but did not ensure that the providers actually possessed the documentation which the code indicated was required.

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