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Audit (A-01-09-00528)

Review of Jurisdiction A Medicare Payments for Selected Durable Medical Equipment Claims With the KX Modifier for Calendar Year 2007

Executive Summary

For certain durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS), suppliers must use the KX modifier on their Medicare claims to indicate that the claims meet Medicare coverage criteria and that the suppliers have the required documentation on file. Our review found that the KX modifier was not effective in ensuring that suppliers of DMEPOS that submitted claims to National Heritage Insurance Company (NHIC), the durable medical equipment contractor for Jurisdiction A, had the required supporting documentation on file. Based on our sample results, we estimated that NHIC paid approximately $54 million to suppliers that did not have the required documentation on file to support DMEPOS items with dates of service in 2007. The missing documentation included proof of delivery, physicians' orders, use or compliant use followup documentation, sleep studies, and physicians' statements.

We recommended that NHIC (1) recover $5,000 in payments for sampled DMEPOS items claimed for which the suppliers did not have the required documentation, (2) review other payments for DMEPOS related to our unallowable sampled items and recover any additional unallowable payments, (3) notify CMS of 24 suppliers that did not meet the supplier standard for maintaining proof of delivery so that CMS can take appropriate action, and (4) develop a corrective action plan to improve supplier compliance with the KX modifier and potentially save an estimated $54 million. NHIC concurred with our first three recommendations but did not concur with the fourth recommendation.

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